A senior government source warned yesterday that people are “addicted” to the furlough scheme. “We have to get people back to work,” he said.

At a time when thousands of businesses and millions of workers are using the job retention scheme exactly as it was intended – to allow people to follow public health advice and stay at home – it’s frustrating to hear tired cliches about “dependency” on state support. The scheme has kept workers in jobs and firms in business. It has widespread support from the public and private sectors and unions alike.

Now, as the UK discusses how to get people back to work, we need to build on the furlough scheme, not cut it off. The warning lights are flashing on our economy. The Office for Budget Responsibility suggests that unemployment could rise to 3.4 million, that’s an unemployment rate of 10%. Since mid-March, 2.3 million people have made a claim for universal credit, five times higher than usual. If we don’t act now, widespread unemployment will have devastating effects on people and communities.

We should particularly worry about young people. The mass unemployment of the 1980s gives us all the evidence we need to predict how unemployment could diminish their prospects. Periods out of work can have long-lasting effects on future earnings and undermine chances of getting a good job – or indeed any job at all. Young people are the ones most likely to be working in the sectors such as retail and hospitality that could face job losses. The Institute for Fiscal Studies estimates that people aged 25 were about two and a half times more likely to work in a sector that is now shut down than other workers.

That parts of the UK have not recovered from Margaret Thatcher’s programme of deindustrialisation and unemployment should be of concern to us all. Britain’s former industrial towns still have lower employment rates and jobs with worse terms and conditions than those in other parts of the country. Further rounds of job losses could be devastating for these communities.

But forecasts don’t have to be predictions. If the government acts now, we can use what we’ve learned from this crisis to prevent people and communities being thrown on the scrapheap. If we are to take any positives from this crisis, one of them should be the newfound knowledge that when necessary, we can act quickly and in coordination to face our collective challenges.

The first step in a new plan is to build in more flexibility into the furlough scheme to enable the safe return to work we all want. At present, people who have been furloughed must be entirely off work for a minimum of three weeks. As we go back to work, the scheme should support part-time working – the best way to ensure social distancing in the workplace and gradually reduce the costs of the scheme. Unions won’t stand for any plan that tries to cut costs by by asking workers on furlough to take bigger and bigger pay cuts while employers continue to benefit from government support as their workers remain on standby.

For those thrown into uncertainty and unemployment, the government needs to raise the rate of universal credit and legacy benefits – to £260 a week. That’s equivalent to the value of 80% of weekly earnings on the national living wage. People facing debt and destitution can’t effectively prepare for work.

These recently laid-off workers will be entering into a smaller jobs market, with few firms hiring. Unless the government steps in to support job creation schemes, the UK will be faced with long-term unemployment. Some will ask where those jobs will come from in these uncertain times. But we should be clear: there’s no shortage of work to be done. We need a huge effort to decarbonise the economy – building new energy infrastructure, insulating our homes and changing the way we manufacture goods.

The crisis has shown that we need a social care system that delivers the decent jobs on decent wages that both carers and those they care for deserve. Our schools, hospitals, youth services and libraries are frayed and fragile after 10 years of austerity. In a time of uncertainty, it’s the government that has the greatest ability to borrow to invest, and there are plenty of things to invest in.

A government-funded jobs guarantee scheme could be devolved to regional recovery panels, bringing together unions, business and local government leaders to make sure the scheme works for each area. And they must be open to everyone – including those groups most likely to face disadvantage and discrimination when looking for work.

A new plan for jobs won’t just support workers. Mass unemployment damages businesses, which lose customers too. It’s also terrible for the public finances, because tax revenues fall. The experience of the coronavirus has shown us that we can reverse this cycle, with government stepping in to protect workers and business. Now we must take the next bold steps to prevent a return to the devastating unemployment of the past.

• Kate Bell is head of the TUC’s rights, international, social and economics department