And Soon You're Spending Real Money ...
Rishi Sunak is now the most popular Chancellor of the Exchequer, since Gordon Brown, apparently. With over 9 million on the payroll and more supported by unemployment pay, the social media modelled Chancellor, is now tipped for the top job, if Boris Johnson slips up.
This week, the Chancellor announced his "Plan for Jobs in 2020". How the government will boost job creation in the UK and more importantly, stop the cash being splashed, on the extremely expensive furlough scheme.
The scheme is due to end in October. The Prime Minister has warned, it is a scheme which cannot go on forever. When it ends, the government fears a wave of redundancies, just before Christmas. Hence, the "Plan for Jobs". The plan includes a VAT cut for the hospitality sector, "eat out to help out" vouchers for families, a cut in stamp duty, a new job retention scheme, a grant for green home spending, plus bonuses for apprenticeships and youth work placement.
Together the schemes will cost a further £30 billion pounds, on top of the £120 billion of special measures already in place. Tucked away in the small print, the Treasury glossed over a further £33 billion of spending on the NHS, including £15 billion to be spent on PPE and £10 billion on "test and trace".
£30 billion here, £30 billion there, and soon you are spending real money. According to the IFS, government spending in the current financial year will be a staggering £350 billion. The deficit will push towards 20% of GDP before too long. But is the money all well spent?
The VAT cut is described as manna from heaven by the hospitality sector. At a cost of £4 billion, the cut may well be extended into Easter next year. The Stamp Duty cut is welcomed by the housing sector. Buyers will save an average £5,000 per transaction.
A boost to the green economy always welcome, a stimulus to apprenticeships and youth employment always a valiant effort. The voucher scheme, to boost the restaurant trade, comes at a time when most people are still uncomfortable about eating out. Jenny Harries, the Deputy Chief Medical Officer is uncomfortable when they do.
People should reduce the risk of dying, by slimming down and losing weight, the main medical message. The scheme is expected to cost about £500 million pounds. Chump change, crumbs from the Treasury table, in the grand scheme of things.
The main criticism is of the job retention scheme. Businesses who bring back workers from furlough will be paid a £1000 bonus per employee if they remain in work into next year. If all furloughed employees are brought back into work, this could cost the Treasury £9 billion.
Companies will receive the bonus, even if employees have already returned to work. Many will return to work with or without the scheme. For those set to lose their jobs, the bonus will be of little value. Economists call this a "dead weight scheme".
HMRC are unimpressed. Jim Harra, Chief Executive, in a written letter to the Chancellor, reports "I am unable to reach a view, this represents value for money, to the standards expected, by the "Managing Public Money" guidelines.
The scheme must have focus grouped well, especially among the Tory back benches. The money would have been better spent on extending the furlough scheme, to the end of the year, in sectors like hospitality, which have been badly hit.
The Chancellor explained there is more to be announced in the Autumn Statement ... time enough to let the markets run and measure the return to work momentum in an economy badly damaged by shut down. Time then to ensure further spending plans represent value for money to the standards expected. The Chancellor's rating may have taken a hit on Instagram, the clock is Tik Toking on any leadership move ...
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