Furlough Didn’t Save Millions of Jobs – It Led to a Welfare Crisis

Furlough didn’t save millions of jobs and its true costs are only now becoming clear, says Fraser Nelson in the Telegraph, as he responds to the latest Rishi Sunak promo advert. Here’s an excerpt.

The latest Rishi Sunak advert paints him as quite the hero. “14 million jobs saved” it declares, in Hollywood poster style. And underneath: “Furlough announced, four years ago today.” SuperSunak is shown in three action-man guises: at his desk, in trademark hoodie. Then walking, with a look of urgent purpose. Finally, wearing a face mask, tie tucked into his shirt, ready to save a life or two. It recalls happier times: when he was more popular than Churchill, hailed as a financial miracle-worker who had saved the country from the worst economic impact of Covid.

At the time, the real-life Sunak was nowhere near as confident. He didn’t sleep the night before furlough launched, feeling physically sick at the sheer scale of his gamble. It would pay 80% of employees’ wages: might such generosity end up creating welfare dependency, making things worse long-term? Would it just prop up jobs that were never coming back, spending a fortune to delay economic rejuvenation? The test, as he knew, would come years later.

In the end, Britain has turned out to be one of the few countries in the world whose workforce is still smaller than it was before the pandemic. Furlough was a powerful drug initially designed for three months. It ended up being used on and off for a year and a half, with £70 billion given to 11.7 million people. Companies, not all of which actually existed, were helped with loans. That was the short-term cost. We’re only now starting to see the longer-term effect. 

So it’s nonsense to say – as the Conservatives are now doing – that Sunak “saved” 14 million jobs. Most who took furlough would have been safe anyway, as we saw from places without such a safety net. Yes, far more jobs would have been lost – at least for a while. But an even greater number would have probably come back later and at better salary levels. This has been the experience of the United States, whose economy is now roaring.

In a leading article, the Telegraph backs up Nelson’s analysis, saying “furlough could well be the policy most responsible for the mess the country is now in”:

Four years ago this week, Rishi Sunak announced one of the most expensive decisions a British Government has ever taken: the introduction of furlough. Millions of people would be paid to do nothing, with 80% of their salaries funded by other taxpayers. Such ‘free’ money was instantly popular, and the newly-installed Chancellor was hailed as the saviour of the nation at a time of heightened uncertainty due to the rapidly-advancing Covid pandemic. Few thought to question what the longer-term consequences would be.

They are now. Furlough could well be the policy most responsible for the mess the country is now in. The billions spent on the scheme still have to be repaid, limiting the Government’s fiscal room for manoeuvre. It damaged the country’s culture of work, buttressing an assumption that people will always be bailed out, even in circumstances where they might once have been expected to stand on their own two feet.

Furlough probably also lengthened the period the country stayed in lockdown. Cushioning workers from the ruinous economic effects of the restrictions meant there was little public pressure to return to normality, unlike in countries with better-designed support schemes. The proportion of people in employment in the U.K. is below its pre-pandemic level.

Both articles are worth reading in full.