Ministers are in an economic hole so deep they can’t get out

Linda J. Dodson

The moment employers are required to pay 20pc of furloughed wages, they’ll start laying off employees. It’s not just that many hospitality firms are not viable as long as social distancing is maintained; many have found they should be able to manage with fewer staff anyway, even if revenues return to normal.

It is perhaps just as well that many of those employed in the sector are from continental Europe. Large numbers of them have already returned to where they came from, with no intention of coming back; almost laughably as Britain prepares to leave the European Union, the UK Government is through the furloughed workers scheme engaged in a form of fiscal transfer to Italy, Spain, Greece and beyond that might, if it were more universally applied, be just what Europe needs to save its struggling monetary union.

In any case, the Government’s unfathomable decision to impose a quarantine on travellers to Britain from next weekend is the final straw. For the Government to have effectively closed down the tourist industry for the best part of a year is not survivable for many of these firms.

As the jobs retention scheme comes to a close, we can expect perhaps as much as a quarter of the 8.4 million on furlough to lose their source of income, and shift on to far less generous forms of income support.

It may be equally difficult for banks to wean customers off debt forbearance. Many of those who have taken advantage of mortgage holidays don’t actually need them as long as furlough and other income support schemes are in place, but plainly will when the schemes lapse and long-term unemployment looms. Banks cannot last indefinitely without interest income.

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