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Wales in safe mode: what next for furlough?

May 12th 2020

With changes anticipated in the Job Retention Scheme, Victoria Winckler Director of the Bevan Foundation looks at what’s needed for Wales’ workers

The Chancellor is expected to announce later today changed arrangements for the Job Retention Scheme over the next few months.  The scheme has  not only introduced the word ‘furlough’ into widespread use it has also been a lifeline for around a quarter of Wales’ workers. In some industries, such as construction, hospitality and arts, around half of employees have been furloughed.

Changes likely to be announced include extension of the scheme to September and the reduction of wage support from 80% to 60%.  But what does this mean as employees in England are encouraged to go back to work while those in Wales must stay at home?

First and foremost, the scheme must support the economy operating in ‘safe mode’.

Safe mode is an option offered when my PC has encountered a problem and shut down unexpectedly, with some cars apparently offering a similar option if they hit a problem. Safe mode protects core functions by shutting down the unnecessary frills – as such it is a good analogy for taking forward the Welsh economy.

For let’s be absolutely clear – this virus can kill, there is no vaccination or cure, and it is still out there.

So what should the furlough scheme do?

The extension to September is very welcome, but even by then not all sectors of the economy may be up and running normally. In some sectors there may need to be some form of wage subsidy or exit payment for some time to come to enable those industries to restructure.

Then there’s the possibility of a reduction in the payment to employers from 80% to 60% of salary.  There are few people who could cope with such a drastic reduction in income, so if the plan is not to ‘incentivise’ people back to work by cutting their pay then employers must be required to top up pay to at least 80% of normal earnings.  As an aside, this might now be precisely the right time to make a 4-day working week the norm.

It is especially important that the furlough scheme is not withdrawn from industries ordered to close, by whichever government closed them. Pubs, clubs, hotels, cafes and non-food retail are all closed not through employer choice but through government edict – the furlough scheme must continue until such time as the Welsh Government decides that they can re-open.  And if the Welsh Government decides they should re-open later than in England, the JRS should continue in Wales until it is no longer required.

Last, any changes to the scheme must take account of workers’ different circumstances. Parents cannot return to work until schools open. People who are shielding or have other high risks cannot return to work until the risks of contracting the virus are greatly reduced.  And people who live with others at risk also need to avoid bringing the virus home with them. These workers must be protected from dismissal and have their earnings supported to a reasonable level by the JRS – the benefits system is simply not designed to cope with such circumstances.

We will wait and see what the Chancellor has to say. But for Wales, the emphasis must continue to be to operate in ‘safe mode’ until it is safe to restart.  Quite what the economy will look like when it does begin to operate remains to be seen, but for now the Job Retension Scheme has been, and must continue to be, in place for all who need it.

Victoria Winckler is Director of the Bevan Foundation  – follow her on twitter @vwinckler

 

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