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Fri 11th Sep 2020 - MPs urge targeted extension of furlough as UKHospitality warns cliff-edge end risks at least 350,000 jobs
MPs urge targeted extension of furlough as UKHospitality warns cliff-edge end risks at least 350,000 jobs: Chancellor Rishi Sunak has been urged by MPs to extend the taxpayer-funded furlough scheme for businesses with a chance of surviving the coronavirus storm. Sunak should “show flexibility” and target companies that are still viable when the existing programme ends in October, members of the Treasury select committee said in the second report of its inquiry into the Economic Impact of Coronavirus – the Challenges of Recovery. Critics have warned in its current form – where it has been available to all companies, paying up to 80% of employee wages if they are temporarily unable to work – furlough allows even failing “zombie” businesses to struggle on. But the committee said the chancellor should “carefully consider” whether a targeted extension was needed for furlough, which has protected 9.6 million jobs so far at a cost of £35bn. UKHospitality estimates at least 350,000 jobs could go in the industry with a cliff-edge end to furlough at the end of October, while other groups argue a slower tapering of the existing scheme could soften the blow this winter. Select committee chairman Mel Stride said: “This requires a very difficult set of judgments; it is where careful analysis and creative thinking will be critical. As the committee has said throughout the crisis, the chancellor must continue to show flexibility in his approach.” Business leaders and MPs across the political divide have called for a more targeted successor scheme aimed at sectors hardest hit by covid-19, including the hospitality industry. It is feared the economy will be hit hard by a new ban on socialising in groups of more than six. The new rules are likely to dent demand after a strong August in which sales at managed pub, bar and restaurant firms bounced back to 2019 levels due to the Eat Out To Help Out subsidy scheme, according to the latest Coffer Peach Business Tracker. The MPs suggested funding already announced by the Treasury could be shifted towards such a targeted extension, including the job retention bonus scheme, which hands companies £1,000 for every employee they retain up to January next year. The committee argued this would lead to “deadweight cost” because many of these employees would have been kept on anyway. The Office for Budget Responsibility forecasts unemployment rising to more than 10% next year, more than double the current 3.9%.

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