Chancellor Rishi Sunak has urged people to dine out and embrace post-lockdown freedoms as he warned that jobs are at risk if economic activity does not return to normal.
Mr Sunak said he was “anxious” about the state of the UK’s economy which is “entering into a very significant recession” because of the coronavirus crisis.
But he said the £30 billion of extra spending announced in his summer statement on Wednesday aimed to make the recovery as strong as can be.
“We’ve moved through the acute phase of the crisis where large swathes of the economy were closed. We’re now fortunately able to safely reopen parts of our economy, that’s the most important thing that we can do to get things going,” the Chancellor told Sky News.
“But we won’t know the exact shape of that recovery for a little while – how will people respond to the new freedoms of being able to go out and about again. We have to rediscover behaviours that we’ve essentially unlearned over the last few months.
“But unless activity returns to normal, those jobs are at risk of going which is why we acted in the way that we did.”
Mr Sunak told the Commons in what amounted to a mini-Budget that the Government would do “all we can” to keep people in work.
He announced that firms which have furloughed staff will be given a £1,000 bonus to keep workers in jobs, a move designed to help protect livelihoods after the economy contracted by 25% in just two months.
Other measures included an “eat out to help out” plan for dining out in August to boost the hospitality sector, a cut to VAT on food, accommodation and attractions from 20% to 5% from July 15 until January 12 and a temporary increase in the stamp duty threshold.
The extra spending is on top of almost £160 billion already committed to dealing with the coronavirus crisis – a figure far higher than previously estimated – and there is little indication of how the Treasury intends to pay for it.
But despite the measures, Mr Sunak said not everyone who has been furloughed would return to work
He told Sky: “I’ve been very clear that we are not going to be able to protect every single job and it would be wrong of me to pretend otherwise.
“There are going to be difficult times ahead and… there are forecasts for people predicting significant levels of unemployment. That weighs very heavily on me.”
He said having “people out and about, back in restaurants, moving house, renovating homes, installing energy efficiency measures in homes” would help stimulate the economy – and that people “should have the confidence to return” because of the measures businesses have taken.
The Chancellor later said the £1,000 bonus being offered to businesses that keep furloughed staff in jobs until January would be a “dead weight” cost, as some employers who intend to retain workers anyway would benefit.
He told BBC Radio 4’s Today programme that “without question” there has been “dead weight in all of the interventions we have put in place”.
Mr Sunak also said that people “sitting there on furlough forever” will see their skills fade as he reiterated the need to “get our economy back to normal”.
However, Labour accused Mr Sunak of taking a “one-size fits all” approach in its incentive scheme to persuade employers to keep on furloughed staff beyond October.
Shadow chancellor Anneliese Dodds told Today: “My major concern with the way Government is proceeding now is that they’re withdrawing the job retention scheme and the self-employed scheme at the same time, right across the whole economy.
“We all know that some sectors are being much more strongly impacted than others, the Chancellor’s continuing with that one-sized fits all approach, we would urge him to look again at this, we have been continuously.”
She added: “I do find it a little peculiar that we now have this bonus that will be paid to all employers regardless of whether their business are back operating up to full capacity or not.
“We really need to have targeted support, this is a crisis like no other where the impact is very strongly sectoral, we should have had a more sectoral approach from the Chancellor.”
The Institute for Fiscal Studies (IFS) will later give its verdict on Mr Sunak’s spending promises.
IFS director Paul Johnson has predicted that “more support may well need to be announced in the autumn” when more is known about the virus and the impact it has had on the UK economy.