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UPDATE 2-Extending UK furlough would trap people in false hope, finance minister says

Fri, 7th Aug 2020 07:50

(Recasts, adds details)

By Andy Bruce and Kate Holton

LONDON, Aug 7 (Reuters) - Extending Britain's furlough
scheme would leave some workers trapped in false hope that they
could return to their jobs after the coronavirus pandemic,
British finance minister Rishi Sunak said on Friday.

With redundancies mounting, opposition politicians and think
tanks have said Sunak should extend the Coronavirus Job
Retention Scheme - due to expire at the end of October - until
the economy is strong enough to support more at-risk workers.

Sunak has said there is no question of a wholesale extension
of the programme and he was backed up by Bank of England
Governor Andrew Bailey on Thursday.

"It's wrong to keep people trapped in a situation and
pretend that there is always a job that they can go back to,"
Sunak told BBC Radio Scotland.

He said the government had taken action to provide people
with new opportunities, including apprenticeships and training
during what "is unquestionably going to be a difficult time".

Last week the National Institute of Economic and Social
Research, a major think tank, said closing the furlough scheme
early would be a "mistake" that would cause surging
unemployment.

Extending the scheme would largely pay for itself by
averting job cuts, NIESR said.

The BoE said it estimated 7.5 million workers had benefited
from the furlough scheme at its peak, and that 4 million had now
returned to work, while 3.5 million were still on furlough.

Governor Bailey said on Thursday that some parts of the
economy would no longer be viable once the fallout of the
pandemic clears - with hospitality and leisure looking
especially vulnerable.

LAY-OFFS SURGING

Major British companies have already announced tens of
thousands of redundancies.

Bailey said on Thursday that the central bank's projection
for an unemployment rate of 7.5% this year was a "very bad
story" for the British public, and warned that it could turn out
worse than that.

Sunak told Times Radio that Britain cannot sustain the level
of borrowing it has undertaken to support the economy through
the pandemic and warned of difficult decisions ahead.

"The appropriate thing is to be bold and decisive in the
response and try and protect as much of the economic capacity we
have as possible. We can borrow this year to do that," Sunak
said.

"That's not something we can or should sustain."
(Editing by Guy Faulconbridge)

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