Opinion: Ian McConnell: Rishi Sunak must think again about what would bring actual hope amid fall-out from coronavirus pandemic

He even gave the impression that he believed the UK Government would actually be doing people a favour by ending the furlough scheme. But his words provided no even-barely-convincing reason why this might be the case.

Mr Sunak’s comments signalled a view that people should not be given false hope.

Asked whether it was time to re-think the decision to end the crucial support scheme, in the context of a projected surge in unemployment, Mr Sunak declared: “I think it is also wrong to keep people trapped in a situation and pretend that there is always a job that they can go back to. That won’t always be the case. And in those situations, it’s better that we look forward and provide those people with new opportunities. And that’s what our ‘Plan for Jobs’ does.”

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It is worth observing immediately that millions of people who have been on furlough will not feel “trapped” by having had their incomes supported by the scheme, through which the UK taxpayer has funded 80 per cent of the wages and salaries of affected workers up to £2,500 a month. This support is continuing through to October, with the level tapering off significantly from the start of August and employers being asked to contribute amounts that rise month by month.

The fact of the matter is that, for many furloughed workers, whether or not they have a job to go back to is not yet set in stone. While some companies have been champing at the bit to revert to their normal cost-cutting behaviours, the future for many furloughed workers will still depend on the speed at which the economy is able to emerge safely from lockdown, a big unknown. It will also depend a lot on hope and confidence. In this regard, we could see either a virtuous or vicious circle, in terms of optimism and wellbeing or a lack thereof and consequently a boost to activity or a dampening of it.

Crucial to what occurs on this front will be whether or not people have, and expect to continue to have or otherwise, money in their pockets.

Unemployment has already surged, with the UK claimant-count having climbed from 1.24 million in March to 2.69 million in July, with most of the spike having occurred by May.

With millions of workers having been furloughed, and the support scheme coming to an end, the already dire situation looks certain to get much worse before it gets better. The Bank of England last week projected the UK’s unemployment rate, on the International Labour Organisation measure, will surge to 5.5% in the third quarter and to 7.5% by the year-end. It was 3.9% in the April to June period, figures showed this week, so that is a near-doubling of the unemployment rate on this measure.

Of course, we can already see the massive extent of the hit to economic activity from the lockdown implemented in the UK in March to slow the spread of Covid-19 and save lives.

Figures published this week by the Office for National Statistics show UK gross domestic product plunged by a record 20.4% quarter-on-quarter in the three months to June. This followed a 2.2% decline in the opening three months of 2020 and the latest figures confirm the UK is in technical recession, defined as two consecutive quarters of decline. There was never any doubt that this was going to happen and the official data are in line with the albeit utterly dismal projections made from early on in the lockdown.

Insolvency trade body R3 this week published a survey underlining the fact that, while huge government support including the furlough scheme had helped ward off company failures, it was not a matter of “if” but “when” in terms of a spike in corporate insolvencies. And 56% of the insolvency and restructuring professionals in its membership who responded to its survey forecast a steep increase will be seen in the October to December period. By this time, much of the government support will have dried up, unless Mr Sunak and his fellow Cabinet ministers have a late change of heart.

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Mr Sunak talked last week about the UK Government’s £1,000 “job retention bonus” for firms which bring back furloughed workers and can keep them productively employed until January. You only have to look at that amount of money to take a view that it is unlikely to be, in any way whatsoever, the near-panacea that Mr Sunak seems to think it is. In his radio interview last week, he claimed this would make a “really big difference” especially to small and medium-sized companies and was a “significant incentive to retain employment”. Really Mr Sunak?

People can make up their own minds about the relative likely effects of the taxpayer backing 80% of wages and salaries, and a £1,000 “bonus” for firms per returning employee over say the three months from the end of the furlough scheme through to January in terms of protecting employment.

The furlough scheme has remained crucial to the retention of many jobs through the summer.

Sadly, however, the requirement for employers to contribute after the end of July precipitated many, many job losses ahead of this cut-off point.

Much of this looked to be to do with the end of 100% UK Government funding of the furlough support scheme, especially in sectors such as hospitality which were not able to start opening until July and even then at nowhere near full capacity.

The situation remains perilous, as the reopening of the economy is balanced with the absolutely correct priority of trying to minimise the death toll.

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We have already seen several local lockdowns south of the Border. And, in Scotland, Aberdeen last week became the subject of a local lockdown.

It does not appear there is anything like sufficient support from the UK Government to deal with such situations. People unable to work or businesses which cannot operate at all or at something resembling full capacity because of local lockdowns need the same type of support that has been available since the spring. The financial issues created by a local lockdown mirror those arising from previous nationwide measures.

In a broader context, it is important that those unable to earn money because of public health considerations, for example because they have to self-isolate as a result of coronavirus symptoms, can afford to do so. This will also be crucial to ensuring widespread compliance with the rules.

So what hope did Mr Sunak have to offer those furloughed workers he is determined to withdraw support from by October, with the end of the coronavirus job retention scheme?

Referring to the UK Government’s ‘Plan for Jobs’ in the context of furloughed workers and his intention to end support under the main scheme in October, he said last Friday: “I’m here in Scotland today to see that plan in action.

“And whether it’s support for new apprenticeships, new training, or indeed our support for the hospitality industry, all of that is designed to create new opportunities that…will provide them with hope at what is unquestionably going to be a difficult time but that, I believe, is the right thing to do.”

He is right that it is going to be a difficult time. But, in the age of the Tory soundbite, it is more important than ever to look at the substance. And the Government’s Plan for Jobs looks like no kind of plan at all in the face of what is coming.

While it is important to support apprenticeships, help the hospitality sector and provide training, the assistance available after the job retention scheme goes surely amounts to a hill of beans when it comes to whether or not most furloughed workers see hope for the future.

Mr Sunak, who seems from his response to the latest labour market figures this week to be aware the unemployment picture is going to get much worse, last week highlighted a very narrow range of things as he claimed the Plan for Jobs would be some kind of solution.

The jobs supported by the furlough scheme are in a very wide range of sectors, covering workers with all levels of skills and experience, and are in a vast array of pay brackets. An experienced worker, skilled in a key sector with temporary woes arising from the coronavirus crisis, is not the right person to be taking on an apprenticeship or basic training. In any case, they would likely not be able to afford to do so.

Before the pandemic struck, the UK employment numbers were on the face of it very strong. But it certainly did not feel like an economy in which we were anywhere near full employment, with growth having consistently disappointed very significantly and the mood of many people far from upbeat after a protracted squeeze on real incomes.

It is important that Mr Sunak and the Tories learn the lessons from this.

Yes, the number of jobs is absolutely crucial, particularly at times such as these. But equally crucial is the preservation of high-value jobs, not only from the perspective of the productive potential and supply side of the economy but also in terms of aggregate demand and people having money to spend.

Extension of the furlough scheme beyond October is a measure that can provide massive support on both of these fronts, and the cost of the scheme will of course reduce dramatically month by month as the economy reopens. Mr Sunak should re-think what hope looks like to ordinary people struggling through this awful pandemic and announce such an extension in short order.