Major business groups and unions have warned Alistair Darling to heed calls for a programme to subsidise short-time working when he unveils the Budget next week.
The British Chambers of Commerce, Federation of Small Businesses, and Trades Union Congress are among industry groups that have launched a joint campaign for such a programme, although Darling is reportedly poised to resist the calls.
Under the proposal put to the chancellor, the government would compensate workers for lost earnings on a short-term basis where they agree to fewer working hours and less pay, with any free time created used for training. Such a scheme would echo those implemented historically in the UK and currently in place in Europe.
However, it is thought that the Treasury is concerned that this would support jobs that would ultimately be lost anyway, and also subsidise salaries of staff who would not actually be made redundant. Government sources said ministers could not see a way in which the scheme would be free from abuse by financially solvent companies.
But the groups campaigning for the subsidy say that measures could be incorporated to overcome "concerns about deadweight costs" and ensure support only went to businesses that genuinely needed it.
The TUC and other groups said: "Such a scheme would be vital to keeping workers in employment and would help viable businesses survive during the global downturn."
The Engineering Employers Federation and think-tank and consultancy The Work Foundation also backed the call for short-time compensation. In a joint letter to the Government on Wednesday, the groups called for a scheme that built on existing best practice in Europe.
In Germany, state support for short-time working is available for 18 months from the date of application, and may be extended to two years if unemployment continues to rise. A similar scheme, ProAct, is under way in Wales.
Speaking to the Daily Telegraph, John Wright, national chairman of the Federation of Small Businesses, said there were often extensive costs to small businesses in making skilled workers redundant.
Mr Wright said that many such workers were likely to be lost to their area of expertise when the economy finally returned to good health. "We cannot afford to lose these skills," he told the newspaper.
The Government would ultimately pay a substantial cost in unemployment benefits for people put out of work in any case, he said. "Obviously placing someone on the dole is going to cost them a lot more money."
Mr Wright added that the cost of starting a new business was "five times" what it would cost to nurse the same business through recession.
© Crimson Business Ltd. 2009