Don’t Throw Away Furlough – Build On It

Ending furlough next week means pulling the rug out from under workers across the country – six days before the Universal Credit cut pushes 500,000 more people into poverty.

Chancellor Rishi Sunak gives a press conference about Covid-19 on 17 March 2020. Credit: Matt Dunham - WPA Pool / Getty Images

The furlough scheme, while far from perfect, has undoubtedly been one of the few successes of the government’s economic response to the pandemic. Called for by unions, and designed with the help of unions, its introduction in March 2020 has been a lifeline for millions of working people.

But next week, the furlough scheme will end. Rather than building on one of its rare achievements, the government is instead choosing to pull the rug from under the feet of workers and businesses, unnecessarily putting jobs and livelihoods at risk.

And to make matters worse, the end of furlough coincides with the imminent cut to Universal Credit – a hammer blow for low-paid workers and those out of work which could plunge millions into hardship, given so many are already teetering on the edge.

Add to this rising energy prices and living costs, and this could be a very bleak winter for many.

What This Could Mean for Job Losses

The jobs market remains fragile. More than one and a half million jobs remained furloughed at the end of July, and estimates from the Office of National Statistics show there’s been little budge in this figure throughout August. The stubbornly high number of workers on furlough is incredibly concerning given that we don’t know whether they will have jobs to return to when the scheme ends.

There’s some optimism that the end of furlough won’t lead to many job losses. Employee numbers have recovered to pre-pandemic levels, the number of vacancies is at a record high, and we’re not seeing a rise in redundancy notifications.

This optimism, however, could well be misplaced. The number of employees may have recovered, but this isn’t true for all industries. Two-thirds of the jobs that remain on furlough are in industries where employee numbers haven’t recovered. These include hospitality, retail, manufacturing, and the arts.

And the redundancy notification data may not be showing the full extent of potential job losses. Employers only have to report planned redundancies if they’re proposing to make twenty or more employees redundant within a period of ninety days or less. Smaller employers, therefore, aren’t required to report. This is a concern, as six in ten furloughed employees work for employers with less than twenty employees. This contrasts with last summer, when the majority of furloughed employees worked for big employers.

The shift towards those who work for small employers being more likely to be furloughed isn’t the only demographic shift that should provide cause for concern. During much of the pandemic, it was young workers most likely to be furloughed. Now it’s older workers.

A Punitive Welfare System

Any job losses will come at the same time the government makes the largest overnight cut to the basic rate of social security since the start of the modern welfare state.

The facts speak for themselves. The £20 per week cut to the standard Universal Credit payment—due at the start of October—will hit six million households and push 500,000 more people into poverty.

The cut will be a reversal of the £20 increase to the UC standard payment introduced at the beginning of the pandemic. This increase was a recognition that the existing amount was clearly too low, but even with it, the standard payment as a percentage of average earnings remains low by both international standards and our own historical standards. The increases also didn’t apply to legacy benefits, and the many punitive aspects of our benefits system—such as the five-week wait, the benefits cap, the two-child limit, no recourse to public funds, and the heartless sanctions system—remain in place.

Temporary, Insufficient Measures

The end of the furlough scheme and the cut to Universal Credit both speak to a broader problem. Much of the government support introduced during the pandemic has been either temporary, insufficient, or a combination of the two.

It’s not just that the furlough scheme is coming to an end and Universal Credit is being cut. Decent sick pay for all was never introduced. Instead, we got the massively flawed and inadequate self-isolation support payment scheme – or as the TUC dubbed it, ‘a failing scheme few people have heard of’.

Other support measures, such as suspending benefits sanctions and the use of bailiffs to collect council tax debt, ended as early as last summer. The eviction ban for renters was extended a few times before ending in May this year.

Local authorities have been provided with short-term hardship funding to support those struggling, but it’s far from enough. And the only thing the Spring Budget did to address household debt was introduce a £3.8 million no-interest loan pilot scheme.

Time for Real Change

It’s not too late for the government to move away from these insufficient, temporary measures and instead build back better and fairer – improving the lives of working people in every corner of the country.

The furlough scheme showed how successful bold, decisive policies that support workers can be. Now is not the time to throw away its good work.

In the short term, furlough must be extended to support those industries still struggling, rather than suddenly pulling the plug – needlessly risking jobs in the process. And going forward, the government must put in place a permanent furlough scheme to deal with future periods of economic turbulence.

In a changing and unpredictable world—as we battle climate change, and new technologies emerge—a permanent short-time working scheme would help make our labour market more resilient and protect jobs and livelihoods. And it would bring us into line with plenty of other countries – 23 OECD countries had short-time working schemes in place before the pandemic.

Alongside this, we need serious investment in future jobs. The TUC has proposed an £85 billion green recovery package to create 1.24 million green jobs and we’ve identified how investment in public sector jobs could create a further 600,000 jobs.

The Universal Credit cut should be stopped, and stopping it should be seen as the first small step towards a more generous benefits system. An urgent overhaul is needed, with the standard payment raised to £260 a week and the many cruel elements of the system outlined above permanently scrapped.

Alongside this, we need sick pay for all at a real living wage, at least a £10 minimum wage, and a proper support package for struggling households. This must include a fully funded freeze on council tax debt repayment, support for renters, and an increase to the short-term hardship funding provided to councils while also establishing a permanent fund that provides a source of grants. Ideas such as cancelling council tax debt and providing the outstanding money to councils should also be explored.

These are not emergency measures for a pandemic – they’re the basics of a fair and equal economy. They should be brought in alongside better rights for unions to access workplaces, and stronger collective bargaining rights to get workers the pay and conditions they deserve.

This all makes economic sense, too. Too many workers face insecure and low wages, and social security is greatly inadequate. A lack of income will translate into a lack of spending in the economy, at exactly the time that the economy needs a boost.

The pandemic has revealed the stark inequalities at the heart of our labour market. It’s clear we need an economic reset. We can’t let the government strip away the few bits of support they provided during the pandemic. Instead, they must be built upon.