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Fears new furlough plan could mean more job losses

Islington businesses will be asked to 'start sharing' cost of employee retention scheme

15 May, 2020 — By Sam Ferguson

Chancellor Rishi Sunak

CONCERNS are growing at the Town Hall that changes to the coronavirus furlough scheme will lead to a wave of job losses this summer.

Chancellor Rishi Sunak this week extended the Job Retention Scheme – which sees the government fund 80 per cent of salaries for people unable to work due to the lockdown – until October.

But he announced on Tuesday that firms would be expected to “start sharing” the £14billion a month cost of the scheme.

With more than 9,000 new Universal Credit claimants already reported in the borough since the outbreak began, Islington’s economic chief Asima Shaikh has written to the government warning that there would be more if the changes to the scheme are implemented.

“We do have concerns that extending the furlough scheme in the way the government has might lead to people becoming unemployed, because they are asking businesses to pay some of these costs, and we’re not confident that every business will,” she told the Tribune.

“The government should strengthen the furlough scheme and ensure above all that employees feel safe in their jobs and can have proper financial support while on furlough.”

Cllr Shaikh also raised concerns over employees feeling pressured to go back to work by financial insecurity, with the percentage of furloughed wage covered by Whitehall to drop to 60 per cent in August.

“My reading of this is that the government is trying to encourage people go back to work,” she said.

“In some cases, it can appear that there’s a certain level of people not having any choice in the matter. If they aren’t providing full financial security to employees to stay at home there will be increased pressure on them to go back to work.

“I’m really concerned that this process is encouraging workers to go back to work when it’s not clear that it’s entirely safe for them to do so.”

The Tribune has previously reported on businesses in the borough struggling to access government support.

Businesses which fall either side of the rateable value threshold find themselves unable to claim government grants. This is a problem for Islington especially because of the high rates and rents already faced by business owners.

Small businesses which do not directly pay rates, such as those which just pay a rent to a landlord, are also missing out, and Cllr Shaikh says the amount released by Whitehall to help them – just under £3million – will not be enough.

She said: “Some of these businesses in Islington are missing out on what similar businesses are getting in other parts of London. That is fundamentally unfair.

“We’re hoping the ­government will look at making allowances to increase the rateable value threshold for business rates relief and also the small business grants fund.

“The key point here is that these businesses are falling through the cracks. They absolutely deserve financial support.

“We would urge the government to extend the pot of money recently made available to these businesses, as just under £3million is not going to go very far.

Difficult decisions will have to be made as we can’t help all the businesses we want to help with the amount of money we have been given.”

A Treasury spokesman said: “Future decisions around the scheme will take into account the wider context of the measures in place, as well as the public health response. We have been clear there will be no cliff edge and people will be eased back into work in a measured way.”

Prime Minister Boris Johnson encouraged manufacturing and construction workers to return to their jobs this week.

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