(Bloomberg) -- Chief Secretary to the Treasury Steve Barclay announced new cash grants for companies forced into local coronavirus lockdowns, while rejecting opposition calls to extend the U.K.’s furlough program.
Smaller companies will get a 1,000-pound ($1,300) grant for each three-week period they’re required to shut due to the pandemic, with bigger ones getting 1,500 pounds, Barclay told the House of Commons on Wednesday.
“This new support will give closed businesses a lifeline through the difficult but temporary period of lockdown,” he said.
Boris Johnson’s government is trying to prevent the pandemic surging back to levels seen earlier in the year, when more than 900 people died a day at its peak, while also getting the recession-hit economy back up and running.
“We have entered an acute recession on a speed and scale we’ve never seen before,” Barclay said. “An economic crisis on this scale means that whatever the government does, that jobs will be lost, businesses will close, and as the chancellor said last month, hard times are here.”
Furlough
The opposition Labour Party urged the government to extend wage support for the hardest-hit sectors of the economy after its flagship furlough program ends on Oct 31. Economists have warned of a wave of job losses as a result of ending the plan, under the which the state has paid as much as 80% of wages for more than 9 million furloughed workers.
“Our country is in the grips of a jobs crisis, a crisis that will intensify if the Conservative government does not change course,” Anneliese Dodds, Labour’s economy spokeswoman, told Parliament. “The chancellor is plowing ahead with his one-size fits all withdrawal of the income support schemes, pulling the rug from under thousands of businesses and millions of workers all at the same time, irrespective of their situation.”
Barclay said continuing the program would only serve to keep people “trapped in a job that only exists because of the furlough scheme.”
“We need to focus now on providing people with new opportunities rather than offer them false hope that they will always be able to return to the same job that they had before,” he said.
The Office for Budget Responsibility estimates the furlough plan will end up costing the government 47 billion pounds in the current tax year. Barclay said “dramatically increasing” borrowing and the public debt had been the right approach given the coronavirus crisis, but “over the medium term, it is clearly not sustainable to continue borrowing at these levels.”
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