Phase out furlough gradually, Chancellor urged

Phase out furlough gradually, Chancellor urged

Government support for workers needs to be wound down gradually to keep a lid on rising unemployment, a think tank has said.

The Resolution Foundation warned that many furloughed workers expect to lose their jobs when the scheme ends.

It said Chancellor Rishi Sunak should use next month’s Budget to show how the government intends to cushion the effects.

The Treasury said Mr Sunak would set out jobs plans at the Budget.

As of January, nearly 2 million people had been out of work for at least six months, according to the Resolution Foundation.

The majority of those have been on full-time furlough or have gone from furlough to unemployment and back, while another 700,000 have been officially unemployed.

Among those currently working, 8% either expect to lose their jobs in the next three months, or have been told that they will be made redundant, the think tank said.

Nye Cominetti, senior economist at the Resolution Foundation, said: “While the UK’s economic prospects are finally looking up, job insecurity remains high, particularly among those who have spent long periods not working, or who are currently furloughed.”

The furlough scheme, which partially covers the wages of people placed on leave, has already been extended through to April.

The Resolution Foundation called on the government to keep it in place for several months after public health restrictions have been lifted, giving employers time to recover and bring staff back.

It said support should be tailored to sectors of the economy which have been the hardest hit such as hospitality.

A Treasury spokesperson said: “Throughout this crisis, we have done all we can to support jobs and livelihoods, spending over £280bhn in response to the pandemic.”

“We will continue to invest in protecting and creating jobs through the remainder of the pandemic and through the recovery, and we will set out further details via the next stage of our plan for jobs at the upcoming Budget.”

The Resolution Foundation recommendation echoes calls made earlier this week by the the Institute for Fiscal Studies (IFS) and Citi Research.

IFS warned that lower-income households face a higher risk of unemployment this year, as “deferred” company failures line up as the furlough scheme ends.

IFS said that it was vital to ensure that the furlough scheme and other government support is unwound gently, rather than coming to an abrupt halt.

However, IFS and Citi also said that the economy will not be able to adjust properly as long as the furlough scheme is still in place.

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