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Rishi Sunak has said he does not want workers “just sitting there on furlough” as he admitted his plan to pay a bonus to companies for keeping on staff would inevitably waste money.
The chancellor yesterday unveiled £30bn of extra spending in an attempt to boost the economy as the coronavirus lockdown lifts.
Sunak’s most eye-catching measure was to promise a £1,000 bonus to firms for every employee brought back from furlough.
If employers bring back all nine million people who have been on furlough, this would be a £9bn expenditure by the government.
The Resolution Foundation said the policy would have a “significant deadweight cost” as most payments would “mainly going to firms who would have brought back those workers anyway”.
The think-tank said it would “not make a major difference to employment levels”.
Speaking to BBC Radio 4′s Today programme on Thursday morning, Sunak admitted “without question there will be deadweight”.
“Throughout this crisis I’ve had decisions to make and whether to act in a broad way at scale and at speed or to act in a more targeted and nuanced way,” he said.
“In an ideal world, you’re absolutely right, you would minimise that dead weight and do everything in incredibly targeted fashion.
“The problem is the severity of what was happening to our economy, the scale of what was happening, and indeed the speed that it was happening at demanded a different response.”
Defending his decision to bring the furlough scheme to an end in October, the chancellor said it was not “sustainable” to have a situation where jobs only existed because of the government subsidy.
“We are not doing those people any favours by not allowing them to get the skills they need to find a new opportunity,” he said.
“Just sitting there on furlough forever means their skills fade an thy lose that opportunity to move onto a different job.”
Other measures included Sunak’s mini-Budget was an “eat out to help out” plan for dining out in August to boost the hospitality sector, a cut to VAT on food, accommodation and attractions from 20% to 5% from July 15 until January 12 and a temporary increase in the stamp duty threshold.
The extra spending is on top of almost £160bn already committed to dealing with the coronavirus crisis – a figure far higher than previously estimated – and there is little indication of how the Treasury intends to pay for it.