Analysis: How will we feel about ‘date night’ stimulus in six months?

Chancellor of the Exchequer Rishi Sunak departs 11 Downing Street to deliver a summer economic update at the Houses of Parliament

Alongside a cut in VAT for hospitality and tourism businesses, a £1,000 bonus to encourage companies to bring back their furloughed workers, and a wage guarantee to help the 700,000 young people on benefits find a work placement, the package of creative measures is a gamble.

Rishi Sunak said the focus of his stimulus package was “jobs, jobs, jobs”, a relentlessly upbeat melody resting on the beat of the Prime Minister’s call to “build, build, build”. It all sounds so positive - but then, everyone talks themselves up when they want to take you out for dinner.

What’s really on the mind of the nation’s dining companion? It’s unemployment, unemployment, unemployment.

More than nine million people have been furloughed through the Job Retention Scheme; the fear is that a third may be made redundant by the time it comes to an end in October.

In the stark terms of a global pandemic, this stimulus is an experimental vaccine - untested protection against a tide of job losses that is already coming in. Like the grim curves on familiar charts of infections and fatalities, the only question is how high the wave will be.

According to the Institute for Fiscal Studies, the UK Government has now spent £190bn since March - nearly a tenth of what the economy produced in the previous year - confronting the public health crisis, and trying to limit the economic crisis that follows it.

Boris Johnson this week stuck by his manifesto pledge not to raise VAT, income tax or national insurance, but Sunak made clear that come the autumn, when he has to deliver a full budget and spending review, the public finances will somehow need to be brought under control. For now, date night dinner is going on the credit card.

Most budgets have winners and losers; because this summer statement was all upside, the divide was between those tucking in to a discount meal and those unable to get a table.

There was nothing to close the gaps in the government’s flagship wage subsidy schemes, particularly for the roughly three million self-employed who are ineligible for government grants because they went freelance too recently, or were on short-term PAYE contracts.

While he offered companies £1,000 for every furloughed employee they bring back to work, Sunak was pointed in his rejection of widespread opposition calls for the Job Retention Scheme to be extended beyond October. The UK Government has - perhaps belatedly - begun talking up the furlough scheme in Scotland as an example of something that only the might of the UK Treasury can deliver.

But that message now risks being drowned out by the cross-party condemnation of the refusal to extend job-saving wage subsidies, at least in industries that cannot reopen, like the performing arts. The SNP will spend the rest of the year pointing at the example of Spain, which just announced that its furlough scheme will extend until 2021.

The Chancellor is also facing criticism over his failure to announce any additional support for childcare, which remains a major barrier for some parents who would like to return to work. And a cut in stamp duty that applies to England and Northern Ireland will fuel complaints that the Conservatives are more concerned about looking after the wealthy who have assets, rather than the least well-off and the young, who rent.

The Resolution Foundation had called for a universal handout to boost the high street, arguing that a £20bn plan to give vouchers worth £500 to everyone in the UK, only redeemable face-to-face in shops, would push people through the doors of newly-reopened shops, restaurants and bars.

There have been grumbles from some on the Conservative benches about how spendthrift Sunak has been for a Tory Chancellor - and in Downing Street about the profile and popularity his handouts have given him. Ideological Tories would have liked the idea of letting people spend their own money, and following the Trump administration, which posted $1,000 checks to every American at the start of the pandemic.

But this privately-schooled, Oxford-graduated Goldman Sachs alumnus isn’t an ideological Tory. And while millions have lost jobs or seen their incomes slashed during lockdown, for many others, lockdown has seen savings increase and debts fall - because there simply hasn’t been anywhere to spend.

So the giveaway on the ‘Eat out to help out’ was smaller, and more symbolic - as much about the slogan encouraging people to do their patriotic duty and support local business, as putting money in pockets. The British Retail Consortium expressed disappointment that the vouchers will only be valid for meals, not in shops.

Retail is also left out of the VAT cut, and the fact that the Treasury didn’t immediately publish detail on the scope of the measure, and capped the cost at £4bn, suggests more businesses may be left out than expected.

It all points to the challenge at the heart of the Chancellor’s proposition. He can convince us all to go one a midweek night out, and coax employers to take back staff or create work placements for young jobseekers.

But the impact of those measures will be nothing compared to the factor that will really determine the future of the UK economy: will the virus be under control through the autumn and winter, when the last of the stimulus runs out and the bill arrives?

So yes, he’s buying you dinner now. For Sunak’s plan to be a success, the question isn’t whether you respect him in the morning - it’s whether you’re still on speaking terms in six months’ time.

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