TWO things in dramatically short supply amid the human tragedy that is the coronavirus pandemic and the huge economic fall-out from it are certainty and confidence.
Of course, in this context, the two things are closely related.
The exasperated reaction of the Scottish hospitality sector to sweeping restrictions brought in this month by First Minister Nicola Sturgeon and the storm over the local lockdown in Manchester highlight the huge uncertainties businesses and households are having to navigate, and will continue to face.
In the context of the Manchester dispute, fuelled to a significant degree by the specific restrictions now enforced but even more by lack of UK Government support for those affected by the measures, Labour mayor of Greater Manchester Andy Burnham’s declaration that Chancellor Rishi Sunak was “the problem” struck a chord.
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Mr Burnham has called for a return to the support offered by the original coronavirus job retention scheme, through which the UK taxpayer funded 80 per cent of the wages and salaries of furloughed workers up to £2,500 a month.
In an interview with the New Statesman magazine, he also described Mr Sunak’s Eat Out to Help Out scheme, which subsidised dining to boost the hospitality sector back in August, as “poor judgement”.
He noted that money could have gone into funding the furlough scheme.
What has become ever clearer amid the grim resurgence of coronavirus cases, and the need to reimpose tighter restrictions in the effort to save lives, is that the disruption to households and businesses is going to be very protracted.
However, the high probability of such a scenario should have been clear from the outset. While everyone was hoping against hope that there would not be a second wave of coronavirus in the UK and other countries, history suggested there would. And it has always looked as if the timing of a return to normality will be dictated in large part by how the lengthy search for a vaccine goes.
It looks as if, in terms of government support measures, the likes of Germany and France have been and remain far better prepared for what is transpiring than the UK.
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There will inevitably be debate about the nature and extent of restrictions put in place to tackle the second wave in Scotland and throughout the UK. And we have this week seen legal action launched in Scotland by hospitality industry bodies against restrictions imposed on the licensed trade. The challenges faced by hospitality businesses, many of which have invested heavily in safety measures, are huge and lamentable. However, the big underlying problem remains the lack of joined-up, long-term thinking from Mr Sunak and Prime Minister Boris Johnson.
The messages from the UK Government through late spring and summer seemed to demonstrate a lack of a long-term and patient perspective on this crisis, and this is sadly being reflected in policy-making.
We had the initial lockdown and then declarations from Mr Johnson during the summer, subsequently reversed as the second wave emerged, that it was time for people to be getting back into their offices.
The furlough scheme was just what was needed when the UK went into lockdown in the spring.
However, it was not long before the Conservatives appeared to become impatient to remove their own programme, one which was playing a huge part in curtailing mass unemployment.
Tapering of support began from the start of August, with companies which could in many cases not afford to do so given the sectors in which they operate asked to make major contributions. Unsurprisingly, job losses racked up ahead of this point, and the labour market outlook now looks utterly grim.
Mr Sunak consistently refused to extend the furlough scheme beyond October 31.
Instead, he offered a £1,000 per post job retention bonus for firms which took furloughed workers back on and employed them through to the end of January. A woefully inadequate measure but one which he spent a lot of time trumpeting, as if it amounted to a king’s ransom.
Then he came up last month with his plan for the job support scheme, effective from November 1. This was initially going to support the incomes of employees who could work at least one-third of their normal hours, with major contributions required from employers and far less state funding. Parallels were drawn between this and Germany’s very successful Kurzarbeit (short-time working) scheme but the support programmes are not the same at all. And, crucially, the German scheme provides support for workers whose hours have been reduced to zero as a result of the economic fall-out from the coronavirus pandemic. Mr Sunak moved yesterday to reduce employer contributions to the new job support scheme, and allow staff working at least 20% of their normal hours, rather than a minimum of 33%, to be eligible. While these are steps in the right direction, they do not solve the problem.
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This problem of support running out for UK employees unable to work any hours was obvious from the minute the Chancellor announced the job support scheme would replace the job retention programme.
Then Mr Sunak, on October 9, extended the job support scheme “to support businesses across the UK required to close their premises due to coronavirus restrictions”.
It was announced the UK Government would pay two-thirds of employees’ salaries up to £2,100 a month to “protect jobs over the coming months”.
And cash grants for businesses required to close in local lockdowns were increased to up to £3,000 per month.
Support for two-thirds of salary is obviously far, far better than nothing, and this measure was welcome.
But the loss of income will still create huge challenges for people affected, with many of them having already faced a grim financial squeeze.
It has appeared that Mr Sunak has had to do U-turn after U-turn as he has moved to unwind support and then had to put it back in place.
Mr Sunak said on October 9: “I have always said that we will do whatever is necessary to protect jobs and livelihoods as the situation evolves.”
However, it does not look as if the UK Government is doing “whatever is necessary”. In any case, households and businesses need a far, far greater degree of certainty about what the medium-term support will be in various scenarios.
The already-yawning gaps in UK Government support will increase hugely when the coronavirus job retention scheme comes to an end later this month, even with the various watered-down programmes being put in place.
The coronavirus job retention scheme was meant to support viable jobs. Many jobs that it has supported will be viable in the medium term, but there will be no work for these employees right now given the nature of the pandemic and associated restrictions. Sectors so affected are easy to see, and include the likes of overseas travel, taking in airlines, ground-handling and travel agents, and crucially tourism businesses and the broader hospitality sector. These are just a few examples.
Mr Sunak’s U-turns do not address this issue. This means that the supply side of the economy will be damaged to a far greater extent than it needs to be, and that the consequent further surge in unemployment will weigh heavily on aggregate demand.
Major names in the Scottish hospitality sector this week launched a new “Save Our Jobs” campaign calling for “urgent support from Westminster and Holyrood to safeguard up to 100,000 jobs” before the UK Government furlough scheme ends on October 31. Those behind the campaign include Michelin star chef Tom Kitchin, Nic Wood of pub and bar group Signature, James Thomson of Prestonfield and The Witchery in Edinburgh, Crerar Hotels, and Edinburgh-based Carina Contini.
They are highlighting a real and urgent issue, given the impending end of the furlough scheme.
Among other yawning gaps in Mr Sunak’s measures, what about businesses and their employees in the supply chains of those firms which have to close because of local lockdowns?
While much of the anger of the Scottish hospitality sector over the latest restrictions has been directed at Holyrood, it is Westminster which actually has the money to provide the major support that should continue to be given to households and businesses affected by the fall-out from the coronavirus pandemic. While the Scottish Government moved earlier with its restrictions, we are now seeing sweeping measures south of the Border.
It is the Conservative Government which has the real tax-raising powers over citizens in all nations and regions of the UK, including Scotland. What tax powers the Scottish Government has are small. The Conservatives have at times given the impression that they are spending their own money, rather than that of taxpayers throughout the UK including in Scotland, on the coronavirus crisis support.
It is clearly up to the UK Government to provide the support required, not to leave the likes of devolved administrations or Greater Manchester facing crises because lockdowns are necessary but the proper mechanisms to fund them are not in place.
For those who talk about the expense, much of the economy has reopened so the cost of furlough support has naturally declined dramatically anyway. And many furloughed workers have sadly already been laid off by companies which have sometimes, although clearly not in many other cases, seemed in a rush to get back to cost-cutting habits.
And people should also consider the longer-term benefits of saving jobs and businesses, such as limiting the surge in unemployment, boosting consumer spending and value-added tax revenues, bringing in income tax from supported workers, and saving over the long term on health and social care costs.
Since the initial launch of a furlough scheme in the spring which was fit for purpose, what we have seen from Messrs Johnson and Sunak has looked like policy-making on the hoof. It is therefore no surprise that huge rows are erupting every time there are major new restrictions or local lockdowns.
It is a very difficult and fast-moving situation. But the UK Government needs to get its act together, and put in place adequate support for businesses and workers to cover the many, many more months during which we will have to tackle this pandemic.
It needs to take a joined-up, long-term, grown-up, non-ideological perspective. And from the point of view of providing certainty and bolstering very weak confidence among households and businesses, it must do so fast.
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