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When furlough has to stop - next steps to avert long-term unemployment is a new report by @reformthinktank and @LearnWorkUK

When furlough has to stop - a new report from Around 10 million workers who are furloughed, at risk of redundancy or in sectors still heavily affected by social distancing measures, urgently require support to help them switch jobs and change careers, labour market experts say.

‘Career changer’ maintenance grants, expanding requirements on employers to notify HMRC of redundancies, and permission to use the Apprenticeship Levy to boost wages, will be key components of support needed as the UK heads towards an unprecedented unemployment crisis.

Ahead of the Chancellor’s planned financial statement next week, the independent think tank, Reform, and Learning and Work Institute, have today (Friday 3 July) set out a £3.2 billion blue print for an ‘urgent and bold response’ to the most severe employment challenge since the Great Depression.

The Government is expected to spend £60 billion over the life of the Coronavirus Job Retention Scheme (CJRS). An equally ambitious response is needed to prevent millions of those currently furloughed from becoming unemployed – at considerable human and economic cost.

Any delay in delivering this would be tantamount to ‘levelling down’, the researchers argue, with the labour market fallout from COVID-19 already exacerbating pre-existing inequalities.

Regions with the highest levels on unemployment pre-COVID-19 – the North East, West Midlands and North West – have continued to experience the highest levels throughout the crisis.

The research also found that local authorities with a higher proportion of furloughed employments are more likely to have a higher proportion of their population already claiming benefits.

Both organisations are therefore warning the Government that it risks jeopardising its levelling up agenda, as well as slowing the recovery, if it does not act urgently to avert a massive rise in unemployment as furloughed workers are made redundant in the coming months.

The researchers estimate that up to 200,000 people could potentially have to change career as the Coronavirus Job Retention Scheme is wound down and sectors such as hospitality and non-food retail are left permanently smaller. 

To help career switchers, and mitigate wage drops as people start over in a new sector, Government should introduce a time-limited means-tested maintenance grant of up to £3,000 (a Career Changer Grant) or a Career Changer Premium in Universal Credit, with eligibility linked to an individual’s National Insurance contributions history. They should also have a £5,000 learning account to invest in accredited training.

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To incentivise employers to hire both career changers and apprentices, and to pay living wages, the Government should allow firms to use a proportion of their apprenticeship levy to subsidise wages, with an equivalent grant for SMEs.

A universal support offer should be made available to all furloughed workers, those at risk of redundancy and workers in the retail and hospitality sectors – in total this is around 10 million workers. This should include online careers advice and one-to-one support, delivered through different channels to fit with people’s lives.

Adult skills funding should be extended to give everyone an entitlement to funding for a qualification, or modules of a qualification, up to and including level 3.

Those learning in a priority sector and those with a minimum National Insurance contributions history should be entitled to funding for a qualification, even if they are already qualified to that level.

The Government should advertise the offer widely, including in HMRC and DWP communications with low-paid workers. HMRC should direct businesses using the CJRS to encourage their workers, who are already permitted to undertake training, to take advantage of the Offer.

To ensure rapid support for workers at risk of unemployment, companies placing furloughed staff at risk of redundancy should be required to inform HMRC, and the current requirement that firms inform the Redundancy Payments Service if 20 or more staff are at risk should be reduced to five. Workers made redundant should have access to a £1 billion package of support, including at least 10,000 new Jobcentre Plus advisors. 

Charlotte Pickles, Director of Reform, said:

“The Prime Minister this week underscored the exceptional economic challenge ahead. However despite his pledge to ‘build back better’, the Government are yet to provide a comprehensive plan to alleviate the impending jobs crisis. Today we have provided a £3.2 billion blueprint for doing just that.

“Ministers acted swiftly to protect jobs as the virus hit, they must be equally swift and ambitious in preventing Great Depression levels of unemployment. The 10 million people facing uncertainty and fearing unemployment cannot wait until the Autumn for action – by then it will be too late.

“We, therefore, urge the Chancellor to bring forward a package of support next week.”

Stephen Evans, Chief Executive of Learning and Work Institute, said:

“Without urgent action, we risk a second spike in unemployment as the furlough scheme is withdrawn which could take unemployment to levels last seen after the Great Depression.

“Young people, low paid workers and areas that had higher unemployment already are being hardest hit.

“We need rapid and ambitious action to support the 10 million workers furloughed or working in at risk occupations and sectors, like retail and hospitality. That should include early support for those being made redundant and a career changer offer of advice and skills support. Investing now can help prevent an unemployment crisis.”

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