Ian McConnell: TUC call for permanent furlough scheme makes perfect sense

However, much of the talk of a “new normal” following the coronavirus pandemic has been wholly unrealistic and somewhat tiresome.

At the end of the day, there is obviously nothing positive about the pandemic, which has wreaked enormous misery. And the road ahead looks difficult.

So it is important to keep at the forefront of the mind that no one would have wished for any of this. And, amid all the overdone talk of nothing being the same again, most people surely just want to get back to normal.

Things will hopefully return to normality sooner rather than later, enabled by international coronavirus vaccine success. There has been a major reopening of mothballed parts of the economy. However, some things many people were able previously to take for granted remain difficult. It is vital, for example, that policy-makers do everything in their power to restore people’s ability to travel abroad with greater peace of mind, crucially in a hassle-free way, as soon as it is safe to do so.

Against the backdrop of generally futile attempts to find positives amid a pandemic which has resulted in so many deaths and lost livelihoods, it was heartening last week to finally see a suggestion for a legacy which would actually do great good in future.

The Trades Union Congress’s proposed “daughter of furlough”, a permanent short-time working scheme of the type it notes existed in 23 Organisation for Economic Cooperation and Development countries including Germany and Japan even before the pandemic struck, would if adopted greatly benefit businesses and households. It would also surely boost the overall economy.

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Such a scheme would deliver major benefits not only in the short term, during which support on this front remains vital particularly for businesses and employees in sectors such as international travel still unable to operate anything like normally, but also over years and decades to come.

In the short term, Chancellor Rishi Sunak’s continuing insistence that the job retention scheme will end next month remains a major worry, with a looming danger of unnecessary unemployment arising on a significant scale as a result.

Looking further ahead, the TUC’s suggestion of a long-term positive legacy in the form of a permanent successor to the taxpayer-funded coronavirus job retention scheme put in place by the Conservative Government in spring last year is surely a great idea. Is it not?

In any kind of normal world, you might think the UK Government would be pleased that its key policy measure amid the pandemic had been picked out as something so valuable that it should become permanent.

However, the Johnson administration’s seeming impatience to end the furlough scheme, almost as soon as it got off the ground in spring last year, would suggest this may well not be the case.

The Conservative Government should, however, put its ideology aside and consider the very well argued case for a permanent short-time working scheme put forward in detail by the TUC.

There has been a lot of perfectly valid talk amid the pandemic about the need for a fairer society.

The Johnson administration itself has been trumpeting its “levelling up” message, even as it has appeared to pursue policies which seem to do quite the opposite. By adopting the TUC proposal, it could actually do some “levelling up”, if that is what it wants to call it, in a meaningful way. If that is actually what it wants to do of course, behind the cheap and gaudy veneer of its rhetoric.

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The TUC declared last week that the furlough scheme, “while far from perfect, is one of the major successes of government policy during the pandemic, protecting millions of jobs and livelihoods”.

This is absolutely correct. It has been by far the most important policy measure in trying to mitigate the economic fall-out from the pandemic, even though Mr Sunak was unable to resist reducing its effectiveness last summer and autumn by insisting he would be ending it on October 31, 2020. Reality caught up with him and he extended the scheme, albeit his dithering would have cost many jobs.

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On the back of the programme’s success, the TUC is urging the Government to “build on furlough – not throw away its good work – with a permanent short-time working scheme to make the labour market more resilient in times of change and crisis”.

The TUC says a permanent short-time working scheme would “reduce the risk of workers losing their jobs in times of crisis; protect workers’ incomes – particularly as short-time working schemes are usually more generous than unemployment benefits; [and] prevent widening inequalities – protecting women, disabled workers and BME (black and minority ethnic) workers who tend to lose their jobs first in a recession due to structural discrimination”.

Crucially, the TUC also highlights the benefits for government of such a permanent scheme in turbulent times.

It says its proposed “daughter of furlough” would “protect against long-term unemployment, and the subsequent devastating impacts on communities”, and “help stabilise the economy, and encourage a faster economic recovery as workers continue to spend their wages”.

The TUC adds such a scheme would also “save money, as the cost of furlough schemes is often below the cost of unemployment benefits, particularly where costs are shared with employers”.

These are all very good points.

Some Tories have from the outset whinged about the costs of furlough support. However, they have failed in spectacular fashion to take into account the benefits, in terms of avoiding increased unemployment benefit costs and additional health and social care expenses resulting from the strain of people losing their jobs and being unable to find employment.

Clearly, people will have more confidence to spend if they know there will be a cushion for their incomes in the event of trouble, either in terms of another general crisis or difficulties facing particular sectors.

The TUC highlights the advent of artificial intelligence and its effects, and labour market challenges created by the drive to net zero as two examples of potentially difficult situations that a permanent short-time working scheme would help to alleviate. It also flags continuing dangers amid the current coronavirus crisis and the possibility of further pandemics.

It says: “The TUC predicts that the UK economy is likely to face significant risks in the future – be it from climate change and the transition to net zero, new technologies such as AI, new variants or another pandemic. All could cause unpredictable and widespread disruption in the labour market – causing big spikes in unemployment and business failure.”

The TUC observes: “Periods of industrial change have too often been mismanaged and led to increased inequality – a short-time working scheme would help prevent this.”

Many communities in Scotland, like those in some other parts of the UK, have never recovered fully from the decline of heavy industry decades ago under the Thatcher administration, which clearly had priorities that lay elsewhere.

So the need to “protect against long-term unemployment, and the subsequent devastating impacts on communities” cited by the TUC should be plain for all to see.

It would also seem to chime with the lip-service paid to such matters by the Johnson administration but less so with the reality of Conservative Government policy measures in the wake of the global financial crisis and, previously, towards the end of the last millennium.

The TUC proposes that workers should continue to receive at least 80 per cent of their wages for any time on its proposed “daughter of furlough” scheme, with a guarantee that no one will fall below the minimum wage for their normal working hours.

It also suggests that anyone working less than 90% of their normal hours must be offered funded training.

The TUC says firms must set out a “plan for fair pay and decent jobs”, and consult and put in place an agreement with workers, as well as demonstrating “a reduction in demand – which can include restructuring”.

It is, of course, important that employers use any such scheme for the right reasons, and only in certain circumstances.

The TUC proposes time limits on the use of the scheme, “with extension possible in limited circumstances”. And it believes firms should commit to paying their corporation tax in the UK, and not pay out dividends while using the scheme.

This call for such commitments might of course not be popular with some employers. And we must remember that managers in some companies driven by short-termism have their bonuses linked essentially to cost-cutting targets, which are achieved through abandonment of workers rather than retention.

That said, there are many well-run companies which appreciate the importance of retaining skills and experience to their longer-term future. And retention of skills in times of crisis is surely more important than ever given the huge challenges in the labour market arising from the UK’s exit from the European Union.

The essence of what the TUC proposes is very sensible, and the benefits appear obvious.

However, ideological blinkers would have to be removed in senior Tory ranks for the TUC’s proposals for what would actually be a very positive and meaningful legacy, incorporating key lessons learned during the pandemic, to become reality.