The Government Is Leading Britain to an Unemployment Crisis

With a new wave of lockdowns slowing economic activity, the government's Jobs Support Scheme is nowhere near enough to save jobs. Without further action, Britain is heading for a deep unemployment crisis.

Last week, under mounting pressure from across the political spectrum, Rishi Sunak announced that the Jobs Retention Scheme – otherwise known as the furlough scheme – will be replaced when it ends next month. Under the new programme, the Jobs Support Scheme, the government will subsidise up to 22% of a part-time workers’ salary as an incentive for employers to keep workers on.

Workers who work at least a third of their normal hours in small and medium-sized businesses (or large businesses that have seen a fall in revenues) will be eligible. Employers will pick up the tab for all the hours their employees work – for example, a third of the wage bill for a worker working a third of their usual hours.

The remaining two thirds of the previous wage is split between the employer, the worker and the state: the worker takes a 33% pay cut, receiving 77% of their usual wage, a third which is paid for by the employer, and a third of which is paid for by the state. This works out to a government subsidy worth about 22% of the employer’s wage bill, capped at a maximum of £697.72 per month. Firms that have also taken part in the furlough scheme can also look forward to the £1,000 Jobs Retention Bonus the government is distributing in January.

The Chancellor has, however, said he “can’t support every job”; instead, the JSS will only support ‘viable’ jobs. We don’t know exactly what he means by this, but we can assume the government won’t be stepping in to save very substantial numbers of jobs in sectors like aviation, tourism and hospitality. Sectors that remain closed, and in which workers are therefore not able to work at least a third of their usual hours, will obviously be excluded from the scheme.

In its current form, the JSS is a long way from the programme needed to save us from an unemployment crisis. As many observers have pointed out, businesses that opt to participate will be required to pay workers for hours that they are not working. Given that many businesses are already struggling under the weight of unpayable debts, this does not seem like it will be a viable option for many. The Resolution Foundation has said that the scheme “won’t stop a major increase in unemployment” because many firms will have “little or no” incentive to use it.

But from Rishi Sunak’s comments around the scheme, it does not look as though the government is really trying to avoid a major increase in unemployment. The furlough scheme was necessary at the start of the pandemic to prevent a massive, unplanned, panic-driven collapse in economic activity that could have generated a financial crisis along with it. The impetus behind the scheme – the generosity of which was clearly down to forceful lobbying from the labour movement – was to prevent the complete collapse of the British economy, not to help individual workers.

Now that the initial panic has died down (prematurely, given we’re experiencing something of a ‘second wave’ of the virus), Sunak will be able to provide much more politically-targeted support to protect his core coalition from the pain of the oncoming recession. But with the end of both the furlough scheme and the evictions ban, millions will be facing poverty, homelessness and unemployment in the months to come.

Those whose jobs Sunak has suddenly decided are ‘unviable’ will be consigned to unemployment. In a country with a declining number of well-paid jobs on decent terms – much less unionised ones, such as those in aviation that are on the chopping block – this is a disaster for working people. The Opposition has pointed out, correctly, that the government is failing to provide training to support these workers to transition into new jobs. But all the training in the world can’t make jobs appear when there are none.

As it stands, the UK is likely to see a significant increase in unemployment over the next several months, which means many workers will have to rely on a social security system that has been decimated by austerity. The poorest households in the country will suffer even more when the temporary boost to Universal Credit announced earlier this year comes to an end in April.

It has become increasingly obvious that the gains from growth in the UK are privatised, but the losses are socialised. Since the financial crisis, the wealthiest individuals and the largest corporations have pulled away from the rest while workers have endured a decade of wage stagnation. Now that another crisis has reared its head, workers are being forced to pay the cost while the rich are receiving government largesse.

The state has dished out billions of pounds worth of loans and grants to huge corporations so that they can pay dividends to shareholders and lay off workers, while failing to provide new jobs and adequate social security to those workers themselves. The imbalances and contradictions that will result from these decisions are likely to lead to another ‘lost decade’ of slow growth, rising wealth and income inequality, and political turmoil when the pandemic is over.

The only way to avoid such an outcome would be to put peoples’ lives ahead of private profit. A Green New Deal would create jobs, protect incomes and support decarbonisation to ensure that crises such as this do not become a regular occurrence in the years to come. But, as much as the Sunak would have us believe that he wants to ‘build back better’, the government will not offer a transformative Green New Deal on its own. The left has to fight for it – which is why it’s so important that we’re unified in the months to come.