With the latest new rules imposed by the Government – from 10pm curfews for bars and restaurants, to the stipulation that they can now only offer table service – it’s clear that the economic toll on the hospitality industry is going to be astronomical. And so, the question everyone’s asking is: what will Rishi Sunak do next?
For months Labour has put pressure on the Chancellor to extend his furlough scheme (which is due to end on October 31) – a proposal which he has repeatedly rejected. But the calls have become even louder since Andrew Bailey, Governor of the Bank of England, called for him to have a “rethink”, despite previously supporting the scheme being brought to a close.
The Confederation of British Industry (CBI), too, has pleaded with Sunak to take action, warning that there could be millions of job losses coming from firms in city centres and in the hospitality sector. Carolyn Fairbairn, its director-general, said it was “desperately urgent” to have a successor to the furlough scheme”, and that whatever it was “need[ed] to be brought in within days or weeks.” CBI has suggested a subsidy scheme, and by all indications this is what Chancellor is contemplating.
Indeed, The Guardian reports that Sunak is weighing-up a German-style wage scheme, having previously considered extending the availability of state-backed loans. As I have written for ConservativeHome before, there are several subsidised schemes which he could take inspiration from, another being France’s.
The German system – titled the Kurzabeit job subsidy – is different from the UK’s furlough scheme in that it encourages employees back to the workplace, albeit on reduced hours. Businesses then pay employees for the hours they’re needed, and the government subsidises any wages lost from (around 60 to 80 per cent) their typical hours.
The key advantage of the scheme is its flexibility, as it allows companies to adapt to increases, or decreases, in demand for their business; something that is greatly needed, given how difficult it is to predict the virus, and the subsequent actions the Government takes. It has also been suggested that the Treasury is considering a plan in which workers undertake education or training while they are away from their work – something that could tie in with Sunak’s investment in traineeships.
While the furlough scheme has no doubt been extremely expensive for the taxpayer, it’s clear that the latest set of measures could prove even more financially crippling in the long-term – wiping out large numbers of businesses. Moreover, hospitality closures are only going to exacerbate youth unemployment, which has already been one of the worst impacts of this crisis; a problem that will become even more troublesome given that many of these individuals will be required in the future to pay off the Covid-19 debt.
Whatever Sunak does, one thing is for certain: it will have to be in the next few days, as the CBI’s director-general points out. Not least because, along with the introduction of curfews tomorrow, next week many businesses are likely to announce job cuts in accordance with the furlough scheme (employers intending to make fewer than 100 redundancies need to run a 30-day consultation). In PMQs today, Johnson promised Britain would go “forward with further creative and imaginative schemes to keep [the] economy moving.” Let’s hope we see this imagination fast.