Covid-19 Economic Support Package

Kevin Hollinrake Excerpts

Wednesday 14th October 2020 Commons Chamber

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I beg to move,

That this House believes the Government should do what it takes to support areas with additional local restrictions, currently the North of England and parts of the Midlands, Scotland, Wales and Northern Ireland, by reforming the Job Support Scheme so it incentivises employers to keep staff on rather than letting them go; ensuring no-one is pushed into poverty when they do the right thing; providing clear, consistent and fair funding that goes hand-in-hand with the imposition of new restrictions, including using the £1.3 billion underspend on the grants fund to support local jobs; fixing gaps in support for the self-employed; and extending the ban on evictions.

We are at a critical moment for our country. Infection rates are rising, and the economic outlook is worsening. It is more vital than ever that this Government get a grip on both the health and the economic crises. There are some who seek to pit people’s health against our economy, but we all know that our country has suffered a double tragedy: the highest excess death rate in Europe and the deepest recession in the G7. The predominant reason why many expect our recovery to proceed more slowly than that in other countries is the continued severe impact of the public health crisis in the UK. It has been suggested that the Chancellor blocked proposals from the Scientific Advisory Group for Emergencies for a circuit breaker. He can now, if he wishes to, intervene on me and set the record straight.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

May I intervene?

[Anneliese Dodds]

I asked the Chancellor to intervene on me. I am willing for another Member to, and perhaps the Chancellor will follow.

[Kevin Hollinrake]

The hon. Member mentioned “a” circuit breaker, but the guidance from SAGE says that “multiple” circuit breakers might be required to bring the virus under control. How many jobs does she believe those circuit breakers would cost?

[Anneliese Dodds]

I was just about to go on to say that the Government’s current stance is costing jobs and leading to reduced business confidence. If we continue as we are, without taking control of the public health situation, we will see a worse situation for jobs and businesses in our country. It appears that that will be the only intervention that I will receive.

It is clear that blocking a circuit breaker does not make sense for the health of our population or for our economy. Government Members need a reality check. One in four people in our country are subject to localised restrictions. We have already experienced a record rise in quarterly redundancies. Without action, we face the prospect of infections rising yet again, with more and more areas coming under localised restrictions and the Government eventually being forced into more national restrictions in any case. Every week of that inaction will hit business and consumer confidence, costing more jobs and livelihoods, with more businesses going to the wall. The question is not whether we can afford a circuit breaker. The question is whether we can afford to continue with a Government who duck taking hard choices until they are forced into them and who seem unable to stand apart from their chaotic lurching from week to week to assess what our country needs and take decisive action.

That circuit break must be used to fix test and trace, devolving it to local areas, so that we can protect our NHS, get control of the virus and start building economic confidence back up again, and it must be accompanied by support for jobs and businesses. We stand ready to work with the Government to ensure that that is put in place, so that no one is pushed into poverty for doing the right thing.

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[Rishi Sunak]

I know what a difficult time this is for the hon. Lady and her constituents. With regard to underspends—I will come on to this later—I think it is wrong to think of them in that way. That was the Government giving an advance to local authorities to make payments to businesses. That was done on the basis that every local authority will have a wildly different degree of overspend or underspend, which we true up at the end of the process. We could equally have asked local authorities to make payments themselves and reimbursed them afterwards. There is significant financial support both for her local authority and the businesses in her area that have closed down. That was announced by the Prime Minister and I will come on to address that in detail later. It is right that that support is there.

Let me reiterate our plan. The House will be well aware of the gravity of our economic situation. The latest figures show that our economy grew by 6% in July and 2% in August, but it remains almost 10% smaller than it was before coronavirus hit. Business investment suffered a record fall in the second quarter of this year. Consumer sentiment remains well below its long-run average. Despite the significant support we have provided, the data is beginning to reveal the true extent of the damage that coronavirus has caused our labour market. The latest statistics published just yesterday show employment falling, unemployment rising and welfare claims rising. The revisions that the Office for National Statistics has made to its previous estimates show that unemployment was higher than it thought over the summer.

I have talked about facing up to the difficult truths clearly, and we are facing an economic emergency, but we are acting on a scale commensurate with this emergency as we address my single biggest priority: to protect people’s jobs and their livelihoods. We have put in place a comprehensive plan to protect, support and create jobs in every region and nation of the United Kingdom. Through more than £200 billion of support since March, we are: protecting more than 9.5 million jobs through the job retention schemes; strengthening our welfare safety net with an extra £9 billion for the lowest paid and most vulnerable; granting more than £13.5 billion to those who are self-employed, with further grants to come; and protecting over 1 million small and medium-sized businesses through £100 billion of tax cuts, tax deferrals, direct grants and Government-backed loans.

[Kevin Hollinrake]

Does my right hon. Friend agree that the best way to protect jobs is to keep the economy open wherever possible? Most other nations are using a local-restrictions approach to deal with this situation, including Germany, which is using lockdowns at a district level, not even at a state or county level. Does he agree that that is the best way forward?

[Rishi Sunak]

My hon. Friend is absolutely right. The only sustainable way to protect jobs in the long run is to have an economy that is open and functioning. No amount of support can make up for that.

There are other things we have done: eased repayment terms on those loans through pay as you grow; delivered on our promise to give the NHS what it needs; backed hundreds of thousands of young people to find good jobs through the kickstart scheme and new investment in training and apprenticeships; created green jobs through the £2 billion green grant programme; showed that we are here for our cultural sector, with the cultural recovery fund and a further support package for charities; and invested hundreds of billions of pounds in the largest, most sustained programme of infrastructure investment the UK has seen in decades. That is comprehensive action to protect the jobs and livelihoods of the British people. It undermines the credibility of the Labour party that, in the face of all that support, it continues to pretend that insufficient action is being taken.

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[David Linden]

I agree with my hon. Friend, but I have to say that I did give the UK Government a degree of praise at the beginning of the pandemic, because it did seem that they were moving in a way that perhaps was not part of traditional Tory ideology, with a lot more state intervention and a lot more Government support. I think there were quite a few of us in this House who, while we would disagree enormously on the politics, welcomed the fact that the Chancellor was willing to be innovative and try new things.

One thing I would say is that nobody prepares us for a global pandemic. Politicians and people in this House have seen recessions and people have seen wars, but nobody prepares us for a pandemic. Yes, there has to be a degree of flexibility on the part of all of us in this House, but the thing I am most concerned about is that the British Government seem to have moved away from those creative, innovative solutions they had at the beginning of the year. We now find ourselves in the midst of a second wave, and all of a sudden that dynamism and creativity the Chancellor has been credited with seems to have gone away, because of the pressure that comes from people on the 1922 committee. I do not think that people on the whole are going to forgive that.

[Kevin Hollinrake]

Does the hon. Member agree with the Opposition that there should be multiple circuit breakers, and if so, is that what the policy will be in Scotland?

[David Linden]

I am not sure that the official Opposition are proposing multiple circuit breaks, to be fair to them, but it is not my job to defend the policy of the Labour party. However, what I will defend is the approach of the SNP Scottish Government, who are trying to do this in a balanced way, but we would like to see a lot more financial flexibility to do that. It would help if the UK Government gave us those financial powers. That is what I would say to the hon. Gentleman on that.

I want to come on to that very point, and highlight the work that the Scottish Government have done in supporting business during the second wave of the pandemic. The Scottish Government’s total package for businesses is over £2.3 billion. That is more than the consequentials received from the UK Government. As I mentioned to the hon. Member for Totnes (Anthony Mangnall), the Scottish Government are making an additional £40 million available to support businesses that will be affected by the new measures, and will work with affected sectors in the coming days. I am in no doubt of that. My city of Glasgow is one of those that have been under local lockdown restrictions, and the restaurants and bars in my constituency have had to shut down, but we have recognised when we have asked them to shut down, which is a way of trying to reduce the spread of the virus, that support must be coming.

The Scottish Government will continue to discuss with businesses how the support package we have offered can mitigate some or all of the employer’s contribution to the UK job retention scheme. We have put in place a £230 million “restart the economy” capital stimulus package to help stimulate the economy following the pandemic. We have announced details of a £38 million package of support for innovative early stage businesses. We have committed £2.2 million of funding to the Music Venue Trust, which will provide stability to grassroots music venues over the coming months.

What all this should highlight is that the UK Government’s financial plans have been and continue to be inadequate—excluding the self-employed, freelancers and artists; prematurely ending the furlough scheme; and refusing to make permanent the £20 increase in universal credit. Where we have had the power, the Scottish Government have spent £6.5 billion on tackling covid—above the Barnett consequentials—and they are doing all they can and all within their powers to support businesses across Scotland.

That is the issue at hand. There is only so much that the Scottish Government can do when the vast majority of Scotland’s tax and spending decisions are taken here in Westminster. The fact is that the Government cancelling the UK Budget simply demonstrates that Scotland remains an afterthought for the Tories. I would be more than happy to give way to the Chancellor if he can stand up and give some sort of clarity to Scotland’s Cabinet Secretary for Finance about what budget we are supposed to set when the Government have just gone ahead in this way.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I am one of the 5.7 million business people in this country for whom this is not a theoretical concept but an existential crisis. I listened carefully to the shadow Chancellor, the hon. Member for Oxford East (Anneliese Dodds), when she talked about business confidence. I agree with much of what she says, although probably not that much in this debate.

One thing that really damages business confidence is when you flip-flop. To say on Monday that you are willing to support a local lockdown strategy and then to say today that it has to be a national lockdown is totally wrong. That damages business confidence, and it damages consumer confidence. One thing that has bolstered business confidence has been the unprecedented levels of support we have seen from the Treasury and the Government. This is the third recession I have been through in our business, including in the years following 2008, and I have never seen support like this.

We need to be honest with people when we talk about a national lockdown and a circuit breaker. Are we talking about just one circuit breaker, one hit? The reality is that the SAGE advice says we might need multiple lockdowns, multiple circuit breakers, to keep the virus at low levels. Imagine the devastating impact on businesses and consumer confidence. The shadow Chancellor has to be honest with the business community. She needs to say that this might mean—[Interruption.] I did not hear it in her speech. She needs to say that this might mean multiple lockdowns, multiple hits and multiple costs to the taxpayer, and a devastating impact on businesses. A circuit breaker will buy 28 days. It will put us back in the same place in 28 days’ time—that is what it says. Please be honest with the people. What I would like to hear from the Opposition are some ideas on how we keep the economy open. I have not heard anything from them about how we tackle this public health crisis while keeping the economy open. I have not heard that.

If we cannot look to the Opposition, we should look to best practice internationally. There is no European country I am aware of that has gone back to a national lockdown. The leader in managing this crisis is Germany, which uses not just a local lockdown policy but a sub-local lockdown policy. It closed down Gütersloh and Warendorf, with 300,000 people per district. That is what we should look at. We should stop looking at wide regional lockdowns and look at sub-local lockdowns. The hon. Lady is looking at a national lockdown, which is the antithesis of what we are talking about.

[Anneliese Dodds]

I regret the fact that the hon. Member, for whom I have a huge amount of respect, particularly when he campaigns on banking and other issues, has not listened to what the Opposition have consistently said about test, trace and isolate. He is absolutely right about Germany. We wish we were in the situation where test, trace and isolate was working effectively. That would mean we could have a fine-grained response. We do not have it in the UK and that is why we need a reset to fix that system. He should be honest about that.

[Kevin Hollinrake]

I agree with that, but it is not either/or. Of course we need to improve test and trace, but that should not mean we have to lock down the entire economy. That is absolutely the wrong thing.

I have three solutions. The number one thing is that we look at this on a super-local basis. We know that the rate of infection in Liverpool is 670 per 100,000. It is 60 in parts of North Yorkshire, but it varies significantly across North Yorkshire. We need to look at a district-based approach that would increase the amount of ownership and responsibility local people have for managing the crisis through peer pressure and from understanding that their actions would be effective.

I fully support having different tiers. I supported them on Monday and I support them today. Having said that, the two higher tiers do lead to a difficult situation. Bars and restaurants in tier 2, and restaurants in tier 3, are not required to close. That means they cannot access furlough support. There are two things we could do: extend the furlough support, which is a hit on the taxpayer; or, instead of coming down from six households per table, as it was last week, to one household, we could go to two households. That concession would have a very important effect for lots of pubs and restaurants, which would then be viable.

The third solution is business support. We need a new iteration of the bounce back loan scheme and the coronavirus business interruption loan scheme, which has been so successful. As my hon. Friend the Economic Secretary to the Treasury knows, we also need to make non-bank lenders part of that new tranche of business support. We need forbearance for SMEs. We should phase support back in, so we move VAT from 5% to 10%, and not back to 20%. We should also phase back in business rates and perhaps stamp duty.

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[The Economic Secretary to the Treasury (John Glen)]

It is a privilege to close this debate on behalf of the Government. First, I thank hon. and right hon. Members across the House for their insightful and considered contributions. From listening to those contributions, it seems to me that we can agree about the nature of the challenge, which is to find a flexible and sustainable response to the twin health and economic emergencies caused by the virus. This Government have designed and implemented such a response. The Chancellor called for a toolkit to protect jobs and businesses over the difficult weeks and months to come, and in closing today’s debate, I will outline its newest elements and respond to some of the points made by Members across the House.

On Monday, the chief medical officer, Professor Chris Whitty, observed that we face two potential harms:

“a harm for society and the economy on the one hand and a harm for health on the other hand.”

In other words, the decisions we take are about finding that right balance. The need for balance as we evolve our economic response was expressed eloquently by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who has provided wise counsel over recent months and set out very clearly how the Government’s intentions are to keep as much open as possible for as long as possible. In formulating the Government’s economic response to the pandemic—the subject of today’s debate—my right hon. Friend the Chancellor has sought that balance. He said earlier that we must not shy away from the burden of responsibility to take decisions and lead. We have not, and we will not.

The primary goal of our economic policy remains unchanged: it is to support people’s jobs. That is why we have progressed the next phase of our winter economy plan with the express intention of laying the track for economic recovery by protecting jobs through the coming months. As the Chancellor said, the new phase of that plan has three key elements: the job support scheme; cash grants for businesses that are forced to close; and additional funding for local authorities. These more targeted measures will come into force as the furlough scheme winds down at the end of the month. That scheme has supported more than 9 million jobs, but the House will understand that it cannot continue indefinitely, as the Chancellor made clear from the outset.

First, we will expand the job support scheme. This will help to protect jobs in businesses that can continue to operate as well as in those that cannot. For those businesses that can open safely but where there is reduced or uncertain demand, the Government will directly subsidise employees’ wages, meaning that those employees can work shorter hours rather than being made redundant. Businesses that are forced to close will also be aided by the scheme. In circumstances where staff are unable to work for a week or more, they will still be paid two thirds of their normal wage up to £2,100 a month. This will be covered by the Government and will apply right across the whole of the United Kingdom. Crucially, because the scheme will run for six months, it will give people and businesses the certainty they need. We have intentionally designed the scheme so that there is no gap in support for employees. Staff can remain on the furlough scheme until 31 October and will benefit from the new job support scheme from the following day.

Throughout this crisis, we have not forgotten about the self-employed, which is why we are extending the existing self-employed income support scheme for a further six months. This is in addition to the support through initiatives such as business rates relief, bounce back loans and the local restrictions support grant. For those who question the generosity of the job support scheme, we have looked closely at schemes implemented by our friends in countries such as Germany and Italy, and they are very closely in line.

Importantly, businesses can also access a wide spectrum of other help that we have made available in recent months. As the City Minister, I have been most closely involved in the temporary loan schemes that have been rolled out at pace to meet the needs of businesses large and small and recently extended to ensure that businesses that still want to access them can do so. As of 20 September, more than £57 billion has been provided to businesses of all sizes through Government guaranteed loan schemes.

At the same time, the welfare safety net available to those most in need has become more generous and responsive. Treasury analysis shows that covid-19 welfare changes, together with Government interventions since March, have supported the poorest working households most of all, reducing the scale of losses for working households by up to two thirds. I note the comments made by the hon. Member for Glasgow South West (Chris Stephens), who is no longer in his place, about the continuing need to address carefully the needs of the most vulnerable. The universal credit standard allowance and working tax credit basic element have both been increased by £20 per week for 2020-21, and given the way in which universal credit replaces 63% of lost income for the lowest earners, this means that someone on the job support scheme at 67% of their original earnings will see universal credit make up at least 63% of the 33% they have lost. This will mean that they will end up, in many cases, with nearly 90% of their original income.

[Kevin Hollinrake]

Can I take the Minister back to the loan schemes, which were delivered at pace and were a fantastic success? Does he agree that we will need a new iteration of those loans scheme to take us through the next phase and that, wherever possible, we should make those loans available to all businesses, regardless of where they hold their business account, including those that hold that account with non-bank lenders?

[John Glen]

I very much agree with my hon. Friend. That is something that the Chancellor and I are working on as a live issue, and we will report back to the House in due course.

The second element of the winter economy plan is cash grants. Businesses in England that are required to close for health reasons can now claim a grant of up to £3,000 depending on the value of their property. That is a cash grant, not a loan, that they will never need to pay back and they can use for any business cost. Should the devolved Administrations in Northern Ireland, Scotland and Wales adopt a similar approach, we will make an additional £1.3 billion available to them to help—part of a £7.2 billion total package—further demonstrating the importance of the Union as we face these challenges together.

I turn to the third component: local authorities. I pay tribute to the efforts of local authority leaders and their officers throughout the crisis, and I pay particular tribute to my own in Wiltshire. Up to £465 million will be made available to those local authorities at high or very high alert to support public health and local economic initiatives. That is on top of the £1 billion to protect vital services, which itself is in addition to the £3.7 billion we have already provided since the spring.

Let me conclude by saying that, as we have throughout this crisis, we will continue to listen carefully to represent- ations of hon. and right hon. Members on behalf of their constituents, keep the whole of our support package under review and, where necessary, adapt and evolve our response. Members from across the House have made representations today, and the Government will reflect carefully on them.

I vividly recall coming to the House in March, 209 days ago, prior to the launch of the furlough scheme, to answer an urgent question on jobs. The House made its view plain on that occasion, as it has today. We were listening then, and we are listening now. We will do everything possible to carry this country through the crisis, in the knowledge that we can and we will succeed. We need what the Chancellor has called a consistent, co-operative and balanced approach. The Government will continue to strive for that crucial balance, protecting lives and livelihoods flexibly and sustainably for as long as it takes. That is why I urge the House to support the Government amendment.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.