The Chancellor of the Exchequer must either choose between job creation or job retention to combat unemployment rising due to COVID-19.
This is the opinion of Richard Churchill, a partner at Blick Rothenberg, a tax and advisory firm. Mr Churchill said:
The Chancellor has a dilemma in choosing between Job Retention, and job creation.
Any extension of the CJRS should be in a targeted manner and focus on specific sectors including seasonal businesses for which this sort of approach is critical if they are to survive.
‘Carte blanche’ measures allow both the strong and the weak to survive a little longer and delays the inevitable, which is not healthy for the economy.
However, for those businesses that were successful but seasonal in nature and for which the spring and summer is the key trading period the Chancellor needs to think hard about further support, will ensure businesses can sustain themselves through the winter months and emerge next spring.
This news arrives as Andrew Bailey, Governor of the Bank of England (BoE) has agreed with the Government’s decision to close the furlough scheme at the end of October.
Mr Bailey said:
It’s been a very successful scheme, but he’s right to say we have to look forward now. I don’t think we should be locking the economy down in a state that it pre-existed in.
Mr Bailey believes winding down the furlough system is the right move and keeping employees in unproductive jobs is not going help. Mr Bailey added that it is inevitable that some roles will be made redundant. The Bank has also stated that it’s original forecast of the UK economy shrinking is not as bad as first thought. The BoE had said the economy would shrink by 14 per cent, now they believe it will contract by 9.5 per cent.
The Bank believes the economy is not doing as bad as first predicted due to the easing of lockdown measures and a quicker pick-up of consumer spending that assisted the UK economy. The latest Monetary Policy Report from the Bank details how spending on clothes and household goods are back to pre-COVID-19 levels. It has now predicted that the UK economy will grow by 9 per cent in 2021 and 3.5 per cent in 2022.
The National Institute of Economic and Social Research (NIESR), an independent economic research institute predicted that closing the furlough scheme at the end of October could result in unemployment reaching 10 per cent this year.