‘Sleepwalking into mass unemployment’: Workers struggle as furlough scheme ends and national lockdown looms

Support for wages is being reduced just at the point it may be needed most – while delays and U-turns have already cost jobs, writes Ben Chapman 

Monday 02 November 2020 12:10 GMT
What is the new job support scheme?

It’s like there’s nobody to turn to,” says Ian McGivern, a 42-year-old dental technician who was made redundant a fortnight ago. After more than two decades in the industry since leaving school, he did not expect to become unemployed.

“My outgoings on my house are a lot and I’ve got nothing coming in,” he says. “I don’t know how they expect us to survive.”

As the 31 October end of the furlough scheme approached, and with few patients coming through dentists’ doors, his employer decided to let him go. It’s the first time in his life he’s been out of work; the first time he’s considered the prospect of not being able to financially support his family, even to keep a roof over his head.  

It’s an experience many more may face this winter, as Covid-19 case numbers rise, while government financial assistance is reduced.

Some 450,000 people are forecast to lose their jobs because, under the less generous support that kicks in from Sunday, their employers will not be able to keep them on. 

The Trades Union Congress is warning the UK will “sleepwalk into mass unemployment and poverty” unless the government provides more help, while analysts at Oxford Economics say that only an extension of furlough can prevent a significant wave of joblessness as a second national lockdown looms.

For McGivern, that wave has already hit and he, like many others, has recently discovered the harsh reality of Britain’s threadbare safety net.

In the next few months I’m going to be forced to sell my house, because of a government that’s made mistakes

Ian McGivern

While renters can claim housing benefit, people with mortgages to pay must be out of work for nine months before the state will contribute towards housing costs – and even then it will only provide a loan to cover the interest, not the repayment. Universal credit can be as little as £409.89 a month.

“In the next few months, I’m going to be forced to sell my house, because of a government that’s made mistakes, as I see it. There will be so many people that have to sell up, in situations like mine,” says McGivern.

Years of welfare cuts driven by the rhetoric of austerity, belt-tightening, and discouraging “dependency” have left a system struggling to fulfil a central purpose: to help people through an unforeseen emergency. 

Basic unemployment benefits for a single person replace a significantly lower percentage of lost income than in many other European countries. Statutory Sick Pay is the lowest in the OECD (Organisation for Economic Co-operation and Development).

McGivern has looked into plumbing and electrician apprenticeships but he’d be paid just £170 per week – nowhere near enough to cover the bills. So the next hope is to do a driving instructor course. It will take at least six months before he’s qualified. In the meantime he’s trying to pick up odd jobs here and there. “I feel like I’ve been forced into this," he says. “I’m trying to be very optimistic.” 

His situation highlights a problem with the government’s stuttering approach to job support. No one could say that his job is not one of the “viable” ones that Rishi Sunak has said he wants to preserve. Covid will not bring about the downfall of UK dentistry.

Yet he is out of work, in part because of a government that has kept one eye on the budget deficit rather than the immediate economic catastrophe.

While France and Germany extended their wage support schemes for 24 months, providing certainty for businesses and workers, the UK’s “whatever it takes” message from early in the pandemic has been replaced by a series of reluctant concessions to the gravity of the situation.

Worried about the cost of continuing the furlough scheme, Sunak steadfastly refused to introduce a replacement. As late as last month, Boris Johnson told the Commons that people on furlough were “languishing out of work” and must go back once the scheme ended.

2 million

Workers still on furlough in mid-September

Shortly afterwards, his chancellor was announcing the Job Support Scheme, which drastically reduced the help available to employers and gave them an incentive to cut jobs rather than keep workers on with reduced hours. 

After weeks of warnings that the flawed design of the JSS would lead to a tsunami of redundancies, the chancellor yielded to calls for more generous support just days before the 31 October deadline. It was too late for thousands of people who had already been let go.  

“The main driver of the reforms now in the UK seems to be ‘how can the state save money’?” says Torsten Muller, director of the European Trade Union Institute, who has analysed wage support schemes across Europe.

Part of the UK’s problem is that it doesn’t have much history of supporting workers’ incomes through crises. When the National Audit Office compared furlough with other similar schemes, it found that the UK was the only one out of 20 countries that didn’t already have an existing mechanism in place for state wage subsidies.

“In countries with a longer tradition of this kind of support, like Germany, Austria, Sweden and others, the state sees the benefit,” says Muller. “It is a very important stabiliser of the economy, which supports demand.”

The economic logic is simple: in a severe downturn, the last thing you want to do is take money out of people’s pockets. Each person who sees a big hit to their income is one less customer for the businesses desperately trying to stay afloat.

Brewer Ian Fozard has seen business halved in a month as cases have risen
Brewer Ian Fozard has seen business halved in a month as cases have risen (Ian Fozard)

Muller adds: “In the short run, the government might save some money but in the long run it is much more expensive if you don’t fully engage in these sorts of schemes.”

Reluctantly or not, from 1 November the government will pay two thirds of wages up to £2,083.33 a month per employee for businesses forced to close under lockdown rules. Affected businesses can also apply for grants of £3,000 a month.

Firms that are allowed to stay open must pay workers at least 20 per cent of their wages to qualify for government support, with the government paying 62 per cent for unworked hours up to a maximum of £1,541.75 per month.

It’s in the second category that unions worry lots of workers could lose their jobs. “Swathes of businesses will be directly hit by shutdowns, even if they haven’t padlocked up the door,” says Tim Sharp, senior employment rights officer at the TUC. “We’re concerned about places like local breweries where the pubs have closed, laundry services for hotels, caterers.”

Self-employed workers can claim just 40 per cent of their previous earnings. Then there are up to 2.9 million people, mostly self-employed or contractors, who have been denied support throughout the pandemic because they did not meet the government’s criteria.

“We may all be weathering the same storm, but we are certainly not all in the same boat,” says Sara Willcocks, head of communications at Turn2Us, a charity that helps people through poverty. “It is clear that we are heading for an intense period of high unemployment. Without intervention this will lead to mass personal debt, rising homelessness and increasing numbers of families going hungry.”

Ian Fozard runs Roosters Brewery in Harrogate which sells to local retailers and pubs, many of which are now under tier 3 restrictions. He has a favourable view of the job support scheme. “There’s a great understanding and acceptance among our team about the situation,” he says.

“We’ve tried to spread the pain across the workforce. But the wider economic situation and the failure to control the virus is a big concern. Sales have halved between September and October. 

As chairman of the Society of Independent Brewers, he understands how badly the industry is being affected. “There’s just sheer worry across the whole sector. People are not buying beer in the volumes they were. There’s a lot of pubs that buy good beer are ones that don’t or can’t sell food.” He feels public money given to big businesses could have been better allocated.

“Tesco got £585m of business rate relief. Small brewers got nothing even though hospitality closing down directly affects us.”

As job losses mount and incomes fall, pressure is increasing on the government to be more ambitious with its recovery plan. All eyes are on Rishi Sunak’s spending announcement next month where he has promised to provide a “Plan for Jobs” and lay out a vision for long-term investment in schools, the NHS and infrastructure.

Boris Johnson attracted ridicule in June when he unveiled a stimulus package consisting largely of projects that had already been announced, and then invited comparisons with Franklin D Roosevelt’s New Deal.

If ever there was a time for a truly Rooseveltian vision, it must surely be now.

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