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Britain is in for a long, hard winter. That came across loud and clear from Rishi Sunak as he announced new steps designed to prevent unemployment from breaking postwar records over the coming months.
The aim of the job support scheme, the extension of the VAT holiday for the hospitality and tourism sectors and the help for businesses with their cashflow was simple: to get the economy through to next spring without a tsunami of job losses.
The snap judgment from experts was that the winter package would temper the increase in joblessness but little more than that.
Sunak has said repeatedly throughout the pandemic that he is not going to be able to save every job and many of those who have been on furlough since March are going to have their jobs made redundant in the coming months.
The chancellor said it was time to move on from a blanket support to a more targeted approach in which the government tried to save viable jobs. There are two issues here. The first is that many jobs that are currently furloughed would be viable under normal economic conditions. Theatres in London’s West End are closed because the government has said it is not safe for them to open, not because they are unviable.
The second issue is that employers have to make a much bigger contribution to the job support scheme than they did to the furlough scheme – and many of them are likely to decide that they can’t afford to keep workers on.
In October, the final month of furlough, businesses will be paying 20% of an employee’s salary and Sunak 60%. From November, the company pays a minimum of 55% and the Treasury a maximum of 22%.
Ruth Gregory, a UK economist at the consultancy Capital Economics, also makes the point that under the furlough scheme, employees are being paid for not working at all, while under the new scheme they will have to work at least one-third of their normal hours. Gregory expects unemployment, currently 4.1%, to rise to 7% by the middle of next year.
That is probably the best outcome that Sunak could hope for. The tone of his speech – with its talk of living without fear – suggests he knows full well how damaging the tougher restrictions imposed this week could be for the economy and that he will push back hard in Cabinet against any further tightening.
Judged by the experience of the past six months, this is not the end of the story. There is likely to be more stimulus – from the Treasury and the Bank of England in the coming months – and attempts to strengthen the welfare safety net.
Source: The Guardian
Keyword: Hard winter ahead as Sunak tries to stop job losses hitting postwar record | Politics