The first eye-catching announcement was the novel idea that anybody who eats out from Monday to Wednesday in August will receive 50% off their bill up to a maximum of £10.
Sunak called it “eat out to help out”, but the soundbite disguised a serious problem: after months of being told of the dangers of Covid-19, many consumers are now extremely wary of going out to cafes and bars even though restrictions are now being relaxed. The expected rush to the pub after last week’s reopening in England failed to materialise.
The same thinking applies to Sunak’s second important proposal: the decision to cut VAT for businesses in the hospitality and tourism sectors from 20% to 5% until March. Again, the plan is to provide an incentive for households to go out and spend rather than save over the coming months.
Given that the chancellor has made the VAT cut time limited, there is a risk that spending will fall sharply when prices go back up next spring. This, though, is a gamble Sunak thinks is worth taking. The hope is that the economy will be through the worst by early 2021 and that the hospitality and leisure sectors will be able to cope by then.