TUC calls on Treasury to create permanent furlough scheme

Covid Furlough

The TUC is urging the government to abandon plans to scrap the furlough scheme at the end of next month and instead build on the wage subsidy experiment to create a permanent short-time working scheme.

Plans drawn up by the TUC would protect workers against recessions, a new wave of the pandemic or the transition to a green economy by having 80% of their wages guaranteed by the state.

The umbrella body for UK unions said the government should build on the success of the furlough and come into line with other rich western nations. It said 23 members of the Organisation for Economic Cooperation and Development (OECD) – including Germany, Japan and individual US states – already had permanent schemes that shielded workers during tough periods.

Britain developed a wage subsidy scheme from scratch when the economy was locked down in March 2020 and while Rishi Sunak, the chancellor, believes the furlough has saved 2 million jobs the Treasury has no plans to extend it beyond the end of September. At the peak, almost 9 million people were furloughed but the number has fallen to below 2 million.

The Bank of England said last week the furlough had been key in preventing the surge in unemployment to the double digit levels expected when the crisis began 18 months ago, and predicted that the jobless rate had peaked at 4.8%.

The TUC, which helped design the furlough along with government officials and the Confederation of British Industry, said the same tripartite approach should be used to flesh out a plan for its replacement.

Frances O’Grady, the TUC general secretary, said: “Furlough has been a lifeline for millions of working people during the pandemic. Now is the time for the government to build on the success of furlough with a short-time working scheme – not throw away its good work.”

The TUC said the success of the UK furlough and prior evidence from Europe proved short-term working schemes could play a valuable role in protecting both workers and businesses.

The cost of the Treasury’s furlough stood at £67bn at the end of July, with a further £25bn spent on support for the self-employed, but the TUC said the experience of other countries was that in more normal times spending on short-term working schemes would be about 10% of those levels.

A properly designed scheme would save jobs, protect workers incomes, limit the impact of crises on inequalities, reduce recruitment and hiring costs for business, and help protect communities from the devastation of long-term unemployment, it said.

Under the TUC’s plan:

  • Workers would continue to receive 80% of their wages for any time on the scheme, with a guarantee that no one would fall below the minimum wage for their normal working hours.
  • Any worker working less than 90% of their normal working hours would have to be offered funded training.
  • Firms would have to demonstrate a reduction in demand – which could include restructuring – commit to paying corporation tax in the UK and not pay dividends while using the scheme.
  • Time limits would be put on the use of the scheme, with extension possible in limited circumstances.

O’Grady said: “The pandemic shows how an unexpected economic shock can wreak havoc on jobs and livelihoods with little warning.

“In a changing and unpredictable world – as we battle climate change and new technologies emerge – a permanent short-time working scheme would help make our labour market more resilient and protect jobs and livelihoods.

“Too often in the past, periods of economic and industrial change have been badly mismanaged – increasing inequalities and leaving working people and whole communities abandoned. Just look at what happened to mining communities.”

The TUC said unions representing UK steelworkers had cited the lack of the sort of short-term working schemes available in other European countries to help manage cyclical ups and downs in business as one reason that Britain was struggling to compete for the investment in low-carbon steel that would be key to securing the transition to net zero.