Rishi Sunak faces a race against time to avoid furlough redundancies

Furlough dilemma as new-look economy emerges

“The Government is going to need to do something to support wages in the most disrupted sectors,” says Tony Wilson, head of the Institute for Employment Studies.

“But they are on the horns of a dilemma here because a lot of what is happening now is longer-term restructuring and it doesn’t do anyone any favours trapping people in jobs that aren’t viable.”

The Chancellor has faced mounting pressure from MPs and businesses to extend the wage support for the hardest hit sectors. His first attempt to ease the transition from furlough through his Plan for Jobs received a lukewarm response, particularly the badly targeted £1,000 job retention bonus economists warned would not save roles.

“It looks like the momentum [behind a furlough successor] is gathering pace and we are also suddenly in this second wave. You get a feel for these things with the type of people coming out saying stuff,” says one senior Labour source. “Some of the noise we are hearing is that some businesses expect it.”

Sources with knowledge of government talks say there has been “increasing appetite” for a successor to the furlough scheme, particularly in the last two weeks.

The runaway success of the Eat Out to Help Out scheme has emboldened officials, one source says.

They add: “It was a big, strong intervention that worked, that appears to have changed a few minds in Treasury… The door seems to be open for new ideas.”

Three main options lie on Sunak’s desk: end, extend or replace the furlough scheme. The key question for the Chancellor is how different will the post-pandemic economy be?

“The key dilemma, and no one knows the answer to this, is whether we are in a temporary change for the sectors worst affected or a more permanent structural change,” says Clare McNeil, associate director at IPPR. “Your solution really depends on your reading of the future labour market.”

The arts, entertainment, food and accommodation sectors were the worst-hit UK industries according to July data.

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