Furlough should be reintroduced if lockdown measures are brought in to curb the spread of the Omicron variant, the International Monetary Fund (IMF) has recommended.
In a statement issued to the UK government, the IMF suggested furlough and other financial support schemes should be redeployed if sectors of the economy are asked to close to help stem Covid-19 infections.
It said: “In the event of a virulent Covid-19 wave requiring widespread mandated closures, the authorities should be ready to redeploy a subset of the most successful previous exceptional programs (such as a furlough scheme and targeted support to the most vulnerable households and small businesses), but with due attention to lessons learned about their design (including tapering and timely sunset).”
The recommendation formed part of the IMF’s concluding statement for 2021. Such statements are issued following a visit by IMF staff to countries that request to borrow from it.
The furlough scheme closed on 30 September after 18 months. The scheme saw the government help pay the wages of more than 11.7 million staff who were unable to work their full hours due to the effects of the pandemic.
The IMF said the UK economy has been “resilient” thanks to strong policy support and a rapid vaccination campaign that enabled the economy to reopen fully by summer 2021.
“Output and employment have returned to close to pre-pandemic levels backed by strong policy support for jobs and firms,” the IMF noted.
However, it said that the pandemic has made the nature of work more digital and has restrained labour market participation.
It suggested that the UK should “go further” by introducing programmes that protect marginalised labour market participants and small businesses from future economic shocks.
It said there should be more “automatic funding of active labour market policies for youth (eg, Kickstart)”, but noted that a scheme such as the Coronavirus Job Retention Scheme “should not be part of the regular toolkit in the UK and is best considered for responding to very large, temporary, and non-structural shocks”.
Policies to develop skills “will need to be adjusted as experience is gained”, and it suggested that some of the new initiatives such as the Lifetime Skills Guarantee, Kickstart and skills bootcamps will “prove more effective that others and should accordingly be prioritised”.
“Stepping back, staff modelling suggests that a period of creative destruction lies ahead, and thus facilitating sectoral labour shifts will grow in importance. Higher funding for these skills-building policies should be a priority,” it added.
A HM Treasury spokesperson said: “We welcome the IMF’s report on the UK’s economic support package and their assessment that the UK economy is resilient, and recovered faster than expected because of this government’s actions.
“The IMF specifically credited the UK’s ‘rapid’ vaccination campaign which allowed the ‘worst health impacts of the pandemic’ to be contained over the summer.
“With a resurgence of the virus, the most important thing we can do to safeguard the economic recovery is for everyone to get boosted now.”