As the Coronavirus pandemic began to take hold and the country was warned to shut down, the UK government introduced a furlough scheme. This furlough, officially known as the Coronavirus Job Retention Scheme, covered up to 80% of the wages of applicant businesses. This meant that employees could still get paid most of their living wage, without actually having to go to work. The scheme began in Spring 2020, but how long will it go on?
What is the current status?
As it stands, furlough is due to continue until April 2021. That is what has been officially announced. What hasn’t been announced, however, is whether chancellor Rishi Sunak and the Government intend to extend the program through the end of 2021, replace it with another program, or scrap the whole thing.
Vaccines are beginning to see rollouts across the world, and though they are proving effective, this glimmer of hope is still very much a long term strategy. It will no doubt be months and months yet before we see anything approaching “normality” – what does this mean for the necessity of the furlough scheme?
The case for the furlough scheme extension
Furlough extension is seen as a necessity by many people, both employees and business leaders alike. With so many businesses forced to close in the wake of lockdowns, there is simply no way for them to keep trading. Even businesses that can stay open are seeing large drops in their level of trade. Without Government assistance, the simple fact of the matter is that unemployment is going to rise – dramatically. With the country already in the midst of economic upheaval, that swell of unemployment is going to further hinder growth. It’s not as if money will be saved, either, as many of those unemployed will claim for Universal Credit.
Many argue that the framework for the furlough is already in place, and so it makes sense as a long-term strategy to extend it rather than replace it. Rishi Sunak himself has been extremely quiet about any plans for the scheme going forward. Many sources close to the Chancellor have claimed that there is every intention to continue the scheme, but in the absence of an official announcement, this is nothing more than supposition.
The case against the furlough scheme extension
While many see furlough extension as essential, there are others who view the situation as being completely untenable. Even conservative estimates put the cost of the scheme at over £50bn so far, and that figure is only going to extend the more time goes on. Others are concerned that while the Government has focused on keeping the wages of employees paid, they have done so without providing appropriate provision for the self-employed. There is a Self-Employed Grant scheme available, however, the maximum amount you can claim is capped and you have to have been registered as self-employed for a certain amount of time before being eligible. The support the Government has provided to the employed has been disproportionate to the self-employed, in the eyes of many.
Others claim the scheme is simply too expensive to be viable long term. As mentioned, the cost so far is conservatively estimated at £50bn, and it’s only going to grow, which is a lot of money to be spending during a time of such economic uncertainty. There is also consternation about the fact that some businesses are perceived to be taking advantage of the scheme, while other businesses desperately in need haven’t been able to apply.
The balanced conclusion
In conclusion, there’s no “cheap” way out of the situation going forward. If the scheme ends, the cost is simply going to be taken back up again in Universal Credit claims as so many people are going to be made unemployed. Boris Johnson is suspected to provide clarity in his Lockdown Exit plan on February 22nd, and the March Budget will provide more concrete evidence of the Government’s plans going forward.
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