The vacation program has now cost £ 30 billion – but an early termination in October will cost 1.2 million jobs, the think tank warns
- Around 9.5 million people from 1.2 million employers remain on the vacation program
- Research Center warns that ending the vacation program in October will cost 1.2 million jobs
- The National Institute for Economic Research suggests that it should take until June 2021
The cost of the government's vacation program has exceeded £ 30 billion this week, but will not prevent unemployment from rising above 10 percent, a leading think tank warned.
The early termination of the program in October is a mistake and will cost 1.2 million jobs, according to a report by the National Institute for Economic and Social Research (NIESR).
It has warned that unemployment will continue to rise to over three million without renewal by the end of the year – the highest level since 1993.
If Chancellor Rishi Sunak extends the program to next year, it will reduce the damage from protecting 1.2 million jobs and the policy would pay for itself, the report said.
Rishi Sunak, who arrived at a cabinet meeting last week, was warned that ending the vacation program "prematurely" in October could cost more than a million people their jobs
The taxpayer would get the money back from income tax revenue, value added tax from expenses and lower entitlements to unemployment benefits.
Around 9.5 million roles have been supported by the vacation program, but it will be phased out next month and completely removed at the end of October.
Mr Sunak has already been criticized for offering a vacation bonus for jobs – a gain of £ 1,000 for businesses for every employee they take back – that costs the Treasury up to £ 9.5bn.
Experts said the measure would likely not make much of a difference in most companies' layoffs, given that companies pay an average of £ 6,360 in wages over the three months of the system.
NIESR said extending the vacation program until June next year would be roughly the same cost – about £ 10 billion – and would be more effective in saving jobs.
Canary Wharf, usually full of commuters, was left yesterday as workers continue to vacation or log in from home
Garry Young, deputy director of NIESR, Britain's oldest economic research institute, said: “The planned closure of the holiday seems to be a mistake, motivated by the understandable desire to limit spending.
"The Chancellor intended the program as a bridge through the crisis and there is a risk that it will be ended prematurely, which increases the likelihood of economic scars."
The Treasury said yesterday that the cost of the vacation program rose to £ 31.7 billion as 9.5 million employees of 1.2 million employers stayed on vacation.
The number was £ 1.9 billion higher than the £ 29.8 billion reported on July 21.
By reducing the system, the government will move from 80 percent of wages to an upper limit of £ 2,500 to 60 percent to an upper limit of £ 1,875 by October.
Vacation has left train terminals like Waterloo Station as companies are waiting to get people back to work
Employers are expected to increase wages and make other contributions as part of the changes.
Treasury Secretary Steve Barclay ruled out an extension yesterday.
He said: "We don't think it is right for people to be out of the job market for a very long time."
The changes have already been partially blamed for a round of job losses.
The UK's largest companies announced more than 205,000 layoffs this week. Survey data show that almost a quarter of small UK businesses have cut jobs in recent months.
More than 2.5 million households have applied for universal loans since mid-March, and the number of workers paying taxes decreased by 649,000 between March and June.
The economy is still fluctuating from a 25 percent drop in economic output at the beginning of the blockade, and many sectors are slow to recover due to social disengagement.
The NIESR report predicts that UK GDP will decrease by ten percent in 2020 before rising by six percent in 2021.
In this scenario, the British economic level would only be seen again in late 2019 in the second half of 2023.
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