Implications of ending furlough

In this blog, Networks and Communications Officer Peter Williams explores what the end of the furlough scheme means for people living in areas experiencing disadvantage.

The Coronavirus Job Retention Scheme, better known as the furlough scheme, was introduced by the Chancellor in Spring 2020. With lockdown restrictions forcing many businesses to close, particularly low-paid jobs in close-contact sectors such as retail and hospitality, the scheme has been a lifeline to millions of workers who would otherwise have lost their jobs.

With the Job Retention Scheme coming to an end in September, the question is what will become of those whose salaries are still paid through the scheme. Unfortunately, it is likely the scheme will have a detrimental impact on the most marginalised members of our society. According to a 2020 report from the Institute for Fiscal Studies, women, people from Black, Asian and minority ethnic backgrounds, people living with disabilities and older people are most likely to have a high-risk job that has been financially impacted by the pandemic.

In conjunction with the furlough scheme ending, the government’s universal credit uplift which provides low-income households with an additional £20 a week - which has acted as a safety net for people - will also end in the autumn. In total, more than 6.2 million families will be impacted by the payment cut. According to JRF estimates, the cut will disproportionately impact single parents, minority ethnic households as well as disabled people as it is these groups that are overrepresented in terms of people that rely on universal credit. These groups have seen rising costs, particularly disabled people who are using more of their finances to pay for additional expenses such as taxis to appointments to avoid public transport.

Older people are also more likely to suffer as a result of the furlough scheme ending. In June 2021, IFS reported that 14 per cent of workers over 65 were furloughed, compared with 10 per cent of those aged 40–49. The report identified that older workers preferred flexible working, such as working part time. The majority of seasonal and part time employment opportunities were lost as a result of lockdown restrictions and older people will now find it challenging to find new employment once the furlough scheme ends.

People’s Health Trust’s COVID-19 surveys, looking at the impact of the pandemic on funded partners and how we could best support them, demonstrated serious concerns amongst residents about their finances. We found that 63 per cent of respondents confirmed that they were working with marginalised groups who were experiencing financial concerns because of the pandemic. In addition to rising unemployment, increased food costs and pressures on household budgets were also mentioned, as was being required to be on furlough for sustained periods of time. Almost two-thirds (62 per cent) of projects said that food poverty or food insecurity was a serious challenge for the people they work with, which is a key indicator of poverty.

The pandemic has created more barriers for people living in areas of high disadvantage as they have seen utility bills and the cost of living increase. By removing both the Job Retention Scheme and the universal credit uplift there will be more households facing greater poverty.

Access to secure, well-paid jobs and sufficient income is a key factor for good health. The welfare system is a vital aspect of this, providing a safety net for those on the lowest incomes. If you have a decent income and secure employment, you are more likely to have access to higher quality food, and better quality of housing, which improves the quality of your health and the length of your life.

Research from The Health Foundation demonstrates that people in the bottom 40% of the income distribution are almost twice as likely to report poor health than those in the top 20%. There is also strong evidence that suggests that people living in more affluent areas are more likely to live a decade longer than people living in areas of disadvantage.

In order to protect millions of low-income households from the aftershock of COVID-19 we need to work at ways of improving household income as well as creating greater employment opportunities. We acknowledge furlough is not sustainable and has to come to an end at some stage but given the likelihood that many of those furloughed will lose their jobs, as a minimum the £20 uplift to universal credit must be maintained in order to prevent sharp rises in poverty alongside unemployment.