Lessons from furlough

The coronavirus pandemic served as a ‘stress test’ for the British welfare state. Arriving at the end of a decade of punishing spending cuts, Covid-19 thrived amidst the poor health and strained services that Tory austerity had fostered. In their response to the crisis, it became clear that the Conservatives had learnt little.

After a period of denialism, the Johnson government finally grasped the scale of the crisis towards the end of March 2020. It implemented the coronavirus job retention scheme (CJRS), a short-time working job retention policy, on 20 March, and announced the first full lockdown on the 23^rd. At its peak, 8.4 million employees were paid via the scheme, costing approximately £14bn per month.

While the scheme preserved millions of jobs, it not only exposed the cracks in our welfare system but frequently exacerbated them. Provision for women and caregivers was an afterthought, existing welfare claimants received little additional support, income inequalities grew and employees were not consulted about changes affecting their work. All the while, private companies maintained their margins and shareholder dividends using public money. A Labour government committed to mitigating the impacts of austerity, social justice, and rebalancing our economy must learn from these failures.

Women remain systematically disadvantaged by Britain’s welfare state. The CJRS was no exception. It did not allow women to reduce their hours to enable the sharing of childcare, or account for unpaid care work, perpetuating a patriarchal model of labour. The government offered only the minor concession that schools and nurseries would remain open for ‘essential’ workers, with no recognition of informal child-related labour. As a result, many women were forced to work from home while simultaneously juggling childcare responsibilities. In its first iteration, the CJRS also disadvantaged women taking family-related leave from the workplace, particularly maternity leave. Women transitioning from the furlough scheme to statutory maternity pay received lower rates, as their maternity pay was calculated based on their furloughed salary, leading to significant income reductions. The lack of targeted action to account for unpaid care work or to equalise CJRS eligibility created an environment where clear inequalities were unmitigated.

The CJRS also provided support to those in work before the pandemic more willingly and extensively than those historically outside the labour market. The UK has a tradition of slim social security complemented by strong employer authority. This sparse social security architecture leaves many critically exposed to sudden economic contractions. Superficially, the CJRS’ universality appeared to buck this trend, delivering 80 per cent of wages up to a net monthly maximum of £2500 for those ceasing work, regardless of employment contract type. Yet those claiming universal credit before the pandemic, many of whom were not in work, received only a paltry uplift of £20 per week. The ability to seek new work then became extremely limited during the pandemic, meaning those on universal credit were effectively confined to lower earnings. These double standards were reproduced in public opinion; there is a body of evidence indicating that furlough claimants were perceived more favourably than universal credit claimants as the public rationalised the expansion of social security as a pandemic-driven response.

While Frances O’Grady of the TUC may have been present in discussions with the Chancellor to shape the furlough scheme, local trade union representatives were bypassed, with workers having no say in the introduction of a scheme in individual firms. The limited role of trade union representatives in negotiations around the workplace implementation of the CJRS highlighted the extent to which working-class power has been reduced. The employer-centred policies of Margaret Thatcher afforded capital great power, and this consensus endures today. Unsurprisingly, then, the CJRS was formulated with business as the priority, intending to subsidise labour costs and reduce bankruptcies. The government masked this approach with pro-worker rhetoric, cynically portraying it as chiefly concerned with offering support to ordinary people.

In Germany, collective agreements were required for the implementation of the Kurzarbeitergeld wage subsidy scheme, demonstrating the desire of the state to empower organised labour to work with private organisations and employers. Where employees are empowered to negotiate with employers over the implementation of a short-time working scheme, a fair pay package can be struck that accounts for both state and private contributions to income replacement. This process can be seen to account for the relative generosity of the German short-term working scheme and the lower government contribution.

All the while, private companies in the UK raked in billions. Legislative guarantees were created but not enforced to restrict dividend payments, allowing some employers to use the furlough scheme to reduce costs while still distributing profits to shareholders. The ability for businesses to receive both government support and continue to reward shareholders emphasised a prevailing Conservative economic logic, where the willingness of the government to reward private enterprise is seen as the driver of the economy. In contrast, the corresponding Swedish scheme could only be used by companies able to demonstrate significant financial difficulty, with profit distributions restricted. While a company received government support, control of distributions passed to the Swedish Agency for Economic and Regional Growth, with restrictions placed on share buybacks, reductions in share capital, and reserve fund payments to shareholders. Any future scheme must ensure the burden of an economic crisis is shared equally among households and businesses.

The consequences of Tory ideology during the pandemic are plain to see. The government’s response increased the cavernous divide between the owners of assets and those dependent on income. Over the first year of the pandemic, the top 10 per cent of earners’ wealth grew by £51,000. And the bottom 10 per cent? Just £99. This reinforcement of the status quo through upwards redistribution embedded a series of economic relations shaped by 12 years of austerity. A massive transfer of capital to the private enterprises providing public services coincided with the degradation of the same services those at the base of the income distribution are particularly reliant on. In short, Britain’s laissez-faire approach to welfare consciously avoids challenging social hierarchies, instead reinforcing them and placing further barriers to accessing social and economic capital.

An incoming Labour government must look closely at the furlough scheme in order to understand the failures of our welfare system. Welfare provision must consider the unpaid care work women and caregivers undertake, holistically evaluating the role of the individual in the labour market. A Labour government must not be afraid of challenging social hierarchies, supporting those on the lowest incomes more extensively than wealthier citizens to drive upward social mobility and tackle precarity. The empowerment of trade unions must also be prioritised, enabling collective bargaining to occur at the firm level. Finally, the government must be committed to fairness; corporations cannot be allowed to exploit emergency government support while continuing to distribute profits to shareholders. Principles of fairness and solidarity must underpin a renewed approach to welfare, one that tackles inequalities, delivers fairness, and learns the lessons of the pandemic.

Image credit: citytransportinfo, CC0, via Wikimedia Commons