Labour has warned Rishi Sunak that the Treasury’s one-size-fits-all approach to ending wage subsidies risks a period of mass unemployment that will reverse much of the good done by the furlough.
Writing for the Guardian, the shadow chancellor, Anneliese Dodds, called on Sunak to use his planned summer statement next month to extend financial support to vulnerable sectors beyond the October deadline for winding up the scheme.
Dodds said it was a mistake for the chancellor to insist that all businesses start to make a contribution to the employment costs currently being met by the state, regardless of whether they were able to open or not.
“Mass unemployment is like an invasive perennial – once it has taken hold, it can take years to fix. Better to prevent it ever taking root.”
Figures released by HMRC this week showed that the number of jobs furloughed in the week to 21 June rose by 100,000 to 9.2m. Almost £23bn has been claimed by the 1.1m employers that have taken advantage of the scheme, which closes for new entrants on 1 July.
Dodds said: “The government’s one-size-fits-all approach to support schemes makes no sense – it treats industries that can open today and industries that can’t exactly the same.
“We have repeatedly urged the chancellor to adopt a sectoral approach to economic support. This should include introducing the employer contribution at a slower rate for those sectors which have been hardest hit – not least because the promised sector deals are still yet to materialise.”
Sunak announced in March that the government would pay up to 80% of the wages of furloughed staff up to a maximum of £2,500 a month. He has since extended the length of the scheme but said it would begin to be phased out in August. The chancellor previously said that sectors such as hospitality and retailing – which were hardest hit by the lockdown – had already received targeted government support through grants and VAT and business rates holidays.
Labour has generally been supportive of the government’s emergency measures to support activity and jobs through the lockdown but has now started to toughen up its approach.
Dodds said: “The UK government was too slow to get PPE to hospitals and care homes and too slow to put in place its test, track and trace system – which was once billed as “world-beating” but currently looks barely fit for purpose. We cannot afford for the government to now be asleep at the wheel when red lights are flashing on the economy’s dashboard. The government can no longer ignore the warning signs. It must act to save jobs.”
Ministers believe the gradual easing of lockdown restrictions will provide a substantial boost to the economy but Dodds said there was a need for a “back to work budget”. Sunak’s approach to the furlough, she added, would “simply lead to more people losing their jobs – and mean much of the good work done by furlough will have been undone”.
The shadow chancellor said tailored support was needed for groups with specific challenges such as young people, older people and disabled workers – and also called for an early warning system for major employers planning redundancies.
Dodds said Britain was lagging behind Germany, which had come up with a package focused on promoting the environmentally friendly, work-rich industries of the future.