Will the furlough scheme being extended until April 2021 provide enough job security for the UK?
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| Image source: Sky News |
The scheme was initially set to expire in May 2020 but was
extended until October. It was then prolonged until March 2021 and has recently
been extended for an additional month. These numerous extensions took place
despite Chancellor Rishi Sunak expressing his unwillingness to ‘endlessly
extend furlough’.
So, how successful has the JRS been thus far? The HM Treasury
has hailed it a success. In terms of its
short-term aid for the population, it
has certainly been of use, with 50% of workers furloughed in May returning to
work by mid-August. During summer, according to ONS data, only less than 1% of
the workforce was made redundant after every two-week survey period, so job
retention was a success during that period.
90% of furloughed workers have remained on payrolls,
ensuring the majority of workers retained their contracts with their employers.
This is essential for ensuring that those who cannot return to their jobs until
after the pandemic will remain employed and have a source of income.
However, it is clear that this benefit will not apply to
everyone. Certain workers, especially those in the arts and entertainment
industry, are least likely to benefit. Their livelihoods are the most likely to
disappear after the continuous lockdowns that have put an end to performances
and exhibitions, and as a result, an end to much of the industry’s sustainable
income.
In addition, the speed at which the JRS was unveiled was at
the expense of rigorous eligibility checks for those partaking in it. According
to HMRC, up to 10% of the £3.5bn distributed by the furlough scheme in
mid-August might have been given as a result of fraudulent claims, of which 40%
belonged to small businesses.
Overall, though, despite the perhaps inevitable lack of scrutiny
and disposal to error, the furlough scheme has been a success in the
short-term. But how will the UK and its economy fare in the months and years to
come as a result of it?
Unsurprisingly, the furlough scheme has racked up a great
deal of debt for the UK. Debt has been at its highest since wartime. As of October,
the government had spent more than £40bn on the JRS alone, with the months
following the introduction of the scheme being exceedingly high for government
borrowing. This was at its highest rate just after the introduction of the
scheme – above £40bn in a single month – and remains high (estimated at £31.6bn
in November).
For those who have been fully rather than flexibly
furloughed throughout the scheme’s existence, their job prospects seem remote.
By the time the JRS will end in April 2020, surviving businesses may be more
reluctant to hire the same employees that were put on furlough after having
survived for more than a year since the furlough scheme’s introduction. After
the many months of cuts and hardships these businesses may have faced, it might
seem unnecessary to hire employees at an extra cost, which has already been
made evident by the total number of workers being made redundant at its highest
level in eight years. This is likely to result in an increase of unemployment once
the JRS ends.
With the new highly transmissible strain of the virus resulting
in Christmas and New Year celebrations being cancelled for most of the UK’s
population, as well as another variant from South Africa threatening to further
prolong lockdowns, it is clear that the economy is going to be in an even more
precarious state.
80% of the population of England has been put into Tier 4
from New Years’ Eve, which is a substantial threat to the existence of all
non-essential shops, which have been forced to close, as well as restaurants,
pubs and other hospitality venues. The vast majority of furloughed workers have
jobs in retail and food services, and many shops and restaurants have gone into
administration or closed down for good, a notable one being a staple shop on UK
high streets, Debenhams.
The new strains and their likely effects raise the question
of whether the extension of the scheme until April will really be sufficient. The
launch of the Pfizer vaccine rollout as well as the recent approval of the
AstraZeneca vaccine certainly raise hopes that life will be back to normal
soon, but after the unprecedented introduction of Tier 4 and the prospect of a
national lockdown if cases continue to skyrocket, the economic effects can
certainly not be overlooked.
Other European countries have extended their systems of
financial aid and job retention for much longer than the UK. For example,
France’s ‘chômage
partiel’ has been extended to the end of 2021, as well as Germany’s
‘Kurzarbeit’ scheme. It could be argued that this is a matter of confidence,
due to these countries having a much lower supply of vaccines than the UK and a
slower start to vaccination, especially as the UK has already bought over 100m
doses of the AstraZeneca vaccine.
However, the prevalence of the new strain in the UK means
that the economic impacts will likely be much greater than in France and
Germany, and this was already the case in the absence of the new variant, with
the UK’s economy being the worst hit out of all major European economies in the
second quarter.
It does seem that recovery for the UK is on the horizon with
the arrival of vaccines and hopes of returning to normality by Easter, but the economic
effects of the virus will not disappear with its transmission. The furlough
scheme has been beneficial for many, for both employees and employers. If
necessary, perhaps the scheme will need to be extended, but the consequences of
furlough need to be addressed too. The debt it has accumulated in addition to
the blows to the economy dealt by lockdowns mean solving the economic crisis
will take much longer than controlling the pandemic itself. It is essential,
therefore, that the government continues to provide support for workers,
especially for those who have been made redundant or young people struggling to
find a job amid the economic crisis.
Sources:
https://www.bbc.co.uk/news/business-54601117
https://www.bbc.co.uk/news/business-54751629
https://www.theweek.co.uk/108101/how-other-countries-are-extending-or-ending-furlough
https://www.boyesturner.com/article/long-term-impact-of-furlough
https://www.farrer.co.uk/news-and-insights/blogs/coronavirus-furlough-scheme-extended-until-march/#
https://www.theguardian.com/world/2020/dec/30/covid-millions-more-in-england-to-enter-tier-4
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