Furlough Scheme: What Happens Next?

Anne Marie Waters

Tuesday 13th October 2020

 

I’ll return to my series of reviews of Thomas Sowell’s Economic Facts and Fallacies in the coming weeks, but for now, Rishi Sunak has announced his latest plans for the economy.  It will involve a lot more spending, and a lot more uncertainty as to where that spending money is to come from.

Chancellor Rishi Sunak has recently laid out his plans for the nation’s workers and employers when the furlough scheme comes to an end.  Under that scheme, the state footed the bill for 80% of employees’ salaries; the end point being October.  So, October is here and Sunak needs to make alternative arrangements.

The government will continue to top up wages for the foreseeable future.  The newly named Job Support Scheme will see employees paid around three quarters of their usual salary for the next six months.

The BBC reports:

Nearly three million workers – or 12% of the UK’s workforce – are currently on partial or full furlough leave, according to official figures. The current furlough scheme ends on 31 October.

Mr Sunak said the new scheme would “support only viable jobs” as opposed to jobs that only exist because the government is continuing to subsidise the wages.

Sunak was not prepared to be drawn on what constitutes a “viable job”  (in which case one might argue he should think through his policy in more detail).  He said:

“It is not for me to sit here and make pronouncements on every individual job,” he said. “What I want to be able to do is to provide as much support as possible given the constraints we operate in. We obviously can’t sustain the same level of things that we were doing at the beginning of this crisis.”

In percentage terms, the amount now provided by the state will drop from 80% to a mere 22%.

This is not good enough from the government.  Once again, they are failing in response to this crisis.

In his speech to the Conservative Party conference recently, Sunak did not provide any information on how he intends to get the country back on its feet.  Now, with this second scheme, those questions remain unanswered.

The new scheme also comes with some conditions attached.  These are:

  • the government will subsidise the pay of employees who are working fewer than normal hours due to lower demand
  • It will apply to staff who can work at least a third of their usual hours
  • Employers will pay staff for the hours they do work
  • For the hours employees can’t work, the government and the employer will each cover one third of the lost pay
  • The grant will be capped at £697.92 per month
  • All small and medium sized businesses will be eligible for the scheme
  • Larger business will be eligible if their turnover has fallen during the crisis
  • It will be open to employers across the UK even if they have not previously used the furlough scheme
  • The scheme will run for six months starting in November

Given the 6 month timeframe, it is clear that the government does not see this crisis coming to an end any time soon.  The handling of this has been shambolic by the Tories, not to mention their demonstrative lack of real concern for the economic outfall.

Jobs, jobs, jobs … must be the priority of government coming out of this extraordinary time, but Sunak takes a rather more casual approach: “I can’t save every business” he said, “I can’t save every job”.

If current policy doesn’t change, it becomes more likely that he will not be able to save many at all.

 

Anne Marie Waters 

Leader 

For Britain 

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