How bad are job losses going to be and what can the government do about it?

Debt forgiveness, extra support for the hardest-hit businesses and better-designed training and assistance for people out of work could all help limit the damage, writes Ben Chapman

(EPA)

The UK now faces its worst outlook for jobs in almost 30 years, according to one poll released on Tuesday.

There is no doubt that, after keeping people alive, keeping people in jobs has become the government’s key focus over the coming months.

According to some reports, the prime minister now sees coronavirus – perhaps controversially – as primarily an economic crisis rather than a public health one.

We don’t know how many people will be out of work as the furlough scheme winds down and the contours of Britain’s post-lockdown economy become clear, but none of the estimates look good.

The Office for Budget Responsibility forecasts that unemployment will peak at close to 10 per cent. That would mean more than 3 million people out of work and looking for a job – back to levels seen through much of the 1980s and early 1990s.

Employers have become less pessimistic over the past six weeks but that could be thrown into jeopardy if a second wave of infections and deaths means the government reintroduces restrictions.

With or without a second spike, it’s clear that suggestions the country would swiftly bounce back from a deep recession were over-optimistic.

Because we have had high levels of employment in the years before Covid-19 struck, we have grown used to expecting that the jobs market will be relatively benign.

Yet past experience points to a painfully slow recovery.

In the wake of previous recessions, unemployment has decreased by 0.7 percentage points each year, on average, according to the Resolution Foundation. If the jobless rate hits 10 per cent this time around, it would take nine years to replace jobs lost in just a few short months.

Thousands of pubs across the country have not opened their doors for nearly three months. Without support from the government, viable businesses could be forced to close for good (Getty)

The government has a number of options in order to mitigate this. Chief among them is more closely targeting support at industries that have been most badly damaged by coronavirus.

In the frenetic first weeks of the crisis it was understandable that measures introduced were very broad given the urgency of the situation. But excuses for not taking a more refined approach are fast running out.

Some sectors and the people that work in them have borne most of the pain. Transport, hospitality and events are among the most obvious.

To give one example of the kind of targeted measures that could work: pubs, bars, restaurants have written to Rishi Sunak calling for a rent-free period while they have been closed. After that, rent would be based on turnover so that costs rise slowly as the industry recovers rather than forcing viable businesses to shut their doors for good.

Another measure the Treasury will be looking at is some amount of debt forgiveness. Businesses have taken on £36bn of debt since the crisis began and a lot of this is not going to be paid back.

Companies that are saddled with debt will hamper any recovery and are much less likely to start hiring people.

Finance industry lobbying group, TheCityUK, said this week that it reckons about a third of the debt being taken on by British firms under emergency Covid-19 loan schemes could be toxic.

The government is wary that letting companies off paying back money they owe creates a “moral hazard” in that it potentially rewards bad behaviour. But if it prevents thousands of firms going under it may be a price worth paying.

Debt could also be treated in a similar way to student loans, with firms paying it back only if and when their future earnings are healthy.

A final key aspect of mitigating harm is training, apprenticeships and support to help people back into work.

It’s right to focus on the headline unemployment figure, especially when it may be telling us that 3 or 4 million people. But the type of unemployment is also important.

If Covid-19 changes the way that we live our lives – more working at home, less public transport, for example – then people working in some jobs will, through no fault of their own, find their skills much less in demand. This is a structural problem that requires a co-ordinated and strategic solution.

Ministers will be conscious of mistakes made during the last time Britain went through joblessness on this scale; mistakes which condemned many people to a life without work, claiming unemployment or disability benefits.

In the 1980s, millions were thrown out of work, many of them in declining industries whose demise was helped along by government policy.

The Thatcher government’s rhetoric at the time was famously summed up by Norman Tebbitt. The former minister for employment told people to follow the example of his father who, when made jobless during the Depression of the 1930s, had “got on his bike” until he found new work.

The implication was clear: that people out of work were feckless and lazy. In its failure to address or acknowledge underlying structural problems causing unemployment it was not much of an improvement on Victorian notions of the “deserving” and “undeserving” poor.

In 1981 it caught the mood of at least part of the population which had grown weary of strikes and militant unionism. But there is little sign that a similar approach from the government today would garner much support.

Perhaps because of the prevailing attitudes towards the unemployed, initiatives that were put in place to help them during the 1980s and early 1990s were poorly designed and often didn’t work. As the IFS's Paul Johnson reminded MPs this week, there is some evidence that the most well-known of these programmes, the Youth Training Scheme (YTS), had developed such a bad reputation that it actually harmed the job prospects of young people who went on it.

The prime minister has talked about making apprenticeships available for all young people but, as the Institute for Government has stressed, quality is at least as important as quantity.

Boris Johnson's government has been keen to show that it is different from some previous Conservative administrations. High-quality apprenticeships, workplace training programmes funded by the government but delivered by employers, job subsidies, along with help and assistance to move people off welfare and into work, are just some of the ways in which it could show it has truly has learned the lessons of the past.