What will happen when the leave plan ends? Business News

Why are we asking this now?

The UK government has begun the gradual process of winding down its coronavirus job retention program, the leave strategy that has enabled the state to bolster the economy and support businesses throughout the coronavirus pandemic by paying the lion’s share of employee salaries to avoid mass unemployment in confinement.

The program has been in place since March 20, 2020 and was originally scheduled to end on October 31, 2020 before the second wave of the virus hit last fall.

What changes are being made?

As of July 1, 2021, the government will reduce its contribution to the wages of a worker on leave from 80 percent (up to a cap of £ 2,250) to 70 percent (up to £ 2,187.50), letting employers recoup the missing 10 percent. one hundred for the first time, a decision with far-reaching consequences for thousands of businesses across the country.

From 1 August he will pay 60 per cent of an employee’s salary on leave (up to £ 1,875).

How did the program support the economy during the lockdown?

Since its introduction by Boris Johnson’s Chancellor of the Exchequer, Rishi Sunak, last spring, the leave program has kept around 11.5 million people at work, according to official figures.

A third of the UK workforce was on leave as of March, but since then the rollout of the vaccine has accelerated and allowed for a cautious easing of social restrictions in line with the Premier’s roadmap. minister, allowing many companies to return to a certain degree of normality, especially in the retail and hospitality sectors.

This means that only 3.4 million workers, or about one in 20, are still on full or partial leave at the time of writing.

But some industries, particularly the international travel sector, continue to face considerable difficulties and lingering uncertainty, sparking criticism of the end of the program in some neighborhoods as some restrictions remain in place after the postponement of the program. the last step of unlocking from June 21 to July 19.

Will its gradual return lead to layoffs?

While young people made up the majority of workers initially put on leave, the reopening of shops, bars and restaurants has allowed many under 25 to return to work or find new jobs in these sectors in recent months.

But older employees could face increased danger with the end of the grant program that returns financial responsibility to business leaders, given that about half of those still on leave are 45 or older, according to the group. Think Tank, The Resolution Foundation.

“This model of younger workers returning from leave faster has placed older workers on full leave at the greatest risk of having been out of work for long periods of time,” the Foundation writes in its annual audit of employment levels. life 2021.

He estimates that up to one in four employees still dependent on the scheme and aged 55 to 64 could see their job in danger.

The Institute for Fiscal Studies also warned that the additional costs borne by struggling companies could lead to layoffs for tens of thousands of workers.

It calculates that the bill for employers keeping a staff member under the scheme will drop from £ 155 per month, an amount covering costs such as national insurance, to £ 322 in July and £ 489 in August due to the withdrawal of State. Support.

“This will mean significant loss of income for many of those who find themselves unemployed unless they are quickly able to find other employment,” the institute said.

What will be the legacy of the leave plan?

The UK government has spent £ 66bn on the Coronavirus Job Retention Scheme since March last year, with the Office for Budget Responsibility, the independent Treasury forecaster, estimating government spending to have peaked at £ 10bn pounds per month before falling to around £ 2.2 billion in June.

There is no doubt that this has been successful, keeping the unemployment rate below five per cent in a time of international crisis and saving millions of UK workers from financial hardship under extremely difficult circumstances.

However, this money will eventually have to be clawed back at some point in the future and although the popularity of the program (relatively speaking, as an alternative to dismissal) has gone a long way in raising the profile of Mr. Leader of the Conservative Party – it is likely to be considerably less appreciated when the time comes to introduce his bill and start proposing tax hikes or new austerity measures.

He also made it very clear that the program would not be extended again, but could face considerable pressure to flip-flop on this statement if the country were to experience a new wave of infections from a new variant of the disease. disease when the weather began to deteriorate. turn later this year.