Sunak’s jobs plan ‘harks back to worst of Thatcher’, says Dodds

The chancellor, Rishi Sunak, has treated people in low-paid work in the north and Midlands in a way reminiscent of Margaret Thatcher by failing to devise a replacement for the furlough scheme that will save their jobs, his Labour opposite number has said.

Related: What is Rishi Sunak's job support scheme and how will it work?

In an interview with the Observer, the shadow chancellor, Anneliese Dodds, said the new job support scheme (JSS) announced by Sunak would fail to provide employers with sufficient incentives to keep workers on, and leave them facing invidious decisions over who to lay off.

The failure to act, and the absence of new measures on training and retraining the UK workforce, risked a period of high unemployment not seen since the 1980s.

Dodds said: “The new job support scheme should have incentivised employers to keep more staff on, instead of making it cheaper to pay one person off than bring back two part-time. That risks putting all the pressure on the employer to decide who stays and who goes.

“It’s a sink-or-swim mentality that harks back to the worst years of Thatcher. And just like in the 1980s, it’s people on the lowest incomes in the north and the Midlands who will pay the highest price.”

She revealed Labour had developed new modelling showing that Sunak’s plan to support companies that keep workers on part-time would, in fact, mean it is far more expensive for employers to retain two employees working half their normal hours, than it is to keep one working full-time.

After Sunak won high praise from large sections of the pro-Conservative media for his latest announcement, Labour is keen to highlight what it sees as the devastating effects on employment that ineffective measures will have in so-called red wall seats – those that went Tory from Labour at December’s election.

In his statement to the Commons on Thursday, Sunak refused to speculate on how high unemployment might go, but said the JSS – which economists estimate will cost around £5bn, in addition to the near-£40bn spent on the furlough scheme so far – would help keep totals down.

Under the plan, an employee will be able to take home a minimum 77% of their full-time wage, even if they only worked one-third of their normal hours, with the Treasury and their employer making up the difference. The Treasury will pay a maximum of 22% of usual wages. The more hours worked, the lower the proportion of wages paid by the government.

But critics say the scheme will do nothing to persuade many companies facing financial hardship to hang on to lower-skilled workers.

The effectiveness of the scheme was also called into question by the Resolution Foundation. Its chief executive, Torsten Bell, said: “The chancellor has rightly sought to combat the coming rise in unemployment with a new scheme to encourage part-time work. But design flaws mean that incentives for firms to use the scheme are weak, particularly in the low-paying, high-turnover sectors like hospitality that are at the centre of the unemployment crisis we face. With small changes the chancellor’s scheme could make a real difference to keeping unemployment down by encouraging firms to cut hours rather than jobs.”

Dodds said Labour was calling for a job recovery scheme that would let businesses in key sectors allow staff to work reduced hours, backed by generous subsidies to pay for a proportion of wages for the rest of the week. It would reward firms that brought back more workers part-time, rather than the government scheme Labour says encourages companies to retain some staff full-time and let others go. John Longworth, chairman of the Independent Business Network, said: “Once again the government has demonstrated its lack of understanding both of our economy and the businesses who drive it. The new job scheme is the equivalent of a pay rise for idleness. Much like the furlough scheme, the government is paying people not to work rather than providing incentives for them to work.

“For those eligible workers, the new scheme will see the taxpayer stump up 22% of a worker’s salary, while the employer will pay 55%. This is the equivalent of a 22% pay rise for those staff. It’s baffling.”