How to wind down the furlough scheme while protecting people in poverty

12th February 2021

This article is from the Joseph Rowntree Foundation.

The Chancellor should chart a course for winding down the furlough scheme that gives businesses certainty of the level of support that will be in place according to decisions that are made on health restrictions.

The furlough scheme has provided huge support to people's incomes during unprecedented times last year. At its peak it paid the wages of almost nine million workers, and it has so far prevented a huge wave of unemployment. With vaccines now being rolled out quickly, this is the right time to chart a course for phasing out the furlough scheme.

In the next few weeks, the Chancellor should give businesses certainty of the level of support that will be available in future. He should tie changes in the scheme to phasing out of restrictions rather than extending the scheme for another arbitrary time- period. As the economy reopens, the scheme should encourage businesses to bring back workers part-time, while ensuring that any business instructed to close or severely restricted by public health restrictions should have continued access to the full scheme.

The furlough scheme has so far achieved what it set out to

Supporting people's incomes wasn't the only, or even the most important, aim of the furlough scheme. The primary intention was to keep workers attached to jobs that were likely to come back after the public health restrictions were lifted.

Doing so is important to preserve ‘matching capital', where workers have skills suited to the job they were in. It would also avoid huge hiring costs for businesses having to start hiring a whole set of staff again post-pandemic. Keeping workers attached to these jobs should speed up the post-pandemic recovery.

The furlough scheme has performed this role surprisingly well. It has supported the majority of jobs in the sectors hardest hit by lockdowns and social distancing requirements - at its peak supporting three quarters of jobs in hospitality and two thirds of jobs in arts, entertainment and recreation. Back in July, with the furlough scheme expected to end at the end of October, the OBR predicted nearly one in eight of the workforce would be unemployed by the end of 2020. Instead, we reached the end of the year with one in twenty unemployed.

Read the full article HERE