Sunak’s scheme will mean millions are made jobless and the movement should reject it, argue Susan Newman and Chris Nineham
1Sunak’s so-called ‘Job Support Scheme’ will only support those who are working at least 33% of their normal hours. The vast majority of furloughed workers are just being dumped.
2This is not aimed to help people in need. It is a subsidy to businesses to keep functioning by holding on only to those employees who they believe will be ‘useful’ to them in the future.
3Unlike the earlier furlough scheme where the government provided an 80% salary subsidy to employers while workers are off work, the new scheme sees the government and employers paying 1/3 of a worker’s wage for 2/3 of the week when they are not in work – furloughed part-time. A worker will have to work 1/3 of the week to qualify and will receive their full wage for this, which together with the part-time furlough amounts to about 77% of their full-time wage.
Sunak’s new scheme will slash government support per job to a maximum of 22%, leaving the employer to cover 55% (a third of non-working pay). So the incentive to keep employees on is low.
4 More than 3 million people are currently believed to be on the furlough scheme. There is no indication what proportion of these are likely to transfer over. When asked neither Dame Carolyn Fairbairn, director general of the CBI, nor TUC general secretary Francis O’Grady, both supporters of the scheme, would even give an estimate of the number likely to be made unemployed when the scheme ends. According to Fairbairn, ‘There will be fewer job cuts than if we had not had this scheme,’ - hardly a ringing endorsement.
5 Despite their close involvement in Sunak’s plan, the TUC actually accepts this measure will do little to stop surge in job cuts, but they have apparently had no promises on any other measures to deal with mass unemployment.
6 The scheme is much less generous than many European equivalents, including the German Kurzarbeit (“short-work”) scheme it has been compared to. The Kurzarbeit had been credited for mitigating the extent of job losses and skills retention in Germany in the wake of the 2008/9 crisis and was reintroduced in Germany in March and recently extended to 24 months.
It provides an income “replacement rate” of 60% immediately, stepping up to 80% for workers furloughed for more than seven months. In France, employees will get 60% of their normal gross wages from October 1st under its furlough scheme – down from 70% at the moment – with the state covering 60% of the cost for employers, reduced from the current 85%. There will be a job retention scheme on top of that, only in France the state will reimburse companies for up to 85% of the cost if registered before October 1st, and 80% thereafter.
If anything, the UK’s furlough scheme would have to be far more extensive to mitigate unemployment in the same way because compared with Germany where the manufacturing base is larger, the UK labour market is a disaster. Low official unemployment figures in early 2020 masked the extent of underemployment and prevalence of zero hours contracts and other precarious work arrangements. Moreover, the UK economy is built upon so-called “low-skilled” low-paid jobs in the service sector where it is unlikely that employers would wish to pay out to retain workers. It would be easier to let the go and rehire later. This scheme will disproportionately benefit higher paid workers who are apparently more highly skilled. It will not prevent what will be significant increases in unemployment in the coming months. This is not a scheme designed to retain jobs, it’s a scheme to reduce costs for the government.
7 Throwing millions of workers to the dole in the middle of a pandemic will cause a huge amount of suffering and deprivation, and will hit poorest families hardest as winter and Christmas approaches. This will be increased by the decision to end the eviction ban. There is nothing in the governments’ plans to support those already out of work and those who will lose their jobs in the coming months. The furlough scheme, and the Job Support Scheme that replaces it, cannot be seen as alternatives to an adequate social security system.
8 The money to extend the furlough scheme is there. The government has already spent an estimated £180 billion bailing out big business. It is committed to hiking its annual arms spending to more than £43 billion this year, and to spend around £200 billion in the next few decades on Trident replacement. Interest rates are at an all-time low and government borrowing levels have risen across the world during the pandemic. Meanwhile British taxes on wealth and corporations are far lower than competitors. Corporation tax rates are around two thirds of those in France and Germany. The furlough cost £4 billion in the last month. The decision not to extend it is political not economic.
Whilst it will certainly help maintain the livelihoods of those who manage to keep their jobs as a result, the Jobs Support Scheme is all about maintaining the economic status quo when what we need is a radical transformation of our economy so that it serves the needs of humanity and nature.
In the short-term there may be a need to subsidise employers to retain jobs – and this can only meaningfully be done by an extension of the furlough and not cutting it down to this bare-bones scheme - but ultimately the imperative has to be on the creation of meaningful work as part of a green economic strategy. Reduced working hours would likely be a part of such a progressive programme but it would be sustained through a more equitable distribution of income and not government subsidy to the private sector.
If the desire is to come out of this pandemic with a fairer, greener Britain, as found in a recent cross-party consultation, we would expect to see the bolstering of unemployment benefits, investment in lifelong learning, and significant government investment in green jobs as part of a coherent economic strategy along the lines of a Green New Deal.
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