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Economy Update
16 June 2021
Lead MP
Steve Barclay
Debate Type
Ministerial Statement
Tags
TaxationEmploymentBusiness & TradeBenefits & Welfare
Other Contributors: 29
At a Glance
Steve Barclay raised concerns about economy update in the House of Commons. A government minister responded. Other MPs also contributed.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Government Statement
The Minister stated that despite the challenges of extending restrictions, the Government has provided substantial economic support to households and businesses. This includes £352 billion in total support over the past 15 months, with the furlough scheme supporting 11.5 million jobs until September. The self-employment income support scheme was extended, providing nearly £3 billion to almost 3 million individuals. Businesses received tax cuts, deferrals, loan schemes and grants worth over £100 billion, including a £10 billion business rates holiday for eligible businesses in retail, hospitality, and leisure sectors. Restart grants of up to £18,000 were provided, and discretionary grant funding was given to councils. The VAT rate was reduced by 5%, providing additional support. The loan guarantee schemes have provided £70 billion in loans to 1.5 million companies. Additional sectoral support includes a £2 billion fund for arts, culture, and sports institutions. Further measures were taken to protect jobs and livelihoods, including extending the £20 uplift to universal credit until September, increasing the national living wage to £8.91 from April, and providing a £670 million hardship fund. The Government's plan has reduced economic scarring, although borrowing is forecast at £300 billion last year and up to £107 billion next year. A further announcement was made regarding the introduction of legislation to support orderly resolution of commercial rent debts accrued during pandemic closures through binding arbitration in cases where negotiations fail.
Stephen Crabb
Ind
UKIP
Question
The Shadow Minister welcomed the statement but questioned whether it was time for a 'sober and clear-sighted look' at the furlough scheme due to concerns about its cost and potential distortions in the labour market.
Minister reply
The Minister agreed with the need for clarity regarding the furlough scheme, emphasising that tapering is justified because of the demand for labour from businesses. He highlighted a wider package of support measures including doubling the number of work coaches, further DWP funding, and schemes such as restart, kickstart, tripling traineeships, and increasing apprenticeship incentives.
Alison Thewliss
SNP
Glasgow Central
Question
My thoughts are also with the family and friends of Jo Cox. Over the past 15 months, companies in sectors such as tourism, travel, hospitality, events, the arts, night-time economy and weddings—and their supply chains—have been building up debts and have not even gotten close yet to breaking even. It is shameful that not an extra penny of support is being announced for them today. The debt incurred by businesses could take a decade to pay back and will be a drag on recovery. What is his plan to deal with this debt? Will the Minister delay the furlough increase, extend furlough, VAT cut, universal credit uplift and sick pay increase?
Minister reply
The Scottish Government are not using all their powers available to them on tax and welfare. The package announced includes a 75% business rates cut for the full year to March 2022, an additional £6 billion in tax cuts this year, and a temporary universal credit uplift. Furlough tapering is necessary as businesses reopen and hire new staff. The Government’s plan has been comprehensive and responsive throughout the pandemic.
Virginia Crosbie
Con
Ynys Môn
Question
Thanks to decisions made by this Government, recent ONS data shows that UK unemployment is among the lowest in Europe at 4.7%, with almost 200,000 more people in work since April. My families on Ynys Môn desperately need more jobs, and a freeport on Anglesey would create thousands of high-skilled job opportunities. What discussions has he had with the Welsh Government about creating at least one new freeport in Wales?
Minister reply
We remain committed to establishing at least one freeport in Scotland, Wales and Northern Ireland as soon as possible through a fair, open and transparent allocation process.
Christine Jardine
Lib Dem
Edinburgh West
Question
My thoughts and sympathies are with the family of Jo Cox on what must be a very difficult day for them. Does he appreciate that it does not feel that way for all businesses facing another month of restrictions, during which time many will have to find 10% of salaries for furloughed staff, face increased VAT in hospitality, retail and leisure, and think about repaying bounce back loans without being able to trade again? When exactly will the Government abandon this piecemeal approach and reveal a long-term strategy for recovery?
Minister reply
No one is saying that next month businesses have to repay their bounce back loans. The schemes will continue through delays in the road map, including the furlough scheme, self-employment income support scheme, business rates relief, and loans programme.
Question
Visiting businesses across Barrow and Furness last weekend, I had one clear message from both those who run the businesses and the staff: they are incredibly grateful for the support they have had from the Government, especially the furlough scheme. Can my right hon Friend confirm that these schemes will continue through this time?
Minister reply
The number on the furlough has come down since November. The Chancellor’s ethos is to respond to changing needs and accommodate delays in the road map through measures such as the furlough, self-employment income support scheme, business grants, business rates relief and loans programme.
Cat Smith
Lab
Lancaster and Fleetwood
Question
With the extension of restrictions and employers having to make a 10% further contribution to the wages of employees who are furloughed from 1 July, jobs and livelihoods will be put at risk. Surely he can see how illogical that is, so will he reassess the tapering on the furlough scheme?
Minister reply
The number on the furlough has come down to 3.4 million people from a peak of 8.7 million. Output grew by 2.3% in April and 2.1% in March, showing improvement.
Question
Unemployment is down to 2 million fewer than originally forecast in April last year, and the unemployment rate at the moment is about 4.7%. Does this not show that our plan for jobs is working?
Minister reply
The furlough data from the end of April shows a decrease in those on furlough to 3.4 million people from a peak of 8.7 million, indicating effectiveness. Output grew by 2.3% in April and 2.1% in March, showing improvement.
Sarah Owen
Lab
Luton North
Question
At the weekend, I visited Tip Top Linen Services in Luton North, which is a fantastic part of the local hospitality supply chain, with its roots committed to the community and an ethical ethos to be proud of, but the Government’s abject failure means that many of the company’s clients now cannot reopen for at least another four weeks. What does the Chief Secretary say to this and other brilliant but forgotten firms, which have taken a hit yet again because of his Government’s failure to contain this dangerous new variant and to recognise that the hospitality sector is not just hotels and restaurants?
Minister reply
I do not accept that. Looking at the vaccine programme that the UK has had thanks to the huge efforts of our NHS, volunteers and so many people in communities up and down the country, I would not characterise it as an abject failure. Actually, our deployment of vaccines is the envy of many countries, and it is key to the road map. For Tip Top Linen Services, and businesses across the United Kingdom, we have provided a comprehensive package of support, as I set out in a number of responses. That is key to those important businesses being able to bounce back as the road map moves to step 4.
Question
Thank you, Madam Deputy Speaker. My right hon. Friend will be aware that some people who have been furloughed during lockdown have taken on other jobs. A big hotel and golf complex—a family-owned business in South Northamptonshire—furloughed about 300 staff. When it came to unlocking and it called back all those staff, around half of them resigned because they already had other jobs at supermarkets, delivery companies and so on. What can my right hon. Friend do, first, to protect the taxpayer from people effectively earning double pay, and also to stop that happening to the huge detriment of this family-run business?
Minister reply
First, may I join you, Madam Deputy Speaker, in offering congratulations to my right hon. Friend on her well-deserved recognition? She raises an important and legitimate point. The furlough scheme was designed to operate within the employment law framework. An employee is able to have a second job while on furlough, provided that that was allowed within the terms of their existing employment contract. I appreciate the spirit of the point she raises, and that was not the original intention when someone moved on to another job. It was part of the balance, as we have debated in this House many times, between the speed of the scheme’s deployment and how one designed its various features. What is allowed within an employment contract shapes what employees can do while on furlough.
Ben Lake
PC
Ceredigion Preseli
Question
In addition to addressing the public health emergency of covid-19, there is a pressing need for Governments across the world to act decisively to combat climate change. The Climate Change Committee has today criticised the Government’s lack of action on climate-proofing our economy and society. Will the Treasury adopt the same urgency in tackling this crisis as it did when tackling the covid-19 pandemic, by allocating the funding necessary to address the recommendations in today’s report, and accelerating our net-zero transition?
Minister reply
Future spending commitments on net zero will be matters for the spending review, but the hon. Gentleman will know well the Prime Minister’s commitment to that agenda and the 10-point plan, as well as the leadership that the UK is providing through COP26. This issue is a key priority of the Prime Minister and the Government as a whole. There is much agreement across the House about the urgency of addressing climate change, but spending decisions on that will be for the spending review.
Question
I thank the Chief Secretary to the Treasury for the £352 billion for jobs and businesses. Will he look urgently at sectors such as aviation, travel agents, and the events industry, which cannot currently trade out of the pandemic? For example, Ace Bar Events in Studham has had very little income and no help since the March 2020 £10,000 grant.
Minister reply
As my hon. Friend will know, Treasury Ministers and colleagues across the Government are always keen to engage with him on specific sectoral issues. The wider package of support was designed to work across sectors, and in addition to that I also mentioned specific support for the culture and sport sectors, such as the £1.57 billion announced and the further grant of £300 million. More than £11 billion of support has gone to the aviation sector. There are targeted measures of support for specific sectors, but they fit within the wider package of support such as the covid corporate financing facility, grants on research and development, and the furlough package of support.
Question
People and businesses, especially in the hospitality sector, still need urgent and ongoing help to navigate the continuing covid emergency. The UK Treasury alone can help in three ways: it could continue the VAT cut for the sector or, even better, remove VAT; it could continue furlough at its current rate; or, as less than a fifth of the promised £350 billion for covid loans has been used, it could convert a chunk of it to grant funding. Will the Treasury do all or any of those three things?
Minister reply
The support package announced by my right hon. Friend the Chancellor was designed to anticipate any potential slippage in the covid road map. The hon. Gentleman specifically mentions VAT, which has not been raised so far. The package of support in terms of reducing VAT totals £7 billion so far, with the 5% rate being extended to 30 September. Then there is a further transitional period for six months at 12.5%. Again, the narrative that VAT reductions are coming to an end, and that that is out of step with the covid road map, is not the case: the VAT reduction has already been extended to 30 September and then there is a transitional period at the lower level of 12.5%, in anticipation of the situation we face.
Bury South
Question
The business rates holiday last year delivered a tax cut worth £10 billion for businesses in the retail, hospitality and leisure sectors—businesses such as the Goat’s Gate in Whitefield in my constituency, which won my best pub competition. Will my right hon. Friend confirm that 90% of the businesses that benefited last year will also receive a 75% cut to their business rates bill for the full year to March 2022, thus continuing to support vital businesses in Prestwich, Whitefield and Radcliffe?
Minister reply
My hon. Friend is absolutely right that businesses will continue to benefit from support. It is about getting the balance right between support for businesses and the cost to the Exchequer. There was 100% support for those businesses last year, and this year it equates to a 75% reduction in their business rates bill across the financial year.
Salford
Question
Both the Association of Independent Professionals and the Self-Employed and the CBI have this week called for urgent sector-specific support packages; the British Chambers of Commerce and the TUC have urged the extension of the full furlough scheme; and ExcludedUK has reiterated calls to support the millions who have been left without support for over 15 months. Will the Chief Secretary heed these calls and commit today to outlining urgently updated sector-specific support for industries subject to continuing restrictions, to extending the full furlough scheme for as long as needed and, finally, to ensuring a comprehensive and backdated package of income support for the excluded?
Minister reply
We have already covered the point that furlough has been extended until the end of September. As I said in my answer only a moment ago, there are specific sectoral support packages in addition to that. At the same time, we need to get the balance right between that and the very considerable cost to the Exchequer—borrowing £200 billion last year and with significant further borrowing this year and next. We need to get the balance right between that level of borrowing and the wider package of support offered.
Question
Nobody in this House, or indeed in Blackpool South, wanted to see a pause in our road map of easing restrictions. Does my right hon. Friend the Chief Secretary to the Treasury agree that this short delay is necessary so that we can proceed irreversibly out of lockdown, build back better from covid and, finally, begin to get our public finances back in order?
Minister reply
Yes, I agree with my hon. Friend. The key is that it will allow time for more second vaccinations, which is key in the step-forward decision on the road map.
Catherine West
Lab
Hornsey and Friern Barnet
Question
My constituents will be very disappointed that the Chancellor has not bothered to come to this Chamber in such a week as this to answer my question relating to freelancers—particularly but not uniquely in the creative sector—who have been excluded from any package. So to pay for that, will the Minister have an urgent meeting with me and other Members who are worried about those who have been excluded from all packages of support, by the end of this week?
Minister reply
It is slightly odd to criticise me when I am literally in the Chamber answering the hon. Lady’s question. The point is that there has been a comprehensive package of support for those on the self-employment income support scheme, which has been further extended. Many of those who were of most concern to colleagues on both sides of the House in earlier debates have come into scope of those schemes as we have gone through extensions, and I understand that my colleague the Financial Secretary has met groups to hear representations on these issues.
Question
I welcome the measures announced today to help business tenants resolve any arrears disputes with their landlords. Does the Chief Secretary think that money could be found for a similar scheme for residential tenants who have gone into arrears with their landlords, to help to contribute to clearing those arrears so that tenants can have a fresh start once the pandemic is over?
Minister reply
Today’s announcement clearly pertains to commercial rents. Of course, colleagues continue to listen to Members from across the House on other issues as they arise. I am very happy to have further discussions with my hon. Friend.
Joy Morrissey
Con
Beaconsfield
Question
I thank my right hon. Friend for the assistance and tax cuts that he has given to businesses. Unlike Opposition Members, I will not demand additional spending and borrowing: does my right hon. Friend agree that we must come to grips with our level of borrowing and spending? We must have sound financial management moving forward out of the pandemic. Will he confirm that the Government have firm plans to do that?
Minister reply
I strongly welcome my hon. Friend’s question. She is absolutely right to focus on that. That is why, at the Budget, my right hon. Friend the Chancellor announced key measures such as maintaining the level of personal tax thresholds until 2025-26 and increasing the main rate of corporation tax. It is important that we take measures to protect the public finances and get them back on to a sustainable path in the medium term.
Question
In December, the UK Government provided a quarantine exemption to people flying business class, as if somehow the richest were immune to covid. Despite the bluster, we know that India was not added to the red list quickly enough. In terms of learning lessons, does the right hon. Gentleman agree that financial analysis needs to be undertaken on the cost of protecting borders with full quarantine and supporting the travel and tourism industries, versus the damage in financial impact of the longer imposition of restrictions?
Minister reply
Where there is a balance between protecting the unlocking of the wider UK economy versus a tougher approach at the border, the bigger prize economically is the UK’s ability to unlock our economy. As the Prime Minister set out in Prime Minister’s questions, we should not judge that with the benefit of hindsight when information on variants of concern which were not known at the time subsequently come to light, not least because of the UK’s capacity to undertake 47% of current global genome testing.
Question
At the Budget in March, the Chancellor made it clear that he was taking a long-term approach to the support schemes for two specific reasons: to accommodate any short pauses in the road map, and to provide certainty in planning for businesses and families. Does my right hon. Friend agree that because the support schemes—most of them, anyway—do not end until September, the principle of continuity and certainty is being delivered? Will it continue to be a part of all planning?
Minister reply
Very much. I am grateful to my hon. Friend for that question, and he is absolutely right. That was exactly the Chancellor’s design for that continuity and certainty. Indeed, that particular thing was recognised and welcomed by many business leaders at the time.
Question
Nightclubs and live music venues across Birmingham have been busy preparing and selling tickets for events in anticipation of the now delayed reopening. That is a further cost they can ill afford. Is there any further support the Minister is prepared to give them?
Minister reply
I have set out the comprehensive package of support that applies to businesses with restart grants and so forth. Of course, I would draw the hon. Gentleman’s attention to the support through local authorities, including the discretionary grants that are available as well.
Luke Evans
Con
Hinckley and Bosworth
Question
I continue to meet businesses in Bosworth, most recently those from the Hinckley business improvement district. They told me they were very grateful for all the support the Government have offered during this time, but they are looking to grow for the future as they come out into the post-pandemic economy, and one of the biggest concerns they have is business rates. I know the Chancellor is committed to a review of business rates. Is the Treasury heeding that call, is the Chancellor committed to bring that forward, and is there a timeline to do so?
Minister reply
As my hon. Friend touched on in his question, the Government have committed to conclude the business rates review by autumn 2021. The review is considering the issues he mentions, including the fundamental changes to the administration of the business rates system and indeed the impact that has on businesses.
Afzal Khan
Lab
Manchester Rusholme
Question
It is wonderful to see cafés, restaurants, pubs and bars in my constituency reopening their doors. Local spots like Levenshulme Bakery, Mediterranean Café and Coffee Cranks in Whalley Range and the Sanam restaurants in both Longsight and Rusholme are well worth a visit, if the Minister would like to join me some time. Despite doors being open again, the hospitality sector is now facing a mountain of debt. Forcing businesses to pay this back while many are still struggling to turn a profit is unfair and could well harm the recovery, so does the Minister agree that a flexible repayment scheme tied to profits is now necessary?
Minister reply
First, I am very grateful to the hon. Member for the kind invitation, and I hope one day to be able to join him in what I am sure are fantastic local businesses to which he is quite right to draw the House’s attention. The key is the support that those businesses have had so that they are able to bounce back and to be open now. On the issue of debts carried by business, part of the design of the Chancellor’s schemes such as bounce back loans has been to allow additional time for those loans to be repaid so that they do not become an undue burden on those businesses.
Question
East Devon is back open for business, but step into any pub, café, hotel or restaurant and it is clear that it is struggling with the impact of social distancing. Does my right hon. Friend agree with me that social distancing in hospitality must go next month to give these businesses a fighting chance of survival?
Minister reply
My hon. Friend is right to highlight the importance of the review of social distancing that the Government are committed to undertaking, and that will obviously shape the approach. We have said that we will have a review, and we are very committed to that. The future beyond step 4 will therefore need to be taken in the round, shaped by the data in that review.
Question
Last year, when faced with the second wave of covid-19, the Scottish Government called for an extension of furlough as Scotland went into a further lockdown. However, the Tories only extended the scheme when it was clear that the south of England needed to be placed under tighter restrictions. Does the Minister agree that if Scotland is to be treated as an equal partner in the United Kingdom, furlough must be available if and when we need it?
Minister reply
The furlough is available—it extends to the end of September—but the hon. Gentleman seems to be suggesting that it is there almost indefinitely, as opposed to being an exceptional measure in response to the exceptional circumstances of the pandemic. Given the wider fiscal cost, not least the £352 billion spent to date, I do not think that that would be fiscally responsible.
Richard Fuller
Con
North Bedfordshire
Question
May I commend my right hon. Friend for the Treasury’s response to the immediate challenge of covid, but also for having an eye on the longer-term challenge of inflation? We are now in the 13th year of competitive quantitative easing by the Fed, the Bank of Japan, the European Central Bank and the Bank of England. May I ask for his reflections on its effect on his near-term economic plans?
Minister reply
Of course, decisions on quantitative easing are for the Bank of England, which is independent. The last time I looked, I think the initial response to the global financial crisis was approximately £75 billion, and there has been about a twelvefold increase in QE since then, so I understand my hon. Friend’s underlying point. Ultimately, what my right hon. Friend the Chancellor has been focused on is the plan for jobs and supporting the economic recovery.
Toby Perkins
Lab
Chesterfield
Question
The impact of these restrictions on Britain’s pubs has been very tough indeed, but it has been even worse for nightclubs that have been unable to open at all. It seems entirely wrong to me that, from 1 July, a nightclub that is unable to open will be paying a 33% business rate bill and seeing an increase in its furlough contributions. Given that the Government’s failure has forced them to extend how long the nightclubs are closed for, will the Chief Secretary confirm that he will consider whether nightclubs should no longer be expected to pay that 33% on their business rates?
Minister reply
The hon. Gentleman raises a perfectly legitimate point about how acutely that sector in particular has been affected, as I think everyone in government recognises, but I do not think it fair to say that the Government have not announced any measures that reflect those challenges. Indeed, on commercial rent, he will have heard in my statement today’s specific announcement that applies to the sector.
Gareth Davies
Con
Grantham and Bourne
Question
This morning’s ONS inflation report highlights the risk we face of rising rates, given the amount of debt that we have incurred during the pandemic. Does my right hon. Friend agree that it is important we focus on sustainable public finances, and that one way we can help is by mobilising more private capital investment?
Minister reply
I absolutely agree, and I think that the importance of securing private investment is a very good note on which to end. My hon. Friend will know that in May, on the consumer prices index, inflation rose to 2.1% and the Monetary Policy Committee judged: ‘Inflation expectations remained well anchored.’ However, with debt at nearly 100% of GDP, we need to pay close attention.
Shadow Comment
Stephen Crabb
Shadow Comment
The Shadow Minister welcomed the Government's statement, acknowledging that recent employment figures indicate a strong rebounding economy with many businesses struggling to hire staff across all sectors. He questioned whether it was time for a 'sober and clear-sighted look' at the furlough scheme due to concerns about its cost and potential distortions in the labour market.
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