UK Government Chancellor Rishi Sunak is putting a “Westminster shaped straight jacket on Wales” by tapering off the coronavirus furlough scheme, a Welsh MP has said.
Ceredigion MP Ben Lake said that the Chancellor was ignoring regional and sectoral vulnerabilities by announcing cuts to Covid support schemes.
Labour have also warned against a “one size fits all” approach to different sectors.
The UK’s coronavirus furlough scheme will then finish completely at the end of October, the Chancellor confirmed today.
Rishi Sunak has previously announced that he will cut the furlough scheme from 80% to 60% of a persons salary being financed by the Government.
From August, employers must pay National Insurance and pension contributions, then 10% of pay from September, rising to 20% in October.
Ben Lake MP said that while there is a growing “debt burden” for businesses withdrawing support “is like opening a trapdoor underneath them”.
“The Chancellor risks undermining the hard work that has been done to save many jobs during this pandemic,” the Plaid Cymru MP said.
“Companies are facing a growing debt burden and many are clinging on by their fingernails. Some businesses may not even be out of lockdown when the Chancellor starts to bring the furlough scheme to an end. They simply will not survive.
“It is disappointing that the Chancellor failed to recognise regional and sectoral differences, let alone the fact that the status of the outbreak in London is not the same as the current situation in Wales.
“Businesses in Wales may well need support for longer due to the way in which the outbreak has progressed across the UK, and certain sectors, such as tourism and hospitality, need support to ensure that they are able to survive the loss of a large portion of their season.
“The Chancellor needs to remember that he acts as the Chancellor for the four nations of the UK, and that an approach that suits the needs of London will not necessarily work for Wales. For the sake of public health and the health of our economy, we must not see a rushed end to these vital measures.
“In effect, the Chancellor has imposed a Westminster shaped straightjacket on Wales.”
Under Friday’s changes, furloughed workers will continue to get 80% of pay until the end of October, but by then a fifth of their salary will have to be met by employers.
“Then, after eight months of this extraordinary intervention of the government stepping in to help pay people’s wages, the scheme will close,” Mr Sunak said.
Asked if he would “switch the furlough scheme back on” in the case of a second peak in cases and the reintroduction of lockdown measures, the chancellor said the scheme “as it stands in a national way, in the way that it is designed” will end in October.
“Eight months, as I said, is I think a generous and long period of time,” he said.
Employers’ claims under the scheme have reached £15bn so far, however the scheme is expected to cost a total of around £80bn, or £10bn a month.
The Office for Budget Responsibility is set to publish detailed costings next week.
‘One size fits all’
Labour welcomed the changes to coronavirus income support schemes announced today by the Chancellor – but warned the government against a ‘one size fits all’ approach.
Commenting on these changes, Anneliese Dodds said: “It is welcome that the government has heeded Labour’s calls for a more gradual introduction of the employer contribution to furlough, the introduction of flexibility within furlough to allow part time working, and the extension of the self-employed scheme.”
But the Shadow Chancellor expressed concern that a “one size fits all approach” was being adopted to coronavirus support programmes over the coming months despite the varying impact on different sectors.
“However, it is concerning that there is no commitment within these plans for support to only be scaled back in step with the removal of lockdown. Nor is there any analysis of the impact on unemployment of a ‘one size fits all’ approach being adopted across all sectors.
“The Chancellor must publish the evidence behind these decisions to provide reassurance that his proposals won’t cause an additional spike in unemployment, and an even more difficult economic recovery from this crisis.”