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The Government’s Furlough Scheme Extension Is Too Little – And Too Late

The crisis Britain faces this winter required an ambitious package of support – from an evictions ban to liveable sick pay and Universal Credit reform. Instead, we got half measures at the last minute.

The furlough scheme has been one of the successes of the government’s economic response to the pandemic, and the Chancellor’s decision to extend the scheme until March is good news. Guaranteeing the scheme until March provides some certainty beyond December, and will help to protect jobs over the next few months.

The reality is, however, that this announcement may have come too late for many. As recently as a week ago, the scheme was set to end on October 31st. After a few months of falling government support and rising employer contributions, it was to be replaced with the Job Support Scheme. The day before it was due to end, the furlough scheme was extended until December. A last-minute and short-term extension will have been little help for those who had already lost their jobs in the weeks and months preceding the extension.

The government has tried to remedy this. Employees made redundant after 23rd September can now be re-employed and furloughed. A positive move, but it is hard to know at this point how many employers will decide to do this. This situation could have been avoided with more timely interventions. The government says it is doing the best job possible by adapting the economic package to a changing situation – but the adaptations have often been one step behind the curve.

Limited Support

The extension of the furlough scheme at 80% of wages came less than two weeks after the government ignored calls from the TUC to extend furlough at 80% in areas facing a lockdown that requires business closures, and repeatedly told Andy Burnham there wasn’t enough money left to extend the furlough scheme at 80% of wages in Greater Manchester.

It should have been clearer far sooner to the government that rather than coming out of a crisis we were heading into a hard winter. The support should have been adapted at that point to meet that reality.

Instead, we’ve had a series of rapid changes: a new scheme for closed businesses, a belated improvement to the flawed Job Support Scheme, the replacement of that scheme by a one-month extension to furlough in December, and now, finally, a welcome extension into next year. This has caused confusion for businesses, anxiety for workers, and is likely to have led to permanent job losses.

The tendency to wind down support too early has been seen in other areas too. Plenty of the support introduced at the start of the pandemic to help those who are struggling has already disappeared. The eviction ban has been lifted, benefits sanctions and council tax debt collection have been reintroduced, and free school meals vouchers were extended across summer but not any further.

And all of this is before we get onto the vital support that is yet to materialise. Since the start of the pandemic, it’s been clear that statutory sick pay (SSP) is too low. At just £96 per week, it’s nowhere near enough to live on for the quarter of employees who will be reliant on it for two weeks if they have to self isolate.

It is also not available to all, with almost two million employees missing out due to not earning enough and five million self-employed workers being ineligible due to their employment status. Despite this, the government has repeatedly refused to do what’s right: increase SSP to the equivalent of a week’s living wage, and make it available for all.

The benefits system also needs a major overhaul. Despite a temporary and minor uplift to the standard payment, Universal Credit (UC) remains too law and too much of the cruelty that is built into the benefits system remains in place. The five-week wait remains, as does the benefits cap and the two child limit. These must be scrapped, and both the standard UC payment and legacy benefits must be raised to £260 per week, alongside a significant boost to family benefits.

Sub-Minimum Wage

While the furlough scheme is one of the successes of the government’s economic package, it’s not perfect. A key flaw is its failure to stop pay dropping below the minimum wage. Employees are guaranteed 80% of their wages, with the option for employers to top up pay if they choose to.

While some employers chose to do this, too many didn’t. Low-paid workers, young workers, and those working in hospitality were the most likely not to see their pay topped up.

This meant that in April, around the scheme’s peak, over two million employees saw their hourly earnings fall below the legal minimum. This is particularly concerning because neither the government’s National Living Wage nor the National Minimum Wage are enough to live off. Both are substantially below the Real Living Wage, set by the Living Wage Foundation.

A mirror scheme for the self-employed has been boosted to match the new furlough scheme pay-outs. But nothing has been done to fix the gaping flaw in the scheme: large numbers of self-employed workers do not qualify for support.

This is due for reasons ranging from the fact that they are newly self-employed, they had to work through personal service companies as a condition of getting work, or they earned too much from employed work.

Unfortunately, today’s announcement did nothing to fix these flaws. The government must urgently introduce a requirement that no one’s hourly earnings fall below the legal minimum wage, and more support is needed for the self-employed.

Future Prospects

The government needs to be planning now (or better, six months ago) for the package of job creation that we know will be vital to stop mass unemployment. We’ve set out plans for how fast-tracked government investment could help to create over a million new green jobs by 2022.

On top of this, a public sector jobs drive could create 600,000 decent, well-paid and much-needed public sector jobs. These are jobs that could be providing real opportunity now, but only if the government decides to accept the scale of the upcoming employment crisis and invest in these jobs.

The positive aspect of today’s announcement is that it offers some confidence over the next four months, and this time was made with plenty of notice. That provides the government with a window to move away from temporary, short-term and last-minute fixes and towards structural change.

As a priority it must repair the social safety net that it has destroyed over a decade of austerity and permanently increase SSP. The best protection at a time of such uncertainty is a decent social safety net, a government that acts more decisively when it is clearly needed, and a programme of job creation that will help to prevent mass unemployment.