Six months ago no one would have foreseen this level of state intervention in the economy, especially from a supposedly free-market Conservative government.
Yet the state had already pumped over £150bn into mitigating this unprecedented recession before Chancellor Rishi Sunak pledged £30bn more in his one-off summer budget, which was clearly focused on sustaining jobs and getting consumers spending again.
The measures include:
- A £1,000 job retention bonus payment for each worker that a company brings back from furlough
- A temporary 15 per cent VAT cut for pubs, restaurants and hotels, as well as a government-funded discount on eating out on Mondays to Wednesdays during August
- Suspending stamp duty on home purchases under £500,000 until March 2021
- A “kickstart” programme for government-subsidised work placements for up to 300,000 16-24 year olds - the state will meet the costs of up to 25 hours of wages a week at the National Minimum Wage
- Additional money for new apprenticeships - over the next six months companies will receive a £2,000 payment for each apprentice taken on
- Extra funding for the Department for Work and Pensions to provide work coaches and additional training resources for job leavers
- A swath of green measures including £1bn put aside to fund grants to improve energy efficiency within public bodies
The reaction from industry has been mixed, with many questioning whether the latest measures will be enough to prevent the wide-scale job losses further predicted as a result of the coronavirus pandemic - a point Sunak himself acknowledges, apologising to the BBC for not being able to help everyone.
Of course it’s likely that with time the government will provide greater detail of its future plans, but there are still many questions left to answer.
Which furloughed staff can you claim for?
The treasury will need to provide employers with more detail about who they can claim for, says Rustom Tata, chairman of law firm DHM Stallard. Currently it is not clear whether an employer can only claim for employees who have been on continuous furlough until the end of October, or whether those who have previously been dismissed but then re-engaged will also be covered by the bonus.
Regardless, he admits it still may not save jobs. “A one-off payment of £1,000 to keep someone employed until the end of January might seem largely inconsequential for most employers considering whether or not to go ahead with substantial redundancies,” says Tata.
Will companies have enough time to prepare?
VAT tax cuts have the potential to raise significant admin issues, for which businesses will need time to prepare.
“In the past, lack of preparation led to disaster," says Alison Horner, indirect tax partner at MHA MacIntyre Hudson. “The UK experimented with a VAT cut in response to the 2008 financial crisis which caused chaos for retailers. Some supermarkets were assured by HMRC that altering their prices would take only a few hours, but instead, they spent over a week in a crisis mode.
“The chancellor was probably right to pick Wednesday 15 July as the date to introduce the cut; it hopefully gives business just long enough to sort this out,” adds Horner.
What about support for other sectors?
The pandemic’s economic impact varies widely between sectors, leading some to question whether the government’s broad-stroke approach is sufficiently strong in the areas it is most needed.
“The chancellor should have announced targeted support for the hardest-hit sectors like manufacturing and aviation. Struggling businesses will need more than a one-off job retention bonus to survive and save jobs in the long-term,” says Frances O’Grady, general secretary of the Trades Union Congress.
Will there actually be jobs available in the future to support?
“The chancellor's three-point jobs plan assumes that once the furlough funding stops, jobs will still be available,” says Chris Locke, Europe CEO of innovation consultancy Rainmaking. “That won’t be the case. We know this from previous apprenticeship schemes - businesses take them on until the end of the course, or funding, and then let them go.”
James Reed, chairman of recruitment firm REED sees the chancellor’s plans as a positive step, but warns that employers will need to be given greater clarity in order to protect workers. He advocates reforming national insurance and developing smarter “less process-driven employment law”.
“Businesses are also desperately needing clarity as to when office workers could return to their workplace… no one wants to see jobs, jobs, jobs, turn into dole, dole, dole.”
How much more help will be needed (and how will we pay for it?)
Sunak reiterated to BBC Radio 4’s Martha Carney that having a system where jobs are subsidised by the government is “unsustainable and unfair” to the workers sitting on jobs no longer needed. The Office of Budget Responsibility (which tracks government spending) estimates the total cost of keeping the economy afloat will top £300bn for the 2020-2021 financial year.
That raises again the other thorny question of how to pay for the increasingly vast mountain of debt. In the same interview, Sunak refused to confirm or rule out the possibility of future tax increases. The coming months and the autumn statement will likely reveal more answers.
Image credit: TOLGA AKMEN / Contributor via Getty images