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Thursday9 July 2020

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Mass unemployment fears despite Sunak’s ‘plan for jobs’

Larry Elliott Heather Stewart

Rishi Sunak was warned last night that he would need to act far more decisively to prevent mass unem-ployment this autumn after unveiling a £30bn mini-budget designed to tempt nervous consumers out of their Covid-19 hibernation.

The chancellor announced a short-term VAT cut for hospitality and tourism and an August “eat out to help out” discount scheme as the govern-ment sought to send out a message to the public that it was now safe to leave their homes and enjoy themselves.

Stressing that the country faced hardship ahead, the chancellor also announced measures to revive the dormant housing market with a nine-month stamp duty holiday – raising the threshold in England and Northern Ireland to £500,000 – as well as creat-ing subsidised jobs for young people and providing targeted support for the sectors hardest hit by the lockdown.

The chancellor was hailed by Conservative MPs as he offered a £10-a-head “eat out to help out” dis-count on restaurant meals and a cut in VAT from 20% to 5% for hospitality and tourism – including accommodation and meals.

But economic experts, trades unions and the Labour party questioned whether his “plan for jobs” had done enough to tackle the looming crisis and

criticised the decision to phase out the furlough scheme in October.

Sunak said extending the wage sup-port programme, which is covering the pay of 9.4 million furloughed work-ers, would provide people with false hope. Instead of providing continued state fi nancing of 80% of wages up to a monthly maximum of £2,500, he told fi rms they would receive a £1,000 bonus for every furloughed worker taken on until January next year.

Len McCluskey, general secretary of the Unite union, said: “Redundancy notices are already flying around like confetti, so today was the day we needed the chancellor to put a stop to this with policies as bold and as necessary as the jobs retention scheme (JRS).

“This statement failed that test. With no modification to the JRS, that dreaded October cliff -edge for businesses and workers has now been set in stone. Our fear is that the sum-mer jobs loss tsunami we have been pleading with the government to avoid will now surely only gather pace.”

The Organisation for Economic Cooperation and Development (OECD), a Paris-based thinktank, warned this week that the number of unemployed people in Britain could soar to almost 15% of the working pop-ulation, from 3.9% currently, if the country experiences a second wave of the coronavirus pandemic.

Garry Young, deputy director of the National Institute of Economic and Social Research , warned: “The new measures look to be badly timed and could precipitate a rapid increase in unemployment. The incentives off ered to employers look too small. Many employers have been topping up the pay of furloughed workers and are expected to bear more of the cost of the scheme from next month. They will be reluctant to do this now they know that the scheme won’t be extended.”

The Institute for Fiscal Studies thinktank said the money earmarked in yesterday’s statement brought the total government support to £190bn since the start of the crisis. Borrowing in the current 2020-21 fi nan-cial year was likely to exceed 4

• Stamp duty holiday introduced to revive idle property market

• VAT reduced to 5% to off er respite to tourism and hospitality sectors

• Critics warn measures not enough to prevent ‘tsunami’ of job losses

▲ Rishi Sunak was widely praised by Tory MPs yesterday, but faced accusations of having a casual approach to the risks of Covid-19 after being fi lmed serving customers at a Wagamama without a mask PHOTOGRAPH: SIMON WALKER/HM TREASURY