Chancellor Rishi Sunak has announced that the scheme for paying the wages of employees on leave will be extended until October.
The chancellor also confirmed that workers will continue to receive 80% of their monthly wage packet up to £2500.
However, from August, the government will request companies to ‘start sharing’ in the costs of the scheme.
The scheme has a total cost of around £14bn a month, covering 7.5 million people - about 25% of the UK workforce.
Sunak said that even though the scheme will continue for all sectors and regions, the scheme would support the transition back to work by operating with greater flexibility from August.
This includes employers who are taking advantage of the scheme being able to bring their employees back on a part-time basis.
The full details are yet to be worked out, but Sunak said that he will slowly reduce the cost of the subsidy scheme to the taxpayer.
However, the Treasury still anticipates having to pay more than half of the cost between August and October according to sources speaking to the BBC.
The chancellor told the Commons: "I'm extending the scheme because I won't give up on the people who rely on it.
"Our message today is simple: we stood behind Britain's workers and businesses as we came into this crisis, and we will stand behind them as we come through the other side."
Mr Sunak told the BBC that the number of people becoming unemployed as a result of the lockdown “breaks my heart... that's why I'm working night and day to limit the amount of job losses.”
Concerns have been growing about the total cost of the furlough scheme, with Sunak saying last week that it cannot continue in its current form. However, the chancellor was under increasing pressure to make changes to avoid employers making mass redundancies.
Sunak also rejected claims that extending the furlough may make some people ‘addicted’ to it: "Nobody who is on the furlough scheme wants to be on this scheme. People up and down this country believe in the dignity of their work, going to work, providing for their families, it's not their fault their business has been asked to close or asked to stay at home.”
The changes were welcomed by Anneliese Dodds, the shadow chancellor, saying: “At least we are moving in the right direction.”
However, Dodds added that the ‘big elephant in the room’ is what exactly the government's employer contribution will entail.
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