Chancellor Rishi Sunak has defended his job retention bonus scheme after MPs questioned its value for money.
The policy – which was announced last week – will see the government pay employers £1,000 for every furloughed worker they retain past January.
MPs on the Treasury Committee described the scheme as “badly-timed and poorly-targeted”.
But Mr Sunak said he believed it would “serve as a significant incentive” to preserve jobs amid the pandemic.
The bonus was unveiled last week as part of a £30bn plan to prevent mass unemployment, which also includes a VAT cut for the hospitality sector and a 50%-off discount for people who eat out in August.
However, the most senior civil servant at HM Revenue and Customs (HMRC), Jim Harra, wrote to the chancellor last week, querying the bonus scheme’s efficacy.
And the influential Institute for Fiscal Studies think tank warned: “A lot, probably a majority, of the job retention bonus money will go in respect of jobs that would have been, indeed already have been, returned from furlough anyway.”
On Wednesday, Labour MP Angela Eagle heaped more pressure on the chancellor, warning him that scheme risked being “deadweight” – or spending taxpayers’ money for no benefit.
“Surely you could have had less deadweight if you’d have focused support on different sectors, why didn’t you do that?” she asked.
Labour MP Rushanara Ali meanwhile suggested the bonus would not stop a surge in unemployment and could end up funnelling money to already-rich companies.
She also questioned whether it would benefit smaller businesses.
But Mr Sunak said he firmly believed the scheme “will and can make a difference”, rejecting suggestions it should have been “more targeted” as impractical.
“I think the way it is designed, particularly for those who are lower paid, it will serve as a significant incentive and reward to those especially small and medium sized companies to protect employment,” he told MPs.
He added that original government furlough scheme – which is paying 80% of the wages of more than nine million workers – was also labelled as “deadweight” when first announced.
“I think most people now think it was a good and sensible scheme that has helped protect millions of jobs,” he said.
Retail giant Primark recently said it would not take advantage of the job retention bonus scheme, sacrificing a potential £30m payout.
The firm placed around 30,000 workers on the government’s coronavirus job retention scheme who have now all been brought back to work.
“The company believes it should not be necessary therefore to apply for payment under the bonus scheme on current circumstances,” a spokesperson said.
There are currently 9.4 million on the government’s furlough scheme who, if they all returned to work, could cost the public purse more than £9bn in bonus payments.