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Rishi Sunak urged not to create new ‘cliff edge’ for businesses in Budget

Andrew Woodcock
·6-min read
 (REUTERS)
(REUTERS)

Chancellor Rishi Sunak is being warned not to let a “cliff-edge” end to coronavirus support pull the rug out from under businesses just as they are coming out of lockdown restrictions.

Ahead of next week’s Budget in which Mr Sunak expected to announce the long-awaited extension of support measures, Labour’s shadow chancellor Anneliese Dodds told The Independent it was vital for Mr Sunak to recognise that many businesses will need “breathing space to get back on their feet”, even after the planned date for the lifting of most restrictions in June.

Mr Sunak is expected to use his 3 March statement to extend support from the furlough scheme, business rate relief, the temporary VAT cut for hospitality business, rental eviction moratoriums and the £20-a-week uplift for universal credit in line with the roadmap out of lockdown set out by Boris Johnson earlier this week.

But he will tell MPs that he needs to be honest about the fact that spending at wartime levels is not sustainable in the long term, sparking fears that he is planning an abrupt end to help as restrictions fall away.

Businesses and unions have warned that it could take months after 21 June – when the roadmap lifts most restrictions – for companies and jobs to be back on a solid footing, with many facing the extra burden of repaying loans and rent payments which have built up over the past year.

They are appealing for support to be extended as late as the end of the coming financial year in April 2022 to give British business a fighting chance of delivering a post-Covid economic upsurge.

Meanwhile, the Unite union issued a plea for the universal credit uplift to be made permanent, after a survey showed that 78 per cent of its unemployed and disabled members found it difficult to meet food and utility bills even with the extra payment.

And Ms Dodds said: “The chancellor doesn’t seem to understand that the end of restrictions won’t mean an immediate end to the worst economic crisis of any major economy.

“Many businesses will need breathing space to get back on their feet. That’s why Labour has called for the introduction of a smart extension of the furlough scheme as long as restrictions are in place and demand is heavily impacted.

“We’ve also called for the furlough scheme to include training and for abusive use of the scheme to be stamped out. Instead of sitting on his hands, the chancellor should give those on furlough clarity about their future.”

At present, the universal credit uplift and business support schemes are due to close at the end of March, while furlough payments of up to 80 per cent of wages for workers who would otherwise be laid off are guaranteed to April.

The Treasury refused to reveal details of Mr Sunak’s plans ahead of his statement to the Commons, but it is thought that the chancellor will not go beyond Mr Johnson’s roadmap timetable in extending any support measures.

He is expected to tell MPs that he wants the Budget to deliver support through the roadmap period and recovery fuelled by existing plans for investment in research, development and infrastructure in the months and years to follow. And he will stress that he wants to be honest with voters about the need to get the nation’s finances back on a sustainable track.

Details of how this will be achieved are sketchy, with no confirmation of reports that he is mulling a gradual rise in corporation tax from 19 to 25 per cent. But already he is coming under pressure not to retrench too soon on coronavirus support packages.

Hannah Essex, co-executive director of the British Chambers of Commerce, told The Independent: “Businesses across the country have been hit hard by the pandemic over the last 12 months. Cash reserves have been depleted while their debts have mushroomed.

“An end to restrictions will not mean a sudden return to pre-pandemic trading for many businesses. It will take time for firms to get back on their feet and the last thing they need is a cliff-edge removal of support at the end of June.”

In a letter to the chancellor, the general secretary of the Usdaw shop workers’ union, Paddy Lillis, called for the Job Retention Scheme and furlough to be extended until the end of 2021.

Mr Lillis said that 689,500 staff in the wholesale and retail sectors were on furlough at the end of December, with more believed to have joined them since. And the experience of last summer suggests that any date for ending the scheme before economic life is back to normal would provoke a significant round of redundancies.

“At the beginning of June, UK firms slashed more than 12,000 jobs in just two days,” said Mr Lillis. “A week later, two of the UK’s biggest high street retailers – John Lewis and Boots – announced a staggering 5,300 job cuts between them.

“The decisions at that time to extend the Job Retention Scheme were welcome, but they were often last-minute and came too late to save many jobs from redundancy announcements.

“Any reduction in, or removal of, the support available through the Job Retention Scheme will have a devastating impact on employment. Usdaw is calling on the government to extend the Job Retention Scheme for the rest of 2021.”

Kate Nicholls, who heads UK Hospitality – a trade body representing pubs, restaurants, hotels, visitor attractions and nightclubs across the country – said that business rate relief and and the 5 per cent temporary rate of VAT need to be extended until April 2022 for the sector, which has been among the worst-hit parts of the economy.

She told The Independent: “The level of debt that hospitality is bearing after being closed for seven months with no revenue and mounting costs means that support needs to extend into the recovery period to help companies rebuild.

“Otherwise, debt will make them topple over as soon as they reopen. Rent debt alone is £2bn.

“If we have business rates and VAT support for longer, we will recover more quickly, and the economy as a whole will recover more quickly as a result.”

Unite’s survey of 579 community members, including unemployed and disabled people, found 78 per cent said they struggled to pay bills and buy food on universal credit, even with the £20-a-week uplift which is due to be withdrawn at the end of March.

Some 52 per cent said that the extra money had helped “a lot” in making ends meet, with one participant saying it “helps to put food on the table” and another saying it had stopped reliance on food banks.

The union’s general secretary Len McCluskey said the £20 top-up had been “a lifeline to millions”.

“The economic havoc the Covid pandemic has unleashed has yet to be fully felt, with unemployment expected to get a lot worse later on in the year,” said Mr McCluskey.

“It is vital that families, who are struggling the most on the lowest incomes, are given immediate reassurance that the government will not suddenly abandon them in their hour of need.”

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