MPs unimpressed by lack of new announcements

14 Jan 2021

Chancellor Rishi Sunak gave an economic statement to the Commons this week (11 January).

Sunak outlined the action taken by the Government to support businesses and jobs and the factors influencing this support. He said 800,000 people had lost their jobs since February before highlighting the £280 billion of government support since the outbreak of the pandemic which had allowed 1.2 million employers to furlough 10 million employees and provided £20 billion worth of support to self-employed workers.

The Chancellor spoke of the furlough scheme being extended until the end of April, the fourth income support grant for the self-employed and the £9,000 one off grant for businesses along with the availability of discretionary funds. While expressing optimism for the future with the rollout of the vaccines, he also spoke of the ‘tough road ahead’ for the UK and the need for responsible management of the economy.

Shadow Chancellor Anneliese Dodds, for Labour, said the statement repeated what MPs already knew and left unanswered questions about what level the fourth grant for self-employed people would be set at, and when that grant would be made available. She complained that there was nothing new for those people who have been excluded from government schemes from the start, and nothing on how the Chancellor would fix the ‘broken system’ of support for self-isolation. Dodds accused the Chancellor of failing to address the problems of about five million people estimated to have taken on over £10 billion in debt just to get through the last year , with City experts predicting that there will be over £100 billion in unsustainable corporate debt by the end of March.

Sunak responded by saying the change in date from the original spring date through to the new date at the end of October, before the announcement of the new scheme and the extension, will bring an additional three million people into coverage for the furlough scheme. He claimed the UK’s economic performance is – contrary to some claims - much in line with comparable countries.

Conservative backbench speeches

Having struck VAT off sanitary products, now that the UK has left the EU, can the Government strike VAT off energy-saving products such as solar panels and home insulation, to promote a greener recovery? asked Sir Bernard Jenkin. Sunak declined to confirm this.

Tom Hunt called for a potential extension of the business rates holiday throughout 2021.

Steve Double had it confirmed by Sunak that the £9,000 one-off grant is in addition to the monthly grants of up to £3,000.

Robert Halfon is concerned that councils across the country are not distributing grants from the Government quickly enough.

Liam Fox pleaded with the Chancellor not to increase public expenditure in the Budget, saying the UK needs a private-sector-driven recovery, most importantly by small businesses. Sunak told him that the Government can support free enterprise by investing in skills, innovation and infrastructure.

Sir Graham Brady complained that the UK has one of the highest levels of air passenger duty anywhere in the world.

Joe Gideon called on the Government to extend the existing package of measures for retail, hospitality and leisure, including the current business rates relief and VAT reduction, which act, he said, as an important lifeline for many in the sector. Sunak replied that he is ‘very committed to supporting our fantastic hospitality businesses’.

Dr Andrew Murrison asked about using a version of the Federation of Small Businesses’ suggestion of a directors’ income support scheme, to help prevent ‘hard-working linchpins of our economy—on modest incomes taken as dividends—from falling through the cracks’. Sunak replied that the Tax Minister has met the FSB and will go through the proposal in detail.

Jason McCartney asked the Chancellor to look at extra support for hospitality supply chains, such as with VAT and business rates, so that when the vaccine allows hospitality to reopen again, there is a supply chain there to support them.

John Howell added his support to the cause of directors who take income as dividends. He said: “As a former inspector of taxes, I have heard what HMRC has said and do not entirely agree with it.” Sunak said that he was “not aware of another country that has found a way to support people’s dividend income, but if my hon. Friend knows of one, I would be delighted to look into it if he sends it in.”

Labour backbench speeches

Bill Esterson 
said the £2 billion that the large retailers have returned in unused business rate relief should go to freelancers and others who have missed out on government help so far.

Derek Twigg asked the Chancellor to look at what extra support can be given to ensure that people who are isolating do not lose any income to give them the incentive to stay at home.

Alison McGovern could not believe the Chancellor is planning to cut £20 a week from universal credit and to maintain the ‘cruel two-child policy’. The Chancellor said that: “At the beginning of the pandemic, we put in place a temporary uplift in universal credit, which lasts all the way through to the end of this year. Of course, future tax and welfare decisions will rightly be made at the Budget.”

Liz Twist said a failure to make the £20 uplift to universal credit permanent would have a disproportionate impact on families across the north-east, which has the highest rate of unemployment and the second highest rate of child poverty.

SNP speakers

Alison Thewliss
 said Scotland is missing the additional £375 million that Sunak promised to that nation on 6 January. Thewliss wants Sunak to extend the English business-rate holiday to allow Scotland to do the same, and to continue the reduction in VAT to assist those in the struggling hospitality sector. She wants the Chancellor to extend the furlough and the self-employment support scheme for ‘as long as necessary’, with ‘no more arbitrary stop-start, extend the £20 increase to universal credit and ‘finally expand it to include those on legacy benefits who have seen no increase over these past months’.  Sunak replied that ‘in aggregate’ this year £8.6 billion in up-front funding guarantees has been made available for the Scottish Government; the most recent announcement did trigger Barnett consequentials, which will net off against that guarantee, he said.

Many people are still in childcare voucher schemes rather than having moved to tax-free childcare. Many of them did not realise, at the start of the pandemic, how long the impact would last, and they have now racked up large balances that they will not be able to spend before their child no longer needs wraparound childcare, said Kirsty Blackman. She called on the Chancellor to look at the people who have these large balances and consider putting in place some flexibility, or ask employers to put in place some flexibility. The Chancellor said he was not familiar with the specific details raised, but could see the logic of what Blackman was saying. He offered to look at it and write back to her.

Lib Dem speakers

Lib Dem Treasury spokesperson Christine Jardine complained that there is still nothing for the many millions who have been excluded from all financial packages, and said that independent retailers need support against the ‘online behemoths’. Sunak said the Digital Services Tax is a ‘right first step’.

Layla Moran called on the Chancellor to save locals pubs by scrapping the rateable value cap for pubs, allowing them to access the retail, hospitality and leisure grant fund, offering rent holidays during times of enforced closure and guaranteeing now to extend the furlough scheme for as long as it is needed. Sunak replied that there is no rateable value cap on the grant.

Other speakers

Sammy Wilson
 (DUP) was concerned about thousands of people being sent letters from suppliers in England saying that neither they personally nor their businesses will any longer be supplied with goods. “The steel industry today has received a letter from Her Majesty’s Revenue and Customs saying that engineering firms will have a 25% tariff imposed on steel that they bring here, and companies that sell goods to GB have been told that they will not get a refund on the taxes they have to pay, even though their goods are not going into the EU. All this has been brought about as a result of either a lack of knowledge by officials in HMRC or a reneging on the promises the Government made that there would be unfettered trade and access for UK firms selling in Northern Ireland and vice versa.” The Chancellor said that goods in aggregate were continuing to move smoothly between Great Britain and Northern Ireland.

Stephen Farry (Alliance Party) accused the Government of “a stubborn refusal to address the needs of those who are excluded often by what are seen as very arbitrary rules. Will the Chancellor confirm that the Treasury has indeed received a number of constructive proposals on how existing schemes can be modified without the risk of fraud? Will he commit to giving those proposals a fair consideration and, where appropriate, to making back payments?” The Chancellor assured Farry that the Financial Secretary to the Treasury “has met various groups and has received various proposals, and of course we will give those proposals fair and due consideration.”

The Green Party’s Caroline Lucas said it ‘beggars belief’ that Sunak has yet again come to the Commons with nothing to announce for people so far excluded from financial help. She urged him to look urgently at the directors income support scheme proposal for directors of small limited companies.

Plaid Cymru’s Liz Saville Roberts said the Welsh hospitality sector employs over 8.5 per cent of the Welsh workforce and is even more important in rural areas, such as Dwyfor Meirionnydd, where hospitality provides 27.3 per cent of employment. Today’s statement provided no new money and no clarity for struggling hospitality businesses that need to be able to make informed decisions in the coming months, she said. Will the Chancellor confirm that there will be no further announcements of extra funding prior to the March Budget? she asked. Sunak replied that the Welsh Government have received over £5 billion of up-front funding guarantees to support their local economy.

The full session is here.

By Hamant Verma