Chancellor extends furlough scheme again as Bank of England warns one in three firms not ready for Brexit
Six weeks ago the chancellor launched a “Winter Economy Plan,” designed to protect jobs as new health restrictions were imposed.Winter hasn’t even begun and there’s not much of Rishi Sunak’s plan left.His Job Support Scheme, which was intended to replace the Job Retention Scheme, has been postponed.
His much criticised Job Retention Bonus has been abandoned, and his anxiety about taxpayers money keeping workers in jobs that are no longer viable seems to have vanished.
On Thursday the chancellor extended the original furlough scheme - which was due to end at the end of October - until March next year. He also made more money available for the Self-Employment Income Support Scheme.This is a big charge of direction.
Rishi Sunak’s strategy of targeting financial support at closed businesses and jobs which have a future when this crisis ends has been replaced by a blanket approach of the sort he unveiled in haste just before the first lockdown in March.
The Resolution Foundation says the move was “inevitable” and that the chancellor should have spotted the need for more decisive action sooner.
The Bank of England’s assessment is that 5.5 million people will end-up furloughed in November, that’s around one in five private sector employees.
The Resolution Foundation calculates that paying their wages will cost the Treasury £6.2 billion a month, a figure it describes as “huge but necessary”.
The head of the Institute For Fiscal Studies is more critical.
Paul Johnson says he was “taken aback” by the chancellor’s announcement and described the move as “basically a return to March schemes (dreamed up on the hoof in 24 hours) as if nothing has been learnt since”.Mr Johnson agrees there is was a need to extend furlough support for the duration of lockdown but believes the chancellor has gone further than he needed to and that money will be wasted as a result.“Some of the self-employed are getting no support at all, while others getting more than need,” Johnson told ITV News.
“And among employees there will be significant number jobs where people on furlough long period and then the jobs will disappear.”
The chancellor insists he was reacting to the worsening economic outlook and says he wants to offer businesses “security through the winter”.
There may be other motivations too.Rushi Sunak may be worried that the virus will prove hard to contain and that further lockdowns may be necessary.
He may be “pump-priming” - protecting the incomes of furloughed workers in the hope they will spend with gusto when the lockdowns finally lift.The chancellor may have one eye on Brexit.
The Bank of England warned on Thursday that the recovery in the New Year would be held back by disruption caused when we leave the Customs Union and the Single Market.It assumes the government will agree a free trade agreement with the EU but warns that 30% are not ready for the new rules which will take effect on 1 January.The governor, Andrew Bailey, warned that if the government fails to agree a trade deal the economic damage would be even greater.