Unemployment in Britain could soar to levels not seen since the 1980s unless ministers boost support for businesses struggling because of the lockdown, Labour warns today as the main parties join battle over how to rescue the economy from the wreckage of the Covid-19 crisis.
New analysis by the House of Commons library shows that up to one million people could be added to the current jobless total of 2.8 million, unless extra support is given from August. Unemployment in the UK peaked at 3.3 million in 1984 under Margaret Thatcher.
As the prime minister prepares to announce plans on Tuesday to “build, build, build” new houses, hospitals, schools, roads and rail projects on a greatly accelerated timetable, Labour says the most urgent need is to protect existing jobs in sectors which still have no date for reopening. These include nightclubs, casinos, indoor gyms, swimming pools, fitness and dance studios, bowling alleys, indoor play areas, conference centres, beauty and tanning salons and nail bars.
Under the Treasury’s current plans, employers will be required from August to make contributions to the furlough scheme – under which the state is currently covering 80% of wages up to a cap of £2,500, as well as employer national insurance contributions and pension contributions. This will be the case even if they have not been allowed to reopen.
The government says it will end the scheme completely in November, creating a potential cliff edge for many businesses struggling to break even.
Labour is demanding that sectors that remain fully or partially shut should be exempt from having to pay employer contributions at least until they are trading well again. This would encourage businesses to keep workers on their books rather than lay them off.
Shadow business secretary Ed Miliband told the Observer that the entire focus should be on “jobs, jobs, jobs” with a Back to Work budget as soon as possible, and flexible targeted help for businesses at risk, as happens in other countries such as New Zealand.
“The scale of the economic emergency facing us is enormous. But the government is pulling the rug from under businesses employing one million people by demanding they start bearing the cost of the furlough when they don’t even know when they can reopen,” he said.
“The government’s approach will put jobs, businesses and livelihoods at risk, which will impose costs on us all. Failing to act to protect jobs now will only add to the burdens we face in higher benefit payments, lost tax revenues and a smaller economy,” said Miliband.
Writing in today’s Observer, former Labour prime minister and chancellor Gordon Brown delivers a withering criticism of the government’s economic response to Covid-19, accusing it of “dither and delay” and betraying those most in need. Calling for a July budget, he says “its main purpose” should be “the support and, if necessary, the re-capitalisation of viable British businesses and the prevention of mass unemployment.”
“A budget for jobs should include tax credits for those restricted to short-term working, retraining grants for those forced to move jobs and the rapid implementation of a comprehensive employment, work experience and training programme for a new generation of school-leavers and graduates facing an historically-unprecedented autumn spike in youth unemployment,’ Brown writes.
”But instead, the Treasury – panicked by the likely scale of the debt and deficit and now politically micromanaged from No10 – seems to be in virtual lockdown. Having acted as the generous economic dove of spring, it is now, sadly, on course to be the tax-raising fiscal hawk of autumn.”
The Treasury insists that its furlough scheme is unparalleled in any major economy. It is funding more than 8 million workers, at an estimated cost of a £14bn a month.
Johnson will say in his keynote speech that there will be “no return to austerity” which was imposed by the Conservative/Lib Dem coalition in 2010, resulting in cuts of up to 40% to departmental budgets, and savage reductions in funding to councils.
Instead, he is expected to announce that the government will invest hugely in nationwide building and infrastructure, and speed up house building and other infrastructure plans announced in the Conservative manifesto. There is also likely to be an emphasis on reforming the planning system and slashing red tape, which Green groups fear will mean relaxing environmental protection.
Labour leader Keir Starmer today received a boost, with the latest Opinium poll putting him ahead of Boris Johnson for the first time when voters are asked who they would prefer as prime minister (37% say Starmer, while 35% name Johnson). It is the first time a leader of the opposition has led an incumbent prime minister since Opinium began asking the question in 2015.
Labour is also well ahead of the Tories on approval ratings for its responses to the Covid-19 crisis. The government’s approval rating is minus 10%, while Labour’s has climbed nine points in a week to plus 9. And after a week in which many people packed on to British beaches and some appeared to break social distancing rules, over half (54%) now think that the UK is coming out of lockdown too fast, up from 46% last week.
The Department of Health and Social Care yesterday announced a further 100 people had died after testing positive for coronavirus, bringing the official death toll to 43,514.