‘Without the job retention scheme we would see a much bigger rise in unemployment’
In a glimmer of positive news, the Organisation for Economic Organisation and Development said the UK’s unemployment rate is on course to average around 5 percent this financial year rather than the 10 percent previously predicted thanks to “extremely effective” measures taken by the Treasury. It means the country is poised to escape a return to levels of long-term unemployment last seen in the 1980s.
But the report also warned that the UK was at a “critical juncture” with a return to a full national lockdown threatening “weaker growth, higher unemployment and even greater pressure on balance sheets.”
It was published as Boris Johnson and his Chancellor Rishi Sunak both rejected demands from Labour for an immediate two-week “circuit break” lockdown.
In a show of unity, the Downing Street pair vowed to stick to the Government’s plan to target coronavirus surges at a local level.
Mr Johnson told MPs: “The whole point is to seize this moment now to avoid the misery of another national lockdown.”
Chancellor Rishi Sunak
And the Chancellor warned a return to national lockdown would cause “significant damage” to people’s lives and livelihoods across the country.
“We need a balanced approach, we need a consistent approach and we also want a co-operative approach,” he said.
Yesterday’s UK Economic Survey by the OECD said the Chancellor’s emergency financial measures to support the economy through the pandemic were helping to curb the threatened rise in unemployment.
“Policies that were applied had an impact on reducing unemployment both in the UK and other parts of the world.
Sir Keir Starmer at PMQs
“Without the job retention scheme we would see a much bigger rise in unemployment.
“The schemes were extremely effective and critical. It is remarkable the way it has kept unemployment down,” the 125-page report said.
Treasury measures to protect jobs including the furlough scheme would mean unemployment in the UK will average at 5.3percent, the report said. The figure was down from earlier OECD forecasts of up to 10.4percent.
The report expected the unemployment rate to peak at 7.7percent, down from a previous forecast of 11.7percent, before the end of the year as the furlough system comes to end before falling next year.
Its estimates were more positive than the Office for Budget Responsibility, which expects the jobless rate to peak at 12percent.
“The United Kingdom is at a critical juncture,” the survey said.
“Decisions made now about management of the COVID-19 crisis and future trade relationships will have a lasting impact on the country’s economic trajectory for the years to come.
“The outlook is exceptionally uncertain.”
It added: “On-going measures to limit a second wave of infections will need to be carefully calibrated to manage the economic impact.”
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Reimposing a full national lockdown could “lead to weaker growth, higher unemployment and even greater pressure on balance sheets,” the OECD said.
It also warned that a “disorderly” end to the Brexit transition out of EU rules could add to the UK’s economic woes.
Responding to the survey a Treasury spokesman said: “We welcome the OECD’s survey, their recommendations and their recognition of our unprecedented package of support which has protected jobs, businesses and the wider economy throughout the pandemic.
“As the OECD note in their report, it’s clear that policy action has mitigated the economic impact of the virus.
“The recent measures announced by the Chancellor, including the Plan for Jobs and the Winter Economy Plan, strike the right balance between protecting jobs and providing people with new training and opportunities, including through traineeships, apprenticeships and our £2 billion Kickstart scheme, to ensure that nobody is left without hope.”
At Prime Minister’s Questions in the Commons yesterday, Labour leader Sir Keir Starmer urged the Prime Minister to trigger a “circuit break” two-week full lockdown in line with a recommendation from the Government’s Scientific Advisory Group for Emergencies.
“I have genuinely concluded that a circuit break is in the national interest,” the Labour leader said.
“It is the failure of the Prime Minister’s strategy that means tougher measures are now unavoidable,” he added, accusing the Prime Minister of being “an opportunist all his life.”
But Mr Johnson insisted the Government would stick to his “common-sensical regional approach” to avoid shutting businesses in areas with low infection rates and causing unnecessary economic damage.
“We want to put in the most stringent measures necessary in the places where the virus is surging, in order to get it down where it is surging,” the Prime Minister said.
“I rule out nothing, of course, in combating the virus, but we’re going to do it with the local, regional approach that can drive down and will drive down the virus if it is properly implemented.”
Later Mr Sunak accused Labour of failing to be “honest” about the economic costs of another lockdown.
During a Commons debate on a motion tabled by Labour demanding more financial support for communities hit by local lockdowns, the Chancellor said: “We need a balanced approach, we need a consistent approach and we also want a co-operative approach.
“But any responsible party calling for a shutdown of our entire country should be honest about the potential costs – economic and social – of such a dramatic measure.
“At the very least they should have the integrity to acknowledge that what they’re proposing will create significant damage to people’s lives and livelihoods.
“I’ve never said there are easy choices or cost-free answers, this is the reality we face and it’d be dishonest to ignore that truth.
“So no more political games and cheap shots from the sidelines. The party opposite can either be part of this solution or part of the problem. It’s called leadership, but from them I’m not holding my breath.”
He added: “I’ve talked about facing up to the difficult truths clearly and we’re facing an economic emergency, but we’re acting on a scale commensurate with this emergency as we address my single biggest priority – to protect people’s jobs and their livelihoods.”
A Whitehall source yesterday insisted the Government was not ruling out a “circuit break” lockdown if the three-tier alert system failed to the surge in infections over the coming weeks.
“We can’t take anything off the table, we can’t rule stuff out.
“The numbers aren’t good and there is huge pressure on hospitals in the North West,” the source said.