Think-tank calls for gradual end to furlough

A new report from the Institute for Fiscal Studies calls for the furlough scheme to be gradually phased out rather than to end abruptly.

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The Institute for Fiscal Studies is calling for well-targeted extensions in emergency support to households and employers over coming months and for the gradual phasing out of support such as the furlough scheme and Self Employment Income Protection Scheme.

In a report out today, conducted with an analyst from Citi Research, it says the economy cannot adjust and recover until most of this support has been removed. It also calls for the Chancellor to set out plans for how to help the economy recover and adjust to a new normal which includes the triple challenges of Brexit, recovery from Covid and the move towards Net Zero.

And it says public finances are not on a sustainable footing and urges sizeable net tax rises in future Budgets. For this Budget, however, it says Rishi Sunak should only commit to permanent spending rises (or tax cuts) if he is sure of an appetite for larger subsequent tax rises.

The report also calls for the £20-a-week Universal Credit uplift to be retained, in part because workers from lower-income households are more likely to lose their jobs once the furlough scheme and other business protections end and some companies cut jobs or go out of business. IFS Director Paul Johnson said the Chancellor “needs to support jobs and investment, but also crucially needs to recognise and address the multiple inequalities exacerbated by the crisis. Fiscal policy should lean against the effects of looser monetary policy which has again benefitted the older and wealthier at the expense of the younger and poorer.”

Meanwhile, the Trades Union Congress (TUC) warns that “patchy” financial support for people self-isolating has put many UK workers in hardship and left a “gaping hole in the UK’s public health approach” to the pandemic. Figures obtained by the TUC suggest that around 70% of applications for the £500 government support scheme were rejected as of January 6th. The TUC has called for statutory sick pay to be increased and made available to all workers as an alternative.



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