‘No such thing as a free lunch’ BofE warns furlough scheme means future tax hikes

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Two mothers fight against Tory benefit cuts – working mums are being denied furlough

DEPUTY governor of the Bank of England Ben Broadbent said this week that ‘resilient’ household spending has been ‘funded by tomorrow’s taxpayers’ – in a thinly-veiled comment on the impact of the UK Tory government’s furlough scheme is having on UK public finances.

Broadbent was clearly saying that the mammoth government spending to support the national economy and some workers through the pandemic had helped buoy consumer spending, but was ‘no free lunch’.
The furlough scheme has been the ‘single most important factor’ in helping protect household income from the hit to the wider economy – according to Broadbent.
He admitted: ‘Spending by today’s consumers has in part been sustained and funded by tomorrow’s taxpayers.’
It came after Tory Chancellor Rishi Sunak had told MPs on Monday that the nation’s public finances ‘have been badly damaged and will need repair’ due to more than £280 billion of government spending to support the economy.
Sunak also gave a stark warning that the economy will ‘get worse before it gets better’, given the latest lockdown. And Broadbent, the deputy governor for monetary policy on the Bank’s interest rate setting committee, said the economy was now expected to contract in the first quarter of 2021.
Following a predicted contraction of gross domestic product (GDP) – a measure of the economy’s size – in the three last months of 2020, this would see the UK enter into a double-dip recession.
Broadbent said:
• ‘GDP growth may have been the weakest on record, but retail spending growth is just about the strongest.’
• ‘The furlough scheme launched last March as the first lockdown began has helped maintain the spending side of the economy.’
• ‘This has been done only at the expense of a material rise in public-sector debt, something that will have to be paid for over time.’
• ‘Households switched spending from physical shops to online, as well as from areas seen as being risky in the pandemic to less risky alternatives …’
• ‘The government has spent £46 billion so far on supporting wages for those unable to work during the pandemic and extended the furlough scheme until the end of April.’

  • While all this is hugely costly, Broadbent said it had been key in propping up the economy. ‘The decline in aggregate consumer spending would almost certainly have been more protracted and more widespread – affecting not just activities that involve infection risk but those that do not – but for the furlough schemes.’

Meanwhile, over 50,000 working mums responded to a new TUC survey on the challenges of managing work and childcare during lockdown.
The working mums reported ‘huge levels of anxiety and stress following school closures’, and the TUC called for ‘an emergency temporary right to furlough for working parents – and for government to promote this new right to mums and dads.’
Yet nearly three-quarters (71%) of working mums who have applied for furlough following the latest school closures have had their requests turned down, according to a new TUC survey carried out in the past week and published on Thursday January 14.
The job retention scheme currently allows bosses to furlough parents who can’t work due to a lack of childcare. But the TUC says many mums are missing out on this financial lifeline – as the scheme is not promoted to parents.
The union body is also concerned (that) some employers are refusing to furlough those who request it, leaving mums in an impossible situation where they are forced to reduce their hours at work, take unpaid leave and annual leave to cope, or leave their job altogether.
Last week, in a survey, the TUC and campaign group Mother Pukka launched a call for evidence for working mums to share their experiences of how they are managing their work and childcare commitments during lockdown.
More than 50,000 mums got in touch – an unprecedented response to a survey of this kind.
And of those working mums who contacted the TUC:

  • Nearly three-quarters (71%) who asked for furlough had their requests refused.
  • Most (78%) hadn’t been offered furlough by their employers.
  • And 2 in 5 (40%) of all mums who replied were unaware that the furlough scheme was available to parents affected by school or nursery closures.

Working mums told the TUC they were struggling with the strain of being expected to carry out their jobs as normal, while balancing childcare and home-schooling. They were also concerned about being treated badly by their employers as a result:

  • Nearly all (90%) of those who replied said that their anxiety and stress levels had increased during this latest lockdown.
  • And almost half (48%) were worried about being treated negatively by their employers because of their childcare responsibilities.

Around half (44%) of mums told the TUC they were worried about the impact having to take time off work would have on their household finances.
A quarter (25%) of mums were using annual leave to manage their childcare – but nearly 1 in 5 (18%) had been forced to reduce their working hours and around 1 in 14 (7%) were taking unpaid leave from work and receiving no income.
The TUC says that the UK’s inadequate system of parental leave and woefully low level of sick pay is leaving parents in impossible situations, where they risk losing their job or facing a catastrophic loss of income.
To support these workers, the TUC is calling on ministers to introduce a temporary right to furlough for groups who cannot work because of coronavirus restrictions – both parents and those who are clinically extremely vulnerable and required to shield.
And ministers should clarify that furlough can be used by both private and public sector employers.
The union body says employers should first explore with parents and those shielding whether other measures – such as offering additional paid leave, changes to working hours or other flexibilities like working from home, and offering alternative work – could help the worker balance their responsibilities, but that as a last resort, workers should have the right to be furloughed.
Ministers should encourage employers to use the furlough scheme for parents and those shielding where other arrangements cannot be made, and run a major advertising campaign so that parents and shielders understand that they can use furlough.
The TUC says this situation results from the UK’s failure to help families balance paid work and childcare. And alongside a temporary right to furlough, it is calling on the government to introduce:

  • Ten days’ paid carers leave, from day one in a job, for all parents. Currently parents have no statutory right to paid leave to look after their children.
  • A right to flexible work for all parents. Flexible working can take lots of different forms, including having predictable or set hours, working from home, job-sharing, compressed hours and term-time working.
  • An increase in sick pay to at least the level of the real Living Wage, for everyone in work, to ensure workers can afford to self-isolate if they need to.

• Newly self-employed parents to have access to the self-employment income support scheme (SEISS).