Chancellor Rishi Sunak has said more workers are going to lose their jobs due to the coronavirus crisis, despite announcing schemes such as the Jobs Retention Bonus designed to protect furloughed staff. Mr Sunak said he was "anxious" about the state of the UK's economy which is "entering into a very serious recession".
"This has been a period of extreme hardship for many people, and indeed hardship lie ahead," he admitted, just one day after setting out his plan to rescue the economy in the aftermath of coronavirus.
The £30bn spending boost he announced on Wednesday, including a cut on stamp duty, a reduction on VAT for the hospitality sector and "eat out to help out" meal vouchers were all aimed at helping to ensure the UK's economic recovery.
The Jobs Retention Bonus, a scheme awarding £1,000 to employers who bring back furloughed staff, has been hailed by many as innovative but critics say it is not enough.
Mr Sunak, defending the sum, said he believes it will make a "significant difference".
"We know that £1,000 can be a significant reward and incentive to employers to successfully bring staff back and continuously employ them," he said.
He admitted he may have preferred to take a more targeted approach, offering different amounts to different firms, but said it "takes a lot longer and we don't necessarily have the luxury of time when you're dealing with a crisis of this magnitude".
Labour leader Sir Keir Starmer has described the Jobs Retention Bonus as "dead weight" and said the government cannot afford it.
Speaking during a visit to Harlow he said: “Some are really at risk of losing their jobs, so we say it should have been targeted in the areas that most need it, not across the piece.
“The chancellor has admitted there is a dead weight in his package – we can’t afford dead weight, we need the money to go where it is absolutely needed most and that’s those jobs that won’t be retained if the Government doesn’t support them.”
HM Revenue and Customs chief executive Jim Harra raised concerns about the value for money of the Job Retention Bonus scheme.
In a letter to Chancellor Sunak he requested a ministerial direction – a formal order to go ahead with a scheme despite the concerns.
Mr Harra said while there was a “sound policy rationale” for the scheme which gives £1,000 to firms for each furloughed employee they bring back to work “the advice that we have both received highlights uncertainty around the value for money of this proposal”.
“It has proved difficult to establish a counterfactual for this scheme, which depends on the overall cost of the scheme and the number of extra jobsit would protect both of which are currently highly uncertain,” he said.
“That uncertainty also applies to the efficiency of the measure.”
Chancellor: 'I can't promise' everyone on furlough will have a job to come back to
Mr Sunak says his focus is to protect employment but added how "every person who loses their job is a tragedy".
"Can I protect every single job? Of course the answer is no. Is unemployment going to rise, are people going to lose their jobs? Yes. The scale of this is significant," he added.
Mr Sunak told the Commons in what amounted to a mini-Budget that the Government would do “all we can” to keep people in work. He announced that firms which have furloughed staff will be given a £1,000 bonus to keep workers in jobs, a move designed to help protect livelihoods after the economy contracted by 25% in just two months.
Other measures included 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.
His additional spending plans announced on Wednesday comes on top of almost £160bn already committed in helping to deal with the crisis, and there is little indication on how the Treasury plans to pay for it. Despite the measures, Mr Sunak issued the stark warning that not everyone on furlough will have a job to return to. He told Sky: “I’ve been very clear that we are not going to be able to protect every single job and it would be wrong of me to pretend otherwise. “There are going to be difficult times ahead and… there are forecasts for people predicting significant levels of unemployment. That weighs very heavily on me.”
He said having “people out and about, back in restaurants, moving house, renovating homes, installing energy efficiency measures in homes” would help stimulate the economy – and that people “should have the confidence to return” because of the measures businesses have taken.
However, Labour accused Mr Sunak of taking a “one-size fits all” approach in its incentive scheme to persuade employers to keep on furloughed staff beyond October. Shadow chancellor Anneliese Dodds told BBC Radio 4’s Today programme: “My major concern with the way Government is proceeding now is that they’re withdrawing the job retention scheme and the self-employed scheme at the same time, right across the whole economy.
“We all know that some sectors are being much more strongly impacted than others, the Chancellor’s continuing with that one-sized fits all approach, we would urge him to look again at this, we have been continuously.” She added: “I do find it a little peculiar that we now have this bonus that will be paid to all employers regardless of whether their business are back operating up to full capacity or not. “We really need to have targeted support, this is a crisis like no other where the impact is very strongly sectoral, we should have had a more sectoral approach from the Chancellor. The Institute for Fiscal Studies (IFS) will later give its verdict on Mr Sunak’s spending promises.
IFS director Paul Johnson has predicted that “more support may well need to be announced in the autumn” when more is known about the virus and the impact it has had on the UK economy."