Furlough 2.0: Rishi Sunak draws up German-style scheme for businesses and the Treasury to jointly subsidise workers' wages to avoid mass layoffs
Rishi Sunak is drawing up plans for a new German-style job retention programme to replace the government's outgoing coronavirus furlough scheme, reports suggest.
The Chancellor is under mounting pressure from business chiefs and politicians to find a new way to avoid the threat of mass layoffs when the government's £39billion furlough scheme ends next month.
It comes as Boris Johnson yesterday hit reverse on his 'back to work drive' and imposed new restrictions on the Covid-19 hit hospitality industry in a bid to slow Britain's rising infection rates, while avoiding an economically devastating second national lockdown.
The new restrictions, which include a 10pm curfew on bars and restaurants, which were forced to close during the first lockdown and relied on the furlough scheme to keep people in employment, could be in be place for up to six months.
But with the furlough scheme set to end on October 31, Labour leader Keir Starmer was warned of a looming jobs 'disaster'.
Meanwhile, bosses at the Confederation of British Industry have proposed a part-government backed, part-company funded scheme in a bid to ease struggling sectors out of the costly job retention programme.
Mr Sunak has vowed to be 'creative' with his proposals and, according to The Finanical Times, is looking at whether the Treasury and companies could share the cost of topping up the wages of staff who can only be employed part-time because of the pandemic.
Rishi Sunak is drawing up plans for a new German-style job retention programme to replace the government's outgoing coronavirus furlough scheme, reports suggest
It comes as Boris Johnson yesterday hit reverse on his back to work drive and imposed new restrictions on the Covid-19 hit hospitality industry in a bid to slow Britain's rising infection rates, while avoiding an economically devastating second national lockdown
What is the German-style system that Rishi Sunak could use in place of the furlough scheme?
Germany's has used its Kurzarbeit job subsidy measures during the coronavirus pandemic and has recently extended its use until the end of 2021.
Unlike the British furlough programme, an emergency scheme which pays companies to pay employees not to work, the Kurzarbeit system, which already existed before the pandemic, surrounds short-time working.
It allows employers to reduce employees' hours while keeping them in a job.
The government pays workers a percentage of the money they would have got for working those lost hours.
According to the Munich-based Ifo Institute for Economic Research, at the height of the pandemic, half of all German firms had at least some of their staff on the scheme.
Influential British political figures including former prime minister Gordon Brown have urged the government to bring in such a scheme, or a similar French-style system, after the furlough scheme ends in October.
Such a scheme would be similar to Germany's Kurzarbeit job subsidy measures, which it has recently extended until the end of 2021.
Unlike the British furlough programme, an emergency scheme which pays companies to pay employees not to work, the Kurzarbeit system, which already existed before the pandemic, surrounds the concept of short-time working.
It allows employers to reduce employees' hours while keeping them in a job.
The government pays workers a percentage of the money they would have got for working those lost hours.
According to the Munich-based Ifo Institute for Economic Research, at the height of the pandemic, half of all German firms had at least some of their staff on the scheme.
Influential British political figures including former prime minister Gordon Brown have urged the government to bring in such a scheme, or a similar French-style system, after the furlough scheme ends in October.
British business bosses, including Dame Carolyn Fairburn, director-general of the CBI, have also proposed a part-government funded, part company funded scheme.
Ms Fairburn, who recently said it was 'desperately urgent' to announce a successor to the furlough scheme, has called on the government to offer a state subsidy to employers who were able to offer workers at least 50 per cent of their normal hours.
The employer would cover the cost of the hours worked by an employee, while the cost of non-working hours would be split between the business, the Treasury and by the employee.
The CBI, which represents around 190,000 businesses, believes the scheme should be available to all companies and should last for a year.
British business bosses, including Dame Carolyn Fairburn, director-general of the CBI, have also proposed a part-government funded, part company funded scheme to replace the current furlough system
Ms Fairburn says such a scheme would be less expensive than the current furlough scheme, which has cost the Treasury almost £40billion up to September 20.
According to estimates by the The Financial Times, if three million people joined a CBI-style work subsidy scheme it could cost the Treasury about £500m each month.
Under original job retention scheme, workers placed on leave have received 80 per cent of their pay up to a maximum of £2,500 a month.
But from September, companies were required to contribute towards employees wages, while a bonus system of a £1,000 is in place per employee on the scheme who remains in a job until at least January 2021.
Recent figures suggest the current scheme has cost the government £4billion in a month, while overall the programme has helped support 11million employees.
Speaking about the CBI proposals, Ms Fairburn previously told BBC Radio 4: 'You would have some support, but it would be less and you would see far fewer companies take it but, but enough to create a smooth transition and protect jobs at this very crucial time.'
Others however have called for a complete end to the furlough scheme in its current format.
The Bank of England's chief economist last month warned against extending the coronavirus furlough scheme, claiming that keeping jobs on 'life support' is simply 'prolonging the inevitable'.
Andy Haldane says the pandemic has caused 'lasting structural damage' to the economy and that 'regrettably, some business will not make it through'.
Andy Haldane says the pandemic has caused 'lasting structural damage' to the economy and that 'regrettably, some business will not make it through'
In a podcast with City A.M, released last month, the economist said the 'most painless solution' is to recognise the damage caused and plan to adapt ' to the new world'.
Arguing for an end to the furlough scheme, Mr Haldane told City A.M: 'Keeping all those jobs on life support is in some ways prolonging the inevitable in a way that probably doesn't help either the individual or the business.'
'For me that would be a less painful way of businesses adapting now, if the burden was shared across the workforce for those companies for which demand hadn't fully returned, and shared through..somewhat lower pay rises or somewhat shorter hours rather than all the burden being taken in job losses for a smaller number of people.'
He said adopting a more flexible approach might be 'one of the things that protects us from too many more job losses.'
'Six months' of restrictions at a glance
It comes as furious Tory MPs have turned on 'authoritarian' Boris Johnson as he ordered the British public to obey his draconian new coronavirus restrictions – or face an economically devastating second national lockdown.
The panicking Prime Minister warned Britons last night they faced a long hard winter of police-enforced curbs on their freedom, saying the alternative was 'many more families losing loved ones before their time'.
In a dramatic televised address to the nation, Mr Johnson, flanked by a Union Jack, said he was 'deeply, spiritually reluctant' to make new 'impositions, or infringe anyone's freedom' after unveiling new measures in the House of Commons.
But he said it was necessary to reintroduce working from home rules and a swathe of social measures in order to avoid a dramatic surge in deaths, overwhelming the NHS and spark a second, economically devastating total lockdown.
The beleaguered premier faced fire from all sides as he U-turned on his push to reopen workplaces. He also faced barbs for introducing other swingeing new measures including a 10pm pub curfew and £200 fines for mask rule-breakers in England, with the Army potentially drafted in to help police, in the face of a surge of coronavirus infections sweeping the country.
But speaking from Downing Street, he warned that 'iron laws of geometrical progression are shouting at us from the graphs that we risk many more deaths, many more families losing loved ones before their time'.
He even hit out at his critics – Tories and business leaders who fear his restrictions will further batter Britain's flailing economy – adding: 'To those who say we don't need this stuff, and we should leave people to take their own risks, I say these risks are not our own. The tragic reality of having Covid is that your mild cough can be someone else's death knell.
'And as for the suggestion that we should simply lock up the elderly and the vulnerable – with all the suffering that would entail – I must tell you that this is just not realistic. Because if you let the virus rip through the rest of the population it would inevitably find its way through to the elderly as well, and in much greater numbers.'
Responding to the Prime Minister's grim address, Telford MP Lucy Allan questioned on Twitter whether the UK's 'collective health' was really at risk: 'Measures to tackle #covid must be proportionate to the risk. The virus is a serious threat to certain vulnerable groups.
'We must protect these groups with targeted measures. Shutting down society causes massive damage to health, lives, and livelihoods of the whole population.'
Meanwhile Brexit Party leader Nigel Farage blasted Mr Johnson's 'authoritarian' response to the coronavirus crisis, angrily tweeting: 'The PM says we are a 'freedom loving country', but will fine you £10,000 and send the army in if he likes. This is authoritarian – I don't believe his promises on testing or the competence of the government.'
The PM has already warned that the new curbs could last well into 2021, and it could take until then to get mass testing up and running fully and a new vaccine widely available.