Has the furlough scheme removed the incentive to work?

Before the government announced its Covid-19 economic safeguarding scheme to pay up to £2,500 a month to ‘furloughed’ or rested employees – the ‘Coronavirus Job Retention Scheme’ – a number of business owners and managers talked to me about their creative ideas to continue operating and trading on a different model after lockdown.

But as soon as they were told that they could in effect shut down and still pay something to their staff with government subsidies, they gave up on those imaginative routes to operating and went into hibernation. For example, the PM in a press-conference before he became ill, tried to encourage pubs, cafes and restaurants to convert into home delivery services. A few did. Most didn’t.

The point is that any new welfare programme – even in a period of acute crisis – has to take account of the CBA factor, and the furlough programme may not have been weighted enough toward encouraging economic activity.