The Treasury has not ruled out either measure from Rishi Sunak’s statement to MPs on the recovery from coronavirus after calls from think-tanks and industry leaders for a major new stimulus to boost the economy.
Mr Sunak is also facing calls from opposition parties to extend the furlough scheme, and pump money into health and social care, when he delivers what is being described as an emergency “mini-Budget” to respond to the deep downturn.
Last night the government confirmed he would unveil investment worth £3 billion to help create thousands of green jobs modernising public buildings and housing to make them more energy efficient.
The Resolution Foundation has called for a £200bn fiscal stimulus to help the economy recover from what the think-tank expects to be a 9.3 per cent fall in GDP. It recommends that a stimulus package delivered over two years should include a £17bn-per-year job support package, which would see the furlough scheme extended and jobs guaranteed for young people.
A £30bn “high street voucher” scheme is also recommended, with vouchers worth £500 per adult and £250 per child handed out to be spent in hard-hit sectors of the economy, such as face-to-face retail, hospitality and leisure.
Universal Credit should also be boosted by £10bn to support low-income families, according to the report.
The think-tank’s ideas for shoring up jobs is laid out in a report, Easing Does It, which is published today.
The report says that, until a vaccine is available, the UK’s “new normal” for economic capacity could be 5 per cent lower than before the pandemic, suggesting a “big and long-lasting” economic hit.
Resolution Foundation research director James Smith said the Covid-19 induced downturn was “like no other crisis we’ve seen”.
Mr Smith said: “With interest rates already at record lows, the Chancellor will need to take the lead in delivering an ambitious policy response to secure Britain’s economic recovery.
“The measures the Chancellor announces in his mini-Budget tomorrow need to be big enough to reflect the size of the crisis we face, targeted at the sectors that need the most support, and flexible enough to cope with the uncertainties that lie ahead.
“A £200bn fiscal stimulus should therefore focus on protecting jobs and supporting spending in hard-hit sectors of the economy, and reflect the fact that low-income households have found it far hardest to cope.”
The Federation of Small Businesses (FSB) Scotland backed the calls for a cut in VAT and a voucher scheme to encourage spending in shops, bars and restaurants.
A spokesperson said: “Ahead of the Chancellor’s statement this week, FSB has been calling for measures to reignite consumer demand, especially in sectors most affected by the lockdown, such as a temporary VAT cut.
“Further, the proposed voucher scheme could be just the shot in the arm the economy needs if it’s designed to maximise spend in local independent businesses.
“It could also help encourage people to return to everyday activities like shopping and eating out.”
The FSB Scotland spokesperson also backed an extension to the furlough scheme that has paid the wages of 9.3 million workers across the UK.
They said: “The small business community will also be looking to the Chancellor to build on the success of the Job Retention Scheme and help reduce the costs of employment by taking bold steps to cut National Insurance contributions.
“Steps such as these could prevent many businesses from reducing headcount – a process that no business owner wants to embark on.”
Ahead of the Chancellor’s statement, the SNP repeated its call for the Job Retention Scheme to be extended, and demanded action on the millions of freelance workers who do not meet the criteria for the government’s grant scheme for the self-employed.
SNP Treasury spokeswoman Alison Thewliss said: “We need an urgent financial package to deliver vital cash to those falling through the cracks and an extension of the furlough scheme to make it truly fit for purpose.
“With the stroke of his pen, Rishi Sunak can end this uncertainty for millions across the UK – the time to act is now before even more people find themselves in a dangerous cycle of spiralling debt.”
The SNP also called for health and social care spending to rise in line with per capita spending in Scotland, generating an additional £4bn for the Scottish budget through the Barnett formula.
Meanwhile, on a visit to Goole in East Yorkshire to promote the government’s work to support the economy, Boris Johnson urged people not to “stuff this up” as lockdown restrictions are eased.
The Prime Minister took advantage of new freedoms in England over the weekend by having a haircut and a drink at a pub near his Chequers country retreat.
Drinkers flocked to popular areas, including London’s Soho, over the weekend, prompting fears over the lack of social distancing.
Mr Johnson said he was not shocked by some of the scenes pictured over the weekend because “I understand what human nature is” but added that the overwhelming majority had behaved sensibly.
“We cannot be complacent, we really can’t afford to stuff this up, to blow it now,” he said. “We have got to keep going in the prudent way that we are.”
Mr Johnson urged people to “maintain discipline” in order to “get back to life as close to normal as possible as fast as possible”.
In a measure already confirmed for tomorrow’s statement, £111m is to be invested in unpaid traineeships for young people. In England, businesses offering placements will receive a £1,000 bonus per trainee. Young people taking part will continue to be eligible to receive welfare payments during their course. Devolved administrations will receive £21m for similar initiatives.