As the country faces a second wave of coronavirus infections, the government doesn’t want to support jobs propped up solely by fiscal stimulus.
By Eshe Nelson
The British government, battling a second wave of coronavirus cases, on Thursday announced a slew of new and extended economic measures to support jobs and businesses. But the centerpiece, a wage-support program, is less generous to workers and employers than the furlough program it is replacing, which expires next month.
And that appears to be by design.
In a somber address to the House of Commons, Rishi Sunak, the chancellor of the Exchequer, outlined the toll the virus continues to take on the country as he said Britons have to “live with” it.
“For at least the next six months, the virus and restrictions are going to be a fact of our lives,” Mr. Sunak told the House of Commons. “Our economy is now likely to undergo a more permanent adjustment.”
The government has been trying to walk the fine line between controlling the spread of the virus and avoiding a second national lockdown. It has also been trying to protect jobs without giving government support to so-called zombie jobs, those that are being propped up only by fiscal stimulus.
Mr. Sunak had been keen to end the expensive furlough program, which has cost the Treasury more than 39 billion pounds ($50 billion) while supporting up to a third of Britain’s work force. On Thursday, he reiterated once again that it would end on Oct. 31 and said it was “fundamentally wrong to hold people in jobs that only exist inside the furlough.”
Britain’s statistics agency said 11 percent of the work force is still on the furlough program.
On Nov. 1 it will be replaced by a new program that will partially top up earnings of workers who have had their hours cut, seemingly inspired by Germany’s long standing Kurzarbeit, or short-work program.
Under the plan, employees must work at least a third of their normal hours, and the company will pay these wages. For the remaining hours, the company will pay a third, the government will pay a third and the employee will forgo the last portion. The program will run for six months.
Though the Treasury hasn’t published details of how much it expected the plan to cost or how many people were expected to be covered by it, the new plan will probably be significantly cheaper than the furlough. At most, the government will have to pay just 22 percent of the cost of an employee’s wages from before the hours were reduced, and no more than about £700 a month. The furlough program, in its most generous iteration during the lockdown, covered 80 percent of an employee’s wages up to £2,500 a month.
“This is less generous by some way than the main furlough scheme,” and a natural change as social restrictions are less severe, said Carl Emmerson, the deputy director of the Institute for Fiscal Studies. .
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