The Guardian view on furloughed workers: safe for now | Opinion

The Guardian view on furloughed workers: safe for now | Opinion

The job retention scheme unveiled by Rishi Sunak in March is estimated to be costing the government about £14bn a month. Rarely has money been better spent. By covering up to 80% of the wages of 7.5 million employees, the chancellor has ensured that economic catastrophe did not follow hard on the heels of a public health emergency. The unprecedented cost and scale of the scheme was testament to its necessity, after the economy entered into forced hibernation because of Covid-19. Without it, as both supply and demand for goods and services collapsed, the ranks of the unemployed would quickly have swollen to a size not seen since the 1930s. In the US, for example, which has no equivalent to Mr Sunak’s scheme, the number of jobless rose by 20 million in April alone.

The government has made serious, lethal mistakes during the pandemic. This was one thing it got right. Yet the murmurs of disquiet in Mr Sunak’s party – not noted for its love of expensive state interventions – had become audible as the policy’s June expiry date approached. Earlier this month, Sir Graham Brady, the chair of the 1922 backbench committee, irresponsibly suggested that the furlough scheme may have left people “a little too willing to stay at home”. A “senior government source” briefed journalists that widespread “addiction” to life on furlough had taken hold.

To his credit, on Tuesday Mr Sunak resisted the pressure to hustle and hasten people back to work by making them too poor to stay at home. The chancellor announced that the scheme would be extended for a further four months from the end of June to the end of October. From August, employers will be expected to make a contribution to paying furloughed workers who return to part-time employment. But at that point – as now – wages are to be maintained at 80% of their pre-pandemic level, up to a cap of £2,500.

This is the right approach, but the crucial detail of this new arrangement will only be disclosed at the end of the month. The level of contribution required from employers will be key in determining the scale of future redundancies. This is particularly true in sectors where physical distancing norms will have the most damaging effect on business.

After the crash of 2008, the hospitality, leisure and tourism industries bounced back at a faster rate than other areas of the economy. This time round, the nation’s pubs, restaurants and travel operators will be the last businesses to unlock and the least likely to return easily to their old economic model. It may be that Mr Sunak will need to treat them as a special case. More broadly, in the midst of an inevitable recession, the government needs to develop a plan for school-leavers, new graduates and those made redundant in the post-coronavirus landscape.

The chancellor received some rave reviews for extending the furlough scheme and opening it up to part-time working. The praise, which included warm words from Len McCluskey, was merited. The majority of employers and employees can be reassured that there will be no cliff edge in June and that the financial taps are not being turned off any time soon. That is crucial, given that the “unlockdown” process over the summer will be messy, partial and uncertain. The reopening of workplaces may at some point need to be reduced, placed on hold or go into reverse if a second wave of infection occurs. It was imperative that incomes and employment were protected, and a sense of security provided. The chancellor’s statement, for now, has done that job.

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