The furlough scheme must be pared back to encourage employees back to work and protect the public finances, a leading think tank has warned.
Cutting the percentage of workers' wages paid by the state under the programme from 80pc to either 70pc or 60pc would make it more sustainable, said Paul Johnson, director of the Institute for Fiscal Studies (IFS).
The current rate – which could cost Britain £42bn over three months according to the Office for Budget Responsibility – “may be more generous than is necessary in the slightly longer term”, Mr Johnson said.
It is even feared that the furlough scheme could itself put the economic recovery at risk if allowed to drag on too long, because workers at failing firms will not have to seek new jobs elsewhere.
Speaking on a conference call with journalists and researchers, Mr Johnson said: “The judgement there is about cost versus the amount of incentives to move into work versus the impact on the individuals.
“If you move too slowly, you lock people into these sectors and jobs where actually there isn’t much hope of them continuing to stay in employment. It’ll cost you a lot more and you may delay recovery.”
IFS research shows that more than 75pc of workers in the accommodation and food services industries have been furloughed, with proportions almost as high in arts, entertainment and recreation.
These jobs are unlikely to return in large numbers immediately after the lockdown is lifted as pubs, restaurants, theatres and gyms will be among the last companies allowed to start back up.
Ministers must balance the offer of vital support for workers who would otherwise lose their jobs with a need to protect the public purse and avoid running up massive debts that could take decades to pay off.
Former Labour chancellor Alistair Darling warned that the Government could trigger mass unemployment unless it continues to pay the wages of a large proportion of the workforce until the end of the year.
Lord Darling, who ran the economy during the financial crisis, told BBC Radio 4's Today programme: “Having seen what happened in the 1980s, when the Government basically stepped back and said, ‘Look, these people will take care of themselves’ – it doesn’t work.
“The furlough scheme was a very good scheme – it was just what was needed – but it needs to be adapted now. We really have to factor in the very strong possibility that there will be people who will not be able to go back to their own jobs and we do not want to find that they go from furlough to redundancy."
He stressed that it would take time for furloughed staff to go back to their jobs and also suggested a short-time work scheme – as is offered in countries such as Germany and Sweden – under which employees can do fewer hours than normal while continuing to be supported by the Government.