When the time came, Britain’s chancellor did not so much loosen the purse strings as rip the purse apart. Rishi Sunak’s commitment to pay a large portion of the wages of anyone facing redundancy was unprecedented, and necessary. Thousands of people in the UK have already lost their jobs as the economic reality of the coronavirus pandemic has hit home. The health crisis has rapidly turned into an economic and labour market emergency with little parallel. When the government closes down large parts of the economy to slow the spread of the virus, it has a duty to protect its citizens from the consequences. Now is the time to put workers first.
The chancellor’s comprehensive package, which also included cash grants to small businesses and help for renters and the jobless, will go some way to assuaging the concerns of millions of employees in the UK. Britain’s response had lagged that of several other European countries, including Denmark, Sweden and Germany.
The promise to cover the cost of 80 per cent of workers’ salaries, or up to £2,500 a month, for any employee who is furloughed rather than made redundant goes further than the pledges made by many other governments. The open-ended nature of the support — it will initially be open for three months but can be extended at any time and will be backdated to March 1 — is welcome. So, too, is the promise to provide a further £7bn of extra support through the existing welfare system.
As well as the money, people will have taken some comfort from Mr Sunak’s measured speech and his apparent understanding of the human cost of the crisis and the need for social compassion. The youthful chancellor appeared more assured than prime minister Boris Johnson.
A lot will still depend on how the measures are implemented; Mr Sunak’s promise that the first grants under the new so-called Coronavirus Jobs Retention Scheme would be paid within weeks may still come too late for many employees. Making it as easy as possible to apply for the grants will also be important.
The promise to defer £30bn of value added tax payments until the end of June will provide some breathing space. The move will help with companies’ cash flow but, given that they will still need to pay the tax later, it will not help their bottom line. The Treasury should consider offering holidays on other taxes, including corporate tax and business rates for all sectors.
What the package lacked was more generous support for Britain’s millions of self-employed and those working in the gig economy, many of them on zero-hours contracts. The offer to allow the self-employed access to universal credit at a rate equivalent to statutory sick pay — which is just £94.25 a week — does not go far enough. Norway last week guaranteed the self-employed 80 per cent of their average pay over the past three years, initially for 20 days.
Mr Sunak’s drastic intervention has, as he himself noted on Friday, no precedent in the history of the British state. For the country to recover from this crisis, companies will need to be able to rely on their workers to help the economy restart. With borrowing costs low, now is not the time to worry about the consequences of the intervention for public finances, though these are big. Estimates show that for each three months of operation, the job retention scheme alone would cost some £3.5bn for every 1m workers affected. For much of the pandemic to date, the UK government’s response has lagged that of its counterparts. With its worker support package it has heeded calls for action and set an example for others.
