False econ­omy

Ac­tively sub­si­dis­ing ac­tiv­i­ties that weeks ago were deemed high-risk seems bizarre

The Daily Telegraph - Business - - Front Page - Ryan Bourne

‘Su­nak’s state­ment over­all elided the big­gest re­al­ity weigh­ing down the econ­omy: the virus it­self ’

We have moved from eco­nomic Phase 1 to Phase 2 of the pan­demic. That was the mes­sage from Chan­cel­lor Rishi Su­nak’s sum­mer state­ment. Gone are the days of en­forced lock­downs and re­lief for jobs and busi­nesses through the fur­lough scheme. With com­pa­nies re­open­ing, the ad­di­tional an­nounce­ment of £30bn in sup­port was jus­ti­fied to help jobs – with new govern­ment schemes to “cre­ate” them, pro­tect them and help the un­em­ployed find them.

The Chan­cel­lor spoke with ad­mirable can­dour about what this meant for work­ers. Yes, tax­payer fur­lough sup­port was ap­pro­pri­ate when the Govern­ment had or­dered work­places shut. But con­tin­u­ing fur­lough in­def­i­nitely would give peo­ple “false hope that it will al­ways be pos­si­ble to re­turn to the jobs they had be­fore”, while their skills wasted away. Su­nak was brave to say so. So the fur­lough scheme will be wound down in Oc­to­ber, as pre­vi­ously an­nounced.

But it will be re­placed with a “jobs re­ten­tion bonus” for busi­nesses, of £1,000 for any pre­vi­ously fur­loughed work­ers con­tin­u­ously em­ployed through to Jan­uary.

That is a rea­son­able com­pro­mise – eas­ing con­straints for firms with vi­able chances of main­tain­ing jobs, while not do­ing too much to sub­sidise un­vi­able ones.

Yet for all his bru­tal hon­esty on fur­lough, Su­nak’s state­ment over­all elided the big­gest re­al­ity weigh­ing down the econ­omy: the virus it­self.

Fawlty Tow­ers’ fa­mous “don’t men­tion the war” episode was tem­po­rar­ily banned from UKTV re­cently as part of the Great Awo­ken­ing. For Su­nak, the state­ment had a theme of “don’t men­tion the virus”.

Much of the Chan­cel­lor’s anal­y­sis seemed pred­i­cated on the idea our eco­nomic prob­lems stemmed from an ir­ra­tional lack of con­sumer con­fi­dence to en­gage in “so­cial spend­ing”, rather than a pathogen. Hence his new poli­cies to nudge con­sumers to get back so­cial­is­ing through a tem­po­rary VAT cut on “food, ac­com­mo­da­tion and at­trac­tions” from 20pc to 5pc, and a Mon­day to Wed­nes­day 50pc eat-in dis­count worth up to £10 per meal through Au­gust.

The Trea­sury ad­mits house­holds have been sav­ing plenty and have paid down debts. So they aren’t avoid­ing pubs, cafes and restau­rants be­cause of be­ing cash-con­strained. They are

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