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The Furlough Scheme Was Not Enough

One year ago today, under pressure from trade unions, the government introduced the furlough scheme. It was a good start – but it was never enough, and the failure to build on it guaranteed a pandemic of inequality.

Today marks one year since the announcement of the furlough scheme. The scheme, which guarantees employees who can’t work due to the pandemic 80 percent of their wages, has been one of the few successes of the government’s economic response to Covid-19.

Its announcement on 20 March 2020 hinted at a government taking the pandemic seriously and a Chancellor willing to work with unions to introduce ambitious schemes that benefitted working people. Sadly, the year since then has proved the scheme to be a one-off.

The Impact of the Scheme

The furlough scheme itself is simple: if an employee can’t work due to the pandemic, 80 percent of their wages are covered by the government. Employers can choose to top up the payment. Since July, partial furlough has been available – meaning that employees can return part-time and be furloughed for the hours they don’t work.

The scheme has been well-used. Over 11 million jobs have been furloughed at some point during the pandemic, and 1.3 million employers have made use of the scheme. At its peak in May, around 9 million jobs were furloughed.

4.7 million jobs remained furloughed at the end of January 2021, and more recent estimates of the percentage of workers furloughed suggest that number is around the same in March.

The scheme has undoubtedly saved millions of jobs. Were it not for furlough, many of these jobs would have instead been lost, with workers left to find work during a pandemic and subjected to the cruelty of our broken social security system.

Some Flaws

That isn’t to say the scheme is perfect. There’s no protection to stop the pay of workers furloughed on reduced pay falling below the legal minimum, and while employers can top up the wages of their furloughed staff, not all do. Low-paid workers are the least likely to have their pay topped up.

This led to just over two million employees not being on the legal minimum wage in April 2020, around the peak of the scheme.

And arrangements for self-employed workers and those in less conventional types of work have fallen short. The furlough scheme doesn’t seamlessly cohere with the Self-Employment Income Support Scheme (SEISS) to ensure all workers are protected by the two.

Too many workers, especially the recently self-employed and those in non-conventional work (such as self-employed workers forced to operate through companies, zero-hours workers, and those mixing employment and self-employment), have fallen between the cracks of the schemes. This has left millions without support.

What Comes Next?

Another problem with the scheme is how and when to safely end it without causing job losses. The government’s previous attempt to wind it down were pre-emptive and misjudged: the government began to reduce its contributions to the wages of furloughed workers in the summer of 2020, ahead of the planned closure of the scheme on 31 October 31.

This was clearly being done much too soon – it was obvious the pandemic wouldn’t be over in October. But it wasn’t until the very last minute that the Chancellor announced an extension.

This indecision and uncertainty inevitably led to confusion, anxiety, and job losses. The number of employees furloughed dropped to its lowest point at the end of October, before bouncing back up on 1 November, and rising further when stricter restrictions were introduced a few days later.

The government will soon face the problem of ending the scheme again. The scheme is currently set to finish at the end of September, with government contributions to the wages of furloughed workers being wound down before then, dropping to 70 percent in July and 60 percent in August and September.

This fits with the current roadmap out of lockdown, which plans, in a best-case scenario, for all areas of the economy to be up and running in June.

However, the September end date creates the type of cliff edge that’s become typical of much of the government’s often short-term temporary economic support. This is made worse as it comes alongside the end of the £20 uplift to Universal Credit a month later.

The government must be willing to learn from the mistakes of last year and ensure it adapts the scheme to any changes of the roadmap. To create certainty, it should extend the scheme until the end of the year.

More is Needed

The question of what comes next speaks to a wider problem: the furlough scheme has been the only success of the economic response to the pandemic.

The government has done next to nothing to improve the safety net for those who need it, and they have not seriously invested in job creation to ensure people have good quality jobs in future. Those who lose their jobs as a result of the scheme ending therefore face both a tough labour market and a cruel benefits system.

Universal Credit was increased by £20 per week, but this will come to an end in October, is still much too low, and doesn’t apply to legacy benefits. And, despite some tinkering to advance payment loans, the cruel aspects of the benefits system remain in place.

There’s still a five-week wait for first payment that pushes some claimants into debt or towards food banks. There’s still a two-child limit, a benefits cap, and no recourse to public funds. Benefits sanctions, after being briefly suspended at the start of the pandemic, were reintroduced last summer.

It’s urgent that the government overhauls the benefits system so that it actually supports those who need it by raising the standard payment and legacy benefits to at least £260 per week and scrapping the cruel elements and punitive sanctions built into the system.

And we’re yet to see serious investment in job creation. The government had the opportunity to address this in the recent Budget, but the measures announced fell well short of the level of investment needed. It’s vital that the government invests properly in green jobs now to help create good, well-paid jobs over the next couple of years. Fast tracking spending on projects such as broadband, green technology, transport, and housing, for example, could deliver a 1.24 million jobs boost by 2022.

Investment in the public sector would also help to create jobs. The TUC has set out plans to fill and create 600,000 jobs in the public sector: 220,000 of these are in the adult social care sector, which, as the pandemic has shown, is in complete disarray, with large scale vacancies and immense future need.

Supporting those out-of-work and creating new jobs is vital. The Office of Budget Responsibility expects unemployment to peak later this year at 6.5 percent, which equates to around 2.2 million people employed.

A particular concern is that black and minority ethnic (BME) workers have been hit hard by the pandemic. Since the start of the pandemic, the BME unemployment rate has risen twice as fast as the white unemployment rate.

The growth in unemployment rate has been highest among BME women, with the unemployment rate now hitting a disastrous 10.6 percent. Young workers have also been hit hard, 6 in 10 of those who have lost their jobs since the start of the pandemic being aged under 25.

The Wider Picture

Other much-needed support has also been absent. It was clear at the time that while the furlough scheme was an important part of tackling the economic impact of the pandemic, it wasn’t the only thing needed.

When the TUC first called for a furlough scheme to be introduced, we also called for the aforementioned overhaul of the benefits system, decent sick pay for all workers, and financial support for those in debt.

Sadly, the year since has seen none of the above. A year into the pandemic, the government is yet to increase statutory sick pay (SSP) to the equivalent of a real living wage, and it is still not available to all workers.

SSP remains just £96 per week—less than one fifth of average weekly earnings—and around two million employees miss out on it entirely since they are not paid enough to be eligible. Instead of much-needed improvement to SSP, we got the self-isolation payment support scheme: a late and underfunded short-term fix that has proved massively inadequate.

Financial support for those in debt, including council tax and rent debt, has also not been forthcoming. While some have saved money during the pandemic, millions are struggling. This has particularly impacted low-paid workers, who have been hit hard by the pandemic in numerous ways: more likely to be having their household finances hit, more likely to have to go into workplaces as usual, less likely to get decent sick pay, and more likely to die from the virus.

TUC research into the impact of the pandemic on household finances found that disabled workers, BME workers, and female workers were also all more likely to report having to cut back on spending each month due to the pandemic.

Yet the recent Budget offered nothing except a vastly inadequate £3.8 million no-interest loans pilot scheme. There was no new support for those who have fallen into debt, nothing new for renters, and no attempt to seriously address council tax debt.

Many of the measures mentioned so far would help with this, but we also need to see the introduction of a £10 minimum wage. This will benefit 9.4 million employees, including 3.7 million key workers, and ensure that everyone earns enough to live on.

Alongside this, we need a fully funded freeze on council tax debt repayment, much more support for renters, and an increase to the short-term hardship funding provided to councils, plus a permanent fund that provides a source of grants. The government should also be exploring ideas such as cancelling council tax debt and providing the outstanding money to councils.

More is Possible

Looking back a year after the introduction of the furlough scheme, it’s clear that the scheme was a success – but in the government’s wider economic response, that makes it a rarity.

The furlough scheme showed that the government was able to introduce bold support schemes that help working people; what came after showed that it wasn’t willing to do much else. It should’ve been one part of a wider package that both supported those out of work and those struggling, and began to create good jobs for the future – but the rest of the package never arrived.

It’s vital, however, that we keep pushing for it. We need decent sick pay for all, we need a generous and supportive benefits system, and we need the government to invest in decent, well-paid jobs for people across the country. These are not just emergency measures for a pandemic – they’re the basics needed to ensure a fair and more equal economic recovery.