Three alternate futures of the Furlough Scheme – Liberal Article
The shining achievement of the UK Government’s otherwise botched response to the COVID-19 Pandemic has been the furlough scheme. However, the widely praised scheme for preventing mass unemployment is set to end come October.
The furlough scheme is a dam holding back a deluge of redundancies and bankruptcies. Most particularly for the industries that have been most disrupted by COVID-19.
The scheme was intended to be a stopgap measure from inception; created with the end date of October when COVID was supposedly meant to be a distant memory. But, as October approaches and the fears of a second wave grow, the government must act to prevent an even more dire economic and social climate.
I see three options for the government going forward to adapt or replace the furlough scheme. Some radical, others much more plausible.
1. Slowly wind it down
From August, employers were to begin paying payroll taxes and pension contributions for furloughed workers. Followed then by 10% of furlough pay in September and 20% in October.
Potentially in preparation, large employers such as John Lewis, Boots, Dyson and Selfridges have been shedding staff. The fears amongst business leaders – both big and small – is that this shift of responsibility for workers who are not economically productive adds additional burden to their diminished incomes.
To minimise this burden, the scheme could be extended until January 2021; which could coincide with an initial vaccine distribution. The tapering of payments from the government to employers should then be spread across a longer time frame.
This is the most likely option as it has happened before, twice. While it is the most straight forward action – minus the administrative hurdles for the allocation of “Flexi-Furlough” payments – it does still burden struggling business with contributions. While larger, well paid professional firms can support staff on furlough, smaller business will be forced to let staff go.
2. Make it sector specific
While the small-government minded might baulk at the Government spending billions to prop up specific sectors of the economy, the truth is there has been substantial damage unique to individual sectors. No more so than in the construction and tourism industries.
The construction industry tentatively celebrated the announced “£100bn” investment plans over the next parliament. However, with 40% of the workforce furloughed, and few of the promised projects shovel ready, there is a need to ensure there is a construction industry left to realise the proposed spending.
The collapse of Carillion in 2018 haunts many in Whitehall. The rest of the British construction industry is scrambling to ensure they aren’t the next. Removing the payroll burden for unproductive staff would ease some of these woes until new projects break ground and staff can be put back to work.
It might be impossible to fully revitalise the leisure and tourism industries. It is uncertain how COVID-19 will affect tourism in the long term. The honeymoon period of bolstered tourist numbers following the dramatic drop in the pound has definitely ended. The UK’s reputation as the worst affected country in Europe has deterred unknown numbers.
Taking a crass political angle, deciding tactically which industries to include could help the Tories keep their gains in the Red Wall. It would be an opportunity to right the wrongs of leaders past; an olive branch to the unions and the working class following previous Conservative government’s harsh handling of socioeconomic crises.
3. Introduce a Universal Basic Income (UBI)
This experimental scheme gained prominence thanks to Andrew Yang’s run for the democratic ticket. By far the most radical approach, it has the potential to right a lot of the woes of society, not just the COVID crisis.
A UBI is much easier to implement than its critics would have you believe. Several reports have pointed out the benefits of an annual sum of £10,000 or more could have on lifting millions out of poverty and stimulating the economy. Raising the tax bills of the highest earners would go a long way to offset the costs as well as to placate concerns the scheme is further lining the pockets of the wealthy.
A recent survey from the UK suggests support for a UBI is 51%, and a group of 170 MPs and Lords petitioned the government to implement on as part of the COVID response. Momentum is picking up for the scheme, and COVID highlights the need for a more comprehensive unemployment structure. Especially as we head towards a more autonomous future.
Thanks to this crisis I am a convert to UBI cause. The case for its implementation has never been stronger. While it is the least likely option, I think the UBI would have the greatest real impact on those who require it. However, it is most likely that the government chooses option 1 in the short term, with a transition to option 2 if there is continued disparities in how industries are adjusting.
Written by Guest Liberal Writer, Daniel Jones
Point of Information
An accurate deduction from Daniel, despite some UBI delusion – A Conservative Response
The furlough scheme has been, what one could describe as, an economic miracle for the UK. Although not perfect, as nothing is, it has done a lot of good for the British people and our economy. Sadly, it has not been able to protect everyone from dismissal – something I had the misfortune to experience during lockdown. But, the Furlough scheme’s pros have most definitely outweighed the cons.
Above Daniel expresses a belief in a UBI implementation being the answer to the UK’s economic woes. During such unprecedented times as these, a ‘better safe than sorry’ mentality seems more appropriate than the introduction of new economic infrastructure. Taking bigger risks can lead to greater rewards, but only when the gambit pays off, as the consequences can be very severe too.
Daniel also does not express the type of UBI he believes should be implemented. It has been done in several nations, all in quite different ways. For example, the Bolsa Familia in Brazil or Spain’s new lockdown initiative which has the makings of a UBI.
However, I do agree with the prognosis of how the current government will undergo the shift away from the Furlough scheme. Using Daniel’s numbering, a short-term introduction of option 1 and then gradually moving to option 2 as we have already seen some minor moves towards this type of strategy. A key example being the £1.57 billion promised to be invested in Britain’s theatres and other small performance venues.
In conclusion, I believe Daniel has more-or-less accurately highlighted the route the government shall take to gradually phase out the furlough scheme despite the introduction of a UBI being unlikely. For a UBI to be implemented into the UK a lot of research must be first undertaken to see how it would play out. Granted it has arguably had some successes in other nations. However, said nations have very different internal economic structures to the UK. At such a critical time as this, trialling relatively untested ideas seems like an unnecessary risk to take. Especially when the only true test of a policy like UBI is through praxis and gradual introduction.
Written by Guest Conservative Writer, Peter Pearce
Furlough extension now, UBI later – A Labour Response
I agree with the majority of Daniel’s conclusions here. The furlough scheme has been a warm-welcomed wonder in such unprecedented times. Naturally then, as we slowly emerge from lockdown, it is necessary to consider the next step.
The extension of the furlough scheme is the most logical. We are far from free of the virus, and for as long as we remain in this period of uncertainty, the scheme must stay. The two go hand in hand. I agree that it should at first be extended until January. Then, if the success of a vaccine is hopeful, we should begin to look at easing the furlough scheme. Until then, it without a doubt must stay; workers and businesses are no better off than they were at the start of lockdown. It is actually quite the opposite in many cases.
Then, perhaps making it sector specific could work as a way of easing off the scheme. But of course the government would have to be very careful as to which sectors they choose to prop up.
Daniel refers to the possibility of political tactics here. I am fearful that this would not go the way he might hope. It has overwhelming potential to further extend what is a very right-wing Tory mandate, rather than an “olive branch” to those continuously impaired by the current government.
When explaining the third of his options, Daniel correctly states how a Universal Basic Income (UBI) would help lift millions out of poverty while simultaneously stimulating the economy. The best of both worlds, right? Well, yes and no.
While UBI has gained a rather large fan-base over the last few months, given its potentially remarkable outcomes, it is no temporary fix. It is not something you can give and then take back, unlike the furlough scheme in question. To offer this hope and then remove it, and to drop those lifted from poverty straight back into it, is illogical. Even Keir Starmer, an avid supporter of a UBI future, does not see it as a realistic fix currently.
More so, after this crisis I am certain UBI will once again become a point of contention in UK politics. So, as a temporary fix, or to merely “ease woes” as Daniel may suggest, this is by no means the most sensible option.
Ultimately, an extension of the furlough scheme is the most promising. While this will unfortunately not save every small business, it is seemingly the best option for now, as we continue to fight coronavirus.
Written by Senior Labour Writer, Abi Clargo