21:15 GMT28 February 2021
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    Britain’s influential business groups and trade union leaders are calling on the government to extend its aid to workers under the Coronavirus Job Retention Scheme to avoid a lasting shock from the COVID-19 crisis. UK Professor of Finance and Economics Kevin Dowd has explained what risks this approach is fraught with.

    Chancellor Rishi Sunak is being urged to once again extend the furlough scheme either until July or the end of the year by the British Chambers of Commerce (BCC) and Trades Union Congress (TUC), who argue that otherwise the unemployment numbers may spiral upwards to 2.7 million by the summer. The previous extension was announced in December 2020 and is due to expire at the end of April.

    Having saved 9.6 million jobs across the UK, the measure – under which the government pays 80% of a monthly wage up to £2,500 to Britons hit by the coronavirus pandemic – has already cost the Treasury almost £50 billion. Together with other aid packages and tax rebates the government's furlough strategy, officially known as the Coronavirus Job Retention Scheme, has added up to a national deficit of some £340 billion.

    "I suspect the scheme has cost more than official figures suggest", presumes Kevin Dowd, professor of finance and economics at the Business School at Durham University in the UK, outlining three major problems related to the Johnson Cabinet's furlough dilemma.

    ·         First, the UK government's finances are very strained and the government cannot borrow at this scale for long without serious repercussions to long term fiscal sustainability.

    ·         Second, the government has to extract itself from the furlough scheme sooner rather than later.

    ·         Third, No 10 cannot feasibly end the Job Retention Scheme until the lockdown is largely removed, lest there be a huge increase in unemployment.

    ​The British government is due to set out a roadmap for easing lockdown measures in late February, as its vaccination programme is continuing to expand. According to National Health Service data, a total of 10,021,471 million Britons received their first dose and 498,962 people got their second jab between 8 December 2020 and 2 February 2021, including 9 in 10 people aged 75 and over in England. The country's healthcare authorities plan to immunise 15 million of the most vulnerable citizens by 15 February and another 17 million by spring.

    ​However, this does not automatically mean that No 10 will considerably ease the lockdown measures allowing businesses to open up, according to Dowd.

    "One just cannot tell, especially with this government", he says in an apparent reference to Johnson's back and forth quarantine measures late last year. "It is already clear, however, that however quickly the government eases lockdown – and my hopes are not high – there will be calls to extend the furlough scheme from self-serving lobby groups who see furlough as an easy option that they don’t pay for".

    While the Office for Budget Responsibility (OBR) estimates that unemployment might reach 2.7 million by the summer if the government ends the scheme as Sunak initially planned, this figure strikes the professor as "very optimistic".

    Admitting that the Job Retention Scheme was necessary, Dowd highlights that it should be seen as a temporary measure. "These gradual extensions to this and that scheme create huge problems for the economy and a fiscal train wreck on top", he says.

    Instead of repeatedly extending the scheme, the government needs to relax the coronavirus restrictions as soon as possible and re-open the country to "restore some sense of economic normality", according to the academic.

    "If this is done, the impact of ending the furlough scheme can be mitigated as much as possible. If this is not done, then there will be large and potentially catastrophic increase in unemployment. Calls for the scheme to be extended to the end of the year are irresponsible and self-serving", Dowd warns.

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    vaccine, lockdown, UK economy, Boris Johnson, Unemployment, coronavirus, COVID-19, United Kingdom
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