The Government’s new Coronavirus plan seeks at once to help move the economy forward, through measures to open it up, while simultaneously moving society backward, through measures to close it down – at least by comparison with the status quo before the new restrictions were announced this week.
This strategy is more sensible than it may sound. The effect of the virus worldwide, social distancing and our lockdown earlier this year was to put the economy into deep freeze. Ministers want to protect the mild thaw that has taken place more recently. This means that home and leisure, rather than work and schools, bear the brunt of the latest measures.
The problem for Boris Johnson, and for all of us, is that these may not work. To cut a long story short, it will be very hard to build a firewall between work and leisure (because retail, cultural activity and the hospitality sector, for example, contain elements of both), and between schools and home (because if children get the virus, they will be sent home, which will keep many parents there – thus affecting work).
As Rishi Sunak knows only too well, this is the mutable background against which his statement yesterday was set. In public earlier this week, the Prime Minister hinted heavily at further clampdowns, saying that “we reserve the right to deploy greater fire power, with significantly greater restrictions”. In private, this site has yet to meet a Minister who isn’t expecting more curbs, and soon.
The Chancellor therefore aimed yesterday to help speed up the thaw, while understanding that Johnson may soon decide that he has no alternative but to slow it down again. So for example, the Prime Minister may decide to bring forward the closing time for pubs and restaurants from ten o’clock in the evening: Sunak fought this off before the latest package of announcements, but the idea is not dead but sleeping.
Furthermore, Johnson is giving ground to the push by Graham Brady and company to give Parliament more control of Covid-19 policy – promising in the Commons this week, for example, to empower MPs to “question the government’s scientific advisers more regularly”. How far the Prime Minister will go remains to be seen, but a new uncertainty is being added to the mix, since it’s unclear what the Commons will do with any new powers it gains.
So like his other big financial statements to date, Sunak’s statement had a strikingly provisional air. Its centrepiece was the replacement of furlough, which paid people not to work, with a German-type scheme (as floated by Charlotte Gill on this site among others), which will pay people to work – or rather will co-pay them with employers. It’s called the Jobs Support Scheme, and there’s a parallel plan for the self-employed.
The second string to the Chancellor’s bow was essentially an extension of measures that he’s already introduced – longer and looser repayment periods for Bounce Back Loans (“Pay as you Grow”), and similar action for Coronavirus Business Interruption Loans, together with further payment deferrals for VAT and self-assessed income tax returns.
The final element was to roll forward the date for VAT rates to return from five per cent to 20 per cent for the hospitality and tourist sectors. Inevitably, the specifics have come under fire, with some asking whether firms will want to pay 55 per cent of wages to staff who under the terms of the scheme could work for only 33 per cent of thei r previous hours.
But it should be recognised that the Chancellor is trying to balance no longer paying people for not working under the furlough scheme, and replacing it with alternatives that are both workable and affordable. If some think the new plan doesn’t go far enough, and that Sunak will return with more money and extensions as unemployment rises further, some believe it goes too far, asking: where will the money come from?
However, what to do if the economy continues to open up is one thing; what to do if Johnson feels he has to close it down again – for example, by shutting non-essential retail again – is another. “Our lives can no longer be put on hold,” Sunak declared yesterday, signalling to restive Conservative backbenchers that, in the Cabinet debate about what to do, he is the leading champion of opening up.
But as we point out, the Prime Minister has this week signalled something very close to the opposite: that our lives are soon likely to be put on hold again (or for some, kept on hold). Indeed, the Budget is, so to speak, on hold: it’s been cancelled, and replaced by yesterday’s pared-down package of measures. There is a questionmark over the Treasury’s plan for a three-to-four year comprehensive spending review (CSR).
That there hasn’t been a new CSR since 2015 is a sign of the scale of challenges that confront the Chancellor. Minimising tax rises and spending cuts by means of faster growth would be a daunting one for Sunak in normal conditions. And these are abnornal ones.