Coronavirus: Chancellor under pressure to extend furlough scheme as he unveils £2bn plan for youth jobs

Rishi Sunak sets out Covid-19 economic recovery plan in statement to MPs

Rishi Sunak is coming under intense pressure to extend furlough and self-employed support schemes in Wednesday’s emergency mini-budget, in the hope of staving off a threatened wave of job losses as the UK emerges from coronavirus.

The chancellor’s hotly anticipated Covid-19 recovery plan will feature a £2bn “kickstart” fund to subsidise hundreds of thousands of work placements for the 16-24 year-old age group whose job prospects have been hit hardest by the pandemic, in what the Treasury described as “the biggest package of support for youth employment in decades”.

But unions said it was no more than a “good first step” towards halting mass youth unemployment. And critics said it fell short of Boris Johnson’s promise of “the chance of an apprenticeship or in-work placement” for every young person, with participants potentially earning as little as £161 a week.

Shadow chancellor Anneliese Dodds said the government had failed to “rise to the scale of the unemployment crisis” and should stem unnecessary job losses by tailoring the withdrawal of support to the needs of sectors which face long delays before returning to pre-crisis activity.

“To the extent that the kickstart programme is based on [Labour’s] future jobs fund model, it should help many young people to access work,” said Ms Dodds.

“However, the government are yet to rise to the scale of the unemployment crisis. The urgent priority right now is to prevent additional unnecessary unemployment in the first place by abandoning the government’s one-size-fits-all approach to the removal of the job retention and self-employed schemes. In addition, older people who become unemployed, and those living in particularly hard-hit areas, will also need tailored support.”

The Resolution Foundation think tank has said that £3-5bn should be spent on extending furlough payments beyond the planned end-date of 31 October for sectors which will return to normal most slowly, such as hospitality, retail and entertainment, as part of a £200bn stimulus package to shore up the post-Covid economy.

And the National Institute for Economic and Social Research said Mr Sunak must do “whatever it takes” in the package due to be unveiled to the House of Commons at lunchtime on Wednesday to support jobs in order to avoid “permanent long-term damage to the economy”.

Prematurely ending the furlough scheme – under which the state pays 80 per cent of monthly wages, up to a maximum of £2,500 – risks permanently higher unemployment and weaker productivity, with a potential loss of £50bn a year to GDP, said the think tank.

The £60bn job retention scheme is currently due to be wound down from the start of August, with employers in all sectors having to pay a progressively larger share of furloughed staff’s wages until it ends in November.

Niesr’s deputy director Garry Young said it would make “economic sense” for Sunak to announce it will continue until GDP returns to 2019 levels, warning: “Premature withdrawal of the measures could mean that the long-term adverse impact on the public finances ends up being worse than the cost of continued short-term support.”

And the Scottish National Party said the furlough scheme should continue as long as each of the four UK nations requires it.

Michael Kill of the Night-Time Industries Association said nightclubs and entertainment venues need continued bounce-back grants and furlough payments in full until the end of 2020 to avoid being “crippled” by Covid-19.

“These businesses account for an annual revenue of over £66bn per year and 8 per cent of UK employment, so it would be incomprehensible if the furlough scheme ends too quickly for staff in our venues,” he warned. “Thousands will be plunged into unemployment.”

Meanwhile, MPs supporting the pressure group ExcludedUK have written to Mr Sunak urging him to provide help for groups like freelancers, the newly self-employed, small company directors and those who started new jobs after mid-March, who have so far been denied support in the form of furloughs, grants or loans.

Liberal Democrat MP Jamie Stone, who on Tuesday launched an all-party parliamentary group to back the estimated 3 million excluded from help, urged Mr Sunak to meet with them, saying: “It is simply unacceptable that many individuals are ineligible for every kind of support, even universal credit, for entirely arbitrary reasons. The chancellor must stop burying his head in the sand.”

The party’s acting leader Ed Davey said it was a “gross injustice” that many self-employed people were not covered.

The Kickstart scheme will allow employers to offer young people at risk of long-term unemployment a six-month work placement, with the government funding 100 per cent of the national minimum wage for the first 25 hours a week – the equivalent of £161 for 18-20 year-olds and £205 for under-25s.

The chancellor is also expected to announce a £111m investment to triple traineeships in 2020-21, an extra £32m for the national careers service and £17m of extra funding for sector-based work academy placements in 2020-21.

“Young people bear the brunt of most economic crises, but they are at particular risk this time because they work in the sectors disproportionately hit by the pandemic,” said Mr Sunak.

“We also know that youth unemployment has a long-term impact on jobs and wages and we don’t want to see that happen to this generation.”

TUC general secretary Frances O’Grady said: “The chancellor has made a good first step. But we’ll be checking the small print to ensure every job provides proper training and a bridge to steady employment.

“Employers must do the right thing. They should work with unions to avoid job displacement, create good opportunities for all young workers and guarantee they are paid at least the real living wage.”

And CBI director general Carolyn Fairbairn described the proposed scheme as “a much-needed down-payment in young people’s futures”.

“Business and government must now work to deliver the kickstart scheme simply and at speed,” said Dame Carolyn. “There can be no time lost in preparing young people who are entering one of the toughest jobs markets we’ve seen in decades.”

But Liberal Democrat leadership contender Layla Moran warned the scheme would prove “too little too late for many of the corona class of 2020”.

“Boris Johnson pledged a month ago that every young person would be offered an apprenticeship,” said Ms Moran. “This announcement appears to fall far short of that promise.

“Eighteen-year olds could be left being paid just £161 a week under this scheme, which in some parts of the country would barely cover rent and transport costs. We risk losing a generation who will never recover their earnings.”