RISHI Sunak may only have been Chancellor for five months but he is already a crisis veteran. Having already splashed out hundreds of billions of pounds worth of support (£281.5 billion since March 11), his latest summer statement added a further £30 billion.
Phase one of his response was about protection via blanket support for the economy. Significantly, phase two is more targeted support and focussed on jobs. And the third phase is rebuilding.
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Bonus - the Job Retention Scheme (JRS) and Self-Employment Income Support Scheme (SEISS) provided a safety net for millions of workers, but will expire at the end of October. To cushion the blow, the Chancellor unveiled the Job Retention Bonus (JRB) where employers who retain furloughed staff up until the end of next January will receive £1,000. Some 212,000 workers availed of the JRS in Northern Ireland. So in theory, if all of the those workers returned to their jobs that would equate to £212m. That isn’t going to happen. But if you assume around two-thirds of employees return that would still provide a £140m injection into the local economy in early 2021.
VAT cut & vouchers - Some sectors cannot wait until 2021, particularly the hospitality and events sectors. They have borne the brunt of the lockdown and social distancing restrictions. A temporary six-month reduction in VAT on food, accommodation and attractions from 20 per cent to five per cent will provide a much needed shot in the arm for the industry. The Eat Out to Help Out scheme provides another added incentive to coax people out of their houses into local eateries during August.
Kickstart - The younger generation always bears the brunt of any recession. To this end it is encouraging that a range of support has been offered to limit the potential scarring from youth unemployment. Employers will be paid for taking on trainees or apprenticeships. Meanwhile a Kickstart Scheme targeting 16-24 year olds will provide employment opportunities and the National Living Wage for six months. In Northern Ireland the Stormont Executive will take forward this vital area of the economic recovery.
Come back in the autumn – Some people may have been underwhelmed that the Chancellor didn’t provide more support (for more sectors or further incentives such as raising National Insurance Contribution thresholds for employers). The UK economy has exited intensive care but its recovery remains highly uncertain and requires active monitoring. Today provided more medicine to address short-term problems and the patient will be reviewed again in the autumn. We can expect a more extensive set of measures in the autumn budget.
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If we have learnt anything in this crisis, it is don’t underestimate Rishi Sunak’s determination to do ‘whatever it takes’ if and when it is required. That thought is worth remembering when considering the state of the public finances.
The Chancellor has reminded us that “over the medium-term, we must, and we will, put our public finances back on a sustainable footing”.
On that front, ‘doing whatever it takes’ will be much more unpopular, because phase four - higher taxation - may not be that far away.
Richard Ramsey (richard.ramsey@ulsterbankcm.com) is Northern Ireland chief economist at Ulster Bank
