Rishi Sunak to extend job-saving furlough scheme to end of September as he promises to be "honest" about state of public finances

The furlough scheme which has kept millions of people in work during the pandemic will be extended until the end of September, with employers asked to contribute to workers’ salaries from July, the Chancellor will announce.

Rishi Sunak has promised to use the full “fiscal firepower” of the Government to support jobs and livelihoods but says he will be “honest” in his Budget about the measures necessary to repair the country’s shattered public finances.

He is expected to say that the Coronavirus Job Retention Scheme, which has protected more than 11 million jobs since its inception and was due to end next month, will remain in place until the end of September.

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Chancellor Rishi Sunak pictured last year in Northallerton

But the Government’s contribution will be tapered from July - with employers asked to pay in alongside the taxpayer for the cost of furloughed employees.

In July, employers will be expected to contribute 10 per cent, increasing to 20 per cent in August and September, as the economy reopens. Employees will continue to receive 80 per cent of their salary for hours not worked until the scheme ends.

The Chancellor will also announce further support for self-employed workers, with more than 600,000 people - many of whom become self-employed in 2019/20 - now eligible for cash grants.

A fourth grant from the Self-Employment Income Support Scheme (SEISS) will be available to claim from April, worth 80 per cent of three months’ average trading profits up to £7,500.

The Budget speech will be closely scrutinised for evidence of policies that will aid the Government’s ‘levelling up’ agenda to boost the northern economy. Mr Sunak is expected to announce more details of hs plans to set up a new Treasury campus in northern England, locations of low-tax freeports and specifics about the £4.8bn Levelling Up Fund.

With Mr Sunak’s predecessor as Richmond MP, William Hague, warning that taxes would have to go up to pay for the cost of coronavirus, he is set to reveal how he will tackle the black hole in the nation’s finances.

Setting out his economic plan in his second Budget speech, the Chancellor is expected to say: “We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people.

“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis. Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.

“And, third, in today’s Budget we begin the work of building our future economy.”

Bridget Phillipson, Labour’s Shadow Chief Secretary to the Treasury, said: “These changes to support schemes could have been made months ago. Businesses and workers have been pleading with the Chancellor to give them certainty - but they have had to wait because he said it wouldn’t be appropriate until the Budget.

“Announcing it the night before shows the focus is on Rishi Sunak getting his moment in the sun rather than protecting jobs and livelihoods.”

The Treasury said that hundreds of thousands more people will be eligible for the grants this time, as tax return data for 2019/20 is now available.

Business Secretary Kwasi Kwarteng yesterday played down the prospect of immediate large tax increases but said Mr Sunak had acknowledged the country could not “go on spending money forever”.

“For now, what we have to do is support businesses, individuals, families, through what has been an extremely difficult time,” he told BBC Breakfast.

“We have got another three years to run in the parliament and the Chancellor will be looking to reduce the deficit. For now, I think the real emphasis is on trying to provide critical support.”

'Chancellor must let North take charge of levelling up agenda'

A northern think-tank has urged Rishi Sunak to “finally let go of power and resources” from Westminster so local leaders can carry out his government’s ‘levelling up’ agenda themselves.

The Chancellor is expected to use today’s Budget to set out more details of how key funding pots such as the £4.8bn Levelling Up Fund and the Shared Prosperity Fund will work.

But the IPPR North think-tank has warned that unless local authorities get more control over how the money is spent this would amount to no more than “a series of one-off funding pots and rearranging the office furniture of the Treasury”.

Richmond MP Mr Sunak told The Yorkshire Post last week that “plans to level up and spread opportunity across the UK” were central to the country’s economic recovery from the pandemic.

He added: “We are committed to our plans to spread prosperity to every corner of the UK as we build back better from the pandemic.”

And Sarah Longlands, Director of IPPR North, said the North’s recovery “will be co-ordinated and led by the people and businesses who live and work here”.

She added: “It is their ambition and innovation which will secure a better future post pandemic rather than a series of one-off funding pots and rearranging the office furniture of the Treasury.

“So for example, the Levelling Up Prospectus and the UK Shared Prosperity Fund should not be administered by Whitehall, but be devolved directly to Combined and Local Authorities.”

The Levelling Up Fund, which was announced in November’s spending review, will make £4.8bn available to “invest in local infrastructure that has a visible impact on people and their communities”.

It will replace local growth funding streams, such as the Local Growth Fund and future rounds of the Towns Fund, which have seen hundreds of millions of pounds distributed around Yorkshire.

The Shared Prosperity Fund replaces the £2.1bn a year the UK received through its membership of the European Union and will be used to “reduce inequalities between communities”.

Boris Johnson’s government won its majority on the back of making major gains in Yorkshire and the North in the 2019 General Election, after promising to ‘level up’ the country by investing in the economy outside London and the South East.

Since then critics say little has been achieved to fulfil the promises by by the Prime Minister and his allies.