In years gone by, if a government couldn’t get its Budget through parliament, the failure was seen as an effective vote of no confidence. In true 2020 fashion, as the coronavirus surges a second time, we now have a government pulling its own Budget, a dramatic move that suggests it lacks confidence in its own ability to make its sums add up.
Instead we get chancellor Rishi Sunak’s ‘Winter Economy Plan’. Just as ‘Winterval’ festivals are Christmases that dare not speak their names, the Winter Economy Plan sounds like a euphemism for ‘a bloody great Treasury panic over ending furlough’.
The fact is that for months Sunak has trotted out the mantra that his incredibly effective furlough scheme could not last “indefinitely”, even though no one has ever suggested it should. As Keir Starmer pointed out in PMQs, the list of organisations calling for a rethink of the cliff-edge end of furlough include the CBI, the TUC, the Federation of Small Businesses, the British Chambers of Commerce and now even the Governor of the Bank of England.
Pulling the plug so suddenly at the end of October was always going to be a huge political and economic gamble. But as soon as the PM decided to impose six months’ worth of new Covid restrictions, including a reversal of the ‘go to the office’ advice and curfews that could hit hospitality hard, that cliff-edge became unsustainable. The new curfews start on Thursday night, so Sunak’s Commons statement will be just hours beforehand.
Pret a Manger founder Julian Metcalfe led the business backlash at the new restrictions today, with a withering verdict: “This man sitting down with his Union Jack talking utter nonsense...to spout off some Churchillian nonsense that we’ll make it through, it’s terribly unhelpful.” Add in all the big firms (the 40,000 staff of HSBC, Goldman Sachs, Citigroup, Deutsche Bank, Lloyds, PWC) that have today suddenly stopped their return-to-office plans and you can see the need to act quickly.
Phasing in new restrictions on workplaces while simultaneously phasing out financial support for workers was never going to be a good look. The question has always been just what kind of continued support Sunak was going to provide, and how much cash he was prepared to spend on it. A new Institute for Government report estimates the cost of Covid as already hitting £317bn for 2020/21.
Labour have long called for a “targeted” furlough (Anneliese Dodds did so on May 7) and their strategy may well pay off. The party was timid in specifying which precise sectors should be targeted, for how long and how it would pay for them. It took Starmer himself during his LBC show to finally say he wanted a ‘bridge’ to next ‘spring’ for the tourist industry, for example. He has talked about targeted help for aviation, retail, hospitality and theatres but again there has been no huge detail.
But the Treasury has until recently failed to take even vague targeting seriously. A major milestone was passed last week, namely the 45 day legal notice period for announcing more than 100 redundancies by October 31. Some Treasury officials tried to get tomorrow’s package ready for that deadline but failed. It now looks like they may hit the 30-day notice period for less than 100 redundancies (a deadline due next week), but it’s a darned close run thing.
Labour and the TUC have advocated a German-style short-working support scheme, with subsidies for wages when a worker is kept on part-time. We will find out on Thursday whether that has proved too impractical for the Treasury, and whether it has a more “creative” alternative. It may well ditch the term ‘furlough’ to avoid the charge of U-turning again, but the new jobs support, whatever it’s called, will have to be as effective.
For Boris Johnson, the impending jobs crisis always carried the danger of being seen to be tone deaf. Starmer’s words today on test-and-trace could easily be applied to the PM’s attitude to the furlough cliff-edge: pretending that there isn’t a problem is part of the problem. It may be however that the raw politics of the Red Wall seats has once more ensured this is no Thatcherite let-the-market-rip government.
As we reported earlier this month, Tory MPs representing 107 seats won from Labour in the 2019 election in the north and midlands had just over 650,000 people still fully furloughed by their employer in the middle of August. That’s a heck of a lot of families hoping that voting Tory wasn’t a huge mistake. Sunak doesn’t want to be constantly seen as Santa dishing out cash, but neither does he want to be Scrooge, especially when the chill winter wind of Covid cases looms.