The IFS have urged for a new budget from March to balance out the country?s dependency on the government furlough scheme.
Government Furlough Scheme
The furlough scheme was introduced last March as a way of financially supporting the huge number of people unable to work due to the Coronavirus pandemic. Yet, nearly a year on, it has become a way of perpetuating national debt rather than fixing public finances. Already Chancellor Sunak is set to borrow more than £400 billion this financial year to cover the government pandemic response.
New Call to Action
A new study from the IFS recommends a new budget on March 3rd in order to phase out the ongoing Covid-19 financial support as a way of discouraging reliance on this scheme. Chancellor Rishi Sunak has been advised to prioritise economic recovery from the coronavirus pandemic up until now.
Vulnerable Parties
Lower-income households will be more vulnerable if the furlough scheme is not extended beyond April 2021. Failing to maintain this financial support would push unemployment rates even higher than they currently are (5%) as companies will be unable to keep staff on and this demographic can be vulnerable to using high cost loans.
Buffer
Those with a financial buffer will be more able to overcome the obstacle of no more government funding. The research suggests that those who are better off are in a safe position to incur a greater tax burden in the future after building up a collective £125 bn in savings since March 2020.
Second Budget
The chancellor has been advised by IFS director Paul Johnson to strike a balance in his second budget between support and helping to “[wean] the economy off blanket support”. Johnson highlights that this blanket support has benefited the older and wealthier yet been costly for those who are younger and less financial stable. He advises for Sunak to support jobs and investment whilst simultaneously giving more support to those with greater need.
