Ian McConnell: Anyone seeing ‘addiction’ to furlough needs to take a look at reality of coronavirus crisis

There was also a sense of “here we go again”, in relation to potential for another big Conservative policy mistake. After all, this is the party which hampered recovery from the last deep UK recession and brought misery for millions with a calamitous austerity programme.

With no name behind the “senior Government source” quoted in the reports, we do not know from where exactly this “addiction” view has emanated, and how representative or otherwise it is of the overall opinion of the Conservative administration. And we should not prejudge this. However, in terms of trying to form a view of whether the comment was merely a clumsy foot-in-mouth incident or reflects actual developing Tory policy, the lack of any attempt by the Conservatives to play down the remark is worrying.

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The source was quoted as saying: “People are addicted to the scheme. We’re not talking about a cliff-edge but we have to get people back to work.”

This remark has come amid reports of the UK Government looking to wind down the coronavirus job retention scheme from July. There seemed to be a variety of interpretations in terms of whether the reported concerns in the UK Government over the scheme relate mainly to workers or companies or both, or even to the nation as a whole. Whatever the target of the “addiction” remark, however, it was a real bolt from the blue.

The UK Government deserves credit for putting in place the massive furlough scheme. This sees it pay 80 per cent of the wages and salaries of furloughed employees up to £2,500 a month.

Such large-scale state support will probably go against the instincts of many Conservatives.

The Tory track record of savage welfare cuts over more than a decade signals that helping those most in need has not come naturally, or much, to the party. It really is to be hoped that this attitude might change in the grim reality that will follow the immediate shock of the Covid-19 coronavirus crisis but it would probably be naïve to think so, especially given the emerging signs of carping in Tory ranks even at this early stage about the cost of the furlough scheme. There are also, in all of this, signs of a Tory perception that the emergency furlough scheme is a disincentive to work. It is a ridiculous suggestion but one entirely in keeping with the seeming view of some Tories that a large proportion of the population is work-shy – an opinion not grounded in reality.

It must have been known when the furlough scheme was unveiled by Chancellor Rishi Sunak, days before Prime Minister Boris Johnson’s move to a full lockdown on March 23, that it would cost tens of billions of pounds. And it is proving expensive, with latest figures showing more than six million workers have been furloughed. But the Tories should have been able to see how many workers were employed in the sectors that would be closed down or reduced dramatically as the lockdown was put in place. Independent think-tanks crunched the numbers swiftly, so the Government must have been able to come up with a good estimate.

Given the amount of the economy that has been shut down, the number of furloughed employees is no big surprise. There has been some debate about whether certain companies might have had sufficiently deep pockets to avoid using the scheme but this is at the margins, and it should certainly not dictate future policy.

There are plenty of examples of businesses, big and small, which are doing all they can, while adhering commendably to guidelines, to continue some operations. Many of these firms have had to furlough staff but have retained a core team.

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The Herald has featured stories about New Hopetoun Gardens in West Lothian, a garden-centre business focusing on deliveries as it misses out on visitors this spring, and East Lothian-based Forth Resource Management. Forth has stepped up local deliveries of topsoil and compost, amid surging online demand, having seen a number of local authority clients stop garden-waste collection. Both businesses have furloughed some workers and taken on coronavirus business interruption loans.

Takeaway food outlets have been among others to continue to operate, with a focus on home delivery.

The priority is saving lives, and National Health Service staff and other key workers deserve great credit for working day and night to minimise the death toll. Millions of people have heeded government advice and stayed at home to slow the spread of Covid-19. Some people have been able to work from home. Others, by the nature of their jobs, cannot. Some businesses have been able to continue to operate, either at full or reduced capacity, but many, many thousands of others have had to close their doors for now. The furlough scheme is rightly aimed at ensuring these doors are not closed for good.

Maximising efforts to save jobs and businesses is absolutely the sensible thing to do right now from an economic perspective. This will cost money but it will be cheaper in the long run for the Tories in terms of mitigating the damage to the supply side of the economy by preserving the business base, and limiting the impact on demand. It will be crucial that as many consumers as possible have money in their pockets and the confidence or at least peace of mind to be able to spend some of it as we emerge from lockdown.

The stakes are high. The Resolution Foundation think-tank warned this week that the current economic crisis risks pushing an additional 600,000 18 to 24-year-olds into unemployment in the coming year – and causing long-term damage to their pay and job prospects unless major new support is provided.

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The scale of the economic crisis is becoming plainer by the day. The Bank of England said yesterday that UK gross domestic product could fall by 14% this year, the worst slump in more than 300 years, with unemployment on the International Labour Organisation measure surging to 9% in the second quarter, the highest since 1994. This would be more than double the 4% unemployment rate for the three months to February, before the UK was hit by the coronavirus pandemic. The Bank’s projections are based on a gradual easing of the lockdown from early June.

It is worth noting the tens of billions of pounds the furlough scheme will cost, while huge, pales into insignificance relative to the increase in public sector net debt from £1 trillion, when the Tories came to power in 2010, to £1.8 trillion, ahead of the coronavirus crisis.

The Tories might also want to take a good look at how much Brexit will cost the economy and public finances if they proceed with their pledge to haul the UK out of the European single market when the transition period ends on December 31. With or without a deal, the cost will be big, and it could hardly come at a worse time.

So here we are, still in full lockdown, with millions of people unable to work and uncertain of the future, and there is Tory talk of “weaning” workers and companies off the furlough scheme.

There has been talk of reducing the proportion of income being subsidised by the UK Government or of reducing the maximum monthly pay to which this percentage is applied.

Does this indicate a view that people need less money as this crisis goes on? Given many people will be taking holidays on loan repayments and the economic situation looks grim, the opposite is surely the case.

There has been talk that such trimming of the scheme might enable a focus on the poorest. The Tories should definitely help the poorest, and this would indeed be a good thing to see. However, the furlough scheme and helping the poorest are not mutually exclusive but complementary.

There has also been chat about how the furlough scheme could cost as much as funding the NHS. There is no need to analyse whether or not this is the case because the key point here is the furlough scheme, whether it lasts three, six or even nine months, or whatever, is temporary, so the comparison is irrelevant. Funding the NHS is an ongoing commitment, and one which the Tories will hopefully take very seriously as we get past the worst of this awful crisis.

The furlough scheme is, and will remain, crucial in terms of allowing the UK Government and the devolved nations maximum flexibility in responding appropriately to this public health crisis, to minimise the loss of life.

More and more businesses will be able to return to full or partial operation when the lockdown is eventually eased, stage by stage. These businesses have a moral duty to retain as many jobs as possible, and all the more so if they have taken advantage of the furlough scheme. The UK Government also has a moral duty to help those unable to work, or on reduced hours because of coronavirus restrictions, as well as to support those facing unemployment as a result of the crisis.

The key will be to ensure there is a flexible furlough scheme as things return to some kind of normality. Flexible in this context does not mean cutting provision for individuals. No-one knows for sure what will happen when lockdown is eased, although we can look to the likes of Italy to get an idea of what lies ahead.

We must hope we will not be faced with further major waves of Covid-19 infection. However, no-one can guarantee the furlough scheme will not be required in a major way again even if the hope is the scale of its use is wound down significantly as the economy eventually re-opens.

Even if things go as well as they can, some sectors will take a long time to return to normal. That is not the fault of the employees or businesses working or operating in these sectors. People are not addicted to furlough, and therefore do not need “weaned off” it. No-one wanted this crisis, and people would rather be working. They have not been working because of the absolutely necessary focus on saving lives.

Many people may find themselves unable to work for periods after lockdown is lifted because of contact-tracing to counter the spread of Covid-19 and they must be supported.

The Institute of Directors yesterday called on the UK Government to ensure there is a scheme to allow firms to furlough workers for a shorter period of time or bring staff back flexibly. This makes sense.

This is a time for patience and a long-term approach from the UK Government. It is not a time for pulling the rug from under the people supported by the Government through its furlough scheme or its backing of the self-employed. The Conservatives must hold their nerve and do the right thing. Adequate furlough scheme provision will be right not just for workers but for companies, the economy, and ultimately the public finances.