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Viable support for viable jobs: why the Chancellor is shifting his stance

By Chris White
24 September 2020

By Chris White

The Chancellor had a difficult job today – support those affected by the second wave, whilst accepting that the immense burden on the exchequer is simply not sustainable. 

He was clear that the government’s priority is to support “viable jobs that provide genuine security,” accepting that he cannot save every business or every job, despite significant pressure from the Opposition in recent weeks. 

Instead of extending the Furlough Scheme, which is due to wind down at the end of the month, he is setting up a new Jobs Support Scheme, which will seek to support the wages of people in work, whose employers are adversely affected by depressed demand. Their wages will be part supported by the government, and partly by their employer.  

Further measures saw extensions of the loan schemes, both in time and flexibility over repayments, and the extension of the VAT reduction for the hospitality sector until 31st March.  The latter in particular, will be welcome relief for pubs and restaurants over the next few months and was swiftly welcomed by Conservative backbenchers.  

This was a shift in emphasis from the Chancellor, from shielding the economy from the impact of coronavirus to accepting that it will need to fundamentally restructure over the coming months. Yet whilst this is probably the only sustainable course of action given the government has already spent an astonishing £317 billion pounds during the course of the crisis, even before today’s announcement, it will be politically challenging. 

Conservative backbenchers are already proving restless over the way in which the government is handling the second wave, both in terms of restrictive lockdown policies, as well as scrutiny of the way lockdowns are imposed. Graham Brady, the influential Chair of the 1922 Committee of backbenchers, is likely to give the government a bloody nose next week by demanding greater Parliamentary oversight of lockdown laws.  

As the Furlough Scheme winds up, and businesses continue to face real challenges surviving the second wave, Conservative MPs may put more pressure on the Chancellor to extend the support provided. The Chancellor may have deferred the pain for a few months, but at some point, the extraordinary support provided by the government will have to be paid for.  The Chancellor will hope that his Plan for Jobs, announced in July, aiming to create thousands of apprenticeships, traineeships and new job opportunities, will offset the pain of the economic restructuring next year.

Labour’s response to the Chancellor’s statement today needed to tread a fine line, demonstrating that the Opposition is supporting measures to save jobs and businesses, while criticising the government for not going far or fast enough to effectively tackle the crisis. Shadow Chancellor Anneliese Dodds positioned Labour as the party which has forced government to act, called the Chancellor’s ‘cautious optimism’ into question and set out a clear vision of how her party would be managing this crisis differently. 

Shadow Ministers through this week’s virtual party conference have focused heavily on the need to deliver training and skills for the future, both in the context of coronavirus and more broadly for a post-Brexit economy. Dodds landed this point strongly today, calling out the Chancellor for saying the government must focus on helping create new jobs rather than prop up jobs that no longer exist, but without mentioning training or skills to help people access these new opportunities.  

Labour in opposition under Ed Miliband was heavily aware that voters tend to trust the Conservatives over Labour on the economy, and all announcements during this period had to be deliverable within the then-government’s fiscal envelope. While Labour under Corbyn put forward more plans for significant increases in government spending and investment, today’s response from Dodds suggests a shift back towards the focus on demonstrating fiscal prudence and regaining voter trust. She did not call for new spending, instead emphasising that Labour has been calling for government to spend pots of money it has already earmarked, such as the £3bn National Skills Strategy. 

With today’s response, the Shadow Chancellor landed a clear message that Labour will support the government to a point, but that its performance over the first six months of the crisis leaves much to be desired, which Labour will be expecting to resonate with voters across the country. Dodds pointed out that the UK is currently in the deepest recession of any G7 country, criticised the lack of planning for vulnerable people and called for the new schemes to incentivise good employment practices and tackle abuses. Both Sunak and Dodds will be closely watching opinion polling in the coming weeks to see whose approach chimes with the mood of the nation.