Ian McConnell: SNP's Ian Blackford is right – Conservatives have a choice on whether people lose jobs

These same governments, while they can act to suppress Covid-19, are unable to choose or ensure a predictable backdrop against which to make decisions. We have seen economies reopened and hopes raised during the summer, with overseas travel a relatively straightforward option for a few short weeks for people in the UK.

However, in spite of huge efforts to suppress the virus across Europe, we are now seeing a major resurgence of the Covid-19 coronavirus. It remains difficult to predict with any precision the path for coronavirus infections and deaths over the long winter ahead, and the steps needed to try to suppress Covid-19, but things in Europe look much more difficult than two months ago.

Unemployment in the UK and other countries around the globe has soared, with far worse to come. And this has further taken choice away for those who have either lost their jobs or fear such a scenario, in terms of spending decisions.

However, governments in the UK and around the globe, to greater or lesser extents, do have a choice on the degree to which they support their citizens through this pandemic. They have very big choices, with major ramifications, and huge moral responsibilities in this regard.

Chancellor Rishi Sunak last week chose not to extend the UK Government’s highly successful coronavirus job retention scheme in its current form, in spite of pleas for him to do so. Instead, he announced a job support scheme. While this was a U-turn from his previous signals of no further job support, beyond the paltry £1,000 per post job retention bonus for companies taking furloughed workers back on, it is woefully inadequate.

It is surely difficult to believe the UK Government could possibly conceive this job support scheme could be a game-changer in terms of helping ward off mass unemployment.

The enthusiastic welcoming of the scheme by the Confederation of British Industry and Trades Union Congress, in the immediate wake of its announcement last week, was somewhat surprising.

You could obviously take the view that something is far better than nothing from a Chancellor who had signalled he was not for turning. But the more important consideration is whether the new support measures can, like the job retention scheme, help preserve many hundreds of thousands of jobs, a large proportion of which will be “viable” as sectors of the economy reopen and return to more normal trading.

With governments around the world making positive noises about a vaccine, a bit of patience would seem to be a good thing at this juncture. France and Germany have so far shown far greater patience in supporting their citizens’ employment than the UK Government, which has appeared in an unseemly rush to end its furlough support scheme. This rush has been evident since the early weeks of the scheme, even though the crucial importance of the furlough support very quickly became clear.

Over the weekend, SNP Westminster leader Ian Blackford declared that “the Tories have made a deliberate choice to let unemployment soar – just like Thatcher did in the 1980s”.

This is an emotive statement, made by a politician.

However, it is difficult to disagree in any way with it, based on the cold facts and economic realities of the situation in which we find ourselves. Mr Blackford’s observation seems astute and the parallel he draws is fitting.

Mr Sunak’s new scheme will only help top up incomes of employees who can work at least one-third of their normal hours. In the likes of the seasonal tourism sector and hospitality businesses faced with curfews, and in other industries hit hard by the coronavirus crisis and consequent restrictions such as travel and notably aviation and associated activities, this will often not be possible right now.

This means that many, many jobs which would be “viable” over the medium and long term will be lost, damaging the supply side of the economy and hammering aggregate demand. It is difficult to know whether the Tories cannot see this, or whether they are choosing to ignore it for whatever reason.

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Comparisons were drawn last week between the job support announced by the Chancellor effective from November 1 and Germany’s Kurzarbeit scheme. However, the German scheme covers jobs even where the working hours have to be reduced temporarily to zero. This seems like an utterly crucial requirement at the moment in countries around the world, amid the economic crisis stemming from the pandemic.

Mr Sunak’s tapering of UK taxpayer funding of the existing job retention scheme from the start of August, even though the programme has continued largely to cover the majority of furloughed workers’ incomes, has triggered job losses because it has forced the hands of companies by making them contribute.

Some will have been able to afford to do so but will have chosen not to. Other businesses, in sectors wholly or largely shut down, will have had no choice but to make people redundant.

Of course, some other companies will, regardless of the Government support, have been unable to shake their obsessive cost-cutting dogma in any case, with many having chosen to make redundancies swiftly even in these most dismal of times for those losing their jobs.

However, with millions of people still on furlough, we underestimate at our peril the effect of Mr Sunak’s refusal to extend the support offered by the job retention scheme, even for specific sectors.

Those who would argue that he cannot afford to do so should take a good look at the cost of mass unemployment, in terms of lost income and corporation tax revenues as well as the burden on health and social care services.

The Tories continue to give the impression of being like a blinkered corporation obsessed with cutting costs because this is seen as a more certain way of driving profits and bonuses than focusing on the revenue line. In so doing, they either do not see or ignore the bigger picture.

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Scottish Government chief economist Gary Gillespie has warned this week that around 100,000 people in Scotland are expected to lose their jobs by the year-end as the coronavirus crisis takes its toll.

The economy has recovered half of the fall in gross domestic product which “followed the necessary restrictions imposed in March to control coronavirus (Covid-19), but may still not return to pre-pandemic levels until the end of 2023”, the latest state of the economy report from the Scottish Government concludes.

Mr Gillespie predicts Scottish unemployment, which has already risen to 4.6 per cent, with 128,000 people out of work, will increase to 8.2% by the year-end.

The Scottish Government declared as it published the state of the economy report that the “UK Government’s new job support scheme will provide less extensive support than its predecessor and is not likely to be as effective at suppressing unemployment as the original furlough scheme”.

This projected unemployment rate for Scotland, on the International Labour Organisation measure, is a bit higher than that forecast for the UK as a whole by the Bank of England. The Bank is forecasting a near-doubling of UK ILO unemployment from its levels before the pandemic hit, to 2.5 million people or 7.5% by the year-end.

And, highlighting his belief that the risks were to the downside, and flagging the scale of the uncertainty, Bank deputy governor Sir Dave Ramsden warned this week: “For me, when looking at unemployment, it’s more likely that unemployment will end up peaking higher than 7.5%, than lower, and it will end up coming down more gradually.”

He added: “For me the risk is that unemployment stays higher for longer and alongside that you might get more semi-permanent or permanent scarring effects from that.”

Sir Dave noted these effects had been seen in the labour market before and, citing the experience after the 1980s recession, he flagged the risk of “skills mismatch”.

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The University of Strathclyde’s Fraser of Allander Institute has this week highlighted the hugely uncertain outlook for the Scottish economy.

Noting Scottish output is about 10% below its February level, Fraser of Allander says that, in its optimistic scenario, the economy is projected to take until the middle of 2021, at the earliest, to fully recover lost output. Its pessimistic scenario is that it could be 2024 before a “new normal” is reached.

The think-tank added: “On balance, the Institute’s weight of expectation is on the more pessimistic outlook at this stage. Even if a second lockdown is avoided, challenges around testing and tracing, the onset of the winter months and the infection rate of the virus itself means that large scale social distancing is here to stay for the foreseeable future. Our economy is likely to remain in limbo for at least the next six months.”

Fraser of Allander warns that “removing the furlough scheme too early, particularly in sectors like hospitality and tourism, has the potential to undermine the good work done to date”. This well-made point seems obvious, but it is not so, it seems, to the UK Government.

The think-tank describes the job support scheme announced by Mr Sunak last week as “welcome” but “much less generous than the furlough scheme”.

It observes: “People will have to be back working and businesses themselves will have to pick up the majority of the tab. Sadly, not all of them will be able to afford to keep their existing workforce in jobs.”

Fraser of Allander director Professor Graeme Roy said: “History is likely to judge the Chancellor’s decision to pay 80% of workers’ wages during the height of the lockdown as one of the most effective policy responses to any economic crisis in history. Over nine million workers have benefited.

“The new scheme is very different, and given the relatively minor subsidy it provides for wages, it is unlikely to protect jobs, hours and incomes in those sectors who are really suffering.”

It is a grim situation indeed.

But Mr Sunak and Prime Minister Boris Johnson can still choose if they wish to preserve a huge number of retained jobs, even after the many unnecessary redundancies triggered by the tapering of the furlough scheme and refusal to extend it.

They should weigh the comments of Mr Blackford and the analysis from Fraser of Allander, Sir Dave, Mr Gillespie, and others, and reflect on their choices as things stand and the effect of these on unemployment over the coming winter.