Furlough has turned Britain into a nation of scroungers

Furlough Rishi Sunak
At the height of the pandemic, with the Government ordering people to stay home, then Chancellor Rishi Sunak unveiled the ‘furlough’ scheme - Pippa Fowles/10 Downing Street

“Were you concerned that paying people to stay at home would destroy the work ethic? Did you commission any evidence on how losing touch with the office would undermine productivity? And did you demand that the tightest possible checks were in place to prevent fraud?”

In some alternative universe it is possible that an expert KC, preferably armed with a first in economics as well as law, has been interrogating ministers and senior civil servants on the impact of Covid lockdowns on the British economy.

In this one, the Covid Inquiry has turned into a trivial examination of who swore at who. But until there is a reckoning with how lockdown trashed Britain’s working culture, we will never get back on track.

After all, that period saw the most extraordinary set of government support measures ever announced. At the height of the Covid pandemic, with the Government ordering people to stay home, then-Chancellor Rishi Sunak unveiled the “furlough” scheme. Employers could put their staff on furlough, and the Treasury would pay 80pc of their wages (up to £2,500 a month) while they sat at home.

Over the length of the scheme, 11.7 million workers were furloughed, with a total of 1.2 million companies furloughing employees at the peak. The total cost was astronomical, with the final bill coming in at £70bn. It was one of the biggest, and most expensive, economic experiments the British government has ever undertaken.

Three years later it is extraordinary that the Covid Inquiry is apparently uninterested in a very simple question: was it worth it?

The evidence is increasingly clear: it wasn’t. A report from the Bank of International Settlements shows that, since the pandemic, workers prefer to work fewer hours. The shift is most pronounced in the countries where the Government was particularly generous with handouts – and Britain’s furlough programme is called out for particular criticism. In hindsight, it isn’t hard to understand why.

Furlough was well-intentioned. With society temporarily closing down, the fear was that firms with no customers would have no choice but to lay off millions of workers. Skills would be lost, teams would be broken up, and the benefits bill would soar.

It made a lot more sense for the Treasury to pick up the wage bill, put the economy into a deep freeze, and wait for it to emerge intact when the pandemic was over. Almost three years later, however, it has become clear that there were three big problems with this plan.

First, it was the wrong scheme. Most developed countries had some version of furlough, but they varied significantly. Some such as Canada and Australia opted for “wage subsidy” schemes whereby eligible firms could claim funds against their wage bill. That encouraged companies to try as hard as they could to keep people employed.

The British scheme, until the introduction of flexible furlough in July 2020, insisted that staff had to stop working completely to qualify. Many employers facing uncertain times simply put as many people on furlough as they possibly could, secure in the knowledge that they could hang on to staff, and it wouldn’t cost them a penny.

It’s hard not to suspect a few will have seen it as a “time and motion” study, a real time experiment in who they really needed and who they didn’t. In effect, however, the scheme seemed specifically designed to discourage people from working.

It also encouraged rampant fraud. According to the Public Accounts Committee, between the furlough and self-employed support schemes an estimated £4.5bn was lost to fraud and error. Another £5bn went to people and firms whose income hadn’t really suffered.

Such a huge scheme organised in such a hurry was always going to have flaws. Even so, it was ridiculously easy to game the system – all businesses had to do was say that an employee wasn’t working, cash the cheques, and then have them work from home. Far too often, the scheme encouraged and rewarded spivs and chancers, and penalised honest employers. We can hardly complain if that has damaged the economy.

Most significantly, however, furlough destroyed the culture of work. Whatever its other faults, and there are plenty of them, the UK has always had a can-do, get-on-with-the-job working culture. The furlough scheme shattered that, replacing it with a “something-for-nothing” attitude that has now become so embedded it seems impossible to reverse.

Employees got used to the idea they could hang around in their PJs all day. The return to work came as an unpleasant shock, with many demanding the right to work from home as a compromise, dialling into the occasional Zoom meeting and drawing a full salary without paying for the commute or a Pret sandwich.

Similarly, calls for four-day weeks, “working-from-anywhere” and “universal basic incomes” have proliferated.

Large numbers over-50s have opted en masse for early retirement, with a few hundred thousand gleefully leaving the workforce. Many, it seems, may not be able to really afford it, raising the spectre of state dependence for decades.

Even the self-employed, who used to be the hardest working section of the labour force, are drifting away for the relative undemanding safety of employment. We rely on mass immigration because no one seems to want to work anymore.

It’s hard not to think most of this is down to the furlough scheme. Along with the lockdowns, it did immense harm to the British economy. It was drawn up by civil servants with little understanding of how the real economy works, and sold by ministers who cared too little for the cost. It will take years of hard work to undo the damage done.

At the very least, the Covid enquiry could start asking the tough questions about this folly, and holding politicians and officials to account. It is the very least that the rest of us deserve. We will be paying the price for those mistakes for years to come.

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