We need a Budget for jobs
Boris has produced the roadmap out of lockdown and now we are about to see its mirror image for the economy when rishi sunak presents his Budget this week. There are three stages to the economic response to Covid-19: emergency support, getting back to work and payback time.
A year on, we are still stuck in stage one. some crisis loan schemes are being scaled back. There are also indications that parts of the economy which can adapt to lockdowns have learned to do so.
Auto-engine production came to a near standstill in the first lockdown but now runs at almost 70pc capacity.
There are sectors where this is not possible. Non-food retail and hospitality are stuck in the deep freeze and 4.5m workers remain reliant on furlough. We are a long way from an economy strong enough to contemplate stage Three and payback.
The economy is far too fragile for the Chancellor
to start raising taxes to tackle the £2trillion-plus debt mountain. shifting to stage Two will be hard but cannot be put off for much longer. Furlough has been hugely expensive and created a false sense of security. it risks marooning people in jobs that would not be viable without state support.
The Chancellor needs to start the transition to a post-pandemic economy, where we learn to live and work alongside Covid-19.
it means a focus on jobs: keeping them where possible, changing them if necessary, and creating them wherever we can. There will be measures building on the Plan for Jobs, as sunak branded his quasi-Budget in the summer, including doubling the cash incentives for firms taking on an apprentice, £126m of new money for 40,000 new traineeships and a new flexi-job apprenticeship scheme. His ‘Kickstart’ scheme, launched last summer to incentivise firms to offer jobs to 16-24-year-olds, has generated 120,000 placements. it is due to end in December but could be extended.
CuTTiNg employer’s National insurance Contributions or raising the threshold where they become payable would be an incentive to hire new staff. The British Chambers of Commerce suggests a temporary increase in the threshold for employer NiCs from £8,788 to £12,500 for at least 12 months after furlough ends. green initiatives such as making batteries for electric vehicles should be pushed harder. Big electric van users would love to use uK-made vehicles and it would be fantastic for jobs. But we currently lack the battery production to make it realistic.
As for raising the rate of corporation tax, it would be bad for employment as it discourages investment and sends out negative signals to potential overseas investors.
The virus should prompt some wider thinking about employment taxes. The current system is predicated on an old-style model where most people worked in offices, shops or factories on defined hours and formal contracts. it needs to adapt for the gig economy and for working from home.
if WFH becomes the norm, there will be a lower tax take. salaries of staff working at home tend to dwindle, and there will be less spending in the office supply chain, on sandwiches, suits and the like. That will need to be addressed at some stage.
For now, the priority is jobs and growth. The uK has the chance to forge ahead in the recovery thanks to the speed of our vaccine rollout. rishi needs to seize the opportunity and help Britain back to work.