The furlough scheme does not end in October. For many, it ends right now.
Although the scheme technically extends until Halloween, firms must start paying to keep workers on furlough from the end of this month. From the perspective of companies, it makes little sense to pay for three months to keep a worker furloughed, only to fire them on October 31st. The obvious time for companies to let their employees go is now. Over a million firings will take place this month.
These newly unemployed workers will walk from jobs they may have held for many years into the worst jobs market in the history of national statistics, even before July’s job losses have been taken into account. Most of them will not find jobs. They will struggle to live on Universal Credit of just a few hundred pounds a month.
Take a moment to think of how this will affect those people, and their families. This country is about to be hit with a wave of unemployment. Alongside that will come poverty, homelessness and child hunger. It will very likely be the worst economic disaster for ordinary people in this country since the war – far worse than the financial crisis of 2008.
What is most fascinating and absurd about this economic disaster is the timing. The worst of the Covid-19 outbreak was in April. The worst of the economic shutdown was in April too. Now, in July, all data shows that the virus has subsided significantly. Much of the economy has reopened. And yet we are only at the very start of the economic crisis.
What this shows us is that allowing an economic shock to cause poverty, homelessness and hunger is not inevitable, it is a choice. During April and May, people’s homes and incomes were protected because we, as a society, chose to protect them. In August and September, millions will fall into unemployment and poverty not because we cannot make that same choice again, but because our government has decided not to.
Why has the government chosen to celebrate its (somewhat) successful battle against coronavirus by plunging millions into poverty? It offers two main reasons. The first is a desire to get Britain “Back to Work.” The second is the high cost of the furlough scheme.
The first reason is completely misguided. Getting Britain back to work would be wonderful for many. But ending furlough without any replacement support will not achieve this goal. 1,000 people applied for a single receptionist job in a Manchester restaurant last week. The jobs are not there.
There will be even fewer jobs once millions lose their furlough income and fall into unemployment. If the government wants British people working, it must repurpose furlough money to create jobs and boost investment, not force millions of unemployed people to compete for jobs that simply don’t exist.
That leaves only the cost. So far, the furlough scheme has been funded entirely with newly created money, freshly printed by the Bank of England, which has pledged to create 300 billion new pounds. I have written in articles and spoken in video about the effect this is having on the economy.
The money has found its way to the bank accounts of high income individuals, and from there, into asset markets, pushing up stock prices by as much as 50% in just a few months, making the richest in our society richer than ever before. In a single day this week, Jeff Bezos’s wealth increased by thirteen billion dollars.
The contrast between this explosion in private wealth and the spectre of millions falling into unemployment paints a picture of horrendous inequality and economic weakness that is likely to continue for decades to come.
It doesn’t have to be this way. Wealth inequality can go down as well as up. Wealth taxes are on the agenda more prominently than ever before. If we repurpose furlough money towards jobs and investment, we can build back with a stronger economy, while developing a taxation system that forces the richest to contribute towards fixing this crisis rather than simply profiting from it.
If we take a mature approach to this crisis, protecting incomes and creating jobs in the short term, and addressing inequality in the long term, then we can move towards a prosperous and secure future. But our government has not chosen that option. They have chosen a bonfire of jobs.