Chancellor returns economic policy to full lockdown mode after an Autumn of U-turns

The Chancellor has responded to the coming winter of lockdowns across the UK’s nations and regions by returning economic policy to a full lockdown mode through the extension of Job Retention Scheme (JRS) to the end of March, the Resolution Foundation said today (Thursday) in response to the Chancellor’s latest statement.

The Foundation says that the return of the JRS – which is now set to last 13 months – is both the inevitable result of the virus persisting for far longer than Government expected back in the summer, and reflects the challenge of trying to match economic policy to different lockdown restrictions across the UK’s nations and English regions. That challenge has now been abandoned in favour of an all-sector, national scheme that was at the heart of the first lockdown policy response.

The Foundation calculates that, based on the Bank of England’s latest estimate that 5.5 million employees could be furloughed during November, the Chancellor’s extension of the furlough scheme is likely to cost around £6.2 billion a month.

This extra cost is huge, but necessary. The Foundation notes that as much as £8 billion will be saved by the Chancellor rightly abandoning his deeply flawed Job Retention Bonus scheme. While the short notice removal of the bonus will be bad news for many businesses that have been expecting payments, it is hard to justify it given its poor value for money, and the reality that the full retention scheme will be available beyond the bonus cut off point in January.

Less welcome however is the extension of existing support for self-employed workers at a cost of £7.3 billion. Recent Resolution Foundation research has shown that this scheme has paid far too much money to some self-employed workers who have suffered no income loss during the crisis, while missing close to 500,000 workers who have lost all their income. Today’s extension will only exacerbate these problems, and offers poor value for money.

Torsten Bell, Chief Executive the Resolution Foundation, said:

“The Chancellor has now reset economic policy on a full lockdown mode, ahead of a difficult winter of lockdowns across the nations and regions of the UK. While the extension of the Job Retention Scheme comes on the same day as a lockdown was imposed in England, this policy shift owes as much to the challenges of designing an economic policy response amid the reality of varying lockdowns right across the UK.

“Support for firms and workers through a difficult winter is welcome, but it is hard to conclude that the messy process of returning economic policy to full lockdown mode via a two-month, five-stage U-turn is anything other than deeply sub-optimal.

“The extension of the furlough scheme will help to protect millions of workers’ incomes in the tough months ahead. Sadly the same cannot be said for the self-employed. Too much of the £7.3 billion scheme is being wasted on workers who didn’t need any help, while it offers nothing for close to 500,000 self-employed workers who have no work at all.”