Rishi Sunak latest massive mini-Budget ‘bailout’
Rishi Sunak vows to take ‘difficult decisions’ on tax amid mounting Tory unrest over £350bn government borrowing – as he admits jobs WILL be lost despite latest massive coronavirus bailout and pleads with Britons to ‘relearn’ the habits of eating out Rishi Sunak today vowed to take ‘difficult decisions’ on tax as he admitted jobs will be lost despite his latest massive mini-Budget ‘bailout’.
With Tory unrest rising about public debt, the Chancellor admitted the government was borrowing an ‘extraordinary’ amount of money and gave a stark message that action will be needed later to return the finances to a ‘sustainable footing’. But in a round of interviews, Mr Sunak insisted it was ‘right’ to pump money into the economy now, dismissing claims the latest £30billion package is poorly targeted. He said a £1,000 bonus for businesses who bring back staff from furlough will make a ‘big difference’, despite criticism it will benefit many business that are back up and running anyway.
Mr Sunak begged Britons to ‘relearn’ the habits of eating out and shopping as lockdown eases, saying their willingness to do so will decide how fast the UK recovers from a ‘very significant recession’. But he cautioned that jobs will be lost regardless of the interventions. ‘Is unemployment going to rise, are people going to lose their jobs? Yes,’ he said. Pressed on the prospect of tax rises, Mr Sunak said: ‘Over the medium term the right thing for the economy will be to have sustainable and strong public finances. Of course I will make the decisions that are required, difficult though they may be, in order to return to that place.’
He insisted: ‘The cost of not acting in this way would be far greater in the long term.’
Mr Sunak made another extraordinary bid to revive the economy yesterday by pledging to subsidise meals out, hand £9billion in ‘bonuses’ to firms who bring back furloughed staff, and cuts to VAT and stamp duty – but hinted at a tax and spend reckoning to come.
At a crucial moment in the coronavirus crisis, the Chancellor admitted that ‘hardship lies ahead’ but he was ditching ‘dogma’ to ‘do what is right’ with a £30billion package – on top of the staggering £280billion already splashed out – as the country ‘opens up’ from lockdown.
In an unprecedented move, he said the government will fund up to 50 per cent of people’s meals out at struggling restaurants from Monday to Wednesday, to a maximum of £10 per head.
Every business that brings back one of the 9million furloughed employees on a decent wage and keeps them on the books until January will also get £1,000.
VAT is being slashed from 20 per cent to 5 per cent for the hospitality industry until January in another huge intervention – and stamp duty is being axed on all homes worth up to £500,000 until March.
There is also a £2billion ‘kickstarter’ scheme to pay wages for young people, and huge subsidies are being offered to insulate and make 650,000 homes more environmentally friendly. But although the steps have been broadly welcomed by the hospitality sector, there have been warnings that Doubts have also been raised about how effective the expensive jobs guarantees will prove and whether a stamp duty cut will merely ‘front load’ activity. Asked today if everyone who has been furloughed will go back to work, Mr Sunak said: ‘No. I’ve been very clear that we are not going to be able to protect every single job and it would be wrong of me to pretend otherwise. ‘There are going to be difficult times ahead and… there are forecasts for people predicting significant levels of unemployment. That weighs very heavily on me.’
Mr Sunak admitted there would be some ‘dead weight’ of wasted public spending from the bonus scheme for businesses who bring back fuloughed workers. He said ‘there has been dead weight in all of the interventions we have put in place’. ‘Throughout this crisis I’ve had decisions to make and whether to act in a broad way at scale and at speed or to act in a more targeted and nuanced way,’ Mr Sunak said. ‘In an ideal world, you’re absolutely right, you would minimise that dead weight and do everything in incredibly targeted fashion.
‘The problem is the severity of what was happening to our economy, the scale of what was happening, and indeed the speed that it was happening at demanded a different response.’ he said: ‘We’ve moved through the acute phase of the crisis where large swathes of the economy were closed. ‘We’re now fortunately able to safely reopen parts of our economy, that’s the most important thing that we can do to get things going. ‘But we won’t know the exact shape of that recovery for a little while – how will people respond to the new freedoms of being able to go out and about again. ‘We have to rediscover behaviours that we’ve essentially unlearned over the last few months. ‘But unless activity returns to normal, those jobs are at risk of going which is why we acted in the way that we did.’
Business leaders and economists today gave a mixed response to the £30billion of giveaways.
Harvard professor Jason Furman, who was previously President Obama’s chief economist, said the Chancellor would be better off ‘throwing Pounds into the English Channel’ than paying for people’s meals out.
While Charlie Mullins, the founder of Pimlico Plumbers, blasted Mr Sunak’s £1,000-a-head bribe to stop bosses sacking furloughed workers.
He said: ‘I don’t like the idea of paying employers £1,000 to take them off furlough – I think you’ve either got a job for them, or you haven’t, and you either want them back or you don’t, I just don’t feel that’s the way to do it with furlough’.
‘I just feel it’s the wrong approach and certain employers will take advantage’, adding that he fears some bosses will sack staff in February after grabbing the cash in January’.
But Laura Tenison, founder of JoJo Maman Bébé, welcomed Mr Sunak’s £10 off meals plans.
She said: ‘The best thing for me is that lunch time meal deal because what we desperate to get people out of their houses with whatever PPE that wish to wear and come into our stores. Our stores are in often in country towns in areas where people live. We can pay all our staff if consumers start buying from us again. Gettuing people out and encouraging them was the kind Pizza Hut 2for1 deal being taken on by the Government is a clever idea’.
However, Mr Sunak made clear the largesse cannot continue much longer amid growing Tory anxiety about the scale of the debt being racked up by the government. There are warnings that if interest rates rise even modestly servicing the £2trillion-plus debt pile could cost more than the defence and education budgets put together. Including loans and other guarantees, the government has now committed over £310billion, while the Bank of England has also expanded its quantitative easing programme – effectively printing more money – by £300billion this year.