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The How to make good things happen series looks at successful policies from around the world that have made good things happen. In this event, we looked at a scheme that saved 11.6 million jobs during a pandemic.

What can the UK furlough scheme teach us about government agility and delivery both during and outside of a crisis?

In conversation with Nesta CEO Ravi Gurumurthy, our Chief Economist Tim Leunig talked about his experience inventing the UK furlough scheme in 2020 when Covid-19 grounded the UK economy to a halt.

Tim revealed how the furlough scheme, conceived over the course of a morning commute from Wimbledon to Westminster, was pitched, decided on, designed and delivered in less than a week.

Sparked by a hurried text from then-Chancellor Rishi Sunak to his economic adviser Tim Leunig, as the cabinet considered shutting down the economy, the policy ultimately ran for 18 months, paid the salaries of over 11 million workers at a cost of almost £70 billion, and prevented an estimated 3.25 million redundancies. It’s widely credited with preventing deep labour market scarring, and mitigating the mass migration and associated risks of viral spread of laid-off workers.

Under the scheme, businesses could furlough (temporarily suspend the employment of) staff known to the UK tax authorities and claim government support to pay up to 80% of their salaries (capped at £2,500 monthly), rather than being forced to lay people off. Although at the outset it was unknown exactly how many (and which) jobs in the economy it might save, the policy design was effectively self-limiting. Businesses reopening would have to un-furlough staff in order for them to start working again. This meant that the scheme ended ‘not with a bang but with a whimper’, following significant reductions in the number of furloughed individuals around the points when Covid-19 restrictions were eased.

The economic response to the pandemic of other governments around the world provide interesting insights into the counterfactual. For example, the US didn’t implement any kind of furlough scheme, and so estimates for the jobs the scheme saved are based on the divergence in labour market patterns between the US and UK during the pandemic.

Government risks missing the best ideas without stronger mechanisms for international learning

Despite many countries around the world having variants of a furlough scheme, it wasn’t a familiar concept within UK policymaking circles. Tim described the serendipity involved in him being aware of the German furlough scheme, having spoken just weeks earlier to colleagues in the German embassy who described it to him. ‘Rely on serendipity’ doesn’t make for a good lesson for future policy challenges, but we can create opportunities for more international learning to prompt innovation at home. Government departments dedicate very little resource to scanning for and studying international policy examples, but doing so is worthwhile; sometimes it’s better to copy good ideas rather than try to implement new ones.

Data availability is crucial in a crisis, but it shouldn't take crises to realise the value of improved data systems for public delivery

Building sophisticated data systems (collection, integration, and analysis) can be undervalued in peace-time, but gives governments more options in a crisis. The UK Government's picture of the UK labour force when the pandemic hit (built on extensive near-real-time His Majesty’s Revenue & Customs (HMRC) data about employees) meant that the furlough scheme could be designed and delivered within days. The US, which doesn't collect tax data throughout the year, didn't have up-to-date employment data to implement something like it. Similarly, HMRC only had timely data about employed individuals, meaning that the design options for a similar job retention scheme to support self-employed people were far more limited. While it can be complex, costly and politically challenging to maximise data opportunities, it can pay off both at crunch points and for business as usual.

Policy delivery is hugely important, and hugely undervalued

When trusted to do so, large delivery departments within the civil service - in this case HMRC - can move quickly too. Despite being given just half a day to make an initial assessment of deliverability before the ‘go, no-go’ decision, HMRC were described by Tim Leunig as ‘heroes’ for their creativity, flexibility, and pragmatism in stepping up to deliver the furlough scheme practically overnight.

The machinery of government has a bad reputation for exacerbating departmental siloes. But our speaker reflected that when the most important thing is to get support up and running quickly, siloes can enable quick delivery. With the current UK Government being ambitious to work more across departments to deliver missions, it's worth being precise about the enabling conditions that will need to be in place, to avoid the sacrifice of pace in service of nominal collaboration.