The UK government’s plan to subsidise the wages of workers affected by the Covid-19 lockdown should be extended until at least autumn to prevent it from becoming a “waiting room” for redundancy, employers groups have argued.
Demanding the chancellor, Rishi Sunak, make urgent changes to protect workers, firms and the wider economy, the Chartered Institute of Personnel and Development (CIPD) said the Treasury’s multibillion-pound coronavirus job retention scheme needed to be made more flexible to allow furloughed staff to work reduced hours.
It also said the scheme should run until at least the end of September to help firms through continuing lockdown measures or the gradual easing of tough controls on social and business activity across Britain.
Warning that unemployment would shoot up this summer if the scheme closed at the end of June as planned, the trade body for human resources said a survey of more than 1,000 companies across Britain supported the move.
Seven in 10 firms that have already furloughed staff said up to half their employees could work reduced hours if the scheme allowed. Pressure is mounting on the government to outline a more detailed exit strategy from lockdown, while Labour has called for more flexibility in the furlough scheme to help companies and people wanting to work limited hours.
Peter Cheese, chief executive of the CIPD, said extending the scheme until at least September would give employers more certainty and remove the risk of a “cliff-edge exit” from furlough straight to redundancy.
“Urgent decisions must now be taken to make it more flexible and to extend it so employers can continue to protect jobs,” he added.
Extending the scheme would add significantly to the bill facing the exchequer for paying 80% of workers’ wages up to £2,500 per month. The government’s tax and spending watchdog, the Office for Budget Responsibility, estimated a cost of £42bn over three months to help 8.3 million people. It could cost a further £12bn for each additional month at this level, according to the Resolution Foundation.
However, adjusting the scheme to give firms greater flexibility could cut the costs facing the public purse, as the financial aid could be scaled back as staff gradually return to work.
Sunak dropped a clear hint on Monday that the scheme could be tweaked to allow for such changes. Speaking in parliament, he said “gradual refinements” were a key part of the government plan to end lockdown measures.
There are early signs the furlough scheme has helped stop far greater numbers of redundancies as Britain slides into the worst recession in living memory, with more than 4m positions protected following the first week of its operation.
According to a survey of around 700 of its members in the first week of the scheme’s operation, the British Chambers of Commerce said 76% of companies had furloughed at least some of their staff. It said almost no redundancies had been made by these firms.
Adam Marshall, the director general of the BCC, also called for it to be extended: “While the furlough scheme cannot be indefinite, it will need to run well beyond 30 June in some form to help businesses transition toward a ‘new normal’ as the lockdown is eased.”
