Furlough scheme: Tory attitude to key support fuels economy fears: Opinion: Ian McConnell

There are many reasons why the Conservatives’ decisions and comments on the coronavirus job retention scheme should have lost their surprise factor, not least the frequency with which bizarre seeming ideological discomfort with the programme has manifested itself.

But the ability of the Tories to shock clearly remains.

As early as last spring, weeks into the scheme, we had a senior UK Government source quoted as saying people were “addicted” to furlough, a remark that was both nonsense and offensive.

Then we had Chancellor Rishi Sunak for months last year, contrary to unfolding reality plain to many others, insisting repeatedly the furlough scheme would not be extended beyond his then planned end-date of October 31, 2020.

READ MORE: Ian McConnell: Refusal to celebrate Scotland’s success is sorry sign of times

His comments on a visit to Scotland last August signalled a view people should not be given false hope.

Asked then 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 had 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.”

Of course, reality overtook Mr Sunak and through last autumn, sadly too late for many businesses and employees, he extended the furlough scheme and increased UK taxpayer backing, having previously reduced this dramatically through a taper.

It is crucial to bear in mind it is the UK taxpayer who is putting up the money for the coronavirus job retention scheme. This, for the avoidance of doubt among some of those keen on anti-Scottish diatribes in these febrile times, includes the taxes paid by people north of the Border. It is not the Conservatives’ own money. That might seem like a point so obvious it is not worth stating. However, at times, listening to the Tories, people might get the impression that it is the Conservatives’ money. It is important to be clear this is not Tory benevolence – it is UK taxpayer support.

And there is an important related issue here. The Tories’ moans about their own furlough scheme seem largely to be around the cost of it. However, this short-term thinking fails to take into account the costs of not providing such support.

These costs would be huge, obviously. After all, think of the damage to the public finances as well as to the economy and society of mass unemployment. Think of the surge in unemployment benefits, and other costs to the public purse of such misery, including the burden on the health service from huge numbers of unnecessary job losses. And what about the loss of income tax revenues from those who would not still be employed were it not for the furlough scheme? Then there is the impact on businesses of customers not having money to spend on their goods and services.

The fact of the matter is the coronavirus job retention scheme has been very successful indeed in saving large numbers of jobs. It could have been even more successful without Mr Sunak’s dithering last year, of course, but we are where we are.

And where we are is at a very important point on the road.

Under Mr Sunak’s plans, employers already making a big commitment to furloughed staff by paying the required pension and national insurance contributions will from July 1 be asked also to pay 10 per cent of the usual wages and salaries of those supported by the coronavirus job retention scheme.

This is as a result of the Chancellor’s proposals to cut the level of UK taxpayer support from 80%, up to £2,500 a month, to 70%, up to £2,187.50 a month. The employer contribution will be 20% in August and September.

And sources close to Mr Sunak have signalled he is going to stick with the end-September finish-date for the furlough scheme. It seems like the Chancellor has not learned the lessons from last summer, again ignoring pleas from politicians and business leaders to change tack in the face of reality.

The Institute of Directors has warned of a cliff-edge, ahead of the planned July increase in employer contributions.

Ian Blackford, SNP leader at Westminster, has flagged potential for “thousands of unnecessary redundancies across the UK, during a third wave of the pandemic” as a result of “Tory plans to withdraw support prematurely”.

Boris Johnson was last week forced to put back his planned June 21 date for the removal of “all legal limits on social contact”, with a four-week delay to July 19 now signalled as likely.

READ MORE: Furlough scheme: Tory attitude to key support fuels economy fears: Opinion: Ian McConnell

Restrictions have been eased dramatically around the UK, enabled by international success in vaccine development and rapid rollout of immunisation programmes here and in other countries, but they remain significant, including in Scotland.

Hospitality has been among areas hardest hit by the pandemic and many businesses remain under severe pressure, operating at much-reduced capacity. The likes of nightclubs have not been able to open at all.

And international travel, taking in airports and ground-handling businesses, airlines, travel agents, and holiday companies, remains unable to operate at anything near normality, given restrictions and testing requirements for travellers.

Yet Mr Sunak appears to think it is fine to go full steam ahead with his plans to ramp up contributions to furlough support from employers in July, and further still as summer progresses, before pulling the plug in September.

It is impossible to fathom what it is he is seeing which is not visible to others.

What is also worrying is that Mr Sunak, as he tried desperately last year to stick to his planned October 31, 2020 end-date for the furlough scheme, seemed to believe a smattering of tiny support measures would compensate for what would be lost by abandoning the furlough programme.

Hopefully he is not thinking along similar lines now – that a few things to try to help people back into work are going to suffice at a time when many businesses cannot operate at all or at anything like normality because of restrictions necessary to save lives.

Mr Sunak’s job-support measures have not taken into account the huge range of people affected by this pandemic, of all ages and with very different levels of skills and experience.

Economists have rightly highlighted the huge degree to which the young have been affected and, in a Scottish context, the Westminster and Holyrood administrations must throw the kitchen sink at minimising the long-term damage to individuals, the economy and society from this.

Older members of the workforce are also struggling greatly amid the pandemic, as a report published last week by the Institute for Fiscal Studies and funded by the Centre for Ageing Better showed.

Emily Andrews, deputy director of evidence at the Centre for Ageing Better, said: “The picture is currently very worrying for older workers furloughed or made redundant during the pandemic. This new research shows that even before the pandemic, only a third of unemployed people in their late 50s returned to work within a year. In a competitive job market, many older workers are likely to struggle to get back into work.”

The IFS said: “While a lot of the focus on the employment effects of the pandemic has, rightly, been on the young, employees over the age of 65 were 40% more likely to be furloughed in late April than those in their 40s (14% versus 10%). As the furlough scheme is wound down over the summer, we can expect to see increased numbers of older jobseekers, many of whom may face significant challenges when it comes to finding new jobs.”

Maike Currie, investment director at Fidelity International, last week highlighted previous research conducted by the fund management giant as she commented on the IFS report.

She said: “Almost two-fifths (38%) of people who were or are furloughed have made changes to their retirement plans as a result of Covid-19, and…a third (32%) of these workers now intend to ‘phase into’ retirement instead of stopping work on a set date, while 6% have delayed their retirement completely and 19% remain unsure about the future, putting any decision-making on hold for now.”

These are big percentages, providing a reminder, as if it were needed, of the widespread and long-lasting impact of this pandemic on household finances.

And Ms Currie warned: “There is a real risk that people in their 50s...placed in furlough over the past year-and-a-half may struggle to find employment once the furlough scheme ends, which could not only impact their finances today but also their retirement in the future.

“The result is that for furloughed workers, the pandemic has pushed the retirement age back by an average of two-and-a-half years – years in which they desperately want to work, earn and put their futures back on track.”

Data published last week by the Office for National Statistics showed the proportion of businesses’ overall workforce reported to be on furlough leave had fallen from around 20% in late January to 7% in late May, the lowest proportion since the coronavirus job retention scheme began.

The ONS noted: “This return from furlough corresponds to the highest proportion of the workforce working at their normal place of work, at 62%.”

This shows the speed with which things are returning to normal.

READ MORE: Ian McConnell: Brexit could have taken many forms. Cheshire Cat Boris Johnson chose this one

The numbers being supported by the furlough scheme have reduced dramatically since the spring and summer of last year. There were 8.9 million jobs on furlough on May 8, 2020.

However, it is crucial to recognise the 7% of businesses’ workforce reported to be on furlough leave in late May equates to around 1.7 million people.

The key is to manage this figure down, without cliff-edges arising from policy measures which create unnecessary unemployment.

This must be done in a carefully thought-out way, free from ideology.

It is not clear the Tories are good at this.

And the comments last week from Dame Andrea, a former Secretary of State for Business, Energy and Industrial Strategy, will surely fuel worries about the Conservatives being out of touch with reality on furlough.

She rightly acknowledged potential mental health issues for people in returning to work.

However, Dame Andrea also told BBC Radio 4 that some people on furlough are avoiding a return to work because it has been “great” for them.

And she claimed some did not want to go back because they have a garden, have “great vegetables growing” and have been able to go walking.

Her comments ignore the reality that it is up to companies, not employees, who is and who is not back at work.

More importantly, they are offensive to furloughed workers who have had to worry for a long period about the future of jobs they wish to resume and that they need to support themselves and their families.

Although many of us are inured to Tory ideology, the suggestion that growing “great vegetables” is a priority over working for the huge numbers of people who are furloughed is truly staggering.