The following Statement was made in the House of Commons on Monday 11 January.
“Before I begin, I am sure the whole House will join me in sending our very best wishes to my right honourable friend the Member for Old Bexley and Sidcup (James Brokenshire). I have been fortunate in having worked closely with him, and he is one of the nicest and most decent people in politics—a fantastic Minister and a tireless advocate for his constituents. We all look forward to his speedy recovery and to seeing him back in this place as soon as possible.
Last week, the Prime Minister set out the actions that we must take to control the spread of coronavirus. With your permission, Mr Speaker, today I will update the House on the economic situation we currently face, the action we are taking to support the British people and businesses through the crisis, and the factors influencing our outlook.
As the House knows well, coronavirus has already caused significant harm to our economy. The scale of the impact bears repeating. GDP fell by 18.8% in the second quarter of 2020. While the economy grew as the country opened up over the summer, it remained 6.7% smaller than it was before the crisis. The Office for Budget Responsibility’s November forecast showed GDP falling again in the final quarter of last year and it forecast the largest fall in annual output for over 300 years. Even with the significant economic support we have provided, more than 800,000 people have lost their jobs since February. While the new national restrictions are necessary to control the spread of the virus, they will have a further significant economic impact. We should expect the economy to get worse before it gets better.
In response, the Government have put in place a comprehensive economic plan. We have provided a fiscal stimulus of over £280 billion to fund our plan for jobs, to support public services like the NHS, and to provide financial support for millions of people and businesses. Some 1.2 million employers have furloughed almost 10 million employees. Almost 3 million people have benefited from our self-employment grants, taking the total support for the self-employed to nearly £20 billion. Over 1.4 million small and medium-sized companies have received government-backed loans worth over £68 billion. Tens of billions of pounds of tax cuts, tax deferrals and cash grants have been delivered to businesses, and the United Kingdom Government have guaranteed at least £16.8 billion of additional funding for the devolved Administrations in Scotland, Wales and Northern Ireland.
In response to the new national lockdown, we are extending and increasing our financial support. We are providing a bridge for people and businesses until the economy reopens, to give them the chance to rebuild productive capacity. To do that, we have extended the furlough scheme to April, we are supporting self-employed people with a fourth income grant, and we have announced, alongside the introduction of new restrictions, an extra £4.6 billion to protect UK jobs and businesses. All business premises in England that are legally required to close, including in retail, hospitality and leisure, can now claim one-off grants of up to £9,000 for each of their business premises, benefiting more than 600,000 businesses and coming on top of the existing grants worth up to £3,000 paid each month. We have also made discretionary funds of £500 million available for local authorities in England to support local businesses in those areas, on top of the £1.1 billion of discretionary funds that we have already provided to local councils.
Sadly, we have not been and will not be able to save every job and every business, but I am confident that our economic plan is supporting the finances of millions of people and businesses. Across almost all areas of economic policy, we are providing comparable or greater support than all our international peers. As the Office for Budget Responsibility, the Bank of England and the International Monetary Fund have all recognised, our economic response is making a difference by saving jobs, keeping businesses afloat and supporting people’s incomes.
Looking forward, there are signs of hope. First, with the vaccine, we can start to see a path out of coronavirus. Vaccine rollout is our most important economic lever and we have made available over £6 billion. We have now administered over 2.4 million vaccine doses across the United Kingdom, and by 15 February we aim to have offered a first vaccine dose to everyone in the top four priority groups identified by the Joint Committee on Vaccination and Immunisation.
Also, the data shows that there are potential sources of underlying resilience in our economy. In aggregate, we have seen the household savings ratio reach record levels and, taken as a whole, corporate sector cash buffers have improved. And of course, we have now agreed a new trading partnership with the European Union. We have removed that uncertainty from businesses and can now start to do things differently and better—not least in financial services, where in November I outlined for the House our plan to reinforce the UK’s position as a globally pre-eminent financial centre.
While the vaccine provides hope, the economy is going to get worse before it gets better. Many people are losing their jobs, businesses are struggling, and our public finances have been badly damaged and will need repair. The road ahead will be tough. Now it is time for responsible management of our economy, taking the difficult but right long-term decisions for our country, but I am confident that, with this comprehensive support that the Government are providing and, above all, the determination, enterprise and resilience of the British people, we will get through this. I commend this Statement to the House.”
My Lords, as ever I am grateful to the Minister for putting this Statement on the record and leading our scrutiny of it. The picture painted by the Chancellor yesterday was a bleak one. Given that his personal brand centres on optimism, it is clear why he has resisted appearing before the Commons until now. Before turning to yesterday’s Statement, I gently say to the Minister that announcing £4.6 billion of expenditure via a Written Ministerial Statement last week was wrong. I hope he will assure us that both Houses will receive verbal updates in future.
As outlined in the Statement, economic performance in 2020 was understandably poor by conventional standards. The Minister will doubtless disagree with me, but this was arguably exacerbated by the stop-start nature of the Government’s response to the pandemic. The outlook for the economy this year and beyond is equally worrying. Even with nifty accountancy tricks, the projections fall far short of where we would like to be. I have commented previously about the speed at which the OBR predicts annual economic growth will flatten out at an unremarkable 2%. I have regrettably seen and heard nothing from the Government which resembles a plan for addressing that concern. We recognise, as we have at all stages of the Covid-19 crisis, the colossal scale of state intervention over recent months. It has been unprecedented, but there is no doubt that challenging times call for such measures.
The Minister will know that we are fast approaching a calendar year since the first national lockdown and the launch of various economic measures that accompanied it. Despite the passage of so much time, current support still falls far short of the Chancellor’s pledge to do “whatever it takes” to help the nation through these tough times. The Government say that not every job can be saved, but more could have been rescued had Mr Sunak provided greater certainty on employment support last year rather than trying to extricate himself from it at the earliest opportunity—in the face of all available evidence. As sure as night follows day, the U-turn came, but the harm had already been done. It is ironic that he now appears to champion the furlough scheme as one of his greatest achievements.
The Chancellor has once again responded to a long-term economic crisis with only very short-term measures. The evidence from the Resolution Foundation of sharply growing inequalities is scary, frankly, as low-income families have to spend more to survive the pandemic. Will the Government at least make permanent the £20 uplift in universal credit?
Economic recovery cannot take hold before the summer even with a successful vaccine rollout, so will the Government now extend furlough, SEISS, the loan and various other support schemes at least to July, if not beyond?
Why have the Government continued to exclude 3 million of the self-employed from help, especially now that the Federation of Small Businesses has devised a scheme that avoids the risk of fraud? The FSB has also pointed to the recapitalisation crunch that could destroy businesses in 2021. Where is the long-term economic plan for recovery that businesses need to enable them to hang in, protect jobs, invest and grow again?
My Lords, I am grateful to the noble Lord, Lord Tunnicliffe, for his comments. I shall to try to address some of his points.
It is clear that the UK, along with the rest of the world, continues to face economic disruption in the wake of the Covid pandemic. No major economy has avoided a dramatic fall in its GDP in the past year. In the face of the significant and far-reaching impact of Covid, the Government’s priority has been to protect lives and livelihoods with a flexible and adaptable response. This response is one of the largest and most comprehensive in the world, totalling more than £280 billion since March. The IMF judges the UK’s initial response as being aggressive, effective and an excellent example of well-co-ordinated action.
While we should expect the economy to get worse before it gets better, as my right honourable friend the Chancellor said yesterday, there are reasons to be cautiously optimistic for the future. The peak of the unemployment rate is expected to be significantly lower than that estimated earlier in the crisis. The OBR has revised down its central scenario from 12% in July’s estimate to 7.5% in November’s estimate. The household savings ratio has reached its highest level since records began in 1963. The corporate sector cash buffers have improved, with large businesses making large net repayments every month since May. The furlough scheme has seen some 1.2 million employers and almost 10 million employees supported and has been extended until April to provide certainty during these difficult times. We have provided significant support to the creative industries through the £1.5 billion Culture Recovery Fund and to the hospitality industry, which I recognise has been severely impacted by the restrictions. It has also been supported by cash grants, loans, VAT reductions and deferrals, and business rate holidays.
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, I will quote from the Statement, where the Chancellor said:
“Across almost all areas of economic policy, we are providing comparable or greater support than all our international peers.”—[Official Report, Commons, 11/1/21; col. 23.]
We are supporting with borrowed money and using the inheritance of the country. When the Government cut back, as they inevitably will have to, they will be opposed and told that they should spend more. I will ask two questions. Do the Government have any perspective on getting back to a balanced budget? And have the Government factored in the possible impact of increases in interest rates on the amount they will have to pay back on all the money that has been borrowed?
The noble Lord asks very important questions. I am not in a position to give a date by which we will attempt to rebalance the budget, but I assure the noble Lord it is a very high priority. Indeed, on his second question, we are aware that we are able to borrow large sums of money at the moment because of the very low interest rates that will not necessarily remain, which re-emphasises the need to bring the budget back into balance as soon as possible.
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We needed swifter intervention in the creative industries, to support hospitality firms and supply chains, and to support the aviation sector. Despite their worth to our economy, many unanswered questions remain about the future of these sectors. Ministers have shamefully refused to address well-documented shortcomings of the Self-employment Income Support Scheme, where arbitrary criteria have left millions relying on universal credit, which is already insufficiently generous and at risk of a significant cut from April. We would have accepted a declaration of intent in the event of full details not being ready; as it happens, we did not get even an acknowledgement of the problem.
The Chancellor could and should have used yesterday’s Statement to outline his plans for addressing these issues and many more, including backing local authorities rather than forcing them to raise council tax. Compliance with guidance on self-isolation is believed to be heavily influenced by an individual’s financial circumstances. The Chancellor knows this yet failed to announce new incentives to help people do the right thing. His Statement was also a missed opportunity to provide much-needed additional help for the homeless, who have, tragically and literally, been left out in the cold. Can the Minister shed any light on why these issues were not directly addressed in the Statement? Can we expect them to be addressed soon, or will the Government continue to hide behind flimsy and unsubstantiated claims?
We are trying our best to support the Government as they tackle this pandemic, and will continue to do so. However, to rebuild public confidence in their response, we need greater honesty, accountability and consistency. The arrival of multiple vaccines against this coronavirus is crucial in our fight to overcome it, but we are still getting different messages and timeframes depending on which member of the Cabinet we hear from. Whether it is in respect of the number of Covid-19 infections and deaths, the state of our economy, the struggle to end inequality or even Brexit disruption to supply chains at border crossings, Ministers warn almost daily, apparently without contrition, that things are likely to get worse before they get better.
We understand that the new strain required changes to plans over Christmas, but, as with the furlough U-turn, clarification came much too late. Despite that experience, the Government have set themselves the target of schools returning after the February half-term and life beginning to look more normal by Easter. Does the Minister stand by these dates? If it transpires that they will be missed and children will remain at home, will the Government look for additional help for teachers and a legal right for parents to request paid, flexible furlough? Can the Chancellor announce future financial support at the earliest opportunity, to give businesses and workers maximum certainty?
The support for the self-employed has been unprecedented and among the most generous of schemes in the world. It has so far supported almost 3 million people at a cost of nearly £20 billion. As the Chancellor has said, sadly we are not able to save every job and business and, in recognition of this, have boosted the welfare system by £7.4 billion in 2021.
I thank the noble Lord for mentioning the vaccine, which represents a significant sign of hope and a path out of the coronavirus. Vaccine rollout is our most important economic lever and we have made available more than £6 billion to facilitate that. We have now administered more than 2.4 million vaccine doses across the UK. By 15 February, we aim to have offered a first vaccine dose to everyone in the top four priority groups identified by the Joint Committee on Vaccination and Immunisation.
The road ahead remains tough, with significant uncertainties. The Chancellor and this Government will continue to work to support individuals, businesses and public services during this time. As the Chancellor said yesterday, he will provide an update on the next stage of our economic response to coronavirus and the economic outlook for the rest of the country in the Budget on 3 March.
On retaining the uplift in universal credit, referred to by the noble Baroness, Lady Kramer, as with all responses so far in the crisis, we have tried to adapt to changing circumstances and this matter will be kept under continual review. In the same vein, we have extended furlough until April, it already having been extended from an earlier time, and we will continue to be alert to the state of the economy.
On the noble Baroness’s point about the self-employed and the Federation of Small Businesses, my right honourable friend the Chancellor said yesterday that he was considering the ideas put forward by the FSB.