As far as it’s possible to say such things in the harrowing circumstances in which we find ourselves, Rishi Sunak has had a good crisis. It has been telling that Labour have struggled to land any meaningful blows on the Government over its economic response.
The initial policy response was phase one: freeze the economy during lockdown and try to prop up incomes and employment until we are through the worst of the pandemic. Phase two will be the recovery stage as we try to get back to work as fast as possible before lasting damage is done to the economy. But the transition from phase one to phase two is not an easy flick of a switch.
The measures announced in the Chancellor’s ‘Plan for Jobs’ should be seen as the first careful steps along the difficult tightrope between the lockdown stage of the crisis and the recovery stage. The economic outlook for the rest of this year is incredibly uncertain, and ministers are acutely aware of the risks of a second wave of the virus. The Government is doing a good job with an impossibly difficult balancing act, but the Chancellor will know he needs to be vigilant and carefully monitor developments.
While some of the announcements are welcome, more will almost certainly need to be done in the coming months, and potentially much more radical and substantial action is hopefully on the table for the Budget if the outlook takes a turn for the worse. Indeed, the small print of the document released with the announcements confirms that further measures on support for the long-term unemployed are already planned but yet to be announced.
In particular, there was a lack of action on new jobs. The £1,000 Job Retention Bonus for bringing staff back from furlough is intended to save jobs which could become viable again in the long-term but are at risk of being lost when the furlough scheme is wound down. It could help with that, but the policy is a huge chunk of the overall package (roughly a third of the £30bn) and the lack of targeting means the vast majority of that money will be ‘dead weight’ – paying firms which were going to bring workers back anyway. More importantly, it only helps save existing jobs.
The Chancellor rightly listed ‘job creation’ in his three-point plan for jobs. He talked about bringing forward infrastructure spending and money for a Green Homes Grant as ways to create jobs, both things that the Centre for Policy Studies called for recently in a paper written with former Chancellor Sajid Javid. In the circumstances these are sensible ways to reduce unemployment in the short term while also helping with long-term policy objectives for levelling up and net-zero emissions. But state-led schemes like this are not what the economy needs in the long term.
More needs to be done to ensure the private sector is creating new jobs quickly and adapting to the post-virus world. In that same paper we set out ideas for reducing the cost of hiring through temporary cuts to employer’s National Insurance, as well as measures to encourage investment and make it easier and cheaper for firms to adapt their premises. If things have not picked up markedly by the autumn, these are the sorts of measures which will need to be considered for the Budget.
The cut to Stamp Duty Land Tax is hugely welcome, and in fact raising the threshold to £500,000 is precisely what we called for in a Centre for Policy Studies paper last year. Pretty much every economist agrees it is a terrible way of raising money as it clogs up the market. The cut is only temporary, however, and the main benefit may be to simply shift transactions forward to support the sector through a difficult period. Making the change permanent would be welcome.
It is reassuring that the idea that was floating around for a £500 voucher for everyone in the country to spend in shops and restaurants did not make it into the package. I am still sceptical of the discount for meals out which was announced instead, but it is sensible that it has been restricted to Monday-Wednesday. Many venues might be finding it frustrating that they cannot cater for the demand on Fridays and Saturdays while social distancing limits capacity, so shifting some of that excess demand to quieter times makes sense.
Perhaps the most welcome part of the package was the large increase in funding for employment support services. The importance of this kind of support for job matching is often underestimated – employers and jobseekers do not have perfect information. The Department for Work and Pensions has been a quiet success story these past few months and will have a huge job on its hands if job losses are as catastrophic as some are predicting. Rishi Sunak obviously recognises the vital role that DWP, Jobcentre Plus and other sources of employment support will play. The other side of the coin is ensuring there are as many good jobs being created as possible for them to help people into.
Overall, this Plan for Jobs was not a Budget and should not be judged as one. Much is left to do, but the Chancellor has done a good job of signalling that he is up to the task and appreciates the scale of the challenges ahead. As he himself acknowledged in his speech, “our Plan for Jobs will not be the last action – it is merely the next – in our fight to recover and rebuild after coronavirus”. That fight could yet prove to be tougher than many expected.
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