Govt warned closing furlough may lead to 10% unemployment’

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LONDON: An economic research group has warned the government that closing the government scheme which is paying furloughed workers’ wages is a”mistake”.It could push unemployment to 10% this year, the research suggests.

The latest furlough figures show 9.5 million people are using the scheme, the same as a week ago, and at a total cost of £31.7bn to the Treasury. But those figures are likely to drop quickly, says the National Institute of Economic and Social Research (NIESR).

Chancellor Rishi Sunak

“The planned closure of the furlough seems to be a mistake, motivated by an understandable desire to limit spending,” said Garry Young, NIESR deputy director.”The scheme was intended by the chancellor to be a bridge through the crisis and there is a risk that it is coming to an end prematurely.

“The scheme has been an undeniable success in terms of keeping furloughed employees attached to their jobs.”

The Treasury says the scheme will have protected millions of jobs for eight months when it comes to a close. “It is in no-one’s long-term interests for the scheme to continue forever and right that state support is slowly reduced as we focus on getting furloughed employees back to work,” it said in a statement.

Earlier this month Chancellor Rishi Sunak said he was sorry he could not protect every job. He also admitted that some of the £1,000 bonuses being offered to take back furloughed staff would go to firms that were already keeping workers on.

From August, employers must pay National Insurance and pension contributions, then 10% of pay from September, rising to 20% in October.

Workers are having 80% of their salaries paid for by the government – up to £2,500 a month – under the scheme, which was originally intended to last until the end of July.

NIESR’s research suggested that UK economy could shrink by 10% this year and is unlikely to recover until the end of 2023.