The new jobs scheme announced by Chancellor Rishi Sunak on Thursday reflects growing panic over the end of the furlough scheme, which closes on 31 October. However, it will not prevent surging unemployment in Britain or offer workers the protection they need.
The scheme, set to run until the end of April 2021offers limited state support for companies that decide to keep employees on reduced hours—provided they work at least a third of their normal working hours.
For instance, if an employer cuts a worker’s hours to 33 percent of the normal total, the state will pay 22 percent of their wages and the employer will pay 55 percent.
So the worker will receive a total of 77 percent of their normal wage. The government payments are capped, so workers earning a salary of over about £38,000 will see a bigger reduction.
At face value, this seems similar, from the point of view of the employee to the furlough scheme, through which workers received 80 percent of their salary (up to £2,500 a month). However, there are some crucial differences—and some major defects—in the new scheme.
First, the announcement comes too late for thousands of workers already handed a redundancy notice ahead of the end of furlough.
They are explicitly excluded from the scheme. It will also be of little solace to the thousands of workers currently being “fired and rehired” on worse terms by employers such as British Airways, British Gas or Tower Hamlets council.
Second, there is huge potential for abuse. Even under the furlough scheme, an estimated 63 percent of furloughed employees worked illegally in April and May, a third of them saying they were compelled to do so by their bosses.
HMRC claims that up to 30,000 firms have been involved in “furlough fraud”.How exactly are working hours going to be policed under the new scheme?
Even for those working full time before Covid-19, unscrupulous bosses would often try to squeeze unpaid work out of employees—putting pressure on them to return early from lunch breaks, to stay late or to take work home with them.
How confident will workers be to resist such demands when their job seems to hang by a thread?
Third, not all companies are eligible for the scheme—and those that are might not be so keen to adopt it. Large businesses—about three quarters of which have used furlough—are eligible only if they have seen a sufficient fall in revenue and are not paying dividends to shareholders.
More importantly—unless firms have a burning desire to retain staff—this scheme may prove more expensive than sacking people.
For instance, if a firm employs three workers on £1,500 a month, it can reduce its monthly pay bill from £4,500 to £1,500 by simply making two of them unemployed.
Equally, if workers don’t have contracts guaranteeing them a set number of hours, it could cut all its workers’ hours by two-thirds and achieve the same result for the same cost.
If instead, the firm chose to use Sunak’s scheme, it would cost them £2,475 a month to retain all three workers on a third of their usual hours.
Some firms may still choose to do this because their workers have important skills or knowledge they would like to retain or if they face large redundancy pay-outs.
This is particularly the case if they think they will become profitable again in six months—and would like to avoid the costs of hiring and training replacement.
However, this is little solace to workers who are deemed more easily expendable.
Many companies are eager to reduce their overheads and they can be fairly confident about picking up new employees if they survive the current crisis.
This includes much of the retail and food services sectors—the two sectors that have claimed most from the furlough scheme since spring.
Disproportionate numbers in these sectors have worked less than two years for their employer, so they do not even qualify for redundancy payments.
This will even more so apply to younger workers, who are by far the most likely to have been furloughed.
So only a minority of those still furloughed—which may be as much as 12 percent of the workforce—will be protected by this new scheme. Indeed, Sunak has made clear that he is now only interested in supporting “viable” jobs and “not keeping people in jobs that will not be there once we emerge from the crisis”.
Furlough has been deemed too costly and too blunt an instrument. The new scheme will be far cheaper for the government, costing about a quarter of expenditure on the furlough scheme.
The side effects being that it will allow businesses hardest hit by the pandemic to collapse.
Of course, because the government has failed to control the virus, far more firms are likely to become “unviable” in the coming months, especially if they are forced into a new lockdown.
The reality is that, up until now, furlough has covered up an emerging jobs crisis. Hours worked in May-June collapsed by 10 percent compared to the previous three months.
Academics from the London School of Economics estimates that “realistic” employment, taking into account the furlough, collapsed by 20 percent from February to April before recovering a little.
The lack of an adequate replacement for furlough means we will see surging unemployment this autumn. The numbers out of work will likely reach levels not seen since the early 1990s—or perhaps the early 1980s when, under Margaret Thatcher, there was a painful restructuring of the British economy and official unemployment figures rose to well over 10 percent.
At least some in the ruling class would like to take the opportunity for another such wave of restructuring.
The ultra-neoliberal Economist magazine argued this week that government aid “has become a threat to dynamism” and “the market should be allowed to play its proper role of determining winners and losers”.
Sunak is not ready to let the market rip in this way—he has offered further soft loans and tax reductions to keep businesses afloat.
However, he is recalibrating the level of state support. As one recently elected Tory MP put it, in response to Sunak’s announcement: “It’s not in people’s long-term interest to keep paying them forever to sit at home doing nothing if they do not have a job to go to.”
But what are these people supposed to do when there is one job vacancy for every ten workers currently on furlough? Why should workers lose out because they suffer the misfortune of being employed by “unviable” firms? And why should “viability” be synonymous with profitability?
Sadly, the leaders of the trade union movement and Labour Party seem to accept Sunak’s logic.
Francis O’Grady, general secretary of the Trades Union Congress, photographed in a cosy meeting with Sunak and the director-general of the Confederation of British Industry immediately before the announcement, called the scheme a “lifeline for many firms with a viable future”.
Shadow chancellor Anneliese Dodds claimed that Sunak was stealing her idea: “I’ve called for the introduction of targeted wage support 40 times.”
Neither showed any interest in supporting workers who want to fight for a better future than one characterised by mass unemployment, poverty pay and unsafe working conditions.
This is why the Emergency Programme launched by the People before Profit network is crucial.
It offers a way out of the crisis that protects workers’ jobs, health and living standards, as well as directing labour to where it is most needed—for instance into green jobs that can address the climate crisis we face. That is a future worth fighting for.