I just watched the statement by Chancellor Rishi Sunak. He made some good rhetorical points which I pick out here:
He said the Government is “doing what is right” and is focused on job protection and creation. We are in the “second phase of our economic response to the virus”. The economy has contracted by 25% and we face significant job losses. But with the furlough scheme winding down to October, the measures are:
- A job retention bonus of £1,000 for each person who comes back from furlough (if all 9 million return, a cost of £9 billion).
- A new “Kickstart” scheme will pay employers for 16-24 year old staff for 6 months.
- Funding for new apprenticeship and trainee schemes
- £1 billion for the DWP to provide more support.
The Government is also investing in infrastructure to create jobs including £2 billion in green investment – for example in grants to improve the energy efficiency of homes. To improve confidence in the housing market, stamp duty is being cut temporarily as from today.
As our economy relies on “social consumption” (cafes, restaurants, etc.), there will be a cut in VAT from 20% to 5% on that sector for the next 6 months – at a cost of £4 billion. In addition, for August you will be able to eat out at a discount of 50% on Mondays to Wednesdays, funded by the Government. The Chancellor concluded with the phrase “Eat out to help out”.
There was a weak response from Shadow Chancellor, Anneliese Dodds who focused on the medical responses to the epidemic rather than the Chancellor’s statement.
Comment: It looks like the Chancellor wants us to put on even more weight by eating out. Encouraging folks to eat out may improve their “feel good” factor but this is a very temporary gesture. As regards the job protection and creation measures, these may help some people but will they really boost the economy?
The hospitality sector, and companies in it, will clearly benefit from these measures, and it might encourage people to eat out. But I fear that many people like me will be reluctant to take the risk until it is clear that the epidemic has really disappeared.
The encouragement for people to return to work and the clear intention not to extend the furlough scheme is surely a sound policy as otherwise it would be too expensive while people would get out of the habit of working.
In summary I would suggest these policies may assist, but what really matters to improve the economy and employment is more confidence that the epidemic is fading away, and that will take time.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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