Reaction: will Rishi Sunak’s £30bn rescue package stave off summer of discontent?
Chancellor slashes stamp duty and VAT as total bill for coronavirus relief soars above annual health spend
Rishi Sunak yesterday revealed a £30bn economic aid package that will push the total bill for the government’s coronavirus relief measures to £188.7bn - far more than last year’s entire health spend.
The chancellor’s newly unveiled plan takes the cost of nursing the economy through the pandemic to a total that equates to 9.4% of GDP, The Times reports.
That spend “far exceeds other Whitehall budgets”, including the £140bn paid out for health and social care in the last financial year, the newspaper adds.
The latest key measures announced include:
- • Confirmation that the furlough scheme will end in October
- • Jobs Retention Bonus of £1,000 to be paid to businesses for every furloughed employee kept on as staff until at least January 2021
- • A £2bn “kickstart scheme” to create paid six-month job placements for 16- to 24-year-olds
- • VAT cut from 20% to 5% from 13 July until 12 January 2021 for food and non-alcoholic drinks in restaurants, pubs and cafes
- • An “eat out to help out” scheme offering a 50% discount for every diner, up to £10 per person, from Monday to Wednesday during August
- • Increase in the stamp duty threshold from £125,000 to £500,000 on residential properties sold in England and Northern Ireland between 8 July 2020 and 31 March 2021.
Sunak was “unapologetic” about the spending spree, “warning MPs that more would be needed to address ‘profound economic challenges’ caused by the virus and lockdown”, says The Times.
Conservative MPs applauded the chancellor’s “bold” plan following his mini Budget on Wednesday. According to the Financial Times’ political editor George Parker, “all the talk was about whether they had just been watching the next prime minister”.
But “economic experts, trade unions and Labour questioned whether [Sunak’s] ‘plan for jobs’ had done enough to tackle the looming crisis”, with warnings that the big-spending chancellor will have to “act far more decisively to prevent mass unemployment this autumn”, The Guardian reports.
Unite union general secretary Len McCluskey said that with redundancy notices “already flying around like confetti”, the chancellor needed “to put a stop to this with policies as bold and as necessary as the Jobs Retention Scheme”.
Meanwhile, Garry Young, a deputy director of the National Institute for Economic and Social Research, said that Sunak’s newly unveiled measures “look to be badly timed and could precipitate a rapid increase in unemployment”.
“The incentives offered to employers look too small to be effective,” Young added.
The Organisation for Economic Co-operation and Development, a Paris-based think-tank, warned on Tuesday that the number of unemployed people in Britain could increase to almost 15% of the working population, from the current rate of 3.9%, if the country is hit by a second wave of coronavirus.
With the threat of a fresh surge in infections ever present, Torsten Bell, chief executive of the Resolution Foundation think tank, said that “this economic crisis is likely to be with us until a vaccine is found”. Sunak “should expect to be returning with further measures to support the economy in the autumn”, Bell predicted.
Some Tory MPs have also voiced reservations.
Sunak’s predecessor, Sajid Javid - a fiscal conservative who was ousted from 11 Downing Street by Boris Johnson - called on the chancellor “to ensure that the country was not exposed to sharply rising borrowing costs when interest rates rose”, The Times reports.
Steve Baker, former chair of the European Research Group, noted that the plans were “quite expensive”, and raised concerns about inflation. Fellow Tory MP Edward Leigh argued that “there are no long-term good subsidised jobs”, adding that “sooner or later they are subject to fraud and market distortion” .
This Tory resistance to the big-spending plans may come as no surprise, says the BBC’s political editor Laura Kussenberg, who notes that “many of the measures run against traditional Tory instincts”.
“And there isn’t a whiff of how any of it will be paid for for at least another couple of months,” she adds.