THE government has officially begun to wean us off furlough. The plan is to reduce taxpayer-funded contributions gradually until the end of September when the scheme ends. But there are growing calls to extend the scheme, with Labour, the SNP and the unions Unite and GMB all calling for a delay of phasing out.
The total cost of furlough is already gargantuan at over £65billion (this doesn’t include the cost of the separate self-employment grants), and the TaxPayers’ Alliance analysis of the latest data found cancelling the taper could cost an extra £9billion. If extended until the end of the year, the cost to the taxpayers grows to a whopping £18billion. To put that into perspective, the Home Office has a budget of less than £15billion this financial year.
Of course, the government had to act quickly to protect businesses and individuals whose livelihoods were interrupted by the sudden lockdown of the country in spring last year. It is commendable that the Treasury was able to implement the scheme on such short notice, but as with all measures introduced by the pandemic, these should be lifted as soon as possible.
The removal of all restrictions in England still on course for July 19, but as of the end of May the government is still paying the wages of more than 2.36million people. That’s about six-and-a-half times the size of the entire Tesco workforce, one of the largest private-sector employers in the UK. Extending the full scheme would place a significant extra burden on taxpayers, with the cost almost equivalent to a 3 percentage point rise in employer national insurance, at £19.5billion in 2022-23. This would be at a time when state support should be rolling back as the economy reopens.
Because vaccination is being used as the measure of success, all four nations of the United Kingdom should return to business as usual by next month at the latest. By then, a scheme introduced to preserve employment from March 2020 will have limited justification. If furlough is not retired when it becomes redundant, there is a danger it will simply morph into another arm of the ever-expanding state. As TaxPayers’ Alliance chief executive John O’Connell makes clear, ‘the Chancellor must drive ahead with winding down furlough and focus on letting the economy stand on its own two feet’.
