Ending the furlough scheme prematurely would be economically reckless and would put millions of jobs at risk, argues Terina Hine.
The coronavirus job retention scheme - or furlough scheme - is due to come to an end on 31 October, putting over two million jobs at risk. This is on top of the 1.5 to 2 million jobs already lost since March.
According to the Institute for Employment Studies, since the beginning of the pandemic 5% of workers have become unemployed. Nothing like this has been seen since official labour market monitoring began almost fifty years ago. To add another 2 million to these figures would be catastrophic.
At present there are no plans for the furlough scheme to be extended, no plans for business or worker support during local lockdowns and no plans for dealing with a second coronavirus wave. The government appears to believe the world should return to how it was and stay that way. Yet with nearly all sectors of the economy operating way below capacity due to Covid restrictions, let alone a second wave, it is impossible to see how most businesses could survive without significant government intervention.
Our European neighbours are, one by one, announcing extensions to their job retention schemes, yet the UK is keeping up its tough approach with the end date apparently set in stone. France, Spain and Italy have all extended their schemes and Germany looks set to do so in the next few days. But Chancellor Rishi Sunak, morphing from his spring time dishy-Rishi image into a more seasonally appropriate ghoulish one, claims the Halloween end date will hold.
If the furlough scheme ends at Halloween, jobs and businesses, already shadows of their former selves, will become mere apparitions. November will dawn to job loss upon job loss, business closures and bankruptcies. The government, fully experienced in the art of the U-turn, must act now.
This non-intervention policy does not even make economic sense. Rather it is a political choice which sacrifices workers for the myth of the market and promotes a small state model at the expense of the economy.
Extending the furlough scheme until the middle of 2021 would, according to the National Institute of Economic and Social Research (NIESR), require an outlay of £10bn, but would most likely pay for itself. The NIESR has pointed out that without such an extension unemployment benefits will rise at an unprecedented rate, add to this the loss in tax and NI revenue and subsequent reduction in spending and the £10bn cost could easily be surpassed. The truth is the furlough extension might not cost anything at all.
Sunak’s intransigence has added to the deepening divisions within the union. The devolved administrations do not agree with the government’s libertarian approach. Welsh ministers have accused the government of putting a “Westminster taped straight jacket” on Wales, while the SNP’s Ian Blackford has warned ending the scheme would be a “grave mistake”.
But Sunak, supported by his boss Boris Johnson, is refusing to budge. Johnson, in a rare statement, said he wants an end to workers being kept in “suspended animation”, and that the furlough scheme stopped people “actually working” – not actually working being the one thing Johnson knows all about.
The Bank of England has also offered Sunak support, suggesting extending the furlough scheme would keep workers in unproductive jobs when they should instead be helped to “move forward”.
Of course, moving forward (rather than backwards) is generally a good thing. Although having some thoughts as to where one could move to might help. To suggest people “move forward” when a) the pandemic hasn’t ended, b) there are no jobs to “move forward” to, and c) many of the jobs being lost are in perfectly viable businesses, is not really helpful.
The tapering of the coronavirus furlough scheme began in July, as employees were encouraged to go back to work part-time. In August, employers were required to pay NI and pension contributions, and in September employers will need to cover 10% of salaries, rising to 20% in October. Consequently, a recent poll has suggested that a third of employers are intending to make job cuts in September.
The Institute of Public Policy Research (IPPR) has warned that up to three million jobs will “still be on life support” when the scheme finishes at the end of October, two-thirds of which are viewed as sustainable in the long term. They are neither unviable nor unproductive.
We should not be debating whether a furlough scheme should exist but which scheme will best serve workers and prevent further hardship. Different models for taking the furlough scheme forward have been suggested: from the IPPR coronavirus work sharing scheme (CWSS), to one based more closely on Germany’s Kurzarbeit scheme. Instead our government is stuck in its fantasy world where the market knows best.
We have seen how the government’s resolve collapses under pressure. So pressure must be brought to bear. Forensic Sir Keir resists criticising the government as much as possible, and although Labour have raised concerns, Starmer has stressed that it would be wrong to continue with the current scheme, and has failed to provide a suitable alternative.
The one thing we do know for certain is that the cost of allowing the market to run wild at this time will be fatal. The coronavirus crisis is not going to suddenly disappear on October 31, and neither should the economic support.
If the furlough scheme comes to a sudden end, as is currently planned, there will be a social and economic crisis on a scale unseen in most people’s lifetime. It is up to us, to activists and trade unionists, to apply the pressure needed to help the government achieve its 12th Covid U-turn.
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