Rishi to the rescue, but who's picking up the tab?

24 September 2020, 21:59

Questions remain over who will pay Rishi Sunak's bill
Questions remain over who will pay Rishi Sunak's bill. Picture: PA Images
Ewan Quayle

By Ewan Quayle

Questions are being raised about how Rishi Sunak will pay for his latest bid to save Britain from a winter jobs crisis.

Estimates suggest the new measures, including subsidised wages and cuts to VAT, will cost the Treasury around £300 million each month per 1 million people who take up the scheme - but it remains unclear who will pick up the tab in future.

The Chancellor on Thursday unveiled his new scheme to avoid catastrophic job losses ahead of Christmas, aimed at keeping workers in their jobs on full pay while only working a third of their normal hours.

Under the Job Support Scheme, businesses and the Government will jointly pay two thirds of the wages of people in so-called 'viable jobs' who are working fewer hours due to the pandemic.

Read more: Questions remain over whether Rishi Sunak's measures are enough

Read more: Many on furlough likely to lose jobs, IFS warns

Mr Sunak also extended a 15% cut to VAT for hospitality and tourism business until the end of March 2021, with employers given the option of repaying their bills over 11 repayments without interest.

In a statement on Thursday afternoon, Mr Sunak told the House of Commons: "Our economy is now likely to undergo a more permanent adjustment.

"The sources of our economic growth and the kinds of jobs we create will adapt and evolve to the new normal."And our plan needs to adapt and evolve in response.

"Above all, we need to face up to the trade offs and hard choices coronavirus presents and there has been no harder choice than to end the furlough scheme."

The Chancellor was criticised after the announcement by some for not going far enough, including Institute for Fiscal Studies director Paul Johnson, who posted online: "This is a v big change from furlough. Less generous. Only open to those who are working a third of normal hours.

"Understandable given need to adapt as economy changes. Can't pay all wages forever. But a lot on furlough now likely to lose their job."

At a press conference later in Downing Street, Mr Sunak outlined the tough economic choices that Britain will face in the years, possible decades, to come.

"Over time and as the economy recovers we absolutely need to have an eye on our public finances and to make sure that we are in a strong and sustainable position."

He said decisions taken by previous chancellors had put the public finances in a position to allow him to act.

"That's what enabled me to react in this particular way, it reminds us of the importance of repairing public finances, having a strong economy, so that when problems like this come along you can throw a lot at them," he added.

Read more: Self-employed say Rishi Sunak's winter economy plan offers 'no help at all'

"But I will obviously have to make similar difficult decisions in the future as we get on a path back to sustainability, but right now the priority is supporting the economy, throwing everything we have got at protecting people's jobs and that's what I will continue to do."

Politicians have been keen to reject a possible return to austerity - significant cuts to public spending - a divisive policy used most extensively by former Prime Minister David Cameron and then Chancellor George Osborne throughout much of the 2010s.

Other options include tax hikes for the richest, a reversal of cuts to corporation tax seen in recent years or a flat tax hike that would hit every taxpayer.

There are also questions about just how many will benefit from the support package, with critics suggesting many thousands of people will not be eligible as their jobs are not deemed 'viable' under the scheme.

After the announcement, many business owners, part-time staff and creatives expressed concern that the new measures would not help them and instead wanted the furlough scheme to be extended into next year.

Nikki Collier from Binis Babies boutique in Halstead, told LBC "nothing the chancellor announced today has helped" and at this rate she "won’t be there at Christmas" and might lose her house.

"I'm more worried now than I was in March," she said."None of what he said, is actually bears any resemblance to my small business.

"I'm not in the job retention scheme. I'm not VAT registered to so having any delay to paying VAT back or reducing it or whatever mechanism is in place doesn't relate to me, the loan extension doesn't relate to me or to a small business.

"Because at the moment, I am unlikely to be here at Christmas, which means that if I have no money coming in I cannot pay my mortgage, I lose my house.

"I'm single, I don't have anybody else to support me, and I am more worried now than I was in March."

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