More than a month into coronavirus lockdown measures large parts of the British economy are now on life support. Nearly one in four UK workers have been furloughed in the past fortnight, with their wages subsidised by the state in an attempt to stop the unfolding economic crisis – already expected to be the deepest recession since 1709 – from getting even worse. So far the government’s coronavirus job retention scheme (CJRS) has protected 6.3m jobs at some 800,000 firms, with a price tag for the exchequer amounting to more than £8bn by 3 May. According to the Chartered Institute of Personnel and Development, as many as 4m redundancies have been avoided, but the workforce specialists have warned its “all or nothing” format must be reviewed to help furloughed staff back into work. As the cost of running the furlough scheme spirals with much of the jobs market now being propped up by the state, Rishi Sunak, the chancellor, is weighing up his options over how best to wean Britain off emergency financial aid as lockdown controls are lifted. Under the current plan, workers who are furloughed have 80% of their wages paid by the government up to a ceiling of £2,500 per month. At present, the CJRS wage subsidies are to remain in place until the end of June, although the chancellor is under mounting pressure to tell employers what he plans to do next. Providing firms with information before the end of next week about whether the scheme will carry on is crucial. This deadline exists because if there is no further support coming then firms may plan redundnancies and, if they are going to cut more than 100 jobs they must first run a 45-day consultation. As the scheme will close at the end of June without action, the deadline for that consultation to be launched is 18 May. Sunak’s goal at the outset was to use the scheme to keep as many people as possible in their existing jobs. The theory was that there might be a V-shaped downturn and bounce back and the jobs subsidy would ensure workers would still be in place when the economy reopened. However, the costs have risen beyond the Treasury’s initial expectations as the number of workers on the scheme has mushroomed. The bounce back is no longer expected to be swift, especially in businesses such as hospitality, leading a senior government source to warn the Times that Britain had grown “addicted” to the furlough scheme. In danger of costing the taxpayer as much as the NHS to run, the Office for Budget Responsibility estimates the CJRS could now cost £42bn over three months if 8.3 million people are furloughed. If continually run at these levels, the Resolution Foundation predicts it would cost an additional £12bn per month. Many within the Treasury regard the cost of inaction as far greater, with the priority to protect millions of jobs. In addition to harming personal lives and finances, stopping the scheme too soon could lead to a growing benefit bill, a weaker economy and greatly reduced tax revenue in future. Adam Marshall, director general of the British Chambers of Commerce, said ministers needed to urgently adapt the scheme to align it with a phased restart of the economy. “Support must remain in place for firms that are not able to operate for an extended period and for those who face reduced capacity or demand for their services as a result of ongoing restrictions,” he added. The options the chancellor has included: Cliff edge Business leaders warn the planned sudden end of the scheme in June could be a “cliff edge” that would trigger a huge number of redundancies without action. Sunak has promised to remove such a risk. There have been calls to extend the scheme until at least the autumn to help firms gradually restart their activities. According to a survey of more than 1,000 businesses by the CIPD, as many as 60% said that was the most important change Sunak could make. Ben Willmott, head of public policy at the CIPD, said: “Even if the government extended for another month it would give them more breathing time to develop a scheme that is more flexible and provides employers with a timeline for weaning themselves off furlough and bringing people back to work.” The problem is the cost: about £4bn a week. Sector approach The government could take a gradual approach to restarting the economy by allowing some businesses to reopen before others. Those where there are higher risks of spreading infection, such as pubs and restaurants, could reopen last, and therefore need continuing taxpayer-funded wage support longest. Willmott said the government could maintain an 80% wage subsidy for hospitality firms, but cut it to 50%, or steadily roll back its support for other firms. “Some sectors are being hit harder by the impact of the virus and demand in those parts of the economy will be slower to pick up,” he added. There could however be challenges, as some activities do not fit neatly into a particular sector. In one example, some retailers have been able to stay open, while others have been forced to close. Cutting the subsidy The Treasury could reduce the level of the subsidy from 80% over time, although this could impose hardship for people if their companies did not top up their wages. It is understood that the Treasury is considering reducing the subsidy to 60%. Kate Bell, head of rights at the TUC, said subsidies would still be required for people who cannot go to work once lockdown has been lifted, such as people who still need to shield themselves for health reasons, or who would struggle to get their children to school. She said another option would be to ask businesses to set out jobs and wages plans on how theyare using the scheme to prevent redundancies, should they wish to continue receiving support. “Companies need to make a profit, but they need their workers to do that. Most people want a return to work, but you could see that some conditionality makes the scheme easier to operate,” she added. Flexible working on furlough The government could allow some part-time working under the furlough scheme, topping up workers’ salary payments. This could be used to ease businesses back to normal. Such a system could, however, be open to abuse. Some firms have forced staff to keep working while claiming public money to furlough them. The current breadth of the scheme, with limited flexibility on working time, was designed to reduce this risk, meaning tweaks and alterations could pave the way for further abuse. Back to the 1970s When Sunak first announced the scheme in March, he said it was for the “first time in our history” that the government was stepping in to help pay workers’ wages. He was wrong. During the turbulent economic troubles of the late 1970s, a temporary employment subsidy was available to support employers. Where at least 10 redundancies were threatened, the TES programme offered a subsidy of £20 a week for up to 12 months for each job saved. Started in the late 1970s as the country grappled with recession and 1.5 million unemployed, it was gradually made less generous until it was removed in 1984, the same year unemployment hit a postwar peak. A new TES could replace the job retention scheme. What are other countries doing? In the US one-off payments to individuals worth $1,200 from the government have been used to soften the blow from soaring unemployment. Some 30 million Americans have signed on as unemployed in six weeks. Wage subsidy schemes have been used to protect jobs across Europe, and other countries are facing problems too. France has a partial activity scheme, whereby firms can be compensated for 70% of a worker’s salary up to €6,927 per month. The government is working on how to adapt the scheme from the start of next month to help the maximum number of people back to work. Ministers in Ireland are also looking at ways to extend a wage subsidy scheme due to expire in June.