As Larry Elliott warned in the Guardian yesterday:
Bank of England forecasts for 7.5% unemployment this winter may have to be revised up considerably
I have long thought that an unemployment rate of at least 15% is likely, and I stick by that forecast, most especially as we are now heading for another wave of coronavirus. But in that circumstance what is very apparent is that the government, and others, are suffering from a poverty of ambition when it comes to replacing the furlough scheme. As the FT reports:
The CBI has outlined a new scheme, to be in place by November 1, which [It would wish to] be available to all companies and last a year. It would involve a state subsidy if an employer was able to offer workers at least 50 per cent of their normal hours. The company would pick up the full wage bill for the hours worked by an employee. But for non-working hours the bill would be shared, with a third paid by the company, a third by the Treasury and a third foregone by the employee. The attraction for Mr Sunak of a CBI-style scheme is that it would keep people in the workplace and support jobs that were still viable, if only on a part-time basis.
Such a scheme does undoubtedly meet the government's usual criteria of appearing to be doing something, whilst being largely ineffective.
First of all, this idea presumes that employers survive, and there is no guarantee that hundreds of thousands will.
Second, this assumes that large numbers of employees can be put on part-time working, and again there is no guarantee that this will be possible.
Third, this presumes that a company can, in effect, pay an increased wage for part time employment compared to that which is affordable at present, and this, quite literally, makes no sense when the whole reason for the part-time employment will be that the company is suffering severe financial stress, with the extra cost being avoidable by sacking part-time staff and keeping full-time employees.
Fourth, this also presumes that there will be no knock on effect over a period of a year in the form of mortgage and rent defaults when in practice both will be highly likely in a great many cases because so many households are already geared to their absolute limit.
To be blunt then, such thinking is a simple recipe for economic disaster. If schemes like this arew imposed, companies will simply get rid of staff rather than pay extra wages spread across their entire workforce. And, a credit crunch will be inevitable.
I really do wish that some people could do joined-up thinking.
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That more support is needed is clear…. and has been clear for some months. The sadness is (like so much else with COVID) that the government has frittered away this time when serious thought about “what next?” was required.
Furlough was a decent short term measure to prevent an even worse disaster and some credit to the government for that….. but it appears that there is no “follow up” – and that is unforgivable.
Furlough has some short comings……
(1) Workers left idle when there their firms could have had them doing some useful work.
(2) Workers left idle when there is so much useful work to be done in the country at large.
(3) A feeling of injustice among key workers that are still working hard for low pay whilst others a chilling on furlough.
(4) Concerns about fraudulent claims.
(5) and more….
A sensible government might have ….
(1) Tinkered with the scheme to allow part-time working
(2) Launched a Green New Deal
(3) Paid a bonus to Health and other key workers as a “thank you” (and raised pay overall).
(4) stopped reading the Daily Mail
…… but we do not have a sensible government……. and that makes me cross.
Agreed
point 4 is the killer blow. Asset prices need to fall, but people have been conditioned to think that their house ever rising in value is a good thing.
“Financialisation” has weakened our economy dramatically.
The Finance Curse by Nicholas Shaxton is an excellent read on this issue.
Britain spent centuries fighting wars both internally and externally which was good business financing and supplying them. Now this business of directly killing people has substantially declined for the British “a killing” has to be made elsewhere and people’s need to put a roof over their heads in this Gulf Stream soaked outpost of Western Europe seems an obvious target.
Off and on for five decades now the finance sector has declared war on British citizens (“Finance is War” Michael Hudson) hyper-inflating house prices where the ratio between gross annual average income and average house price has nearly doubled during this period. Even many women now working has seen much of their income going into bankers’ coffers. The British people meekly put up with it in bovine fashion.
Paradoxically it’s starting to look like only a substantial weakening of the economy through Covid and No-Deal will prompt an awakening. The problem is though there don’t appear to be many political leaders around with much in the way of economic insight. Maybe a needs must will discover them. Interesting times!
What will the fuel and emissions be like for 7,000 lorries bumbling along for 2 days each? And while we are hearing that sales of chimineas and outdoor heaters are rocketing for use outdoors this winter. Air quality is going to be horrible.
I wonder if the illegal levels of air pollution will be fixed by making it legal?
Sorry, I’ve obviously posted that under the wrong article.
I too have heard that…
Agreed with all those comments.
This is about investment for the future having an economy to return to when Covid is under control.
Sunak is a dunce. Only a state hating Tory would think that he is being ‘radical’.
Useless.