The 80% furlough scheme has been extended until the end of March for any firm hit by local or national lockdowns, chancellor Rishi Sunak has confirmed in a major U-turn.
Speaking in the Commons, the chancellor pointed to a “worsening economic backdrop” as England’s second national lockdown begun.
Sunak said the government’s highest priority remains “to protect jobs and livelihoods”.
The decision to extend the furlough scheme will be reviewed in January.
The government has also said that, iund people who lost their jobs when furlough ended in October can be re-employed and re-furloughed by their employers.
It comes amid fears the pandemic will spark mass joblessness due to the hit to the economy.
Boris Johnson had previously confirmed that the 80% furlough, which sees the government pick up the wage bill for those forced out of work during restrictions, would restart in England in November, as the country goes into lockdown, until December 2.
But Sunak’s announcement extends the scheme until the end of March and follows furious rows between the government and Greater Manchester mayor Andy Burnham over ministers imposing a much-inferior 67% emergency wages scheme in areas facing tier 3 local lockdowns.
The first ministers of Scotland and Wales, Nicola Sturgeon and Mark Drakeford, had also hit out at the Treasury amid reports other national lockdowns would not see the 80% scheme attached.
As during the first lockdown, payments will be capped at £2,500 a month.
Sunak said the support the government was offering would protect “millions of jobs”.
“In the face of such an unprecedented crisis, the government must be flexible to ever-changing circumstances,” he said.
“It is not a weakness to be agile and fast-moving in the face of a crisis, but rather a strength and that will not change.”
He also rejected suggestions that the government has treated workers in the north of England as “second-class citizens” in recent weeks.
Labour’s Margaret Greenwood, who represents Wirral West, challenged Sunak in the Commons: “Can the chancellor explain why workers in the north were expected to get by on 67% of their pre-crisis wages when tier 3 restrictions were put in place but that has now changed to 80% once areas in the south are being locked down?
“And will he give a cast-iron guarantee to people in Wirral West that workers in the north will never again be treated as second-class citizens?”
Sunak replied it was a “misrepresentation” to say people were not being treated equally, adding: “It’s simply not the case that the wage support schemes we’ve put in place differentiate between people on the basis of where they live.”
Conservative MP Peter Bone, meanwhile, questioned how the country will pay for the “unprecedented” support.
Congratulating the Chancellor on “the enormous amount of help” he has provided, Bone added: “But could the chancellor tell us how the country is going to pay for that support?”
Sunak replied that “in the short-term”, the cash would come from “extensive borrowing”, and added: “Now, that is not a sustainable situation, so as we continue to recover and grow we will have to make sure we reduce our structural deficit over time in line with the recommendations from the IMF to stabilise that.
“In the first instance, that will come through growth, but also we’ll need to make sure that our public finances are balanced appropriately ensuring that we can pass a strong economy onto the next generation.”
Editor’s note: An earlier version of this story incorrectly stated that the furlough extension would only cover businesses shut down in “Tier 3” lockdown areas that had been forced to close. In fact, it is open to any firm hit by Covid-19 restrictions.