The U.K. Chancellor for the Exchequer Rishi Sunak yesterday unveiled a £30 billion pound summer economic package, in an attempt to help reboot the British economy during the Coronavirus pandemic. This so-called “mini-budget” includes a job retention bonus for employers after the government’s job retention scheme ends in October, a 6-month VAT cut for the hospitality industry, and a kickstart scheme for young people aged 16-24. While such a sum would normally be considered extraordinary given that is outside a formal economic statement, the announcement has been broadly criticized as being insufficient.
With the Organisation for Economic Co-operation and Development’s warning on Tuesday that the U.K.’s unemployment rate could rise from 3.9% to 15% should a second Coronavirus wave occur, further large economic interventions from the government are widely acknowledged to be necessary. Yet many experts feel this economic statement falls far short of what is truly needed.
“These new measures look to be badly timed and could precipitate a rapid increase in unemployment”, argues Gary Young, deputy director of the National Institute for Economic and Social Research. “The incentives to employers are too small”. Ryan Shorthouse, director of liberal-conservative thinktank Bright Blue, believes that this economic intervention is “unlikely” to provide a strong enough incentive for employers to retain their furloughed employees.
Perhaps the most damning critique of Sunak’s summer statement came from Labour’s Shadow Chancellor Anneliese Dodds. Instead of providing a providing £10 off for those going to eat out, she argues, the government should have prioritized putting in place an effective ‘test, track and trace system’ to persuade the public it is safe to venture out into public spaces.
This is something the government has undeniably failed to achieve. Currently cost at around £10 billion, the system is still unable to contact 25% of patients who have Coronavirus. With the biggest detriment to the U.K. economy currently being fear, it is arguably wishful thinking that Sunak’s restaurant discount can coax out millions of people still (rightfully) fearful of a deadly virus.
This is merely one aspect of an economic stimulus package that, although well-intentioned, is dwarfed by the economic problems it is seeking to remedy. Labour has argued that the job retention bonus, currently promising to pay £1000 to employers for each furloughed employee they retain until January, should be targeted more specifically at the hospitality, culture, and other sectors that are most affected by measures implemented to tackle coronavirus, such as social distancing.
These handouts are merely likely to benefit employers who were already planning to retain furloughed employees. The ‘green homes grant’ tells a similarly hollow story. Promising to pay £5000 for every household to install insulation to improve energy efficiency is undoubtedly a positive step. Nevertheless, far more wide-reaching measures – such as massive green infrastructure projects – are likely to be needed to effectively contribute to the decarbonization of the British economy and to stimulate mass job creation.
What the Chancellor has called a government “unencumbered by dogma” can also be said to be one that has been unpredictable in its response to the Coronavirus pandemic – often dangerously so. While it took a campaign launched by a premier league footballer to persuade the government to pay £120 million for free meals for children from low-income families over the summer, the chancellor offered 4 times that for people to eat out in August.
While offering £4 billion for homeowners and buyers, Sunak has provided nothing for renters. The same is true for the self-employed and countless other sectors of the U.K. economy. This statement, then, can be seen as a symptom of this government’s inconsistency, and its desire to rely on the superficial – rather than the substantial – to persuade the population it governs of its competency.
Some hope can be taken from Sunak’s promise that this package “is simply the next step, not the last step”. Indeed, the steps needed to restart, renew, and rebuild the U.K. economy are much greater than the one this government has just announced. It remains to be seen whether these steps will ever amount to the new, green deal this country desperately needs for the uncertain years and decades that lie ahead.