Employers need more support as restrictions get tighter. The chancellor must put jobs first

In the midst of the pandemic, employment should be at the forefront of chancellor Rishi Sunak’s thinking.

Sure, keep in close contact with the Bank of England and especially the Debt Management Office. Do your best to keep a lid on the Brexit ultras, and always make sure you’ve got some garlic handy to keep Dominic Cummings at bay when he shows his fangs.

But the priority should be people’s jobs. It’s that simple.

At the start of the crisis that was the case. Sunak has never been the Labour chancellor with a blue rosette that some people thought. He’s not done much for the poor. But he did approach jobs in a most un-Tory like manner, spending billions on preserving them via the Job Retention Scheme that put a huge chunk of the private sector workforce on furlough.

The trouble is he then started to waver, in part because of people shouting about debt.

ln September the government borrowed £36.1bn, which is the third highest in any month since records began in the early 1990s.  Much of it went on supporting businesses and paying the wages of furloughed staff.  

So, a good reason to be replacing the furlough scheme with the most less generous, and cheaper, Job Support Scheme (JSS)? Wait just a moment.

When the JSS was announced things were different. Covid cases were much lower, and it was more generous than a lot of people (including me) expected. Trouble is, the flaws are becoming increasingly clear, especially with the imposition of what looks more and more like lockdown 2.0.

The New Economics Foundation (NEF) has run some modelling which highlights just how flawed.

To qualify for help with an employee’s wages, they have to put in at least 10 per cent of their normal hours. The government pays a third of those not worked up to a cap, with the employer also kicking in a third.

Here’s the problem: The NEF’s analysis shows that in most cases it would be cheaper for employers to make one worker redundant and keep a second on 100 per cent of their hours than it would to reduce two of them down to 50 per cent of hours on the JSS.

That holds true even if you factor in Sunak’s Job Retention Bonus, which will pay employers £1,000 for each formerly furloughed member of staff still on the payroll at the end of January.

The foundation’s modelling suggests that the JSS is likely to support just 17 per cent of jobs currently at risk of redundancy, with 2.2m out of 2.7m set to be left without protection.

As more local areas move into tier 2 lockdowns this is likely to get worse, leaving thousands more businesses facing heavier restrictions but without eligibility for the local furlough schemes that kick in only at tier 3.

Here's the good bit: if the employer’s share of the JSS is reduced the calculus changes. And it doesn't need to be reduced by much to have a big impact. Reducing the employer’s share  to 25 per cent from 33 per cent could protect 400,000 more jobs at a cost of around £150m per month.

Reducing the contribution to 10 per cent could save 1.4m more jobs. That would cost quite a bit more: an estimated  £800m per month.

But when set against £36.1bn that isn't so much. If Sunak does the right thing and puts jobs at the centre of his thinking, the decision should be easy. 

But debt, debt, debt. Yes, sure it’s an issue. It becomes much less of one, however, if you support jobs and thus the economy because then the debt will be much easier to manage and the fiscal retrenchment that’s coming will be easier to accomplish.

Throw in the fact that Sunak can currently borrow at a rate of just 0.19 per cent at a time when members of the Bank of England’s Monetary Policy Committee are openly talking about moving to negative interest rates and it becomes clear that he has the capacity to do this.

Not to put too fine a point on it but this isn’t solely a matter of benefitting the economy. If he were to act Sunak would also spare hundreds of thousands of people a miserable journey to their local Job Centre Plus branch and a lot of pain as they try to find new employment while struggling to balance their household budgets on universal credit.

It’s time for Mr Sunak to do what he did when this all started. He needs to think jobs.