Thursday 5 November 2020 3:25 pm

Editorial: Chancellor's move is a five-point-turn that has already cost jobs

If it wasn’t such a serious matter, Rishi Sunak’s description of his furlough u-turn today as the result of a flexible and agile approach would have been darkly comic.

Because a U-turn it most certainly is, albeit not of the handbrake variety. Instead, it has been by degree, a five-point turn that has already cost jobs. 

It is but weeks ago that the Chancellor, whose Midasian touch appears to be waning, was saying that he wanted only to protect viable jobs and that an extension of the furlough scheme would be economically unwise. 

Businesses made decisions about their staff, with entrepreneurs and managers making the toughest decisions of their lives to lay people off, and those made redundant looking at an even bleaker version of this liberty-free winter than they were. 

Read more: Covid-19 cases begin falling in London

Those comments have had consequences. If today’s scheme was announced in September, many if not all of those redundancies don’t happen. 

Of course, the scheme – even if it was announced weeks ago – is still deeply flawed. It’s a one-size-fits-all sticking plaster for an economy that is anything but. 

A scheme that needed fixing, not revisiting

In its purest form, in which staff are unable to work at all, it actively encourages inactivity. In firms that are totally shut, that makes sense. But it is nonsensical that the policy has no flexibility for firms that are able to operate, just at lower levels than in ‘normal’ times. It encourages businesses to shut up shop, rather than keep the till ticking over at a slower rate.

It is also ruinously expensive, but such arguments about fiscal prudence – and the apparently antiquated belief that it is broadly unwise to run a country on IoU notes – don’t have much cut through these days. 

In March there was an excuse: an unprecedented spike in cases of a new and unknown disease. 

In October, there is less of one: just as appears to have been the case in other areas of the pandemic response, the lessons of the first wave have gone unlearnt in the second. 

The inconsistency of the self-employed scheme, which continues to spray cash to many of those who don’t need it whilst ignoring nearly half a million who do, is again a horrendous failure of policy and planning over the summer. 

Sunak was right to talk about viable jobs. He was right to resist pressure for this clunker of a scheme to stick around for the winter. 

But if he was going to change his mind, then doing so several weeks ago could have prevented the wave of redundancies we have just seen. 

And though no doubt the Government will claim the virus has moved the goalposts, they cannot say they weren’t warned. 

We have seen the SAGE modelling. 

If the Government takes those projections as gospel – and one assumes they do, since we are being consigned to house arrest for four weeks – then they should have adjusted their economic policy then. Instead, Sunak continued to essentially tell employers to get on with redundancies.  

There are parallels to the Government’s lockdown strategy here, too: it is not for the first time that the Government has been committed to one course of action, before changing its mind just after the point at which a change of heart would have the most positive consequences. 

The Resolution Foundation describe this by-hook-by-crook u-turn as “deeply suboptimal.” Paul Johnson, boss of the economic wonk factory the Institute for Fiscal Studies, says he is “baffled” by the announcement. 

It seems churlish to complain about a project that will save jobs. But count us amongst those who, on trying to ascertain the Government’s strategy, see only sporadic, often panicked tactics. 

Read more: There has to be another way out of Hotel California lockdowns

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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