Covid-19: Economy Update

Statement

The following Statement was made in the House of Commons on Thursday 22 October.

“Let me speak first to the people of Liverpool, Lancashire, South Yorkshire and Greater Manchester, and other areas moving into or already living under heightened health restrictions. I understand your frustration. People need to know that this is not forever; these are temporary restrictions to help control the spread of the virus. There are difficult days and weeks ahead, but we will get through this together. People are not on their own. We have an economic plan that will protect the jobs and livelihoods of the British people, wherever they live and whatever their situation. Just as we have throughout this crisis, we will listen and respond to people’s concerns as the situation demands.

I make no apology for responding to changing circumstances, so today we go further. The Prime Minister was right to outline a balanced approach to tackling coronavirus, taking the difficult decisions to save lives and keep the R rate down while doing everything in our power to protect the jobs and livelihoods of the British people. The evidence is clear: a regional, tiered approach is the right way to control the spread of the virus. My right honourable friend the Chief Secretary to the Treasury yesterday set out for the House our economic support for businesses that are legally required to close. We are providing billions of pounds of support for local authorities and a grant scheme for affected businesses, worth up to £0.5 billion every month. Of course, we also expanded the job support scheme, with the Government covering the cost of paying two-thirds of people’s normal wages if their employer had been legally required to close. For areas in local alert level 3, we have made available over £1 billion of generous up-front grants, so that local authorities can support businesses, protect jobs and aid economic recovery in a fair and transparent way. That is our plan to support closed businesses.

But it is clear that even businesses that can stay open are facing profound economic uncertainty. This morning I met business and union representatives, including those from the hospitality industry, to discuss the new restrictions. Their message was clear. The impact of the health restrictions on their businesses is worse than they hoped. They recognise the importance of the tiered restrictions in controlling the spread of the virus, but a significant fall in consumer demand is causing profound economic harm to their industry. It is clear that they and other open-but-struggling businesses require further support, so I am taking three further steps today.

First, I am introducing a new grant scheme for businesses impacted by tier 2 restrictions, even if they are not legally closed. We will fund local authorities to provide businesses in their area with direct cash grants. It will be up to local authorities to decide how best to distribute the grants, giving them the necessary flexibility to respond to local economic circumstances, but I am providing enough funding to give every business premises in the hospitality, leisure and accommodation sectors a direct grant worth up to £2,100 for every month for which tier 2 restrictions apply. That is equivalent to 70% of the value of the grants available for closed businesses in tier 3. Crucially, I am pleased to confirm that these grants will be retrospective; businesses in any area that has been under enhanced restrictions can backdate their grants to August.

I have been listening to and engaging with colleagues around the House, including—but not only—my honourable friends the Members for Heywood and Middleton (Chris Clarkson), for Hyndburn (Sara Britcliffe), for Penistone and Stocksbridge (Miriam Cates), for South Ribble (Katherine Fletcher), for Burnley (Antony Higginbotham), for Keighley (Robbie Moore), for Cheadle (Mary Robinson), for Leigh (James Grundy) and for Southport (Damien Moore), and I am pleased to confirm that the backdating of the new grants means that we are being more generous to the businesses and places that have been under higher restrictions for longer. Let no one say that this Government are not committed to supporting the people and businesses in every region and nation of the United Kingdom.

Secondly, to protect jobs we are making the job support scheme more generous for employers. If businesses are legally required to close, as we have already outlined, the Government will cover the full cost of employers paying two-thirds of people’s salaries where they cannot work for a week or more. For businesses that can open, it is now clear that the impact of restrictions on them is more significant than they had hoped, particularly for those in the hospitality sector. I am therefore making two changes to the short-time work scheme to make it easier for those businesses to keep staff on, rather than make them redundant. First, under the original scheme, employees had to work for 33% of their normal hours, whereas now we will ask them to work only 20% of those hours; and, secondly, the employer contribution for the hours not worked will not be 33% as originally planned, or even 20% as it is in the October furlough scheme, but will reduce to 5%.

The scheme will apply to eligible businesses in all alert levels, so that businesses that are not closed but which face higher restrictions, in places such as Liverpool, Lancashire, South Yorkshire and Greater Manchester, as well as the devolved nations, will be able to access greater support. These changes mean more employers can access the scheme and more jobs will be protected. We have made this one of the most generous versions of a short-time work scheme anywhere in the world. It is better for businesses, better for jobs and better for the economy.

Thirdly, as we increase the contribution we are making towards employees’ wages, I am increasing our contribution to the incomes of the self-employed as well. Today we are doubling the next round of self-employed income support from 20% to 40% of people’s incomes, increasing the maximum grant to £3,750. So far through this crisis, we have provided more than £13 billion of support to self-employed workers. Sole traders, small businesses and self-employed people are the dynamic entrepreneurial heart of our economy, and this Government are on their side.

In conclusion, a wage subsidy for closed businesses, a wage subsidy for open businesses, cash grants of over £2,000 a month for tier 2 businesses and up to £3,000 a month for closed businesses, support for local authorities, support for the self-employed, support for people’s jobs and incomes, all on top of over £200 billion of support since March. This is our plan—a plan for jobs, for businesses, for the regions, for the economy, for the country. A plan to support the British people. I commend this Statement to the House.”

My Lords, as ever, I am grateful to the Minister for presenting this Statement. When we last discussed the economic update from the Chancellor on 28 September, he was rather unhappy with my characterisation of it as

“another example of Ministers reacting to events, rather than attempting to shape them—of allowing problems to grow, rather than acting quickly and decisively to prevent them in the first place.”—[Official Report, 28/9/20; col. 18.]

The fact that we find ourselves discussing major revisions to the package of measures outlined just a month ago suggests, sadly, a lack of strategic thought in both No. 10 and No. 11 Downing Street. While some of the changes outlined by the noble Lord are to be welcomed, there is too little detail on how others will operate in practice. We know with financial Statements that the devil is in the detail, but on too many fronts we are still waiting for that detail to be finalised.

I have no doubt that the noble Lord will tell us not to worry and that everything is under control. However, in an ideal world, the Treasury would not be redesigning the Job Support Scheme a matter of days before it went live. That it is having to revisit its plans will have done nothing to address the anxiety of businesses and workers, which I referred to during our previous discussion. The revisions to the JSS and the announcement of an increase to the third grant for the self-employed are small steps in the right direction. Additional support for businesses operating in tier 2 and tier 3 areas is also welcome, although the announcement of new funding for such businesses makes it puzzling that some of that support was withheld when requested by the Mayor of Greater Manchester earlier last week.

We hope that changes to the formula for the JSS will encourage businesses to keep on more workers. However, as a range of commentators have noted, the late arrival of the announcement means that many thousands of jobs that may otherwise have been safeguarded have already been lost. As I said last time, each job loss is a personal tragedy. More needs to be done to protect people’s jobs and that requires a concerted government effort. Despite the changes announced last week, many workers still face noticeable reductions to their pay.

My Lords, this feels like déjà vu. Once again, the Government are forced to revise and increase their support for businesses. We need them to give up their bravado and recognise the depth of the economic crisis coming both from Covid and from the harmful economic realities of Brexit, undercutting investment and jobs, even with a deal. Frankly, we desperately need a new OBR forecast, even if without a Budget. While I understand the Government choosing just a one-year spending review, we should be getting open kimono on the long-term issues and choices for discussion in this House and elsewhere. This is not the time for secret spells cooked up in No.10. The situation that we face is far more dire and needs the resources of everybody’s minds and energy.

I want to make two pleas to the Government. First, feed the kids. I know that we have just taken a PNQ on that subject but the money provided to local government under the local authority welfare assistance fund and others was never intended to cope with the present scale of demand, when much of the country is necessarily closed down again, many people are facing redundancy at the end of the month in just a few days’ time, homelessness is rising, and mental health and other demands on local services are increasing exponentially. Many Liberal Democrat, Labour and Conservative councils have stepped in to provide food vouchers to children on free school meals, but that is at the price of financing other needs. Families who qualify for free school meals have by now exhausted any savings, borrowed anything that a respectable lender will let them have and tapped out family and friends. Please will the Government put in place a voucher system to at least carry us over to next Easter?

Secondly, will the Government finally step in to help the 3 million excluded people? They consist primarily of self-employed contractors with personal service companies but also include a range of other people in the self-employed arena. There has, by now, been plenty of time to set up appropriate schemes. The Government argued from the beginning that the issue was complicated, but there has been time to sort it out. As the Resolution Foundation pointed out, and as the noble Lord, Lord Tunnicliffe, described, the SEISS has been badly targeted. The self-employed have suffered an even bigger market shock than employees, and with so many people facing redundancy and needing to look to self-employment for any future income, it is absolutely crucial that proper support is put in place for the self-employed, under whatever arrangements they have established.

I thank the noble Lord and the noble Baroness for their comments. I shall try to deal quickly with the issues that they raised.

I completely accept that we are dealing with a fast-moving and difficult situation. The noble Lord, Lord Tunnicliffe, feels that we did not move quickly enough, and he made similar comments the last time we discussed this subject. However, we have moved quickly. We have acknowledged that, given the rolling lockdowns occurring across the country, we need to do more, which is why we are supporting more extensively businesses that have been forced to close as part of the lockdown. We are paying rate relief, which will include a portion of the rent of those businesses that are forced to close. Those that remain open but are affected by a fall-off in trade are receiving a great deal of extra support as well.

It might be worth summarising the extent of extra support announced since I was last here. The government contribution to payment of salaries has increased from 22% to 49%. The employer contribution has fallen from 22% to 4%, and the minimum-hours requirement has fallen from 33% to 20%. The noble Baroness asked about support for the self-employed. It has been a complicated group to support but we have essentially doubled the level of support with the recent announcements, taking the figure up from 20% to 40%. We will continue to monitor the situation.

The noble Lord asked about evictions. There are already provisions with lenders to ensure that they are handling those processes in a sensitive and reasonable manner, but, again, we will of course keep the situation under review.

It is extremely difficult to know how much longer this horror will continue. However, on the point made by the noble Baroness, Lady Kramer, about a more strategic response to the crisis, it is worth reminding her and the House that we have put into the system an unprecedented level of support over the past nine months—some £158 billion of direct fiscal support. That includes £69 billion for employment support, and £51 billion for public service spending, funding for charities and support for vulnerable people.

My Lords, we now come to the 30 minutes allocated for Back-Bench questions. I ask that questions and answers be brief, so that I can call the maximum number of speakers.

My Lords, does my noble friend not think that perhaps the time has come for us to have a UK-wide plan for education, employment, housing and welfare that will enable us to live with this virus? Should the Government not consider inviting the opposition parties to be part of this plan and involving local authorities in its creation and execution?

My noble friend raises an important point. This country now has a more devolved structure. We have tried to keep the devolved and mayoral authorities involved in decisions at every point. We have given some £13 billion to the devolved authorities to react to the issues that we are facing. I accept that it might be easier if we could operate on an entirely national basis, but unfortunately that is not the present reality of our constitution. I assure my noble friend that we are doing everything possible to talk to the devolved authorities at all times.

My Lords, we welcome the latest support measures from the Chancellor, especially the new Job Support Scheme. It is miles better than the one he announced a few weeks ago. Can the Minister tell us when the rapid 15-minute, affordable antigen coronavirus test will be available to businesses, universities and schools across the country so that regular testing can take place to enable the economy to fire on all cylinders? When we will be able to open up airport testing to allow tourist and business travel?

The noble Lord asks an important question. I do not speak as a health expert, but a lot of these tests are simply not reliable enough. The worry is that we would create a false sense of security which could then cause further problems. I might be incorrect but, as I understand it, some of these tests cannot pick up the infection when it is still gestating in the gut of an asymptomatic person. I am aware that a number of universities and employers are taking their own decisions and using their own technologies. It is much easier for independent organisations to do this, knowing the risks, and they can respond accordingly.

My Lords, tier 3 restrictions are hugely disruptive to the economy and will lead to the collapse of yet more businesses. In these circumstances, as many Conservative MPs in these areas now say, it is imperative to provide clear information about the exit route from tier 3 so that businesses can at least try to plan for the future. Will the Minister tell the House what measures will be used and how will they be weighted when the decision to exit is made?

I agree with the noble Baroness that tier 3 has a devastating impact on businesses and on people’s lives, but it is how we are trying to control the spread of the virus. We see what is happening in Spain at the moment. That is the nightmare that we are seeking to avoid. As I understand it, the overriding way of monitoring whether an area can come out of tier 3 is when the percentage of those being tested for the virus falls below a certain threshold. This information gives some indication to businesses that they may be coming out of this nightmare.

My Lords, in answer to an earlier question, the Minister reeled off a whole range of government measures. I do not think he mentioned the Bounce Back Loan Scheme. In September, the BEIS annual report stated that losses from non-repayment bounce-back loans would be in the range of 35% to 60%. I note that this would buy a lot of school meals. Meanwhile, we know that banks are hiring debt recovery specialists to reclaim those loans. With his Treasury hat on, can the Minister tell the House which route the Government favour? Do they favour greater use of debt recovery services to reduce the overall level of loan defaults or do they accept that there will be widespread default? In either case, what level of default is the Treasury modelling?

It is important to differentiate between default and fraud. As the noble Lord will know, there are no repayment requirements on bounce-back loans for a year. The idea that banks are now hiring debt recovery firms to go out collecting is probably inaccurate. They are increasing their resources to deal with fraud because this has been a problem. I am concerned about this both as fraud Minister and as a Treasury Minister. No repayments are due on BBLs for 12 months from drawdown and we have recently extended the repayment period to 10 years.

My Lords, on the “Today” programme this morning, my right honourable friend Nadhim Zahawi said that the Government had to strike a balance between combating the virus and damaging the economy. In the light of those remarks, have the Government ever carried out a cost-benefit analysis before taking these quite dramatic decisions on lockdown, both nationally and regionally?

I am not aware of an analysis of this kind. We have to be realistic. It is easy for people sitting in a dark room with spreadsheets to say how many deaths we are prepared to accept for the balance of the economy. Frankly, it is extremely difficult. So far, we have had more deaths than other European countries, which has brought us a great deal of criticism. It is extremely difficult to balance lives against livelihoods. I might have a completely different view from that of Members opposite. We have to try to strike what we consider to be a reasonable balance—protecting lives where we can, but also protecting livelihoods.

My Lords, it would be churlish and wrong not to salute the efforts made by the Chancellor to boost the arts, and indeed I do. I also understand that not every job or venue can be saved. In Sunday’s Observer, Simon Rattle articulated the real worry that freelance musicians and artists at the workface could be so depleted that the cultural life of this country and its significant contribution to the economy could be seriously curtailed—especially if, as the Chancellor has suggested, considerable numbers leave the profession and retrain. Have the Government assessed this potential damage, given that their own figures found that out of 187,000 creative freelancers only 64,000 were eligible for and accessed SEISS? Will the Government look at this and the remaining 65% who fell outside the package?

I am not aware of the specific figures. It is clearly very worrying that we could lose the creative capacity of our economy and our society. We are in the most unprecedented situation, certainly in my lifetime and probably going back to the end of the Second World War. Whenever this crisis ends, there will have to be a period of rebuilding and regeneration. I absolutely affirm the Government’s support for this very important part of our society.

My Lords, I declare an interest as a member of Cumbria County Council, and it is a Cumbria point I want to make. One of the welcome features of the Chancellor’s Statement was the introduction of a grant scheme for businesses impacted by tier 2 restrictions, even though they are not legally closed. Cumbria is in tier 1 but most of its businesses, such as hotels, boarding houses and restaurants, serve people who come from tier 3 areas in the north-west. There has been a dramatic fall in bookings, with lots of cancellations in the last week or so. These businesses are going to go bust unless they receive the help that tier 2 is getting. Can the Minister offer them some hope that, despite being in tier 1, they might receive some help?

My Lords, the Job Support Scheme Open is available to all small businesses experiencing difficulties in this crisis. They are eligible for the figures that I gave earlier to the noble Lord, Lord Tunnicliffe, as are large employers of more than 250 employees that can demonstrate a negative impact on their turnover from Covid.

My Lords, the Government have been pretty supportive of retail and other business tenants, with the rates holiday, VAT help, the furlough scheme and the moratorium against enforcement by landlords. I have little doubt that these will be extended for as long as coronavirus issues continue, but have the Government seriously considered how they will be unwound for tenants, in particular the moratorium on rents? As soon as it is lifted, some landlords will seek enormous backdated rents, all owed at once, which themselves would bankrupt businesses that have been unable to trade for a significant period. Either government support or some unwinding of the moratorium is needed to avoid these bankruptcies.

My Lords, a great deal of thinking is going on, but this matter might be worth some pragmatism. If landlords collectively behaved in the way suggested by the noble Lord, there would be a mass exit from commercial buildings when the point comes. Doing that would surely be shooting themselves in the foot.

My Lords, as other Peers have pointed out, there does not seem to be much strategic thinking embedded in the Statement. For example, the Government could have focused on companies committed to a zero-carbon future, or picked companies that are not handing out dividends and bonuses, or those that are registered in the UK to pay tax. Did the Government do any thinking of this kind?

To answer the noble Baroness, as I mentioned earlier, a huge range of initiatives has been announced over the last few months, particularly for some of the sectors referred to. On 30 June, the Prime Minister announced substantial infrastructure commitments, partly from new money and partly from acceleration of money. Many of those are strategically aimed at the sorts of businesses mentioned, including those involved in a carbon-free economy.

My Lords, I draw attention to another division in this country. Those who I define as the salariat are largely working from home and not suffering any reductions in pay. Indeed, they are saving money and a couple of hours a day from not travelling to work. They are making the rules, but seldom suffer any of the consequences. At the same time, we have a lot of very junior workers, some around this House, who are struggling to get by. Some are furloughed; some have no jobs at all. They feel rejected and unwanted by society. This is not a matter that the Government can wave a wand to solve, but we need to pay more attention to this division in society.

This House is almost empty of workers. If they can work at home for so many months without us even seeing them, is there not a good case to move some jobs from the House of Lords to areas of high unemployment and poverty in the north-east? If they can be done remotely from Dorking, Woking and towns in Berkshire, they can surely be done from Hartlepool and other delightful towns found in the north-east and north of the country, where these jobs are seriously needed.

The noble Lord makes an extremely important point. By coincidence, I am the Minister working on the programme to move civil servants out of London, which was recently announced. The Prime Minister will be making more comments on this shortly but, given that I have lived this for six months, I can reassure my noble friend that we have identified 14 hubs with spokes across Britain, including the devolved authorities. The most important part is to get the senior civil servants out of London, because they make decisions on the lives of people from whom they are, in my view, far too detached. At the moment, some 65% of all senior civil servants in the country are here in London, and the vast majority in this postcode. We are committed to ensuring that opportunities for those senior jobs are outside the capital, and that they make policies that affect citizens in those areas.

My Lords, the availability of an effective coronavirus testing regime is critical to reopening the economy. With the reported Good Law Project prospective legal action on the procurement of testing equipment in mind, can we have an assurance that the procurement programme has, extraordinarily, either National Audit Office prior approval or that government lawyers are satisfied that contracts do not breach the 2015 Public Contract Regulations? Can we have that assurance in writing, as it is very important for business confidence?

The noble Lord’s question is timely, because part of my responsibility is for the procurement reform rules which we are putting into place and will be able to use once we leave the EU on 1 January. Part of the problem we have had over this crisis is the extremely clunky method of procurement that is imposed on us by the OJEU rules. It will need primary legislation, but we have designed a programme that will deal with exactly the issues that the noble Lord raises. If he is interested, I am happy to send him a draft copy of the Green Paper, which will be available in the next week or two.

My Lords, like the noble Lord, Lord Berkeley of Knighton, I applaud what the Chancellor has been seeking to do in very difficult and trying circumstances. However, as the noble Lord said, if the country is to get back to normal, it, like the hospitality sector, will be very dependent on a thriving cultural sector. My noble friend did not really face up to this in answering the noble Lord, but it is a fact that, although we all applaud the creation of a safety net for the self-employed, a vast number of them—self-employed musicians and so on—are falling through it, particularly in the cultural sector. Can this matter be addressed as one of urgency? Frankly, it is insulting to say to musicians, who have spent a lifetime training, that they can retrain for something else.

I respect my noble friend’s passion for this area and I agree that it is an extremely important part of our society, as I said earlier. We have put forward a cultural recovery fund of some £1.5 billion, and of course we will continue to look carefully at what more can be done to support those who are falling through the net. I just remind my noble friend that our overall employment support scheme has been one of the most generous in Europe, but the group that he refers to is extremely difficult to get to easily.

My Lords, what discussions have taken place with ministerial colleagues in the DWP regarding the need to extend the minimum income floor of universal credit beyond 13 November for self-employed people during the Covid outbreak?

My Lords, I am aware that those discussions are ongoing but I do not have the figures to hand, so I will write to the noble Baroness about the latest thinking on that.

My Lords, the Sunday Times of last Sunday says that the Prime Minister has ordered a review which would allow

“City dealmakers, hedge fund managers and company bosses flying into the UK”

to be

“exempt from the 14-day quarantine period under plans to ‘promote global Britain’.”

There are also stories that working lunches of up to 30 people, now being promoted by expensive London restaurants, can be allowed as long as business is discussed. Can the Minister confirm that anyone who is, or thinks they are, involved in global business, global Britain or business can therefore exempt themselves from these rules and that that can apply to anyone else? If not, how can the Government expect the rest of the country to comply while allowing their apparently rich friends to buck the system?

My Lords, I suspect that this is just speculation. I am certainly not aware of any government policy promoting that. As we know, groups of six people, socially distanced, can eat if they are in an outside setting. Those facilities are being made available by pubs and restaurants, but I am not aware of any special treatment that the noble Lord refers to.

My Lords, first, I thank the Minister, who, unlike some of his colleagues, has shown massive respect to the House in responding to the questions that he has been asked. That being so, perhaps I may take him back to the first supplementary question, from the noble Lord, Lord Forsyth, who called not for a coalition but for a united national effort, and I think that that is what the public want. If we stay in our tribes, we will not win. We have to reach out outside the tribe. I am looking for some desire on the part of the Government to seek to reach out, outside the tribe, so that we can have a national effort to get through this crisis. Does the Minister agree?

I certainly agree with the noble Lord that this requires a national effort and that we need to avoid tribalism at all costs. What has perhaps taken us all by surprise is the long-term reaction to the crisis that we will have to sustain. I think that most of us—certainly I speak personally—thought that we could handle three months of lockdown, after which it was hoped that we could get back to our lives. The brutal reality now is that this could roll on for even another year, depending on any progress on a vaccine, which is far from certain. Therefore, the longer it goes on, the more there is a need for us to rise above our sectarian differences and to operate as a whole country.

Sitting suspended.