Chancellor rightly brings back furloughing to pave the way for fresh lockdowns

The Chancellor has rightly U-turned on his wish to fully phase out the furlough scheme at the end of this month, now offering to pay two-thirds of the wages of workers in firms required to be fully closed by national or local restrictions, the Resolution Foundation said today (Friday).

While today’s announcement would only apply to a limited number of firms who are currently required to be entirely closed, such as pubs in the central belt of Scotland and nightclubs across the UK, it will benefit parts of the hospitality and leisure sectors in Northern England where tighter restrictions are expected to be announced and rolled out on a geographical basis in the coming days.

By reducing employer contributions in the Job Support Scheme (JSS) to zero, and ending the minimum hours requirement, the Chancellor has recreated the Job Retention Scheme (JRS) in all-but-name, just with less support for workers and much tighter eligibility based on whether firms are closed due to local or national restrictions.

The Foundation says that this major change to a scheme announced just two weeks ago is the right thing to do, but taking so long to get to this point will have come at a high cost in terms of extra uncertainty facing firms and lost jobs. Workers already laid off from affected firms will not able to be brought back, in marked contrast to the approach taken in March.

And while reducing government support to two-thirds of employees’ pay, down from 80 per cent in the JRS, represents a substantial reduction in support to workers, the Foundation notes that the scheme is still broadly in line with similar European schemes – broadly matching the levels of support in France and Germany.

The Foundation adds that further changes to the economic policy response would also increase the chances of keeping both the spread of the virus and rise in unemployment down this winter. These include extending the support for isolating workers beyond the one in seven who currently qualify, and reducing employer contributions within the Job Support Scheme for all firms so that they have a clear incentive to cut hours rather than jobs.

Torsten Bell, Chief Executive of the Resolution Foundation, said:

“With infections rising sharply, the Chancellor is right to have brought back a targeted version of the furlough scheme to pave the way for further lockdown restrictions, both local and national, in the weeks to come. It will particularly benefit the hospitality and leisure sectors that are most likely to be required to close.

“It has been clear for some time that this form of a more sectorally- and geographically-targeted furlough scheme would be required to see us through a difficult winter. The delay in putting it in place will have come at a high price in jobs lost.

“Economic policy now needs to keep pace with the spread of this virus, if we are to suppress both the disease and the rise in unemployment that is now underway. We need more support for the six in seven workers who do not qualify for a £500 payment if they are required to self-isolate. The Job Support Scheme also needs to give firms a clearer incentive to cut hours rather than jobs in the difficult months to come.”