New Job Support Scheme lacks vision and depth

Chancellor of the Exchequer Rishi Sunak has announced a new Job Support Scheme designed to help the British economy stave off a coronavirus-induced winter chill.

It encompasses a novel short-time work Scheme that will give extra support for workers and businesses, after the furlough Scheme ends on October 31, 2020.

This Scheme sits alongside other policies, including extensions in loan repayment periods that will help some struggling firms.

But, overall, the Chancellor’s speech lacked both the broader reforms and vision needed to tackle the crisis. It also failed to offer a clear recovery plan.

Details of the Scheme

The New Job Support Scheme is designed to create the opportunity for “viable jobs” to continue, even where demand is suppressed by reduced spending. Which jobs are to be deemed “viable” remains unclear, but the Scheme will apply to fewer jobs than the previous Furlough Scheme.

Under the Scheme, the government will offer a wage subsidy to firms to retain workers on shorter hours, rather than make them redundant. Modelled on similar Schemes in Europe, it offers protection for people in work, until the economy recovers.

The Job Support Scheme is scheduled to begin on November 1, 2020, at the point when the existing Furlough Scheme ends. It is due to last six months.

To be eligible for the Scheme, employees must work at least a third of their normal hours. They will be paid two-thirds of their pay for the remaining hours. The government pays a third of the hours not worked, while the employers pay the other third.

Employees will lose some pay for being on the Scheme, but at least they avoid unemployment.

Support is targeted at small- and medium-sized firms. For larger firms, there is an eligibility criterion: they must prove that the crisis has hurt their turnover.

Four problems

Some details remain to be worked out, but there are questions about the extent and effectiveness of the support provided.

First, the Job Support Scheme is aimed at those in work.

It does not help those who have lost their jobs and those who are about to lose their jobs.

Many of those on furlough who are not working at all face unemployment.

Notably, there was nothing in the Chancellor’s speech on raising universal credit, the default benefit payment that unemployed people qualify for. And the concern remains that people faced with unemployment will be pushed into financial hardship.

Those who get ill will still face a meagre existence on statutory sick pay.

Second, it is assumed that firms can afford to pay the extra cost of employees not working some of their hours. The risk is that some firms will not sign up to the Scheme, as the cost of doing so is too high. This risk is especially severe, given the continued depression of the economy.

David Spencer is Professor of Economics and Political Economy at University of Leeds, West Hampshire, England. The above article and picture have been published under Creative Commons Licence.