The government's new Unemployment Creation Scheme is worse than I expected. These are my Twitter reactions, best read from the bottom up:
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It’s now reached the stage where if anything can be done badly this Tory government will do it! Mad as Hatters!
I couldn’t agree more – this is gold plated madness.
And by extending the loans they are just trying to ensure the write offs come on somebody else’s shift, but if the companies don’t survive they’ll have to be written off anyway…
And still nothing for the arts sector, which is actually a major UK export.
Agreed
Carnage ahead, then Brexit. Wow.
useless – and still no hope for the future
Does anyone benefit from this “creative destruction” within the fixed term of this government? I’ve been lost for a point to any of it for a while, but remain anxious to steer clear of the conspiracy theorists. And yet, one would think it easier to govern well than to govern this badly.
Agreed
He does not appear to appreciate the scale of the crisis.
Viability is to be determined by the employer and will be evidenced by his willingness to extend employment contracts over the next six to twelve months.
This, in turn, takes us to income expectation. There will be employers who will be able to project income at normal or increased levels (Amazon), there will be employers who will not be in a position to project income that will cover their fixed operating costs and there will be employers falling somewhere between these two extremes. This crisis is one of demand and in certain cases — theatres- demand has been extinguished by government decree.
The JSS will not be required by those employers in category one, will be of no use to those in category two and may or may not be used by those in category three. Those employers willing to pay their part time employees more per hour worked, because of retention issues or redundancy timing issues, may use the scheme but this will depend upon the extent to which turnover has diminished, the projected impact on their bottom line and the current position of their accumulated funds .
To what extent companies will now continue to make supplies of goods and services on credit to other limited liability companies I think will be an issue.
Many will have already passed the going concern point of no return but may have been kept alive by the bullish rhetoric of Johnson and his fellow austerians and the piecemeal support strategy of Sunak
I listened to the World at One. As you say the BBC have been pressing the line that furlough has to come to an end, and at lunchtime they were bigging up this new scheme, while giving very few details about it.
Everything gets a pro-government spin these days.
You need to take an emetic before watching the BBC news and commentaries on it. That’s how bad this country’s become. Run by knaves and spivs!
Neoliberalism is not a conspiratory
Theory and the process of constructive destruction has been with us for a long time and is well understood and documented. I would refer anyone interested to Nancy MacLean’s book ‘Democracy in Chains’. Part of the process has also been the neutralising of the trade union movement which was effectively completed in the UK during the Thatcher years. This is a long term gradual project that we are not supposed to notice but it is clearly evidenced by the constantly increasing divergence between the richest and the poorest in our society. The ultimate aim is for the minority to permanently control the majority. If you look around you will see how that is being achieved. The BBC is part of it in my opinion.
It seems to me that there is a very basic, first principle flaw in the Chancellor’s plan. Here is a free-market, neo-liberal Conservative Chancellor telling us that he can’t support unviable jobs (therefore businesses) in the “new normal”. Notice that he does not provide us with a clear picture of the precise nature of the “new normal”. He doesn’t know what it will be. This is puff-politics. It doesn’t stand up.
The Chancellor could only make that judgement on the basis of some rudimentary evidence of the survival of businesses as they operate in the exceptional circumstances that, please note, the Chancellor is involved in creating. He is not an impartial spectator of a market in which he has no hand. His hand is evident: it is not invisible. This is not a free market; it is a Rishi Sunak sponsored market, a phoney market. The Chancellor is selecting what jobs and businesses survive as if it was a free-market decision, when it isn’t. There may be perfectly sound businesses that will be destroyed by the environment he creates, while other businesses, with no viable future in the “new normal”, whatever that is, but which survive well only because of the environment the Chancellor has created. Rishi Sunak is flying blind, and pretending 20/20 foresight.
Well said
All that would happen if furlough continued would be an increase in our debt – a number on a spreadsheet. Yet the story we’re being told, as always, is that we cannot afford to furlough indefinitely. Why? Because the government needs to pretend it must recoup the money. It can then create unemployment to suppress wages and use austerity to increase the wealth of the super rich. The government has already done very well on this front with its blatant filching of public funds for the benefit of Serco and friends.
I am not sure I follow your logic
To be fair, others have expressed their opinions far better than me! I am happy to be led by them. I do have a question though. Supposing money flowed to workers on a furlough scheme indefinitely? They would not be producing anything (goods or services) but they would be receiving close to their normal wage. So, overall, there would be fewer things to buy because those things would have stopped being produced. The workers, along with the rest of us, would probably save any money they had, especially under lockdown conditions. Would a sudden spending spree, caused by the end of the crisis, cause inflation? A case of too much money, because savings would suddenly be available to be spent, chasing too few goods, because production had stalled.
This is precisely why money should have been spent on job creation as well
That has to be done too
Again nothing to disagree with here at all.
I’ve heard people saying that all Covid has done is bring forward what would have happened anyway in the economy!!
But also, I cannot see how starting a GND scheme could help at the moment.
I work in housing development and we have had the supply chain disrupted, contractors disappearing and we are struggling to finish before we can start new schemes. This is not a good time to start a new economy – green or not – that is my argument.
What we really need is what everyone knows we need: better management of the pandemic. It all starts there for goodness sake. We need to get that right before we can think of sustaining and changing the economy.
I have managed to keep my job and have kept going to work during the lockdown and I can tell you things are really, really difficult – to even build affordable housing. I cannot see how it would be any different in the supply chain for green technology and production. I just can’t.
Covid Chaos will affect everything – even the superb ideas we hold here close to our hearts.
We need to get our approach to the Covid right first – that is the priority in my view. The economy has no context in which to function because the Boris and His Crew of idiots have failed to create it.
I now think it’s New Deal before Green New Deal
That’s superbly neat way of putting it – agreed!
This scheme might work for a small handful, but you can see numerous scenarios coming.
If you normally employ 3 people to do similar work but only have enough work for one person you have 2 options:
1) keep one person and pay them full time wages to do the job for which they will receive 100% of their pay
2) keep all three, get exactly the same amount of work done but pay 66% extra
The choice for most businesses, particularly when dealing with the low skilled, will be obvious.
Another perverse result is that companies able to offer a third of the hours to their employees will have to pay a 66% premium, whilst those that can offer two thirds of the normal hours only pay a 17% premium. You have to ask which company is most likely to be able to afford to pay the larger premium?
There was no point in trying to save jobs that might never come back, nor those that might not come back for years: all you are doing is paying people to sit at home and lose whatever skills they might have had.
No system will be perfect, but one that economists, the TUC leader and the Director of the CBI agree on is pretty close.
No it isn’t….
It’s an Unemployment Creation Scheme
Mr Howells,
Allow me to examine the credentials of the three parts to your basic ‘argument from authority’.
The reputation of “economists”, like that of banks has sunk below the water-line, and for related and well-deserved reasons. Mainstream, conventional-wisdom economics no longer serves any effective purpose that I can see. The purpose of economics depends on insight, and needs foresight; but the capacity of neoliberal economists to make reliable, or even usable predictions has failed catastrophically; the credibility of the disicpline has declined sharply following its failure even to see there was a problem in 2007-8. Economics (save for those exceptions, most still sidelined by the intellectual tyranny of neoliberal ideology within the discipline) has learned almost nothing from the experience. We do not need a disipline that principally offers little more than self-important pontification by long term, over-tenured time servers, that effectively offers the world no practical utility at all. The discipline is becoming an embarrassment in polite circles.
A Director of the CBI was on BBC ‘Newsnight’ last night, attempting an unconvincing defence of the Government’s new post-furlough policy, and then spent the rest of the time trying to row back from what she had just said, pleading helplessly the CBI really “cared” (so what?); when confronted by three other interviewees (who clearly do not have the ear either of the CBI or the Government) but who came from the bitter experience of important economic sectors (hotels, the self-employed, and the music industry) who are now facing economic oblivion. All that the senior representative of the CBI actually demonstrated, was that the institution is simply another British, self-important, self-serving, toe-curling, inarticulate creature of neoliberal Government puff. As for the TUC, its tragedy is that nobody in power has listened to it for almost forty years, and – now nor does the public.
Will that do as an argument?
Yes
The CBI interview was awful
I am shocked that the TUC went along with this
It seems that in accepting these voices of so-called authority, it has not occurred to many that the people who lead these institutions may have been appointed to put forward a particular point of view of the financial establishment.
They do this is broad daylight in America – look how vested interests manipulate supreme court nominations for example.
The problem here is that if support is withdrawn a vicious cycle of falling demand is entered into leading to more businesses failures. This leads to more and more unemployment and an increasing suicide rate and probably increasing crime figures for robbery, domestic violence and increases in drug and alcohol abuse. The state still has to fund all of the consequences of this collapse at a societal level in increased costs of health care, a prison system bursting at the seems even more than it is now, a further collapse in the legal and probation system and massive increases in Universal Credit payments and policing costs. More business loans will go bad many of which the Government has funded. The Government is discounting these costs as a reality and thinking that there are no consequences to abandoning support for workers. The additional costs that will arise by not supporting workers is likely to as much or more than the savings from stopping the furlough scheme.
Many businesses remain viable but not in the eyes of the current Government. Tourism, hospitality, music, sports, theatre indeed all businesses that rely on people going in numbers are all viable in the long term once people are able to go back to them. But none of these businesses will get support because at present their revenues are for all intents and purposes nil due to a Government policy over which they have no control.
The only business I can see that will have a fundamental change is retail as more and more people become used to purchasing online and here training and support needs to be given to allow these workers to transition into new jobs. Forcing them into unemployment on a severely reduced income does nothing to help anyone.
Thanks
Hello Richard.
You say – “My impression is that no one in the Treasury thought through what they’re proposing – unless, and I suspect that this is the case – they actually think getting what they consider to be zombie companies to close is what’s needed to clear the decks for a supposed recovery.”
It’s this bit about ‘clear the decks for a supposed recovery’ that I’m struggling with.
I genuinely don’t know what the Treasury might consider ‘clear the decks for a (supposed) recovery’ to mean.
Could someone explain the possible Treasury thinking on this please?
The theory is that the UKnus full of marginal, inefficient, employers and if only they were got rid of there would be capital available fir new, efficient, employers
It’s crass
It assumes capital is finite, survives failure and is transferable
It is Schumpeterian madness
Thank you.
Last 10 seconds of this clip sums it up. BBC even! https://twitter.com/bbcnewsnight/status/1309255107675123712
He is right
It’s actually even worse as the employer is responsible for all the NIC and pension contributions. Will I wake up soon – this cannot really have happened?
I hope I mentioned that…I have done so in some places this morning
The effective cost increase per hour is maybe 80%
This did happen
It was deliberate
I’ve seen the Resolution Foundation making the very sensible point that the £1,000 job retention bonus (with its massive deadweight cost for all those people who would be retained as employees anyway) could be rolled into the new so-called “Job Support Scheme”, and the extra £7.5 billion or so on top of the £10 billion already expected for JSS could eliminate most of the employer contribution for the time an employee is not working, at least until the spring.
Things get even worse in March 2021 if Universal Credit is cut back as is currently planned.
Agreed
It turns the clock back a long way to operate a policy of high unemployment to solve a struggling economy. But let’s face it, it is entirely consistent with the response to the 2008 crisis where the solution was seen to be ‘austerity’ measures guaranteed to make matters worse and and starve business of demand.
How did the Tory party ever get the reputation for being the party which understood sound economic management? Repetitive self praise, I suppose.
Agreed
If you are working out a charging out rate in order to quote a customer what rate would you choose. A 33% hours worked charging out rate seem s to be different to a 70% rate.