Beyond COvid: The Digest

Summer Fiscal Event

July 13, 2020
SUMMARY

The Chancellor's "summer economic statement" delivered on Wednesday (8th July) outlined the next steps the UK government will take to help the economy as the country comes gradually out of lockdown. This week’s “Focus” analyses the proposed plans and related criticisms around incentives for businesses, workers, and hospitality, including the Green Homes Grant and a package to support cultural activities and training.

This week's "In Brief" section features pieces on how radical proposals can help stimulate the economy and the labour market through a four-day week and a relaunch of local and greener economies, and how a care-led economy, attention to SMEs’ digitalisation, and a larger rescue package can more adequately support the “Build Back Better” scheme.

Our "Reflections" this week include how a greener package would boost economy and employment, as well as a sharp analysis of “recessionals” as the most vulnerable category in the post-Covid-19 international labour market.

Focus: summer economic statement

  • The Chancellor’s “summer economic statement” on July 8 announced a package of interventions aimed at allaying fears of impending and unprecedented unemployment as we enter the second phase of the government’s economic response.
  • ~~Total discretionary spending was increased by £30bn, bringing the additional spending this year to over £190bn.      
  • Whilst the Coronavirus Job Retention Scheme has protected 9.3m jobs in 1.1m companies so far, Shadow Chancellor Annaliese Dodds expressed fears that the policy has simply delayed mass unemployment until the scheme ends in October. The IPPR has argued that 1 in 10 employees could be out of work by the end of 2021.
  • According to the Institute of Fiscal Studies, under-25s are about two and half times as likely to work in a sector that is currently shut down, such as hospitality.
  • The Resolution Foundation found that one-third of 18-24-year-old employees (excluding students) have lost jobs or been furloughed, compared to one-in-six prime-age adults 35% of non-full-time student 18-24-year-old employees are earning less than they did prior to the outbreak, compared to 23% of 25-49-year-olds.
  • The Nuffield Foundation found that 600,000 18-24 year olds are forecast to be pushed out of work this year.
  • Headline announcements include the £1,000 Jobs Retention Bonus for firms who bring back furloughed workers and keep them employed until January, worth up to £9bn.
  • ~~The bonus has been strongly criticised as not providing be a sufficient incentive for businesses to retain workers under conditions of financial distress, making it  only a ‘halfway house reform’.
  • ~~In a highly unusual move, the top civil service at HM Revenue and Customs refused to sign off the measure without ministerial direction, claiming that there was insufficient evidence for its use.
  • The ‘Kickstart’ scheme where the government covers the cost of 25 hours of wages per week at the National Minimum Wage
  • This will include grants to employers for additional training and to hire apprentices.
  • Eat Out to Help Out’ voucher scheme to give all consumers 50% (up to £10 per head) off all dining meals in August (Monday-Wednesday), where participating businesses will be reimbursed by the government within 5 working days, at an expected cost of £500m.
  • ~~This has also been criticised after it was revealed that HMRC's Permanent Secretary had expressed serious concerns about the scheme's effectiveness, again refusing to sign it off without ministerial direction.
  • ~~The sector was also targeted with a temporary and sector-specific VAT cut (from 20%-5%) for hospitality firms until March 2021.
  • Other measures include temporarily raising the threshold for stamp duty from £125,000 to £500,000, a move strongly supported by free-market think tanks, but criticised by some in the property sector as potentially distorting decision-making by homebuyers.
  • The £3bn of "green investment" included the pre-announced £2bn Green Homes Grant, where homeowners and landlords apply for vouchers between £5-£10k (depending upon income) to retrofit their homes; £1bn to improve the energy efficiency of public sector buildings; and £50m to ‘pilot the right approach to decarbonise social housing’.
  • Other measures include the pre-announced £1.57 support package for museums, galleries, theatres and other attractions, and an extra £1bn funding for the DWP to double the amount of work coaches at Job Centres and improve the provision of its training.
From recovery to reform: rebuilding local economies after covid-19

Our most recent Beyond Covid webinar saw Greater Manchester Metro Mayor Andy Burnham, Sarah Longland from IPPR North, and Neil McInroy from the Centre for Local Economic Strategies discussing the critical role of local and regional governments in implementing strategies to build back better after the crisis.

In brief

Reflections

View more
Public sector pay freeze
November 24, 2020
Read
The political economy of a vaccine
November 18, 2020
Read
What does a Biden victory mean for the environment?
November 10, 2020
Read
Lockdown
November 3, 2020
Read