Coronavirus (COVID-19) - extending the Coronavirus Job Retention Scheme: analysis

16 Sep 2020 12:11 PM

Paper exploring the costs and benefits of extending the Coronavirus Job Retention Scheme on a temporary basis. Such an extension could reduce unemployment in Scotland by 61,000 through the first half of 2021, at a cost of around £850 million.

The fiscal response to COVID-19 has been unprecedented in scale and scope. Both the UK and Scottish Governments have provided significant support to help protect jobs and enable business to survive. The economic policy response is largely reserved and the Scottish Government does not have the full suite of fiscal powers to fully.

The UK Government’s Coronavirus Job Retention Scheme (CJRS) has been the largest intervention, with the UK Government paying out almost £4 billion in a single week at its peak. The costs were highest during the most stringent restrictions, and have since fallen, reflecting both the return of employees to work and the reduction in the share of support coming from government. The Office for Budget Responsibility (OBR) estimates that scheme costs will fall to around £3.5 billion per month (after tax) in October, when government will be paying 60% of wages.

The CJRS is playing a key role in mitigating the impact on unemployment which is reflected in the low rates of unemployment across the UK. The UK Government has announced the scheme will close on 31st October 2020. Data published by HMRC show that the scheme has protected 779,500 Scottish jobs, around 32% of the total Scottish workforce. Although the number of people furloughed has fallen as the economy has reopened, more than 217,000 jobs in Scotland are still estimated to be supported by the scheme. Given the high number of furloughed workers, the closure of CJRS could precipitate a surge in unemployment. The purpose of this paper is to explore the costs and benefits of extending the CJRS on a temporary basis through undertaking economic modelling of the impact on unemployment and employment over a three year period.

The modelling suggests that:

COVID-19: Analysis of Extending the Coronavirus Job Retention Scheme 15 page PDF, 574.3 kB