Think tank: Furlough bonus scheme a £9bn ‘deadweight loss’
Rishi Sunak’s £9.4bn scheme to compensate companies that bring back furloughed employees has been described as a “deadweight loss” by a leading London think tank.
The chancellor’s Job Retention Bonus will see the government pay businesses £1,000 for every furloughed employee they bring back to work and keep employed until the end of January.
The government is paying 9.4m workers through the furlough scheme, which is due to finish at the end of October, meaning the bonus’ could cost the Treasury up to £9.4bn.
The Resolution Foundation, a left-leaning think tank, has questioned the usefulness of the scheme, citing a recent employment survey that shows 1m furloughed employees were already in line for redundancies once the furlough scheme ends.
The think tank said the bonus £1,000 per employee would likely not be enough to stop many of these jobs going, while many companies who had no intention of laying off employees will still get the bonus.
A statement from the Resolution Foundation called the scheme a “deadweight loss” and that the “cost may be too small and temporary to prevent high unemployment as the job retention scheme is phased out, while costing a lot”.
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Labour shadow chancellor Anneliese Dodds also called the bonus scheme “peculiar” this morning and called for a more targeted approach.
Speaking to BBC Radio 4, she said: “I do find it a little peculiar that we now have this bonus that will be paid to all employers regardless of whether their business are back operating up to full capacity or not.
“We really need to have targeted support, this is a crisis like no other where the impact is very strongly sectoral, we should have had a more sectoral approach from the Chancellor.”
The government’s furlough scheme has won wide praise for stopping mass unemployment and ensuring people still receive wages during the coronavirus crisis.
Workers on the scheme receive 80 per cent of their monthly pay, up to £2,500 a month, while they are unable to work.
The scheme is now being wound down and will end in October, despite calls from Dodds for it to be extended.
Sunak said in his statement yesterday that the scheme “cannot and should not go on forever”.
“The truth is that calling for endless extensions to the furlough scheme is just as irresponsible as it would have been to end the scheme overnight in June,” he said.
“Leaving the scheme open forever gives people false hope that they will be able to return to the jobs they had before.”