MPs, unions and business leaders have warned the government that its plan to end the Job Retention Scheme abruptly in October will cost thousands of jobs and stall economic recovery.
Over 185,000 jobs have been lost due to the Coronavirus crisis so far, according to a report by the Press Association.
Now, the Treasury Committee has urged the government to “carefully consider” extending the furlough scheme to select areas of the economy that would struggle to stay afloat without it.
Mel Stride, Chair of the Treasury Committee, explained: “The key will be assisting those businesses who, with additional support, can come through the crisis as sustainable enterprises, rather than focusing on those that will unfortunately just not be viable in the changed post-crisis economy.
“This requires a very difficult set of judgements; it is where careful analysis and creative thinking will be critical.”
In a new report, the Committee recommended that the Chancellor also considers extending the currently raised level of Universal Credit, which was intended to last for one year.
It also urged the government to be clear on how it expects businesses to pay back loans made to them; how it intends to bring down public debt after the crisis; and how it will proceed to ‘level up’, warning that without action this could become an “empty slogan”.
The Committee also expressed its “disappointment” that the government ignored its previous report, which warned that over a million workers were falling through gaps in the government’s Coronavirus support schemes.
“We hope that the Treasury’s unwillingness to implement the recommendations from our first report is not a sign of how it will respond to this one,” Stride said.
The proposal to extend the Job Retention Scheme has widespread support, including from the CBI, Federation of Small Businesses (FSB), the TUC and the manufacturing industry.
A survey of manufacturing companies by industry body Make UK found that nearly two-thirds (62%) of respondents wanted the Scheme to be extended, with almost a quarter saying it should continue in targeted areas of the economy and 17% saying it should be extended for all businesses.
Chief Executive of Make UK, Stephen Phipson, said: “The protection of key skills should be a strategic national priority as this will be the first building block in getting the economy up and running.
“Ensuring that those sectors which are at the forefront of technology and will provide the growth sectors and high-skill jobs in recovery should receive the greatest support possible.”
Frances O’Grady, General Secretary of the TUC, suggested European-style support for “short-time working” could be an effective successor to the Job Retention Scheme.
This would entail paying a 70% subsidy to employers that bring back every worker currently enrolled on the Job Retention Scheme for a minimum proportion of their normal working hours. These workers would be paid for hours they are furloughed at a rate of at least 80% of their normal wage.
Similar schemes have been adopted in Austria, Germany and France to help prevent employers from cutting staffing levels when the Job Retention Scheme ends.
Without out, the UK could face a “tsunami of unemployment”, Frances O’Grady warned.
“Ministers cannot afford to throw away the good work of the job retention scheme,” she said.
“Working people carried the burden of the pandemic. They must not bear the brunt of this recession too. Protecting decent jobs with fair pay is how we recover.”