Ian McConnell: Conservatives will be judged on unemployment misery from coronavirus crisis so they had better listen

However, the emerging signs, even as early as May, were that some in the Conservative Party were already champing at the bit to get on with phasing out the scheme. Remember those reports in early May about the unnamed “senior Government source” declaring: “People are addicted to the scheme.” This is as outrageous a comment now as it was then.

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Mr Sunak last month, while extending the scheme to October, at the same time emphasised the Government’s intention to make employers with furloughed workers contribute to the cost of the scheme from August. Under the programme, the UK Government pays 80 per cent of the wages and salaries of furloughed workers up to £2,500 a month.

The details of the employer contributions being sought were set out on May 29. The Treasury puts the average contribution being required from businesses in August at 5% of the gross employment costs they would have borne had a worker not been furloughed, through payment of employer national insurance and pension contributions.

In October, by which time the Government contribution will have reduced to 60% of wages and salaries up to only £1,875 a month, the average contribution of businesses is put by the Treasury at 23% of the gross employment costs that would have been incurred had the worker not been furloughed.

Against this evolving backdrop, we have seen a deluge of announcements of major job losses across a raft of sectors including hospitality, airlines, and engineering, to name but a few.

If any further confirmation were needed, it is becoming plainer by the day that what will be key to mitigating the albeit inevitably still major economic damage from the coronavirus crisis will be minimising unemployment.

It is also important for the Conservative Government to recognise that some businesses, particularly those at the back of the queue as the economy reopens, will not be able to afford to make any contribution to the furlough scheme in the short term. Some sectors will not be able to return to anything near normality for a long time.

Taking all of this into account, First Minister Nicola Sturgeon’s call for the furlough scheme to be extended further seems eminently sensible.

She has highlighted France’s indication that it could continue this type of support for up to two years if necessary.

Seasonally adjusted official data yesterday showed a surge in the UK claimant-count, which measures the number of people claiming benefit principally because of unemployment, to 2.8 million in May. This is up 125.9 per cent or 1.6 million since March. The month-on-month rise in May was 528,900. The claimant-count measure in Scotland has risen from 111,400 in March to 217,600 in May. It was 197,800 in April.

In the wake of these miserable figures, Ms Sturgeon warned yesterday of a “cliff-edge” if the job retention scheme were not extended. Warning against any “reckless relaxation” of lockdown measures, she added that easing restrictions to slow the spread of Covid-19 too quickly and allowing the virus to “run out of control again” would be “economically counter-productive” as well as costing many more lives.

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Day by day, we get an ever-broader insight into the likely very protracted nature of the economic disruption from the Covid-19 crisis.

Of course, the furlough scheme will naturally reduce very significantly in scale as sectors of the economy reopen or increase their activity, if we can avoid a second wave of coronavirus. However, the reality is that those sectors which will not be able to reopen fully for a long time will need protracted support. The seasonal Scottish tourism industry is a case in point, in terms of its loss of a large part of its busiest period. However, there will be major implications for many other sectors.

There seems to be a developing problem of perception around the coronavirus job retention scheme which, as Mr Sunak noted at the weekend, has protected around nine million workers and about one million businesses. He noted around two-and-a-half million self-employed people had also been protected.

The scheme is costly, of course, and we cannot lose sight of that.

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However, unemployment also brings with it major costs, in economic and social terms. The greater the unemployment arising from the coronavirus crisis dislocation, the more protracted and painful a subsequent recovery will be.

So those who say the Government cannot afford to support the incomes of what will in any case hopefully be a sharply diminishing number of people as the economy reopens should think about the expense of not doing so.

People are not on furlough through any kind of choice, as Mr Sunak has acknowledged. They would far rather be working but have been unable to do so because of the coronavirus crisis and measures put in place to save many thousands of lives. The public health emergency remains and it is important moves to withdraw the furlough scheme do not in any way pressure decision-making by devolved nations such as Scotland on what represents a safe route-map out of lockdown. Avoiding a second wave remains utterly crucial.

Ms Sturgeon has in any case quite rightly observed that withdrawing support does not necessarily take away any financial burden from the public purse – but rather simply transfers it if lots of people are then avoidably made redundant.

Mr Sunak, on the BBC’s Andrew Marr show at the weekend, signalled those seeking a further extension to the furlough scheme would be given short shrift.

This is a great pity. The furlough scheme is a practical thing, and the Conservatives must keep at the forefront of their minds the aim, when the programme was brought in, of warding off mass unemployment.

Mr Sunak, correctly, pointed out the situation would be “far worse” without the furlough scheme.

However, he said: “It’s not sustainable to carry on doing that.”

Mr Sunak talked about a “general consensus about that across probably the political and economic spectrum”. Ms Sturgeon’s comments indicate otherwise, there are a variety of opinions among economists, and, among businesses, there is plenty of support for an extension.

It would be good if Mr Sunak might reconsider his viewpoint on phasing out the job retention scheme. He should weigh the cost of the alternative, and take into account the fact the furlough scheme will reduce dramatically in scale of its own accord if the right judgements are made on when various parts of the economy can be reopened safely.

There remain huge unknowns in all of this, including whether or not a vaccine emerges, and, if so, on what timescale.

Mr Sunak talked about how the furlough scheme, under current plans to keep it going until October, will “run in total for eight months, which I think is a generous period of time to provide support”.

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And this maybe gets us to the nub of the problem of perception. This is not about generosity. This is about supporting the incomes of people unable to work because of a drive to save many thousands of lives. And it is about minimising the long-term cost to the economy, and hopefully to society, of the dislocation.

To minimise the ultimate economic cost will require an open mind when it comes to the furlough scheme, as the situation evolves.

Mr Sunak and the Conservatives will, rightly, be judged on whether, having done the right thing initially by introducing the scheme, they can preserve the benefits by remaining flexible in their decisions and making the right calls on the furlough programme. Hopefully, for everyone’s sake, they prove up to that task.