Rishi Sunak decided hospitality was worthy of special help

Chancellor Rishi Sunak was greeted with a thunderous banging of desks by Conservative MPs on Wednesday after unveiling his £30bn plan to save jobs.

Graham Brady, chair of the 1922 committee of backbench Tory MPs, urged them to cut short their effusive praise, telling Mr Sunak: “We take it as read that everyone thinks you’re brilliant.”

But Mr Sunak was brought back to reality with a bump on Thursday. Against the backdrop of more than 5,000 jobs going at John Lewis and Boots, he faced tough questions about the type of jobs he was trying to save in his coronavirus summer statement — and the way he was going about it.

The Treasury revealed that the top civil servant at HM Revenue & Customs, Jim Harra, had warned Mr Sunak that it was impossible to judge whether his £1,000-a-worker “job retention bonus” for companies and his “eat out to help out” half price meal scheme for households represented good value for money.

Mr Harra accepted there was a “sound policy rationale” for both schemes but asked Mr Sunak to provide a “ministerial direction” to proceed. The chancellor admitted that he was making policy at high speed amid the Covid-19 crisis and inevitably taking risks with taxpayers’ money.

Mr Sunak is aware that any applause for his summer statement will be short lived, admitting that he would not be able to protect “every single job” and that the UK was entering one of the worst recessions “ever seen”.

Some business lobby groups and trade unions claimed the £30bn plan, with its focus on helping the hospitality sector, was poorly targeted and not ambitious enough to stave off a massive round of job cuts when up to 9m people leave the government’s furlough scheme, which will end on October 31.

Mr Sunak cautioned against people “sitting there on furlough forever” as their skills would fade, and they could lose the opportunity to move on to a different job.

He said the government’s job retention bonus, a payment of £1,000 per worker for companies that bring back staff who have been furloughed, was a “significant reward”. It could cost £9bn if all 9m people currently on the scheme were re-employed by January.

Mr Sunak admitted some companies would claim the £1,000 even though they were already planning to keep workers on. “Without question there will be deadweight — and there has been deadweight in all of the interventions we have put in place,” he said.

But Labour’s Bridget Phillipson said hard-pressed sectors like aviation and oil and gas would not get the state support they needed while “companies who are returning to normal get public money they don’t need”.

Mr Sunak’s allies insisted the government has already provided tens of billions of pounds of support in grants, loans and the furlough scheme to help all sectors of the economy, but that the hospitality industry was a special case.

Two of the chancellor’s flagship measures, the half-price meal offer in August and a value added tax cut from 20 per cent to 5 per cent for the hospitality sector, were intended to coax people out of their homes and back into pubs and restaurants.

Mr Sunak took the view that while at least some retailers could fall back on online sales, the hospitality sector could be crippled if it failed to capitalise on at least part of the peak summer season. Consumer confidence was key.

“Hospitality was at the centre of a Venn diagram,” said one ally of the chancellor. It had been largely shut during lockdown, employs millions of young people whose life chances risk being scarred by unemployment, and is an area where work can now be increased quickly.

Although most of the key decisions for Mr Sunak’s summer statement were taken at the end of last week, the chancellor’s decision to focus on hospitality was reinforced by the sluggish return of punters to the pubs on Saturday, when the sector reopened in England.

“People were going back, but it was nowhere near back to normal,” said one government official.

Restaurant chains like Wagamama, which Mr Sunak visited on Wednesday in central London, are waiting to assess consumer confidence before reopening some of their still closed branches.

Mr Sunak rejected Labour’s suggestion of a more sectoral approach to help other industries — for example by extending the furlough scheme beyond October — on the grounds that he thinks it cannot be made to work, even if it were desirable.

Treasury officials considered a sectoral furlough scheme, but found it impossible to define an “industry”: would this include all parts of the supply chain, plus accountants and lawyers?

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But as Mr Sunak visited Worcester Bosch’s plant on Thursday, some business leaders complained the manufacturing sector was not given special help in his £30bn plan despite loud warnings in recent weeks about the potential for widespread redundancies, in what is meant to be one of Britain’s industries of the future.

Stephen Phipson, head of Make UK, the manufacturing trade body, said: “All measures should be on the table including those equivalent to actions already taken by our European competitors to protect key industries.”

Mr Sunak insisted on Wednesday he would “never accept unemployment as an unavoidable outcome”.

With the UK braced for further waves of redundancies over the coming weeks and months, the chancellor is therefore expected to use his autumn Budget to take further action to save jobs.

 

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