Chancellor considering short-time wage subsidy system to replace furlough

The Chancellor of the Exchequer is contemplating a possible successor to replace the furlough scheme with something similar to Germany’s short-time wage subsidy system.

The Guardian reported this after business and industry sources told them that the Treasury is considering such plans. Rishi Sunak has been looking in to what could potentially replace the Coronavirus Job Retention Scheme (CJRS) after it comes to an end in October.

The German ‘Kurzarbeit’ system is where the Government pay at least 60 per cent of wages for the time a worker is not working, with employers paying staff their usual rate for the hours they work.

This news comes following Andrew Bailey, the governor of the Bank of England (BoE) called on the Government “to stop and rethink” the furlough scheme as the use of it has become “more concentrated”.

Mr Bailey, whilst speaking on a webinar hosted by the British Chambers of Commerce (BCC) made the suggestion that certain sectors could benefit from a targeted furlough system.

Mr Bailey said:

We have moved from a world of generalised employment protections, to specific and focussed areas.

It would be completely inappropriate of me to do anything to tie the chancellor’s hands, it’s a very difficult situation we’re in at the moment and I fully support the decisions that he’s taken.

Furlough has been successful and I congratulate the chancellor.

It has helped manage the shock, to firms and to labour. The use of it now, as far as we can tell, is more concentrated.

Sources from within the Government have stated that the Chancellor could be announcing this support package in the next week. These plans are similar to those the Trades Union Congress (TUC) made earlier this month, the ‘New Jobs Protection and Upskilling Plan’. The TUC also helped Mr Sunak draft the original furlough scheme in March.

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.

However, Nick Ferrari, a breakfast show host on Leading Britain’s Conversation (LBC) radio said on his show that extending the flexible furlough scheme is just “delaying the unfortunate inevitable”.