The chief economist of the Bank of England offered some tough love on Monday to employees who fear that when the government ends its flagship job retention scheme (JRS) at the end of next month, their P45 will follow soon after.
In an interview, Andrew Haldane said that continuing the furlough payments in some form would be a case of merely “prolonging the inevitable, in a way that probably doesn’t help either the individual or the business”. Some businesses, he suggested, were destined to go to the wall. Therefore, “a necessary process of adjustment” should not be further delayed.
This kind of bracing market analysis was highly popular in the early 1980s, when vast swaths of industrial England were judged to be past their sell-by date and abandoned to their fate. The result was a lost generation of the unemployed, a collapse of collective self-esteem in formerly proud communities and the emergence of resentments and inequalities that persist today. Mr Haldane talked hopefully of “re-equipping” businesses and employees for the brave new world, post-Covid. But to turn off the tap of financial support this autumn, as the chancellor, Rishi Sunak, still seems determined to do, would be premature, cruel and short-sighted. The necessary adjustment that needs to be made, with a second wave of the virus ever more likely and the drag anchor of Brexit creating new economic burdens, is to the chancellor’s timetable for winding up the JRS.
Talk of “prolonging the inevitable” is fashionable Covid speculation dressed up as brutal realism. There is nothing inevitable about the disappearance of theatres, cinemas, pubs, restaurants, sport centres, art galleries and music venues. For obvious reasons, these businesses have their backs against the wall right now, and the expected surge in infections over the winter will only make their situation more parlous. But post-pandemic, they are likely to be just as popular as they were before it. A letter delivered this week to the chancellor, Rishi Sunak, from the digital, culture, media and sport select committee (DCMS) points out that 51% of employees in the arts and leisure sector are currently dependent on furlough, compared with 13% across all industries. They deserve to be treated as a special case.
Equally, there is nothing inevitable about huge job losses in the automotive and aviation industries, or other areas of skilled British manufacturing that have been disproportionately hit by the pandemic. The nascent electric car industry, for example, should be a strategic asset in a future green economy. But about one-third of manufacturers are likely to let employees go at the end of October unless the furlough scheme is extended. The new “red wall” intake of Conservative MPs might have imagined that the concentration of manufacturing in the Midlands and the north would give Mr Sunak pause for thought. Apparently not.
A respected thinktank has calculated that as many as 2 million viable jobs will be at risk if the chancellor sticks to his timetable. The suggestion from the DCMS, and from manufacturing bodies such as Make UK, is that the furlough scheme should be extended in targeted sectors facing exceptional difficulties. In France, Emmanuel Macron has done just this, extending the French equivalent for two years in sectors badly affected by social distancing requirements. The Italian government, fearing a collapse of household and consumer spending, has extended until December. In Germany, part-time working subsidies will continue until the end of 2021. These nations have acted in this way because they realise the pandemic is by no means over and it is both wasteful and unfair to throw affected businesses and their employees on to the scrapheap. What was true in March is true now. Mr Sunak should announce a targeted extension of his furlough scheme beyond the end of October, or come up with a better alternative.
