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Pressure has mounted on the government to reconsider the decision to end its wage subsidy scheme next month after an influential group of MPs said that Rishi Sunak should continue to provide targeted support to struggling sectors of the economy.
The Treasury’s selected committee said viable companies would be ruined unless they continued to receive state support and urged the chancellor to “carefully consider” specific extensions to the licensing scheme.
In a comprehensive report on the impact of Covid-19 on the economy, MPs said that Sunak should:
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Consider extending the most generous terms for universal credit.
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Have a plan to help small and medium businesses with debt problems or risk prolonging the recession.
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Create a roadmap in the fall budget to repair the hole in public finances caused by the pandemic, but be careful not to raise taxes too quickly.
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Temporarily abandon the triple lockdown on pensions.
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Explain what the government means by leveling up.
The report’s licensing recommendation was supported by trade unions and think tanks. But despite mounting pressure, Sunak has shown no signs of backing down in his decision to end wage subsidies.
However, Treasury officials are working on new measures to support the labor market during a period when the chancellor expects unemployment to rise. The Treasury insisted that it “will continue to innovate in support of income and employment through our employment plan.”
In its previous report, the committee said that Sunak should help more than 1 million employed and self-employed people who had fallen off the grid and were not receiving financial aid from the government.
Mel Stride, the Conservative MP who chairs the committee, said: “The committee’s disappointment that the government did not implement our recommendations to help those who have fallen due to gaps in support persists. Our second investigation report focuses on emerging challenges as lockdown measures are lifted.
“One of those challenges is targeting assistance effectively to those companies and individuals who need it. The chancellor should carefully consider the specific extensions to the coronavirus job retention scheme and explain his conclusions. “
The report said spending was recovering after lockdown restrictions were eased, but continued consumer caution, localized outbreaks and the prospect of a second wave of infections were hampering full recovery and making some degree of unavoidable. economic scars.
He called on the government to come up with a plan to help recapitalize struggling SMEs and suggested that repayments should be conditional on companies showing sufficient financial health.
The report said hasty tax increases would likely stifle the economic recovery, but noted that the committee would support the chancellor if he got rid of the triple-lock commitment from the Conservative Party’s manifesto on pensions, which says the annual increase should be in line. with earnings, inflation or 2.5. % depending on which is the highest. Earnings have been kept artificially low this year by the government’s income support schemes, but are expected to rise by more than 15% next year as the programs roll out.
The report said: “We are concerned that while there have been impressive examples of the Treasury moving at scale, at pace and imaginatively to support the economy, there are also disappointing signs of intransigence.”
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Frances O’Grady, general secretary of the TUC, said MPs from all parties were now urging Sunak to provide support beyond October.
“The TUC has established a new plan for a job skills retention and enhancement scheme that supports short-time work. The chancellor must act quickly and decisively to implement a plan before unemployment increases. “
Torsten Bell, Executive Director of the Resolution Foundation think tank, He said: “This authoritative account of the economic impact of the coronavirus should be a must-read for Treasury officials planning the fall budget in the highly uncertain context of the growing number of coronavirus cases.
“The chancellor will have to reconsider his plans to quickly remove support given the painful reality that the economic crisis is here to stay.”
