THE effects of any second Covid lockdown on an already struggling public could be allayed if the Chancellor of the Exchequer were to introduce an emergency basic income.

That is the contention of a top economist as Scotland nervously waits to see if there will be a repeat of the March lockdown as early as the school mid-term holidays.

Heriot-Watt University economist Mike Danson told the Sunday National: “It would be literally the straw breaking the camel’s back for many firms in the service sector and in manufacturing, partly because of restrictions on them being able to make things, etc, but also because people’s incomes will have fallen.

“And they will fall drastically because of the end of furlough anyway and that will exaggerate unemployment and redundancies.

“And so that is a very good argument why the Chancellor at Westminster should be introducing an emergency basic income.

“That would maintain an effective demand in the economy and therefore spending power.”

Danson believes that putting money into people’s accounts would be a shot in the arm for the economy and society at large. He added: “One, they would be able to spend that money and that would keep demand up for food, clothing, household goods and so on.

“And that would keep a major part of the economy confident that it could continue to produce and have sales.

“And two. It would make sure that people who might be tempted to go out when they were symptomatic or shielding, if they were getting a basic income there would be less pressure on them to avoid the rules and go out and earn money.

“There has been a huge increase on shopping online so that the overall decline in retailing wasn’t anything like might have been expected with the lockdown.”

The economist also warned that businesses would be put under extra strain by a second lockdown and to be more proactive to help them out.

“It will be more difficult for some businesses to survive if a second lockdown came along particularly for those who have been able to hang on.

“Maybe they’ve had their rents suspended, they’ve been able to use furlough, they’ve eaten into their own savings. For many it will be the last straw.

“This would just make it so much more difficult, particularly for those in the service sectors, entertainment, food, etc.

“The Chancellor’s post-furlough plans are very muddled. It’s difficult to discern a real strategy going forward. It’s almost fire-fighting with short-term decisions being made with lots of money being put in at some points and then threatened to being withdrawn again.

“Ask any business at any time and they will say they want certainty, to reduce risk, whether it is worth investing, keeping on the workers, especially skilled workers, to order up stock.

“They need a degree of certainty to know that markets are going to be there, that they’re going to have markets that they can sell to, that they’re going to have workers that they recruit and keep and the Chancellor is not giving that confidence. And we are hearing that across the board.”

The economist’s views were echoed by the STUC who believe that Rishi Sunak’s new post-furlough arrangements are leading to increased numbers of lay-offs and redundancies.

Dave Moxham. deputy general secretary, told the Sunday National: “With the massive increase in infection rates we’re looking down the barrel of a gun.

“It doesn’t give us any pleasure in the Trade Union movement to say we told you so but we made it clear months ago the real threats associated with plans for the return to schools and higher education. And the Government is now being moved to introduce further lockdowns and we think there will be more in the weeks to come because of the public health situation.”

Moxham believes that the Chancellor’s new arrangements have already cost people jobs and fears that more will follow unless he takes a different course.

HE said: “There are reports across sections of the economy of employers deciding that they won’t use the scheme because of the 22% component of the three-quarter wage that they’re being asked to pay for workers.

“We unfortunately have a fire and hire culture across a number of sectors, not least in hospitality which the scheme has been designed specifically to support.

“Loads and loads of those workers are on zero and low-hour contracts and the information that we’re getting back is that employers will choose to fire those workers and rehire them on shorter hours rather than stump up the 22% component.

“So, not a lot of good news really in that scheme and we suspect that the Government will have to reconsider very quickly if it wants to prevent certainly across the UK hundreds of thousands of redundancies and across Scotland tens of thousands in the next month or so.”

The STUC believes that if the Government would only double its injection of cash then that would stem the loss in jobs.

Moxham added: “So the Chancellor’s scheme I think we calculated is worth abut £3.6 billion over the next six months.

“Now were he even to spend £7.2bn and move from the employer to pay that 22% component and instead for a short period of six months, the Government, the taxpayer paying that, then that scheme would become much more than twice as attractive to employers and much more useful.

“And though they look like big figures we’re talking about an increase to the taxpayer of about £100 over the next year and that wouldn’t have to be repaid immediately because it could be added to the Government’s borrowing deficit.

“And it’s actually not really a lot of money when you think about the tens of thousands of jobs across Scotland that will actually be saved.

“Then there are the tens of millions in economic activity that would be generated by workers who would still be able to spend on the economy and them not having to go onto benefit.”

Moxham thinks the UK Government should be looking for inspiration from Germany on how to redress the situation.

He said: “We would prefer the furlough scheme to continue, that would be our No 1 priority, we believe that was more effective than this mechanism.

“But if the Chancellor is stuck to his scheme he has to make it more like the German scheme where their government picks up a lot more of the slack in order for employers to maintain jobs and contracts for a six-month period.

“This German scheme has been running for ten years, since the Recession, and it does precisely what the UK Government scheme doesn’t.

“And they are a country that emerged more quickly and effectively from the last recession than any other country.

Moxham believes that we are at a critical juncture now with a second lockdown looming and issued a parting shot. The nightmare scenario here is that unemployment figures hit 10, 11, 12% from the current position of 4.6 or 4.7%.

“We think, and the Scottish Government agrees with us, that there’s an immediate threat and jobs of 60,000 can be saved in Scotland but that may be the thin end of the wedge.

“That could happen in the first period that moved from the end of the furlough to this new scheme – and we still can’t calculate for fear that it could be in the hundreds of thousands, the ultimate impact if more action isn’t taken.”