At £40bn it perhaps wasn’t the most wasteful government scheme ever. After all, it is still less than half the likely bill for HS2, and that is before the next round of cost overruns. But as the furlough scheme ends today it is already looking like one of the most pointless.
There was a perfectly good argument for putting jobs on hold until the epidemic was over.
There was never much of an argument for supporting them until the second wave hit so that people lost their jobs in November rather than May and June. By the end of 2020 how many jobs will have actually been saved by the scheme? Possibly only a handful.
In fact, we need a different approach.
Instead of job retention, we need a blast of job creation. Like how? We should be paying people to retrain rather than do nothing; we should help them to start businesses; we should beef up the Future Fund; and we should slash employment taxes and deregulate the labour market to make it easier to create new jobs.
Even in the middle of an epidemic, businesses can be started, and they can expand, and that is what we should be concentrating on – not desperately trying to preserve jobs that don’t exist anymore.
It wouldn’t be fair to criticise the Chancellor Rishi Sunak excessively for launching the furlough scheme in March. As the Covid-19 crisis escalated, and we moved towards a full national lockdown, it made sense to simply pay companies to put their operations on hold, preserve skills, know-how and teams, and allow them to tick over until everything got back to normal.
It was executed flawlessly, and it supported plenty of businesses and staff through a very difficult time. At its height, almost 9m people were furloughed, getting on for a third of the workforce.
It was one of the boldest interventions in the economy ever made by a British government. The important point, however, is surely this: it only made sense if you kept it running until the end of the pandemic.
If you bring it to a close halfway through the crisis, and just as the second wave is breaking, you might as well not have bothered.
Whether someone gets fired in April or November is hardly a big deal: what matters is that they have been fired. We postponed a wave of job losses, but we didn’t prevent them, and that is a big difference. Plenty of people will argue the scheme should now be extended until the virus has been bought under control, as similar schemes have been in other countries.
The trouble is, we have no way of knowing when that will be, and the cost may turn out to be ruinous. In truth, if, as sadly seems inevitable right now, the Covid-19 crisis is going to stretch on for 12 to 18 months then the focus shouldn’t be on job retention – it should be on job creation instead.
Such as? There are four places we could start.
First, we should pay people to retrain, rather than do nothing. The biggest flaw in the furlough scheme, and one that has been carried across to its more limited successor, the Job Support Scheme, is that staff get paid for doing nothing.
We have plenty of evidence that idleness is the surest way to destroy skills permanently. If people can’t work because a restaurant has closed down that is fine, but the time should be used for training, for voluntary work, or for anything that keeps them purposeful and occupied.
For £40bn, we could have created the most digitally savvy workforce in Europe – and that would have been a big improvement. Next, we should relaunch the enterprise allowance scheme that was a big success in the Eighties, the last time we faced unemployment on the scale we are about to witness.
That Tory government offered people a no-strings-attached income while they launched their own businesses. Lots and lots of new companies emerged that powered the prosperity of the late Eighties and Nineties.
It would be easy to offer everyone on furlough the option of getting the same money for starting a new venture. There would be no extra cost to the Treasury – but far better results.
Thirdly, we could beef up the Future Fund. The Chancellor’s scheme for helping start-ups has spent £770m so far.
According to an analysis by Beauhust, 28pc of the money went into companies at the “seed” stage of funding, and 52pc at the “venture stage”, while the most popular sectors were software, internet platforms and mobile apps. In other words, it went into brand new start-up businesses in high-growth sectors. Which is, of course, fantastic.
Couldn’t we have flipped those numbers around, and spent £40bn on start-ups, and £770m on old jobs? It might have been better if we had. Finally, we should slash employers’ national insurance charges, and deregulate the labour market.
On what possible planet is it really a good idea to whack a massive tax on any company that takes a deep breath and decides to create a new job in the middle of a global crisis as bad as this one?
We should give them a medal, not send them a bill. At the same time, with a new breed of hybrid, home-office workers emerging we should create more flexible forms of labour contract that reflect the way just about every job is now just a gig.
With a budget of £40bn to spend on employment over the last six months we could have done so much more than simply shift the day someone got fired from a restaurant, gym or cinema by six months.
There are jobs that can be created, even with Covid-19, and businesses that can be started, or expanded. We should work out how to create them – instead of racking up endless debts on clinging on to an economy that has already disappeared.