Questions over future of furlough job scheme
WHAT is happening with the furlough scheme?
That is the question on the lips 6.3 million people in the UK who are relying on it to pay at least some of their wages.
That is not to mention the businesses who are relying on it to stay afloat.
But the scheme is a victim of its own success. The Chancellor Rishi Sunak has said that by the end of June the £40bn scheme could be costing the same amount to run as the NHS. Mr Sunak told ITV News that “clearly that is not a sustainable situation”. So what are the options? There is a lot of debate around what could be done to reduce the furlough scheme and these are some of the possible ways it could be wound down:
■■The cliff edge
One option open to the Treasury is to simply end the scheme.
This would mean setting a date and saying that after that point, employers can not claim any of their furloughed employees wages.
However, it is believed that this could be truly devastating for the economy and employment.
Finance Minister Rebecca Evans said in a press conference yesterday that it is “unthinkable” the UK Government would bring an abrupt end to the job retention scheme.
She said the Welsh Government does not have “anything like the resources that we would need” to pick up the furlough scheme.
There are important discussions to be had about when is the appropriate time for it to end, she said, adding that processes need to be in place to make it “less of a sharp shock for businesses and individuals”.
The good news is that this seems to be off the table. The Chancellor has already gone on the record saying there would not be a cliff edge.
England’s Health Secretary Matt Hancock has also echoed these sentiments saying the Government must “wean” businesses off the scheme.
■■Reducing the furlough amount in phases
The Liberal Democrats have called for a “tapered” end to the programme, with the Treasury paying 50% of salaries for the first month after people return to work, falling to 30% after the third month, with employers picking up the full bill after the fourth.
The Treasury does seem well disposed to this. The FT revealed last week that Mr Sunak was considering cutting support to 60% or even 40%.
The idea would be for employers to start picking up more of their employees’ wages as demand picked up and they were becoming profitable again.
However, this could mean real issues for many staff who are struggling on 80% of their pay (remember an employer doesn’t have to top up the full amount).
A reduction of any more could lead to anger and real hardship for some people.
■■Keeping furlough only for certain people
This idea reported in The Sun suggested that the job retention scheme could be in place just for people considered more at risk.
This could include “renters” as they are more likely to be living hand to mouth and who see a large percentage of the income going out in essential bills.
The big issue with this is how unfair and arbitrary it could potentially be.
■■Keeping furlough only for certain industries
This was an idea floated by a group of Tory MPs led by Anthony Mangnall. They suggested the job retention scheme could be kept for the industries that have been hit hardest such as tourism and hospitality.
Mr Mangnall said: “Businesses in the tourism and hospitality sector were some of the first to close due to coronavirus and in many cases are expected to be some of the last to reopen after lockdown.
“While the Government’s existing support schemes are very welcome, we are asking for further measures to support these vital sectors and to provide a more tailored approach to safeguarding jobs, livelihoods and these vital industries.”
The problem with this idea is that almost every industry has been hit by the crisis. For instance, car makers reported a 97% drop in sales with just 4,000 new cars registered in April. This means many industries are likely to feel very hard done by to be left out.
■■Everyone going back to work part time
Some businesses have expressed a desire to have their employees back on a part-time basis.
“You can’t just flick the switch and everything is back to normal. That might not happen this year or even into 2021,” said Richard Warren, head of policy at UK Steel told the FT.
“Companies want the same system as Germany where instead of 30% of staff not working, all staff work 30% lower hours.”
There are fears that switching to part-time workers could leave the taxpayer open to fraud and exploitation through the scheme.