It is no surprise that Rishi Sunak is popular. Between April and May, the Chancellor borrowed an estimated £103.7 billion – the highest such figure since comparable records began in 1993.
Monthly public spending now dwarfs anything seen during the 2008/9 financial crisis, reflecting the growing gap between this recession and the one that brought the world economy to heel a decade ago.
After contracting a record 20.4 per cent in April, UK GDP could be up to 10 per cent smaller going into 2021 than it was at the end of 2019.
It’s therefore no surprise that the budget deficit could go as high as £300 billion this year, as per the Office for Budget Responsibility’s (OBR) April analysis.
Outlining his Plan for Jobs to the House of Commons yesterday (July 8), Chancellor Rishi Sunak looks to be pushing towards that colossal figure.
The ‘mini-budget’ was the latest in a growing number of policy interventions from a Chancellor who might have expected his first £30 billion stimulus package, announced back in March, to have been enough to get the UK through the coronavirus crisis.
A job retention and income protection scheme later, Mr Sunak has got his cheque book out again, this time with another £30 billion commitment to try and protect millions of at-risk jobs.
One of the most eye-catching policy announcements was the Job Retention Bonus – a one-off payment of £1000 to UK employers for every furloughed employee who is brought back to work and kept on through to the end of January 2021.
It is hoped this measure will incentivise companies to take back as many of the nine million furloughed employees as possible by October when the job retention scheme ends.
Also on the menu were a number of targeted initiatives to support the hospitality sector.
The Eat Out to Help Out scheme will support around 130,000 businesses by encouraging people to visit restaurants, cafés or pubs. Diners will be entitled to a 50 per cent discount of up to £10 per head in any participating eatery for the entire month of August.
This follows murmurs that the reopening of food and drink establishments on July 4 has not been met with the volume of customers anticipated, perhaps because many still fear going out in public.
Mr Sunak also announced tax cuts in the form of a VAT reduction. From July 15 to January 12 next year, food and non-alcoholic drinks, accommodation and admission to attractions will be taxed at just 5 per cent.
These measures were warmly received by NewcastleGateshead Initiative (NGI).
Chief executive Sarah Green said: “It’s great news that the Chancellor has listened to our calls for support and today announced a temporary VAT cut for the tourism and hospitality sector and a new eating out voucher scheme.
“This will provide a much needed boost for the North East’s £5 billion tourism industry and help support the 66,000 people it employs.”
With unemployment typically higher among young people during economic crises, the Chancellor also aimed a number of new measures at 16-24 year olds, many of them entering the workforce for the first time.
A £2 billion fund called the Kickstart Scheme will create hundreds of thousands of six-month work placements for youngsters who are on Universal Credit. Each job will cover 100 per cent of the National Minimum Wage for 25 hours per week.
£1.6 billion will be channelled into skills training, apprenticeships, employment support and job finding services, with £895 million dedicated to doubling the number of work coaches in Jobcentre Plus by the end of the financial year.
Meanwhile, to support the housing market, the Government is also increasing the threshold at which stamp duty is paid from £125,000 to £500,000 until March next year, alongside a £2 billion Green Homes Grant for homeowners and landlords to incentivise them to decarbonise their homes.
The Government will match this with £1.1 billion for the decarbonisation of public buildings and social housing, in line with the UK’s net-zero carbon 2050 commitment.
This is on top of the £5.6 billion infrastructure investment package announced by Prime Minister Boris Johnson a week ago.
All told, the cost of these interventions could be as high as £30 billion, depending on how many furloughed workers are kept on through to January next year.
The question on everyone’s lips is, will it be enough?
In ordinary times, a £30 billion stimulus package would be considered a lot of money, but this is no ordinary crisis.
Jonathan Walker, assistant director of policy, North East England Chamber of Commerce said: “The Chancellor’s statement contained a number of measures that will provide short-term boosts to parts of our economy, but we continue to be dismayed at the lack of detail when it comes to long-term action to ‘level up’ regions such as ours.
“It was good to see the Chancellor acknowledge how hard the impact of the pandemic has been, and will continue to be, on young people in the early stages of their working lives.
“We hope the measures are effective in enabling them to be prepared for good quality jobs but to work effectively the Kickstart scheme must not be overly bureaucratic or confusing.
“The £1000 for returnees will help some firms but we are concerned this level of funding will be insufficient to make a real difference to a business in financial difficulty.
“Getting people spending in our great hospitality and leisure businesses is essential, but when this sector remains so vulnerable to further lockdowns, we would like to see specific support to help them become as safe and resilient as possible.
“In essence, the Chancellor’s Statement is too short on long-term strategy. He promised that Government was taking these issues seriously but with business confidence extremely fragile we cannot afford to wait too long for action.”
IPPR North director, Sarah Longlands, added: “I welcome the Chancellor’s announcements particularly his focus on jobs which will be crucial for the many businesses across the North who are struggling at the current time.
“But given that we have one of the most centralised Government’s in the developed world, I fear that he has too much confidence in the power of Whitehall to deliver this plan.
“COVID-19 has shown us the real value of devolved and local authorities working hard to support their communities. The Chancellor must now commit to working in partnership with them to deliver the economic recovery.
“The Chancellor talked about the value of endurance. In the North and across the regions of England, businesses, communities and local councils have had to endure years of centralised decision making, which has seen them become poorer, sicker and with fewer job opportunities.
“Getting our economy back up and running cannot be achieved from Whitehall alone.”