Opinion: Ian McConnell: Rishi Sunak weighs novelties and brings to mind Norman Tebbit on your bike speech as job woe answer stares him in face as furlough scheme ends

With millions of people still on furlough, and job opportunities appearing extremely thin on the ground compared with any sort of normal times as companies remain very firmly mired in cost-cutting mode, it is difficult to see how Mr Sunak’s strategy is backed by the basic realities and numbers.

Figures published this week by the Office for National Statistics show UK unemployment on the claimant-count measure reached 2.7 million in August, an increase of 120.8 per cent since March. This is an utterly grim situation.

If Mr Sunak has time to look at only one indicator, it should probably be this one, although hopefully he will analyse the labour market in the round and change tack dramatically to respond to the realities.

The ONS data also reveal the number of employees on payrolls in the UK has fallen by 695,000 or 2.4% since March and by 32,000 since July, based on early indicators for August from pay-as-you-earn information.

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On the International Labour Organisation measure, the UK unemployment rate rose to 4.1% in the May to July period. It was 3.9% in the April to June period, and there is clearly much worse to come, given the coronavirus job retention scheme put in place by Mr Sunak has been tapering in terms of UK Government support since the end of July and is due to end completely in October. This scheme has in large part, even with the tapering, continued to fund the majority of the incomes of furloughed workers. The Bank of England last month projected a near-doubling of the ILO unemployment rate to 7.5% by the year-end.

The ONS figures underline the huge effect on young people of unemployment triggered by the coronavirus crisis.

The estimated number of people who are unemployed and aged between 16 and 24 years was, at 563,000 in the May to July period, up by 76,000 on the same three months of last year. There looks to be much more grim news to come on this front, with younger people often employed in more insecure jobs and in some sectors bearing the brunt of the economic crisis.

Meanwhile, the ONS figures also show that in the May to July period the number of redundancies was, at 156,000, up by 48,000 on the preceding three months. This appears ominous indeed, given these figures only take us to July.

And the ONS observed that, for redundancies, “both the quarterly and annual changes are the largest seen since 2009”. Redundancies in the May to July period were up 58,000 on the same three months of last year.

The ONS noted the number of people who were estimated to be temporarily away from work, including furloughed workers, had fallen, but that “it was still more than five million in July 2020, with over 2.5 million of these being away for three months or more”. It observed there were “also around 250,000 people away from work because of the pandemic and receiving no pay in July 2020”.

ONS figures yesterday showed 10% of the UK workforce was still signed up to the furlough scheme in the two weeks to September 6, down only slightly from 11% in the prior fortnight.

All of these numbers must surely ring an alarm bell for Mr Sunak, in terms of the scale of the challenges ahead.

France and Germany have moved to extend their huge support for furloughed workers so that it will last for two years, a most realistic timescale at a juncture when we are seeing a renewed rise in coronavirus infections and amid uncertainty over whether and when a vaccine will emerge.

Mr Sunak talked this week about how looking for new ways to protect jobs is his “number one priority”.

Protecting jobs should absolutely be his priority and maximum success in this, as well as mitigating mass unemployment and thus damage to the economy, society, living standards and people’s health, will also help the public finances in the long run. This simple truth appears to continue to be lost on the Tories.

The big issue, however, is that minimising mass unemployment is highly unlikely to be achieved by new methods.

Mr Sunak talked about how he was “always looking for interesting, creative, innovative and effective new ways to support jobs and employment” and this would remain his “number one priority”. Bully for him.

The fact remains that by far the most effective way of warding off or mitigating mass unemployment is for the Tories to extend the very scheme they put in place to do just that as the pandemic hit – the coronavirus job retention scheme. This is no time for procrastination or tinkering.

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If Mr Sunak is unsure of what to do, he should take a good look at the sensible responses of the UK’s major mainland European neighbours. Germany has long experience of furlough support with its short-time working scheme (Kurzarbeit). And Germany’s experience highlights the benefits of such patient support.

What little the UK Chancellor has in place so far for the period beyond October to protect jobs includes a £1,000 job retention bonus, if companies take back furloughed workers and employ them through to the end of January. Really? Is that it?

And it is not as if the cliff-edge that we are headed to with the UK Government’s refusal to use taxpayer money to extend the furlough support scheme beyond October has appeared suddenly, as if out of the mist.

People have been highlighting the need to extend the support since the spring.

Yet Mr Sunak continues to give the impression of someone who thinks the scheme has served its purpose, and that the need for such mass support is no longer there.

The “new opportunities” mantra is a bit more polished than Norman Tebbit telling people to get on their bikes to find a job amid the Thatcher economic shambles but is seems to amount to pretty much the same thing.

To be fair to Mr Sunak, while the Tories have made the Brexit mess, the awful coronavirus crisis is arguably a black swan event beyond the control of countries around the world, unlike the mass unemployment created by the Thatcher administration’s policies.

However, that does not change the reality of the situation – that there are millions of people still on furlough and there are absolutely not a corresponding number of jobs, regardless of whether the Tories want people to walk, cycle or drive to them.

Mr Sunak has made much of how many furloughed workers will not be able to go back to the jobs they had before because this employment effectively does not exist any more.

This will be the case for some jobs. And some situations will sadly have been brought to a head already by Mr Sunak’s insistence that employers start to contribute to the cost of furloughed workers from the start of August. Many employers will not have been able to do so, given the sectors of the economy in which they operate. Other employers, sadly, would have been able to do so but will have reverted in the run-up to that point to their bad old cost-cutting habits.

However, the crucial point that is missed in terms of the need to extend the coronavirus job retention scheme is that, in many sectors, whether or not massive amounts of employment can be retained will be down to timing. And patience.

Timing will be dictated in large part by how the pandemic unfolds from here, and progress with a vaccine.

It does not take complex theory to work out the sectors in which massive numbers of jobs can be preserved, thus boosting in aggregate the supply and demand sides of the economy, if furlough support is extended to cover the period over which coronavirus is preventing operations or limiting capacity.

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Take, for example, hospitality and tourism businesses.

And what about the aviation sector, from people providing ground-handling services such as moving baggage and catering to the engineers working on the aeroplane engines, as well as the huge number of airline workers?

The ONS has this week highlighted continuing huge numbers of people working from home, and this underlines what will be in large part a temporary effect for many city and town centre businesses reliant on office workers. Such businesses include retailers, cafes, restaurants, hotels, newsagent shops and gyms, to name just some. And then there are the public transport operators, which have seen hugely reduced demand for their services.

The rate of exclusive working from home decreased from a peak of 38% in June to 24% in July, the ONS notes, but this is still a huge proportion.

Scottish Government research published on Wednesday estimated that extending the furlough scheme by eight months could save 61,000 jobs in Scotland. This report noted that, in accommodation and food services, an estimated 34.4% of employees were still on furlough, with 57.5% of staff in the arts, entertainment and recreation sector in the same position.

So this is all about timing, and patience, Mr Sunak.

Patience, or otherwise, is up to governments and employers.

Commendably, the French and German governments have acted swiftly to reassure their citizens they will be patient.

This should help boost demand in their economies because people will not be fretting endlessly about their financial future.

In contrast, after a good start with the UK furlough scheme, it was not long before the Tories started appearing impatient to wind it down as soon as they could.

They continue along this path.

Mr Sunak continues to ignore so many desperate pleas for an extension of the scheme, even for specific sectors.

The public health decisions in dealing with this pandemic are complex in the extreme.

However, the solution for Mr Sunak, in terms of warding off to the greatest possible extent mass unemployment from the pandemic, is simple.

He does not need to look for new ways of protecting jobs. Specific measures put in place to try to tackle youth unemployment are fine and well, as long as they do not turn into things which provide cheap labour, rather than looking after the needs of young people who have in many ways borne the brunt of this crisis. However, those measures, and the highly inadequate job retention bonus, are like trying to fight a battle with a pea-shooter.

The very mechanism to save many hundreds of thousands of jobs in the huge economic battle ahead is already in place. But Mr Sunak and the Tories want to wheel it off the field. You can only conclude this is for reasons of ideology or Tory habit. After all, why else would you possibly want to take away the one effective weapon against mass unemployment that has been assembled?