Delay furlough phase-out, Labour urges, as economists raise redundancy concerns

·3-min read

Labour has called for the Government to delay plans to shift some of the burden of paying for furloughed workers to businesses, saying it is set to impact nearly half a million firms.

The party said that 450,000 businesses will have to pay around £225 million more as a result of the plans.

From Thursday, employers will have to pick up 10% of their furloughed workers’ salaries, rising to 20% in August and September.

It means that the cost of keeping someone who earns £20,000 per year on the books will rise from £155 in June to £322 in July and finally £489 in each of the two following months, according to the Institute for Fiscal Studies (IFS).

Yet some of these businesses will still be unable to trade due to a delay in the reopening plans for England.

“A month’s delay may seem like a short time, but for businesses in retail, hospitality and leisure, legally closed from trading or relying on the summer season, the delay is another blow,” said shadow chief secretary to the Treasury Bridget Phillipson.

“The Government must make sure economic measures go hand in hand with public health measures and that our British businesses and high streets are not left out in the cold.”

Economists expect to see a spike in redundancies over the summer as furlough is phased out. The latest figures from the end of April showed that 3.4 million jobs were still furloughed.

“With the cost of keeping employees on furlough rising, we therefore expect to see rising redundancies over the summer, even before the final end of the scheme,” the IFS said.

For those laid off, many will be forced onto Universal Credit, and their fates will vary hugely based on their circumstances.

Someone who made £37,500 a year, for instance, would see their income slashed to only £1 in every £8 that they were paid from furlough, or £3,885 per year.

However, a lone parent who rents could see their support drop by a third – a big loss of income, but less severe.

This puts the UK well below the Organisation for Economic Co-operation and Development (OECD) average for benefits for middle earners who fall out of work, the IFS said.

“A large majority of other developed countries provide some form of ‘social insurance’ scheme which offers more support for at least a few months to higher earners when they lose their job,” the IFS said.

Business groups have also voiced concern that the Government is sticking to its furlough schedule, despite delaying the full reopening of the economy in England by a month.

British Chambers of Commerce director general Shevaun Haviland said: “The taper of government payments into the furlough scheme should be immediately deferred until we take the final step in the road map, and further grant support should be extended to the worst affected businesses.”

Unite assistant general secretary Steve Turner said: “The country has invested billions in keeping people in work ready for recovery, but if ministers ‘pull the rug’ from under businesses too soon jobs will go and our heroic national investment will be wasted.

“Nobody is arguing for eternal furlough, but the Government has to work with employers and the trade unions to chart a new course through the pandemic. One that in the longer-term recognises short-term business and economic disruption with short-time working protections, and right now, does least damage to the economy and the livelihoods of millions of working people.”