Has Rishi done enough?

Date: 09/07/2020
Author: University of Salford Business School
Company: University of Salford Business School

Maria Rana, lecturer in economics and finance from the University of Salford Business School, comments on Chancellor Rishi Sunak’s economic plan for Covid-19 recovery.

She said: “In the first quarter of this year UK GDP experienced its sharpest quarterly contraction since 1979 (ONS). Last week, more than 12,000 jobs were slashed in just two days. The IMF expects the UK economy to contract 10.2% this year, with only a partial recovery in 2021.

“That is the background to Chancellor Rishi Sunak’s announcement today of a package of measures designed to support the economy as Covid-19 lockdown measures have been further relaxed last Saturday. 

“During a crisis that has been defined “like no other” and with uncertain recovering, did we get what we needed?

“The temporary cut of VAT to 5% in the hospitality sector, as well as the 50% discount  for meals out are welcome and should  help sustain demand. However, these incentives might not have  the desired effect in the absence of an efficient tracing system that can help people to feel safe to go out. Additionally,  the plan to award £1,000 to those businesses that keep workers employed until the start of the new year seems an insufficient measure to contain  the wave of redundancies  expected once the furlough scheme ends in October.

“It also remains to be seen who will benefit the most from the stamp duty cut. This, in fact, might be not enough of an incentive to boost demand for houses in a time when people are actually worrying about the uncertainty of their jobs and future with precautionary saving as a consequence. One thing , unfortunately, seems to be certain: the UK and world economy are in for a rocky few months. 

“In October 2013, the then Chancellor of Exchequer, George Osborne, justified austerity measures by saying that the UK Government should be “Fixing the roof while the sun is shining”.

“The sun was not particularly bright then, and it has not been shining for a long time, at least since the Brexit referendum in 2016. In addition, an unexpected storm has arrived, so it would not be wise to focus on fixing the roof.

“This can be done when the sun will be shining again, however considering the uncertainty related to the pandemic and post Brexit negotiations, this might not be for a while, and definitely not by the time of the autumn budget.”

Professor Allan Walker, Dean of the School of Arts, Media and Creative Technology at the University of Salford said: “As a result of the current COVID-19 pandemic, our creative industries have taken a huge hit financially, while at the same time, the importance of arts and culture for our sense of well-being and personal connection has never been more obvious or necessary. As we emerge from the long period of lockdown, our world-renowned creative sector will be a key element in driving the UK’s recovery and in revitalising the quality of our lives. The Government’s announcement to deliver a £1.57 billion rescue package comes at a critical time to ensure we are able to rebuild the creative industries and for the UK to resume its global role at the forefront of culture, heritage and the arts."