Opinion: No Kurzabeit here

Rishi Sunak has enjoyed unusual levels of popularity since taking over at the Treasury back in February but could that all be about to change in light of the surprisingly frugal Job Support Scheme and the sharp rise in joblessness that will follow? Richard Dawson investigates

The Job Support Scheme (JSS) is the long-awaited and campaigned for replacement to the Coronavirus Job Retention Scheme (CJRS), which will come to an end on October 31.

It was unveiled last week (September 24) by Chancellor Rishi Sunak as part of the Government’s Winter Economy Plan.

In the media furore that has come to define such announcements, the JSS was largely welcomed by trade unions and business groups, who had been campaigning all summer for more state support.

Now that we have had time to digest the policy and its implications for businesses and jobs though, I wonder if that relief will turn to anguish.

The first thing to say about the JSS is that it is much more confusing than the furlough scheme.

Starting on November 1, employees who can work at least one third of their usual hours will have two thirds of the other two thirds of their hours topped up by the Government together with employers.

Yes, that’s right. I did say, two thirds of two thirds.

Put another way, an employee working 33 per cent of their usual hours would be eligible to receive 77 per cent of their usual pay, with the additional 44 per cent being split down the middle by the Government and the employer.

Under the JSS, employers will therefore have to pay 55 per cent of an employee’s wage for only a third of the work.

This makes it more expensive to employ two members of staff part-time than to employ one full-time.

Akin to the confusion, the JSS is also far less generous than its predecessor (the CJRS), which saw the state pay 80 per cent of wages through to August, reduced to 70 per cent in September and 60 per cent in October.

It looks less generous still when compared to the landmark wage subsidy scheme in Germany – the Kurzabeit.

First introduced in 2008/9, the Kurzabeit is estimated to have saved 500,000 jobs during the global financial crisis.

Repurposed for COVID-19, it covers 60 per cent of wages at the outset rising to 80 per cent over time, or 87 per cent for those with children.

Running through until the end of 2021, the Kurzabeit allows German employers to reduce staff working hours and apply to the Government to make up the difference.

Its aim is to prevent a massive rise in unemployment come the end of the year, something which I’m afraid the JSS will not be able to achieve in the UK.

Cash-strapped employers will in many places prefer to make redundancies and consolidate job roles rather than pay employees for hours not worked.

We can therefore expect to see a headline unemployment rate close to 10 per cent in the very near future, equivalent to more than 3 million people.

In full possession of the facts, Mr Sunak appears to have accepted this.

There could be a couple of reasons why.

Firstly, he may not believe that jobs, which are not currently viable due to coronavirus restrictions, will ever be viable in the future.

Pain is inevitable, as it were, so it would be better for those people whose jobs are untenable to look for new ones now rather than after six more months of wage subsidies.

That seems harsh on businesses which haven’t been able to open yet such as theatres, sports venues, night clubs and music halls.

The second point is that the UK has borrowed a staggering £174 billion in the last five months, according to the latest Office for National Statistics (ONS) figures.

This puts us on course for a budget deficit in excess of £300 billion this year – higher than at any time since the Second World War.

It is true that borrowing costs are low but still, there is no peacetime precedent for a Government expanding its balance sheet on such a scale and the full consequences of doing so are not yet known.

They say politics is about choices and with the JSS, Mr Sunak appears to have decided that mass unemployment is a better outcome than unsustainable public debt.

Given the potential long-term impact unemployment can have on economic growth though, and the fact that said growth is the fastest way to fix the public finances, I can’t help but feel the Chancellor might have got it wrong this time around.