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The most senior civil servant at HM Revenue and Customs (HMRC) did not support two of Rishi Sunak’s key economic recovery policies amid concerns over value for money.
The chancellor yesterday unveiled a £30billion package of spending designed to boost the economy as the coronavirus lockdown lifts.
Sunak unveiled a Job Retention Bonus programme that will see employers receive £1,000 for every worker they bring back from furlough.
He also announced an “eat out to help out” plan for dining out in August to boost the hospitality sector, with a 50% discount per head from Monday to Wednesday up to a maximum discount of £10 per diner.
But Jim Harra, the HMRC’s permanent secretary, wrote to Sunak requesting a ministerial direction – a formal order to go ahead with a scheme.
Harra said while there was a “sound policy rationale” for the bonus programme, “the advice that we have both received highlights uncertainty around the value for money of this proposal”.
He said it was “currently highly uncertain” how many extra jobs it would protect.
Harra also said the “eat out to help out” scheme designed to incentivise people to return to restaurants had “particular value for money risks”.
A Treasury spokesman said: “The system of ministerial directions is a normal part of business where the managing public money rules for one reason or another can’t be met.
“So for example, the same thing happened with the launch of the furlough scheme back in March and April. There is nothing unusual about that.
“What the head of HMRC said was that there was a clear policy rationale for this policy, but that both because of timing, i.e. this has all been worked out very fast like all the work during the crisis has, and because of the uncertainty about take-up in the policy, in formal terms he asked for a direction on it.
“We have been very transparent about that, including in the fact that we said up to £9.4 billion was the cost because it would entirely depend on take-up, but we are confident it is the right policy to help make sure as many of those million jobs are protected as we reopen.”
Sunak admitted this morning the bonus scheme would inevitably lead to some waste of taxpayer’s money, but he said this was unavoidable.
Speaking to BBC Radio 4′s Today programme, he said “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.
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”.
The Institute for Fiscal Studies (IFS) think-tank also said today a lot of the money spent on the programme would effectively be wasted.
IFS director Paul Johnson said: “A lot, probably a majority, of the job retention bonus money will go in respect of jobs that would have been, indeed already have been, returned from furlough anyway.”
If employers bring back all nine million people who have been on furlough, this would be a £9bn expenditure by the government.