‘£500m extra’ to help Wales recover from Covid-19 crisis
FIRMS which have furloughed staff will be given a £1,000 bonus to keep workers in jobs, diners will get a discount to support pubs, cafés and restaurants and the Welsh Government will receive £500m in extra funding from the Treasury, the UK Government said yesterday.
Chancellor Rishi Sunak, unveiling his summer statement in the House of Commons, set out the next steps aimed at securing an economic recovery from the coronavirus pandemic’s impact.
He warned that “hardship lies ahead” but insisted that no-one will be left “without hope” as he announced measures in a “plan for jobs” which included:
■ An “eat out to help out” plan for dining out in August to boost the hospitality sector, with a 50% discount per head from Monday to Wednesday up to a maximum discount of £10 per diner.
■ VAT on food, accommodation and attractions being cut from 20% to 5% from July 15 until January 12, a tax cut worth up to a total of £4bn.
The furlough scheme winds down in October, and Mr Sunak is acting in an attempt to avoid widespread redundancies as state support is withdrawn.
“While we can’t protect every job, one of the most important things we can do to prevent unemployment is to get as many people as possible
from furlough back to their jobs,” he said.
Under the Jobs Retention Bonus, firms will be paid £1,000 for each employee they bring back from furlough and continuously employ through to January on an average of at least £520 a month.
“We’ll pay the bonus for all furloughed employees,” he said.
“So if employers bring back all nine million people who have been on furlough, this would be a £9bn policy to retain people in work.
“Our message to business is clear: if you stand by your workers, we will stand by you.”
Addressing MPs, Mr Sunak said his plan would help protect livelihoods after the economy contracted by 25% in just two months.
He said: “We have taken decisive action to protect our economy. But people are anxious about losing their jobs, about unemployment rising. We’re not just going to accept this. People need to know we will do all we can to give everyone the opportunity of good and secure work. People need to know that although hardship lies ahead, noone will be left without hope.”
Mr Sunak also announced a £2bn “Kickstart” scheme of taxpayerfunded work placements for 16- to 24-year-olds on Universal Credit and at risk of long-term unemployment. The Chancellor’s statement comes after warnings from the Organisation for Economic Cooperation and Development (OECD) that the UK’s unemployment rate could soar to 14.8%, with job losses comparable to the 1930s.
Mr Sunak said the Office for Budget Responsibility and Bank of England are both projecting “significant job losses”.
That was “the most urgent challenge we now face” but “I will never accept unemployment as an unavoidable outcome”, Mr Sunak said.
The statement also confirmed an additional £500m of Covid-19 funding for the Welsh Government through the Barnett formula.
The UK Government said it is now providing £2.8bn through the Barnett formula to help the Welsh Government support individuals, businesses and public services through Covid-19.
Mr Sunak said the plan for jobs was the second phase of a threephase plan to secure the UK’s economic recovery from coronavirus.
The first phase, beginning in March, focused on protection with a £160bn package of support – one of the largest and most comprehensive economic responses in the world. The UK Government said that in Wales this package has so far protected more than 316,000 jobs, helped thousands of businesses and paid £273m to more than 100,000 self-employed people.
The Chancellor outlined that following the second phase focusing on jobs, there would come a third phase focusing on rebuilding, with a Budget and Spending Review due in the autumn.
Secretary of State for Wales Simon Hart said: “The Chancellor’s package of measures delivers for Wales and will rebuild and refocus our economy as we bounce back from the coronavirus pandemic.
“Our priority remains firmly on levelling up the nations and regions of the UK, safeguarding people’s livelihoods and delivering prosperity. The opportunities we are creating and the new routes into employment are great news for young people in Wales, while VAT cut for tourism and hospitality will be a huge boost for that sector. It is now absolutely essential that Wales’ worldclass tourism and hospitality industry can properly open for business.
“This has been an exceptionally challenging time for everyone in the UK. We have supported Wales throughout, and our decisions will mean the devolved government will also receive an extra £500m bringing their additional Covid-19 support funding to £2.8bn.”
A Welsh Government spokesman said: “We await full clarity on what this announcement means for Wales but we do know that it did not pull the macro levers needed to support the recovery. It ignored the joint calls from devolved nations to ease the rigid fiscal rules that limit our response and made only a passing reference to public services.
“We do, however, welcome the Kickstart Scheme, which clearly mirrors the Jobs Growth Wales programme we’ve offered to support 19,000 young people in Wales.”
Shadow chancellor Anneliese Dodds welcomed the support for the economy but stressed that more needs to be done to control the virus.
“The best the government can do
to boost demand is to give consumers and workers the confidence and psychological security that they can go out to work, to shop, and to socialise in safety,” she said.
CBI director-general Dame Carolyn Fairbairn said the Chancellor had been right to prioritise jobs but said more immediate support for firms is required.
“Many viable firms are facing maximum jeopardy right now,” she said. “The job retention bonus will help firms protect jobs.
“But with nearly 70% of firms running low on cash, and three in four reporting lack of demand, more immediate direct support for firms, from grants to further business rates relief, is still urgently needed.”
The potential £30bn of extra spending comes on top of almost £160bn already committed to dealing with the coronavirus emergency, a figure far higher than previously estimated, and there is little indication of how Mr Sunak intends to pay for it.
Institute for Fiscal Studies deputy director Carl Emmerson said the measures are likely to push the deficit further above £300bn “which would be easily the highest as a share of national income since the Second World War”.
“What matters more for the public finances will be the extent to which the economy manages to bounce back strongly,” he said. “If, as is likely, the economy does not fully recover then future fiscal events are likely to involve a less pleasant set of announcements over the extent to which taxes need to rise to restore the health of the public finances.”