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UK furlough scheme enters its final month – should it be extended?


There have been few unalloyed successes for the government during its battle with the biggest public health challenge of modern times. Vaccine procurement was one, the furlough introduced at the start of the crisis was another.

State wage subsidies are entering their final month and although in the past deadlines for winding them up have been missed, there is no prospect of that happening this time. Unless something dramatic occurs in the next 30 days, a scheme that has supported 11.6m jobs and for which the final bill will be £70bn or more will come to an end.

The furlough represented the sort of government intervention in the labour market that would have been unthinkable to previous Conservative administrations, but in reality ministers had no choice. Businesses were shut by government diktat in March last year, with further lockdowns in late 2020 and early 2021, and without financial help from Whitehall there would have been unemployment on a scale not seen since the 1930s.

Jobs have still been lost during the pandemic but on nothing like the scale anticipated in the spring of 2020. The Bank of England thinks the jobless rate peaked at 4.8%, less than half the level predicted by the independent Office for Budget Responsibility in the early days of the crisis.

The furlough scheme – under which the government paid up to 80% of a worker’s wage up to a monthly maximum of £2,500 – encouraged firms to keep employees on the payroll rather than making them redundant. The chancellor, Rishi Sunak, thinks without furlough, unemployment would be 2 million higher. The TUC, which helped design the plan, says it should provide the template for a permanent short-time working scheme.

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Latest estimates from the Office for National Statistics suggested there are between 1.6m and 2 million people furloughed, at least half of whom are working some hours each week. Since the start of August the state’s contribution has been cut to 60%, with employers expected to contribute 20%.

There are arguments for extending the furlough. One is that the economy faces a cliff edge at the end of September when businesses face the choice of paying wages in full or laying workers off. A second is that there are certain sectors of the economy – aviation, for example – that still face particular challenges.

Yet, with the ONS reporting more than 1m job vacancies, Sunak will only be forced to rethink his decision to end the furlough if a winter surge in Covid-19 infection rates leads to another lockdown. In the meantime, the chancellor thinks the government should concentrate on targeted – and cheaper – support to help match jobseekers with the vacancies on offer.



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