The chancellor’s statement is a radical attempt to provide a shot in the arm to the jobs market – at a very difficult time.
But the new jobs support scheme is a fraction of what we have seen over the past few months, and is concentrated on those deemed to be in “viable” jobs. It cannot prevent a sharp rise in unemployment in the coming months in “non-viable” jobs.
Indeed, the economic impact of this package of several billion pounds is likely to be far outweighed, even by this week’s announcement that the UK faces a six-month “new normal” of social restrictions.
The sight of Chancellor Rishi Sunak flanked by the Trade Unions Congress and the Confederation of British Industry bosses at Number 11 was meant to show the country that a non-ideological innovation to protect livelihoods was on the way.
It is an echo of German Chancellor Angela Merkel locking the heads of the equivalent organisations in a hotel for two days in order to come up with the “short-time work” policy, upon which the new jobs support scheme is based.
It will be possible to claim the coronavirus job retention bonus for reemploying furloughed workers, too. It has been tailored for the UK’s more flexible jobs market. The chancellor has kept a careful eye on schemes from all around the world.
But the size of the scheme also reflects the phenomenal amount of borrowing that the government has done, and will continue to have to do, in terms of lost tax revenue as the recovery is subdued by ongoing restrictions.
Funding conditions for government remain benign. But the Treasury is keeping an eye on how sensitive the public finances are now to even a small increase in market interest rates.
The Treasury has extended the bridge of support it put in place in March to cover the next six months.
But the new scheme requires everybody to chip in. That will be too much for many employers. We are about to find out just how many.