Boris Johnson is facing a Tory revolt over failure to protect millions of workers from redundancy during the coronavirus crisis, with a former cabinet minister urging the state to start paying wages.

Greg Clark, the ex-business secretary, said ministers should fund workers’ pay if firms continuing to employ staff as he warned that the government’s loan scheme was “not enough” to save jobs.

He said firms were being forced to make “irreversible” decisions, adding: “If the government does not act immediately, large numbers of people will be unemployed.

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“Registering them will put huge pressure on the welfare system, vital skills will be lost and good businesses will cease trading, who themselves will be the customers and suppliers of other businesses.”

Mr Clark said all employers pay tax for employees through Pay As You Earn (PAYE), which should be flipped and paid back to firms “if, and only if, they continue to employ their staff.

He added: “Separate arrangements would need to be made for the self-employed, but at a stroke this would save people’s jobs, save businesses and put an immediate end to the risk of contagion and help save the economy.”

Other senior Tories lined up to demand further action, with former party leader Sir Iain Duncan Smith, the architect of universal credit reforms, calling for moves to speed up welfare payments.

“You could change the benefit rates allowing the greater expanse of money to flow. This could be done today,” he told the Treasury minister John Glen.

Veteran MP Sir Bernard Jenkin said the package was “simply not going to be enough” and urged the government to listen to Conservative “die hards” calling for radical change.

He added: “Can I urge the government to say something today to give people assurance that the help will come?”

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Mr Glen, a junior Treasury minister, said the government was prepared to do whatever it takes to support workers in the face of repeated criticisms from all sides.

Top: Nabi Younes market, Mosul

Bottom: Charles Bridge, Prague

Top: Nabi Younes market, Mosul

Bottom: Charles Bridge, Prague

He said: “I recognise that the package of measures that we’ve put out with respect to statutory sick pay, easier access to universal credit and ESA, the business rates relief, the small business grant facility, the local authority hardship funds, and the HMRC forbearance measures, will for some not feel at this point sufficient.

“But (Mr Clark) will also know from his experience in government that it’s very important that when the government announces the measures that we wish to take to assist with supporting employees, that they need to be effective and work.”

Peter Dowd, Labour’s shadow Treasury minister, said: “People are asking us why Denmark had its first coronavirus case on February 27 and New Zealand its first case on February 28, four weeks after our first case, so why have Denmark and New Zealand announced comprehensive job protection plans though they had their first cases four weeks after us – while we’ve announced nothing to secure people’s jobs and wages?”

Mr Glen said the UK is “looking at the furlough system” and proportion of support available while also examining other systems around the world.

Asked by the SNP about a universal basic income scheme, Mr Glen said the government is “looking at that”, before adding: “The issue there is will it help the most affected most urgently?

“Many of us in this House, for example, would not require such support and we’ve got to make sure we target at the most vulnerable.”

It comes after Rishi Sunak unveiled a package of £330bn package of government-backed loans and more than £20bn in tax cuts to help firms threatened by the outbreak – the largest injection of emergency state support for business since the 2008 financial crash.

Meanwhile, Labour leadership contender Sir Keir Starmer has called for workers to have their incomes guaranteed through a new national scheme, where government loans would be tied to job protection.

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