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Rishi Sunak to extend furlough scheme beyond December as Bank of England pumps £150bn into economy
BANK of England chiefs have agreed to pump £150 billion of extra money into the economy as England’s second lockdown starts today.
And Rishi Sunak will make it a double bazooka by promising to keep the Government’s latest Covid bailout schemes in place even after the lockdown ends on December 2.
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The Chancellor is expected to announce the 80% furlough scheme will continue to be on offer in any area of the UK that faces the highest level of Covid restrictions - including Tier 3 areas of England.
The £150billion boost to the Bank of England's programme of quantitative easing is on top of the £100billion cash injection it agreed on in June.
It takes its mammoth quantitative easing (QE) bond-buying programme for the Covid crisis to £875billion.
The Bank's economic forecasts are even gloomier than expected too, as it slashed its predictions of recovery amid fears the new lockdown will push the UK economy into a double-dip recession.
What is quantitative easing?
QUANTITATIVE easing is a process that allows the Bank of England to print more money.
The process sees the Bank buy government bonds from investors, pumping money into the economy in the process.
It does this to help keep inflation low, which in turn should encourage people to spend if prices are low, which should result in more money flowing to businesses and through the economy.
QE also tends to make it cheaper for households and businesses to borrow money by indirectly causing interest rates to fall, which again encourages spending.
The Bank will keep interest rates at 0.1 per cent - holding off from taking the unprecedented move of negative interest rates for now.
Mr Sunak will lay out how the furlough scheme, which was extended until December 2 to pay 80 per cent of wages, will continue to be on offer for future lockdowns in Scotland, Wales and Northern Ireland - even if the measures aren’t replicated in England.
And he is also expected to announce that the 80% wage subsidy scheme will be on offer for specific regions hit by Covid restrictions.
Boris Johnson has said the 28-day lockdown that starts tomorrow will be replaced with the regional approach of Tiers next month, which is likely to see areas such as Greater Manchester stay in the highest Tier 3 restrictions.
Previously, the Government said furloughed workers in Tier 3 areas would only get 60 per cent of their costs.
But asked if they will now see their incomes drop from the 80 per cent rate during the national lockdown, the PM told MPs: “They are not going to. The furlough scheme was extended until the end of October.
"We are putting in measures now to support people across the whole UK throughout this period until 2 December, and that is the right thing to do.
“We are putting our arms round the people of this country to get them through the pandemic and beyond.”
Meanwhile, the British Beer & Pub Association has urged the Government to provide more longer-term support to boozers over fears 12,000 could be permanently shuttered in the second lockdown.
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Emma McClarkin, Chief Executive of the British Beer & Pub Association, said: “As our sector enters this second lockdown, we are fearful for the future.
"It is clear more support is going to be needed so our sector can get over this latest hurdle of a second lockdown and the inevitable further hit on consumer confidence. "
They're also called for Mr Sunak to cut beer duty, continue VAT reduction and an extension of the Business Rates holiday.
Governor of the Bank of England predicts UK economy will 'end this year probably around ten percent below where it was last year' after releasing £150bn for crisis support
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