Rishi Sunak has a problem.
His furlough scheme, which successfully protected millions of jobs through the first lockdown, closes at the end of October.
It has been winding down since August, encouraging people to go back to work and limiting the bill to the Treasury, which currently stands at £40bn.
But a resurgence in the virus means new restrictions have been introduced, so the crisis is not over yet.
The problem is urgent. Around 10pc of business employees were still on furlough at the start of this month, according to ONS surveys, amounting to around 2.2m people.
By the end of next month their employers will either have to take them fully back on to the payroll, or make them redundant.
If coronavirus measures continued to lift, letting more staff in industries such as hospitality and leisure get back to work, then this might, just about, have been enough time to save those jobs.
As it is, new restrictions will limit demand for workers in pubs and restaurants. Venues such as sports stadiums have been forced to abandon plans for reopening even with highly limited audiences. Fresh instructions to work from home will hit businesses in towns and city centres, or those catering to workers on office parks.
Pressure is mounting to extend the Job Retention Scheme (JRS) or replace it with a new system of support. So what are the Chancellor’s options?
Sunak could look abroad for inspiration.
Ramp up benefits
One option is the US model. This involved no furlough at all, but instead beefed up unemployment benefits.
Joblessness spiked sharply, then fell back rapidly as the economy reopened. But the damage is still significant with the unemployment rate at 8.4pc in August, down from almost 15pc in April but more than double the 3.5pc low in February.
It is a model that plays to the relatively smaller state, flexible traditions of the world’s largest economy, promoting the possibility of workers moving to new jobs instead of being given a potentially false hope that their old position will still exist.
On the other hand, it would not match the UK’s actions so far in the pandemic, and could make the JRS look wasteful if the Treasury has spent heavily to retain jobs and now simply scraps the scheme.
Double down on furlough
Other nations with schemes more like Britain’s have extended their programmes.
Australia, for instance, offers a similar though less generous ‘JobKeeper’ programme, offering A$1,500 (£825) a fortnight, falling to $1,200 a month from the end of September.
This has been extended to March 2021.
Germany has a more established ‘short time work’ system, or kurzarbeit, under which workers whose hours have to be cut because of weak demand in a recession receive top-ups from the Government.
The idea is that laying off skilled workers in a downturn risks being unable to re-hire them in the recovery, wasting time, effort and skills. It also makes investment in heavy machinery less risky.
On the other hand, it might not suit the UK’s economic model, or the services industries that are currently most depressed by the anti-Covid measures.
Tony Wilson, chief executive of the Institute for Employment Studies, notes that the cash paid through Germany’s scheme flows straight to workers, so it only benefits bosses who cannot cut employees’ hours. By contrast employers in the UK’s leisure and entertainments industries can simply keep workers on shorter days.
“I am not sure a short-time working scheme is the answer at all. That would make sense where labour markets are less flexible,” he says.
“The alternative is a straight subsidy, to pay a percentage of wage costs of employees. That way, you can encourage employers to keep people at work, so you don’t end up pulling the stool away at the same time as we are shutting down parts of the economy.”