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Tue, 11 August 2020

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Rishi Sunak hopes the UK’s economic response can define its handling of the coronavirus crisis

Rishi Sunak hopes the UK’s economic response can define its handling of the coronavirus crisis

Rishi Sunak leaving No 11 Downing St today

4 min read

“We will not be defined by this crisis, but by our response to it.”

In this neat summation, Rishi Sunak laid bare the challenge facing not only the country, but his party, too. 

The actions of the Government in the coming months and years, and the steps that have already been taken in response to the coronavirus crisis, could define the outcome of the next election. Most pertinently, of course, decisions by ministers continue to affect the lives and wellbeing of the people of the United Kingdom. 

Sunak is cognisant of this, and of the consequences large scale unemployment could bring. Whereas Norman Lamont once said unemployment was “the price that we have had to pay to get inflation down”, his successor asserted at his summer statement: “I will never accept unemployment as an unavoidable outcome.”

With the UK suffering the third highest death toll from Covid-19, Sunak’s chancellorship has been a rare source of commendation in a government that has routinely been under fire. The furlough scheme has helped sustain nine million workers and protected businesses during an unprecedented period of crisis.

But the Treasury’s generosity inevitably will lead to tough decisions. Still to this day, we do not know how Sunak plans to replenish the deluge of cash currently being doled out to prop-up the UK’s economy. His beacon of light remains undimmed, but it can only be so long before this is challenged.

Sunak has clearly gambled that some of the more painstaking decisions can wait

While the major decisions on recouping government spending are pushed back, perhaps until the Autumn Budget later this year, the chancellor used his summer statement to set out his three-pronged plan for stimulating jobs. In doing so, he put more flesh on the fledgling Rooseveltian ‘New Deal’ first outlined by the prime minister last week. 

The most significant announcement related to the furlough scheme, which is due to end in October. In an attempt to stave off a wave of redundancies, Sunak said that companies would receive £1,000 for every staff member brought back from furlough retained until January. “If you stand by your workers, we will stand by you,” he said. The scheme, he added, could cost up to £9bn. 

Overall, the measures unveiled by Sunak this lunchtime could carry a £30bn price tag. They were broken into three categories; supporting, creating and protecting jobs.

SUPPORTING

Many of the major policies in this category were trailed overnight. There was the new £2bn kickstart scheme, where the Government will cover 100% of the National Minimum Wage for 25 hours a week for six-month work placements; £111m investment in traineeships for young people, with businesses receiving £1,000 per trainee; and plans to double the number of work coaches in job centres.

CREATION

In another major announcement, Sunak confirmed that he would temporarily remove stamp duty until the end of March 2021 on homes worth up to £500,000. Along with a number of infrastructure projects, he said 5,000 jobs would be supported in green industries as part of a new £40m Green Jobs Challenge Fund. 

PROTECTION

In the third and final section, the chancellor concentrated on the hospitality and tourism sectors, which have been ravaged by the spread of Covid-19. In two new eye-catching measures, he said VAT on food, accommodation and attractions would be slashed from 20% to 5% until the start of the year, amounting to a £4bn “catalyst” for the industries.

From August, in what Sunak said was a first for the UK, the Government will introduce a “eat out to help out” scheme, offering customers a discount worth up to £10 per head if they dine out from Monday to Wednesday.

Anneliese Dodds, the shadow chancellor, argued Sunak had put off the tough choices. “Today, Britain should have had a back to work budget. But instead, we got this summer statement, with many of the big decisions put off until later,” she said.

Sunak has clearly gambled that some of the more painstaking decisions can wait and that, after months of lockdown, Britons would struggle to stomach much by way of sobering fiscal measures. 

His focus is on seeking to stimulate the economy back into health, and borrowing at a time of low interest rates for Britain to “build, build, build” its way out of trouble.

Sunak has bought himself time to work out the grand plan for getting the UK out of the economic doldrums. 

The Government’s preparedness for a pandemic and handling of it from a health perspective has come in for severe scrutiny. Sunak hopes the UK’s economic response can instead help to define how Britain handled a period of unprecedented challenge.

“Governments, much less people, rarely get to choose the moments that define them,” he said. “What choice there is, comes in how we respond.”

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Coronavirus Economy
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