Jobs bailout 'to cost £40bn' as government braces for avalanche of phone calls

The UK’s coronavirus wage subsidy scheme may cost taxpayers £40 billion as more companies take it up than expected.

The Resolution Foundation think tank says the Job Retention Scheme could result in a third of private sector employees  – between 8million and 11million people – being “furloughed” on up to 80% pay.

It comes as tax officials race to prepare their systems for the scheme’s launch in 12 days’ time – when firms will formally ask for cash to subsidise their staff.

It is only companies and bosses, not their workers, who have to ask for the money from HMRC. If you are furloughed, it’s your employer’s responsibility to give you the money.

But Britain’s tax chief warned people may have to delay calling HMRC while 5,500 call handlers, plus the government’s web servers, deal with hundreds of thousands of requests per hour from business owners.

The scheme was designed to support jobs during the three month lockdown.

It was widely welcomed by firms which have seen their incomes plummet and need help to stay in business and keep staff on.

The Treasury had estimated around 10% of businesses would furlough staff.

But figures from the British Chambers of Commerce, analysed by the Resolution Foundation, suggest take-up could be three times higher than expected.

The BCC found that nearly one in five smaller firms plan to furlough staff.

That means putting them on a leave of absence but continuing to pay them, with 80% of their wages up to £2,500 a month reimbursed by the Government.

The Resolution Foundation calculated that if that pattern is repeated across the economy, then the scheme will cost £30-£40bn over three months.

BCC director general Adam Marshall told the BBC: “So many businesses around the country need cash quickly.

“If they don’t receive some of the funding urgently by the end of this month, many of them are going to have to take drastic steps.

“I’m afraid that we would see an increase in the rate of business failures. And we’d see a lot of otherwise viable companies going to the wall.

“That’s why it’s so important that the furlough scheme and the other government support schemes get cash out to the front line as quickly as possible.”

Although expensive, the social cost of millions going unemployed without the Government guarantee would be “far, far greater”, Mr Bell said.

Without it, workers face “catastrophic hits to their living standards”, he said.

It comes as thousands of tax officials work flat out to prepare the scheme for its April 20 opening date after it began limited testing today.

The UK’s tax chief admitted it is “quite uncertain” how many people will be furloughed or for how long.

HMRC chief executive Jim Harra said government servers have been tested for 450,000 claims an hour, and will be open 24/7.

But he admitted it will be a “challenging and testing period” with “very high volume” of claims – and if most claims come within a few days, staff will “struggle”.

“I’m sure we will be calling on people’s patience”, he told the Commons Treasury Committee.

“Obviously if a million employers all try to ring us on the same day it will not be possible for me to deploy enough resources to handle all those calls at the same time.”

Mr Harra warned taxpayers may be asked only to call HMRC about emergencies or the job retention scheme, and nothing else, during the peak week.

The job retention scheme will open in full on April 20 and payments will take four to six working days to arrive after the date of claim.

There will be 5,500 staff to man a helpline including 3,500 redeployed from other areas in government.

Mr Harra said “time has been the enemy of perfection” and a similar scheme without an emergency would have taken “a year or two” to set up.

And he admitted the hurried scheme has prompted a “range of fraud and abuse risks”.

“Any scheme that involves paying out money I’m afraid attracts criminals who want to exploit it,” he told the Treasury Committee.

“We’re going to be paying out a vast sum of money in a very rapid period of time.

“Any scheme like this is a target for organised crime.

“We believe we’re striking the right balance between protecting the Exchequer from that kind of abuse, and the imperative to get help out to those who need it as fast as we possibly can.”