Extend UK furlough scheme or risk wave of joblessness, think tank warns

© Reuters. A man walks past a job centre following the outbreak of the coronavirus disease (COVID-19), in Manchester

By Andy Bruce and David Milliken

LONDON (Reuters) – British finance minister Rishi Sunak should extend the government’s job retention scheme until the middle of next year to stop a surge in unemployment to levels not seen since the early 1990s, a top think tank said on Tuesday.

The National Institute of Economic and Social Research (NIESR) said the furlough programme for workers at companies hit by the coronavirus outbreak should run until June 2021. It is due to wind down at the end of October.

“The planned closure of the furlough seems to be a mistake, motivated by an understandable desire to limit spending,” NIESR deputy director Garry Young said.

“The scheme was intended by the Chancellor to be a bridge through the crisis and there is a risk that it is coming to an end prematurely and this increases the probability of economic scarring.”

Earlier this month Sunak said calls for an endless extension to the furlough programme were “irresponsible” and brought in a scheme to pay employers 1,000 pounds for each worker they retain following furlough.

Sunak’s deputy, Chief Secretary to the Treasury Steve Barclay, said on Tuesday that extra “targeted measures” to help workers in especially hard-hit sectors were possible but a further wholescale extension was not.

Spending on the Coronavirus Job Retention Scheme, which has supported 9.5 million jobs and is the costliest single government COVID relief measure, has reached 31.7 billion pounds so far.

See also  Investment alone cannot save distressed communities

NIESR said unemployment looks set to rise to almost 10% of the workforce by the end of this year if the furlough scheme shuts as planned – similar to forecasts from the Bank of England and the government’s own budget watchdog.

By contrast, extending the scheme into 2021 would be “relatively inexpensive”, preventing a rise in joblessness and might pay for itself if it prevented people becoming unemployed long-term, NIESR said.

But Barclay said at an event hosted by a centre-right think tank, Onward, that workers were likely to lose their skills and fail to develop new ones if they spent more than eight months on leave, waiting for jobs that might never come back.

“The rationale behind the furlough scheme was about maintaining the link with the job. And actually if you stretch the elastic of that too long… it is not good for them, never mind the debate on the financial side of it.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

See also  Metropolitan police investigate incidents in South London, including fatal stabbing



Please enter your comment!
Please enter your name here