Sunday , November 29 2020
Home / Dr. Eamonn Butler /The furlough scheme has a cost and must come to an end eventually

The furlough scheme has a cost and must come to an end eventually

Summary:
Like other countries, the UK is subsidising jobs during the virus crisis. Now, the Treasury is finding that it’s much easier to give money away than to stop giving it away. But that needs to happen, and fast. One reason is cost. The government’s interventions may end up costing a third of the national income. That means higher taxes—which will choke off job-creation and recovery—or cuts in public service spending, or a massive rise in public debt.Another is that the scheme promotes inactivity. We have fruit and vegetables waiting to be picked but seasonal workers can’t get here to pick them. Yet we have 10m domestic workers being paid to do nothing.The scheme also prevents businesses adapting to the crisis situation. Sure, we’ve seen restaurants turning into takeaways, and taxi drivers

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Like other countries, the UK is subsidising jobs during the virus crisis. Now, the Treasury is finding that it’s much easier to give money away than to stop giving it away. But that needs to happen, and fast. 

One reason is cost. The government’s interventions may end up costing a third of the national income. That means higher taxes—which will choke off job-creation and recovery—or cuts in public service spending, or a massive rise in public debt.

Another is that the scheme promotes inactivity. We have fruit and vegetables waiting to be picked but seasonal workers can’t get here to pick them. Yet we have 10m domestic workers being paid to do nothing.

The scheme also prevents businesses adapting to the crisis situation. Sure, we’ve seen restaurants turning into takeaways, and taxi drivers running deliveries. But rather than developing new ways of working, some 900,000 businesses have simply taken the money and sent their workers home at taxpayers’ expense.

After this crisis, our economy will look very different. Jobs in travel, hospitality and retail may be gone forever. It would be far better to let businesses and workers adjust to that reality now, than to keep them idle for six months, only to discover that their jobs have gone anyway.

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Dr. Eamonn Butler
Eamonn Butler is Director of the Adam Smith Institute, rated one of the world’s leading policy think-tanks. He has degrees in economics, philosophy and psychology, gaining a PhD from the University of St Andrews in 1978.

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