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Sunak refuses to rule out tax increases and urges Britons to spend HMRC chief: impossible to judge if UK recovery plan is value for money
(about 2 hours later)
Chancellor warns of more job losses unless country embraces post-lockdown freedoms Permanent secretary wrote to chancellor warning he could not vouch for ‘efficiency’ of plans to boost economy
Rishi Sunak has repeatedly refused to rule out future tax rises to pay for record public spending during the coronavirus pandemic as he warned that more jobs would be lost unless Britons embraced post-lockdown freedoms. HMRC’s permanent secretary, Jim Harra, warned the chancellor it was impossible to judge whether his £1,000-a-worker “job retention bonus”, or his “eat out to help out” meal discount represent good value for taxpayers’ money, it has emerged.
The chancellor said it was “too early to speculate” when asked whether the government was planning to increase taxes to pay for the unprecedented public borrowing behind the coronavirus response. Harra took the relatively rare step of writing to the chancellor this week, in two separate letters, to request a formal “ministerial direction” to go ahead with each scheme – though he said there was “sound policy rationale” for both.
Sunak said the £30bn extra spending announced in his mini-budget on Wednesday was intended to make the economic recovery as strong as possible but that it depended on whether Britons were willing to go out and spend. The letters, and Sunak’s replies, were published by the government on Thursday.
Sunak’s job retention bonus will hand employers £1,000 for every furloughed worker who is still on the payroll in January, and could cost £9bn, according to the Treasury.
Harra warned that as the principal accounting officer of the department funding it, he could not vouch for the scheme’s “efficiency” – because it would be unclear how many additional jobs would be safeguarded.
“It has proved difficult to establish a counterfactual for this scheme, which depends on the overall cost of the scheme and the number of extra jobs it would protect both of which are currently highly uncertain. That uncertainty also applies to the efficiency of the measure,” he said.
In his reply, Sunak said there were “clearly compelling reasons to justify the introduction of this scheme”, claiming it would “play a vital role in supporting employers to bring their furloughed staff back to work”.
Similarly, on the “eat out to help out” discount, Harra warned that the baseline for the scheme – to judge whether or not it has worked – “depends on the future demand for eating out in the absence of this scheme, which is currently highly uncertain”.
He stressed it was “entirely appropriate” for the chancellor to make his own judgment, given the severity and fast-moving nature of the downturn.
The letters emerged as Labour questioned whether the job retention bonus in particular was well targeted.
The shadow chief secretary to the Treasury, Bridget Phillipson, seized on Sunak’s admission that there would be some “dead weight loss” in the £9bn scheme – meaning it would be banked by employers who would have brought staff back onto the payroll anyway.
In interviews on Thursday, Sunak said this dead weight was necessary to act at the scale and speed required even though it presented “some degree of moral hazard … in an ideal world we wouldn’t be doing those things”.
But Phillipson said: “The government have had months to prepare for the end of lockdown and design targeted support to protect jobs - but instead we have an on-the-hoof fix that the chancellor himself admits risks wasting billions of pounds of taxpayer money.
“Hard-pressed sectors where thousands of jobs are at risk, like aviation, oil and gas, and tourism, will be missing out on the help they need while companies who are returning to normal get public money they don’t.”
She added: “It’s not brave to admit the government plans to waste billions at a time when others are crying out for support.”
Experts have questioned whether Sunak’s “plan for jobs” has done enough to tackle the looming unemployment crisis.
The Resolution Foundation thinktank pointed out that recent surveys suggested eight out of nine furloughed workers were set to keep their jobs anyway; while £1000-a-head might be too modest a sum to protect many jobs. Its chief executive, Torsten Bell, called it, “poorly targeted at those jobs that are most at risk of being lost”.
In a series of broadcast appearances on Thursday after delivering his summer statement, the chancellor repeatedly refused to rule out future tax rises to pay for record public spending during the coronavirus pandemic.
Sunak said it was “too early to speculate” when asked whether the government was planning to increase taxes to pay for the unprecedented public borrowing behind the coronavirus response.
He said the extra spending announced in his mini-budget on Wednesday was intended to make the economic recovery as strong as possible but that it depended on whether Britons were willing to go out and spend.
“We’ve moved through the acute phase of the crisis where large swathes of the economy were closed. We’re now fortunately able to safely reopen parts of our economy, that’s the most important thing that we can do to get things going,” he told Sky News.“We’ve moved through the acute phase of the crisis where large swathes of the economy were closed. We’re now fortunately able to safely reopen parts of our economy, that’s the most important thing that we can do to get things going,” he told Sky News.
“But we won’t know the exact shape of that recovery for a little while – how will people respond to the new freedoms of being able to go out and about again. We have to rediscover behaviours that we’ve essentially unlearned over the last few months.“But we won’t know the exact shape of that recovery for a little while – how will people respond to the new freedoms of being able to go out and about again. We have to rediscover behaviours that we’ve essentially unlearned over the last few months.
“Unless activity returns to normal, those jobs are at risk of going, which is why we acted in the way that we did.”“Unless activity returns to normal, those jobs are at risk of going, which is why we acted in the way that we did.”
The chancellor said he was “not going to write future budgets now” when pressed on how the government would pay for the record borrowing behind the measures announced on Wednesday.The chancellor said he was “not going to write future budgets now” when pressed on how the government would pay for the record borrowing behind the measures announced on Wednesday.
Sunak said the cost of not taking this action would be far greater but that such high borrowing was not sustainable and in the medium term ministers would “return our public finances to a sustainable position”.Sunak said the cost of not taking this action would be far greater but that such high borrowing was not sustainable and in the medium term ministers would “return our public finances to a sustainable position”.
He said: “It’s difficult now to get exactly the right trajectory of that because we have an uncertain path ahead but as soon as we have a clearer path about that, we can look at the situation and make sure that our public finances are back on a sustainable footing over a reasonable period of time.”He said: “It’s difficult now to get exactly the right trajectory of that because we have an uncertain path ahead but as soon as we have a clearer path about that, we can look at the situation and make sure that our public finances are back on a sustainable footing over a reasonable period of time.”
Asked by LBC Radio if there could be tax rises this year, he added: “We’ll have to return our public finances to a sustainable position over a reasonable period of time – that’s the right thing to do for the economy. Not least because, as we’ve seen, things come along and we need to have the strength to respond to them.
“I will make the decisions that are required, difficult as they may be, to do that … I’m not unafraid to make whatever difficult decisions are required.”
Economic experts, trade unions and Labour have questioned whether Sunak’s “plan for jobs” had done enough to tackle the looming crisis and criticised the decision to phase out the furlough scheme in October.
Sunak acknowledged on Thursday that some firms who had no intention to let workers go could still bank the £1,000 government bonus, leading to “dead weight” – support for employers who do not need it.
He said this dead weight was necessary to act at the scale and speed required even though it presented “some degree of moral hazard … in an ideal world we wouldn’t be doing those things”.
Anneliese Dodds, the shadow chancellor, said the government was taking a “one-size fits all” approach in its incentive scheme to persuade employers to keep on furloughed staff beyond October.
She told BBC Radio 4’s Today programme: “My major concern with the way government is proceeding now is that they’re withdrawing the job retention scheme and the self-employed scheme at the same time, right across the whole economy.
“We all know that some sectors are being much more strongly impacted than others, the chancellor’s continuing with that one-sized fits all approach, we would urge him to look again at this, we have been continuously.”
Dodds said she found it “a little peculiar” that the taxpayers’ money would be going to employers “regardless of whether their business are back operating up to full capacity or not.”
She added: “We really need to have targeted support, this is a crisis like no other where the impact is very strongly sectoral. We should have had a more sectoral approach from the chancellor.”