With the prospect of a vaccine, the previous projections, calculations and activities of companies can now credibly be used to forecast the futureby Peter Urwin / November 20, 2020 / Leave a comment
A doubling of unemployment in the UK. That’s what we were facing, according to the Bank of England, which predicted a rise to 7.75 per cent by 2021, the highest since 2013. That was, until news broke of possible vaccines with efficacy of more than 90 per cent.
It has been difficult to follow the details of frequently changing employment policy in the UK since March, with more to come in the spending review. To get to the heart of this policy debate it is important to understand the “tricky balancing act” that the chancellor of the exchequer, Rishi Sunak, has alluded to since the start of the pandemic. The competing aims that need to be balanced, of protecting jobs but not dampening incentives for job creation, were most obvious at the end of September when the chancellor announced details of the Job Support Scheme (JSS)—replacing the Coronavirus Job Retention Scheme (CJRS) or “furlough”, as most people call it.
The CJRS paid 80 per cent of the wages of workers placed on furlough up to a maximum of £2,500 a month and had a straightforward rationale—the UK government closed down entire sectors of the economy, and without support there would have been a more immediate and painful rise in unemployment. This policy aimed to protect jobs as the UK went into lockdown in March. In years to come the decision to close the economy will be picked over by commentators but, with the notable exception of Sweden, the UK has mirrored the approach of governments around the world and received praise from the IMF for its package of measures.
With hindsight, changes announced at the end of September to replace the CJRS with the JSS seem premature. We should perhaps have been more aware of the potential for a reopening of schools, colleges and universities to drag infection rates back up, but at that point rates were low and the economic recovery seen over the summer was taken as an indication that support for jobs could start to be reduced. Furlough was the right policy at a time when all jobs needed to be…