Rishi Sunak is perfecting his Santa act. Nearly four months after announcing 30 billion pounds of extra spending, Britain’s finance minister on Wednesday unveiled new measures worth up to the same amount to help the economy. The best of them aim to avoid deep scars in the labour market.
Sunak will offer employers a 1,000 pound bonus for every furloughed worker who stays on the payroll until the end of January 2021. The furlough scheme, which has so far cost over 27 billion pounds and is supporting 9.4 million jobs, winds up in October. Extending it indefinitely is infeasible. But this carrot may mean some staff are retained a little longer.
Another good idea is allocating 2 billion pounds for six-month work placement schemes for those aged between 16 and 24 years and deemed at risk of long-term unemployment. Like other European countries, youth unemployment in Britain is higher than the national rate. Failing to find work and acquire skills when young can have damaging lifelong consequences.
Sunak’s focus on the labour market is welcome given worrying survey data. The availability of workers rose at the fastest rate since January 2009 in June, a KPMG and REC survey showed on Wednesday. And the number of UK job ads posted online on a given day fell by 52% between February and May, the Organisation for Economic Co-operation and Development’s employment outlook said on Tuesday.
Sunak also helped sectors hardest hit by Covid-19. Value-added tax for the hospitality and domestic tourism sectors will be cut for six months and there’s a temporary restaurant meal subsidy. These might nudge households to spend. Less necessary was a tax cut for homebuyers. While UK house prices have slipped, they aren’t in freefall. The 3.8 billion pounds that the finance ministry says the measure will cost would have been better deployed elsewhere.
Sunak has so far won plaudits for channelling Santa. How long he keeps the act up is another matter. Citibank analysts expect that UK public sector net borrowing in the 2020/21 financial year will total 315 billion pounds, or 15.7% of GDP. That is nearly double the peak during the financial crisis. Trying to whittle away at the deficit too quickly could, however, jeopardise the recovery, and leave the finance minister looking more like the Grinch.