Businesses can now use the scheme to pay their workers until the end of October, meaning that many firms can look to the future without the prospect of having to make redundancies. While the Government’s decision is a welcome one, it also paves the way for our route out of lockdown.
With more people returning to work over the coming weeks, fewer businesses will become reliant on the state for support. During the lockdown the demands on the Treasury have been unprecedented.
A quarter of the workforce – some 7.5 million people – are currently furloughed, at a cost £14 billion a month.
The Institute of Fiscal Studies economic think tank estimates the scheme will have cost nearly £100bn by October.
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Under the new rules, millions of workers could end up being furloughed for a period of eight months, at which point the level of subsidy is reduced and employers are expected to pay more of a contribution.
While the scheme is incredibly costly, it is also entirely necessary.
The cost to Britain’s economy of a huge spike in unemployment would be equally as high in the short term, and far more damaging in the coming years, as firms disappeared and job opportunities reduced. Without this extension, many businesses say they would have started redundancy consultations as early as this week.
Although workers and businesses now have more time to plan for the future, it is clear that the country needs to start preparing for a return to some form of normality, where furloughed staff can be phased back into their old jobs. There is no easy solution here, and both government and industry will need to be flexible in the coming weeks and months.
In an ideal world no one would lose their job due to this devastating virus and businesses would pick up as normal once the pandemic faded.
Sadly, it is wishful thinking to believe in such an outcome.
The very best we can hope for is damage limitation.