Robert Peston

Will Rishi Sunak’s Job Support Scheme work?

Will Rishi Sunak's Job Support Scheme work?
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Rishi Sunak's Job Support Scheme may represent the most ambitious programme to socialise or nationalise work in British history – because at a time when so many companies face bleak demand for their goods and services, it subsidises employers to put their staff on short hours, or turn them into part-time workers, as an alternative to sacking them.

The Treasury is not publishing estimates of how many employees will be on the scheme over the six months of its existence. But its designers 'guess' that there may up to four million people on it – which would cost the Exchequer around £1.2 billion a month or £7.2 billion in total.

On the basis of my research for a film about the looming unemployment crisis – which airs this evening on ITV at 7.30pm as part of the 'Tonight' series – I suspect this may be an under-estimate; I have lost count of the number of employers I've met who are desperate about the future and equally desperate not to sack staff, if at all possible.

To be clear, the scheme applies to everyone – on furlough or not – on the basis of the contracts they were on yesterday. It probably won't help those currently on furlough whose employers are still in dire straits – like those in events and entertainment. They continue to face the risk of redundancy at the end of October, and may need urgent retraining if they are to avoid the disaster of long-term unemployment.

But what it does is present an important alternative to laying off people for businesses facing depressed demand for many months yet, but which are viable in an underlying sense (so long as our behaviour is not changed forever by Covid-19).

Here is the simple way of thinking about this: if a company currently thinks it needs to make 10 people redundant, it can now keep them on and save the equivalent amount of money by putting 18 employees on to part-time working. Going part-time represents hurt for those employees. Because their respective incomes will fall by around 22 per cent. But that is surely still preferable to the dole. And for companies – and society – there is the benefit that precious skills and capacity are not permanently wiped out.

UPDATE:

I made a slightly naive error in my calculation. For which I am embarrassed. Which is that I neglected the effect of the Chancellor’s stipulation that employers must subsidise one third of the unworked hours – which means the cost per hour of employing someone part-time under the Job Support Scheme is always higher than the full-time hourly rate. So it is mathematically impossible for the financial savings of retaining part-time workers to be equal to savings from sacking full-time workers – unless part-time workers are more productive than full-time ones (which they might be). 

Even so it is rational for many employers to use the scheme, because a) for many employers who expect business conditions to improve one day it is mad to sack one group of workers and then expensively retrain a new bunch in a few months and b) some employers feel a sense of social responsibility towards their staff (yes really). 

But even so, this absence of a simple financial gain from using the scheme in preference to redundancies does mean significant numbers of jobs will go in coming months.

    Now listen to today's Coffee House Shots podcast with Cindy Yu, Katy Balls and Kate Andrews on the Chancellor's latest economic package:

    Written byRobert Peston

    Robert Peston is Political Editor of ITV News and host of the weekly political discussion show Peston. This post originally appeared on his ITV News blog

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