Chancellor’s much-hyped measures can only tinker at the edges of our one-metre-plus world
Rishi Sunak’s latest bid to help out hospitality firms that are suffering a Covid-19 cataclysm is a headline grabber, but the Chancellor didn’t mention the elephant in the room: social distancing. VAT cuts and even August restaurant vouchers are better help than nothing. But up against the one-metre-plus world we have to live in until a vaccine is discovered, it is just an extra pair of hands pushing the Sisyphean boulder up the hill. To illustrate the point, here’s a personal example. My August holiday plans involved camping in the Lake District. But two weeks ago, an email from the campsite warned there would be no toilets and no showers; the block has to remain closed because the site doesn’t have the staff to clean them in the peak season. Against eight days of that, not even a 15pc cut in the price would persuade me to go.
So too with the “eat out to help out” initiative, where we can partially dine on Rishi’s dime at an estimated £500m tab to the Exchequer. All well and good, but capacity has been slashed
dramatically due to social distancing. Even if people overcome their nerves about going out, how will restaurants react? The risk is that diners will find that the cost of their meals has risen to reflect the state’s £10-a-head largesse as demand surges. Many eateries will be tempted to ease up on social distancing to take advantage.
A £3.8bn stamp duty cut meanwhile sounds bold, but arguably is of limited impact when many such first-time buyers were exempt on purchases up to £300,000 already. Deals may be brought forward to take advantage of the holiday by people who were already intending to move, with a resultant drop in demand next year.
‘A bolder decision would have been to cut employers’ NI contributions and raise the employment allowance’
But with just £1,500 in tax to be saved on the average purchase price of about £200,000, will that make a difference at the margin when consumer confidence around bigticket purchases is at record lows?
As for the furlough bonus, accountants say the £1,000 incentive will have a negligible effect on hiring and firing decisions and smacks more of a PR
stunt. A bolder decision would have been to cut employers’ national insurance contributions and raise the employment allowance, but the Chancellor may be keeping that in the locker for an autumn Budget potentially overshadowed by a deepening jobs crisis.
Sunak has made a habit of underpromising and over-delivering – but not yesterday. This is a Chancellor who doesn’t want to offer “false hope” to those in danger of losing their jobs.
And his dark hint over the “medium-term” fixing of the public finances – a Banquo at this “eat out to help out” feast – will worry businesses and households alike.