Neither a Budget nor a run-of-the-mill statement, but falling somewhere in between, no one quite knew what to expect in the build-up to the chancellor’s economic update last week. For those of us keeping tabs on the balance sheet, the cost of the Government’s intervention to date, although necessary and welcome, is, at £190bn, nothing short of eye-watering. With public fatigue palpable, and the economic ramifications of the virus becoming fully realised, it would have been all too easy to throw caution to the wind and open the spending taps to the max – from a steady gurgle to a rapid spurt.
That was the position advocated by shadow chancellor, Anneliese Dodds, who expressed disappointment that the Government had not used the opportunity to deliver a full, comprehensive Budget.
While a £30bn stimulus of additional spending is nothing to sneer at – and would be considered seismic at any other time – this was a mature statement rooted in pragmatism. The chancellor should be applauded.
Of course, there are a raft of sectors, each with their own unique challenges, that will require further financial assistance, not least local government. Support from the Treasury to councils so far falls markedly short of the costs they have incurred in responding to the pandemic, nor has it covered the loss of income they have suffered from the lockdown. In London alone, the estimated funding gap in 2020/21, taking into account the emergency funding made available, stands at £1.3bn.
The promise of ‘some’ compensation for those losses suggests that the sector has a lot more work to do to get its case across to Whitehall.
The reality of this pandemic, and the rapidly evolving nature of the situation we have all been thrown into, requires nimble policy-making that can react to the shifting sands of the virus. The welcome £1.57bn package announced last week for the arts and cultural sector being one such example. This was a statement less about pulling rabbits out of hats than it was about delivering fiscally prudent, creative policy.
The primary aims of protecting, supporting and creating jobs while nurturing an eco-friendly economic recovery are ones all of us, regardless of our politics, can get behind. With the Bank of England projecting GDP will shrink by 14% this year, over 250,000 more people under the age of 25 claiming unemployment benefits since March, and 9.3 million jobs furloughed, they are also well targeted.
Through a mixture of incentives to retain workers and take on new apprentices and trainees, and funding to recruit career advisers and develop skills in high-value sectors, it makes more sense to invest heavily in people’s futures now than to divert even more cash to support the same people through the welfare system further down the track.
The measures aimed at the hospitality and tourism sectors, like temporarily cutting VAT from 20% to 5%, will be especially welcome news to those communities reliant on these hard-hit industries, while the decision to scrap stamp duty on homes under £500,000 is sensible.
In fact, on the latter, many of us would argue that long-term, we should be even more ambitious in reforming a tax that, at times, inadvertently dissuades people from moving, prevents first-time buyers from getting on to the housing ladder, and generally slows down the market. That is particularly the case in places like London where even an ordinary family home is caught within the upper levels of the tax.
To those disappointed not to have been given a nod last week I would say this: the recent economic update should be seen as a prologue to the autumn Budget. The chancellor was clear this is just the latest in a line of announcements that will be made over the coming months. Although the outlook will not in all likelihood be any rosier by then, we will I hope have a better feel for the lie of the land in the autumn.
It is inevitable that more support will have to be made available. The chancellor should adopt the same honest, open and bold approach in the intervening months to get a handle on those intractable problems, like social care funding and local government finance which – due to the pandemic and the toll it has taken on both sectors – simply cannot be kicked into the long grass any further.
Sir Bob Neill MP is a former local government minister and is chair of the Commons Justice Committee