Rishi Sunak is expected to move to protect jobs on Thursday as the opposition insisted more needed to be done to bolster the economy in the wake of the Covid-19 crisis.
The Chancellor will address the Commons after cancelling this year’s Budget.
With the furlough work scheme set to finish at the end of October, he is set to announce measures aimed at protecting millions of jobs in sectors hit by the latest Government guidance on coronavirus.
The intervention comes after increasing pressure from business groups, MPs and unions to extend the furlough scheme as stricter restrictions are introduced.
Number 11 said work on the scheme, first revealed by the Chancellor on Twitter, had been taking place in parallel with Budget preparations and the focus has been on jobs to avoid the expected three million unemployed.
The Treasury said: “We will always be honest with people about the difficult trade-offs that are involved here.
“Not between health and the economy, but between keeping people in jobs and helping them find new ones. And between help in the here and now and rebuilding in the future. That’s what people deserve.”
The Chancellor initially announced his move via Twitter, with a graphic titled “Winter Economy Plan”.
Mr Rishi’s initiative will include VAT cuts, loans for hard hit businesses and wage subsidies, according to reports.
The moves come after Prime Minister Boris Johnson said the country could have to deal with up to another six months of coronavirus restrictions.
Labour’s shadow chancellor Anneliese Dodds said she had called for Mr Sunak ‘to U-turn on his one-size-fits-all withdrawal of furlough’ 40 times.
As our response to coronavirus adapts, tomorrow afternoon I will update the House of Commons on our plans to continue protecting jobs through the winter. pic.twitter.com/eP6aqcocxd
— Rishi Sunak (@RishiSunak) September 23, 2020
Leader of the opposition, Sir Keir Starmer, said that new Covid restrictions were the result of Government failures.
The mooted plans would reportedly see the Government and firms share the cost of topping up wages for employees only able to work part-time due to the pandemic.
Ministers are desperate to avoid a second lockdown and the associated economic damage, with early indicators suggesting the recovery has slowed.
One option reportedly being considered to replace the furlough scheme is Germany’s Kurzarbeit, or shorter work-time policy, under which firms can cut working hours in economic downturns with the state replacing part of their lost income.
Another proposal put forward by the CBI business group would see subsidies for firms that can offer staff at least 50% of their normal hours, with the cost for non-working hours shared equally by the company, the Treasury and the employee.
At Prime Minister’s Questions, Mr Johnson was repeatedly challenged about the looming prospect of support being withdrawn from firms and workers despite the prospect of the latest restrictions being in place for six months.
The furlough scheme has cost the Government £39.3 billion to date, with £3.9 billion between August 16 and September 20 alone, according to the latest figures released.