End of furlough: This is no kind of plan at all, Rishi Sunak, for all the big talk

Chancellor Rishi Sunak, in spite of dire warnings from various quarters, has carried on regardless and decided to end the furlough support scheme on September 30. It will only be in coming weeks that we find out the scale to which that will increase UK unemployment, which has already surged on the claimant-count measure since the pandemic took hold.

It continues to look like a most unwise decision.

A total of 1.6 million people were on furlough as of July 31, the Treasury itself noted in September. The Resolution Foundation think-tank estimated last month that up to one million people could still be on furlough when the scheme was ended on September 30.

The international travel sector for example, a major employer, remains very far indeed from any sort of normal trading conditions. Across a raft of sectors, it is also still absolutely not business as usual for so many firms.

Not only has Mr Sunak ended the coronavirus job retention or furlough support scheme, but he is also this week taking away the £20 per week uplift to Universal Credit put in place to help people through the pandemic.

Whether Mr Sunak thinks there is no major problem or not, we should certainly brace for significant impacts from both of these huge calls by the Chancellor.

And we should definitely not fall into the trap of underestimating the effects just because of his big, vacuous talk.

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Mr Sunak has since last year been making much of his “plan for jobs”, an umbrella term for a variety of what in the midst of the pandemic can only be regarded as very small measures.

We have this week had a trumpeting by the Treasury and Department for Work and Pensions of a £500 million extension to this “plan”, aimed at helping ward off a surge in unemployment seemingly.

It continues to look as if the UK Government is failing, in a spectacular manner, to grasp what will be required, that is assuming it is actually serious and bothered about preventing a further sharp upward spike in unemployment.

UK unemployment on the claimant-count measure was 1.24 million in February 2020, ahead of the coronavirus pandemic hitting. It peaked at around 2.7 million as the crisis took hold. While it has since declined a bit, its 2.19 million level in August is nearly one million higher than the number ahead of the pandemic.

The “plan for jobs” seems to have as one of its bases the idea that somehow the pandemic changed much for ever and that some posts which existed before will no longer do so. And that people who had these jobs will, in the minds of some Tories, just have to jolly well go off and do something else.

However, the international travel sector will presumably return to normal, even if this will take many months, and the jobs that people filled will need to be occupied again. That was surely the idea behind the prematurely ended furlough scheme.

There is another problem with the bizarre Tory perception of the labour market.

The Conservatives have with their hard Brexit fuelled massive labour shortages in the likes of the haulage, food production and hospitality sectors among many others.

There has been talk of huge numbers of vacancies. And there seems to be an assumption in Tory ranks that people who have been furloughed will fill these jobs, and all will be fine.

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Never mind the mismatch between skills and qualifications and the job vacancies. It often seems the Johnson administration thinks anyone can fill whatever job comes along, and that people will just have to do that if they want to work.

These Tory notions are, of course, nonsense. But it is far from clear the Tories realise they are, with past comments from the Chancellor providing plenty of room for worry on this front.

Mr Sunak, when asked in August 2020 in the context of a projected surge in unemployment whether it was time to re-think the decision to end the furlough support scheme on the then planned end-date of October 31 last year, had replied: “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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The Chancellor, who was on a visit to Scotland which included a trip to Rothesay, had added: “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.”

In the end, Mr Sunak was overtaken by reality and, amid the second wave of coronavirus, extended the scheme, eventually until September 30 this year.

Much of the economy has reopened over recent months, which is great to see, and the cost of furlough has declined dramatically. The number of people on furlough was, at the peak in May 2020, nearly nine million.

This natural sharp decline in the cost would seem to be all the more reason for extending the jobs protection provided by the scheme, or at least coming up with some kind of meaningful successor programme especially for sectors that are so far from normal times. Sudden abandonment of the support is hazardous, and makes no economic sense.

Apprenticeships and training are all well and good but they are not going to be nearly enough to mitigate in a serious way the damage from the end of furlough.

The £500m extension of the “plan for jobs”, including the promise of extra support for people who are older than 50 and who have previously been supported by the furlough scheme, is also inadequate.

Prioritising people coming off furlough for one-to-one government “job finding support” and extending until January 31 next year the £3,000 incentive for firms to take on apprentices are all fine and well, but they are small policies which tinker around the edges.

One-to-one support will not result in the sudden appearance of suitable jobs for which the over-50s, and others, now looking for employment are trained. Many of these individuals will be highly skilled and experienced in their field, and would rightly have been paid well for their major contributions. Surely we are not suggesting it would be a long-term solution for them to take on a minimum-wage job, or set aside all of their skills and pursue a completely new employment? Especially given that in many cases, whatever Mr Sunak thinks, jobs will be available in their specialist field again when things get back to greater normality, as they will for over-50s and others who have been employed in posts across the whole range of skills levels.

Causing unnecessary job losses by ending the furlough scheme which had ensured continuation of such employment surely goes directly against what Mr Sunak said at the Conservative Party conference in Manchester on Monday.

We should pay heed to research last month from the Institute for Fiscal Studies showing the surge in UK job vacancies has been “driven entirely by low-paying occupations” and competition for posts is for most people still fiercer than before the coronavirus pandemic. This is the reality.

The Chancellor, who made a plethora of grand, superficial statements on Monday, declared: “I will do whatever I can to protect people’s livelihoods.”

Yet Mr Sunak seems happy enough to have ended the furlough scheme, and had a relaxed bearing on Monday, even taking the time to crack a joke at the start of his speech.

The end of furlough support is certainly not something that has in any way taken the wind out of the Chancellor’s sails or big talk.

Ramping up the rhetoric around infrastructure and skills, Mr Sunak told the Conservative Party conference: “We are going to make this country not just a science superpower, not just the best place in the world to do business. I believe we are going to make the United Kingdom the most exciting place in the planet.”

Wow. It is quite the talk.

Back in the real world, the UK economy continues to labour under the twin effects of the pandemic and Brexit.

And the end of the furlough scheme and disgusting decision on Universal Credit are causes for major worry, especially given Mr Sunak’s “plan for jobs” is no kind of plan at all.