Responding to Rishi Sunak's economic statement, IEA Editorial and
Research Fellow Professor Len Shackleton said:
"Mr Sunak is right to resist pressure to extend the Coronavirus
Job Retention Scheme (CJRS). Furloughing workers only makes sense
when there are jobs to come back to, and it is clear that many
furloughed workers are no longer in this position.
"Offering support to businesses that are sufficiently viable to
keep people in part-time work imitates the successful German
Kurzarbeit scheme, and may be an acceptable compromise.
"However, like all wage subsidy schemes it has the potential for
fraud and for deadweight, substitution and displacement effects,
and its effectiveness needs to be carefully monitored.
"Like the furlough scheme, it cannot continue indefinitely.
"It is possible that the Government will spend a mammoth amount
of public money for little reward in terms of jobs saved.
"Rather than simply focusing on supporting existing jobs, the
Government needs to be finding ways to make it easier for new
sustainable businesses to develop. This involves reducing
excessive regulation in both product and labour markets.
"Finally, considering the billions these schemes will cost the
taxpayer, it will be essential to make savings in public spending
elsewhere."
IEA Economics Fellow Jessop added:
"It is right not to extend the extraordinarily generous furlough
scheme.
"The new wage subsidy scheme strikes a reasonable balance between
tiding companies and workers over a brief period of additional
restrictions and uncertainty, while still incentivising firms to
let people go and workers to find new jobs, if there is little
prospect of them returning to full-time employment in their
current role.
"Nonetheless, there are still plenty of concerns – including the
ongoing cost of the scheme, the additional bureaucracy, and the
potential for fraud and mistakes.
"It would be preferable to have a more targeted approach, whether
based on geography or sector.
"This could also have been achieved in other ways, rather than
subsidising short-time working. The money might have been better
used to support the incomes of those who will still lose their
current jobs and by helping the unemployed back into new ones."
