Matthew Lynn

Sunak’s furlough scheme is a victim of its own success

Sunak's furlough scheme is a victim of its own success
Rishi Sunak (photo: Getty)
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Who are we kidding? If you are still furloughed through July, August, and September, the chances are that your job isn’t on hold as you wait for lockdown to gradually be lifted or for your company to get back to normal levels of demand. In truth, you have probably been fired. It’s just that no one got around to telling you yet.

Rishi Sunak's coronavirus job retention scheme, to give its full title, has in many ways been one of the most successful government projects we have seen for years. More than six million workers and half a million companies have taken it up. It has been brilliantly implemented by HMRC, who built the system in only a month, with hardly a hitch in the process (Who knew giving away free money was so easy? Maybe we should try it more often). Today the Chancellor announces an extension of the scheme, keeping it in place for another four months, although with some tweaks to try and reduce the estimated £10-£15 billion monthly cost.

The trouble is, it has been far too successful, and now the challenge is to end it, or at least bring it under some form of control. Sure, it was absolutely right to introduce the scheme. Two months ago, we had no idea how bad the epidemic would be, or when we might get out of it. The Nightingale hospitals could have been filled to the brim right now, and we could have been looking at half a million deaths, perhaps even more, as the healthcare system was overwhelmed. As it turns out, while the death toll has been horrific, the NHS has coped so far, the rate of infections has started to come under control, and we need to start gradually getting back to normal.

And yet right now the furlough scheme is destroying the incentive to work, and putting too many companies on permanent life support. Extending it, and allowing companies to bring back staff part-time, will only compound the problem. In fact, the big change that is needed is to turn furlough into a form of 'Covid Community Service.'

Furloughed staff should not be doing nothing if they are being paid by the government. They could be ‘contact tracing’ infections. They could be volunteering to help vulnerable groups. They could be doing compulsory online training to prepare them for new jobs once the scheme ends. Whatever. There are plenty of different alternatives – and all of them would be better than having people sitting around at home doing nothing for months on end.

That would be the radical option. It would mean that workers had no incentive to stay on furlough rather than go back to work. It would mean their skills and motivation were kept up (after all, we know from countless studies that the long-term jobless become unemployable very quickly, and that is what furloughed staff will soon turn into), and it would prepare them to come back into the workforce, probably in a different role. Sure, it wouldn't be as popular as giving away free money. But Rishi Sunak needs to start showing he can make the harsh, difficult decisions as well as the popular ones – because that is the real job of the Chancellor, and a Conservative Chancellor most of all.