Rishi Sunak is expected to announce his fourth package of support for business in as many months amid mounting pressure on the government to help hard-hit companies in lockdown-affected regions.
Trades unions and the UK’s five big employers’ organisations have been summoned to the Treasury on Thursday morning to hear details of the chancellor’s plans before he makes a statement to MPs.
Sunak, who has scrapped plans for a three-year spending review in favour of a stopgap one-year settlement, will tell the Commons that the prospects for the economy are getting bleaker as more and more of the country faces tougher restrictions to combat the Covid-19 pandemic.
In a week dominated by the government’s row with Greater Manchester over financial support, and with 26,688 new coronavirus cases and 191 deaths announced on Wednesday, the chancellor will seek to rebut criticism that not enough is being done by underlining £200bn of Treasury support since the crisis began.
But Sunak has been looking at a number of options for providing further help after becoming increasingly downbeat about the prospects for jobs in the months ahead.
These include whether the two-thirds wage subsidy for workers furloughed from the hospitality sector in tier 3 areas – those with the most stringent restrictions – is generous enough, and whether enough is being done to assist bars and restaurants in tier 2, which are not being forced to close but have seen takings plummet since the ban on households mixing indoors.
One plan under consideration is extending the eligibility for business grants, which are currently only available to businesses ordered to close altogether. These are worth £1,500 every three weeks for larger firms, and £1,000 for smaller ones.
After a flurry of measures when the crisis began, Sunak cut VAT and stamp duty in his eat-out-to-help-out mini budget in July and announced support for part-time workers in his September winter economic plan. This was followed by his plan to support hospitality workers laid off due to tier 3 measures earlier this month.
The shadow chief secretary to the Treasury, Bridget Phillipson, said: “Every intervention he makes is clearly rushed and sooner or later falls apart. They need to take a step back and sort out the relationship between health and economic strategy.”
Ministers are particularly concerned about the hospitality industry in London, which accounts for almost a quarter of the UK economy and is currently in tier 2, but will not want to be seen to favouring the capital at a time when north-south feelings in England are running high.
Calls for Sunak to bolster his support have intensified, despite official figures showing that the UK borrowed more in the first six months of the current financial year than it did in the worst year of the banking crisis of the late 2000s.
The Conservative mayor of Birmingham, Andy Street, has called for more help for the city’s businesses, which are also under tier 2 measures.
The Warrington South MP exhorted the government to do more to help hospitality businesses in the Commons on Thursday, saying local pubs had told him the drop-off in trade had made their businesses unsustainable. “Now is the time for hospitality sectors in particular, in tier 2, to get sector-specific support,” Andy Carter said.
Torsten Bell, the director of the Resolution Foundation thinktank, said: “The big picture of this autumn is economic policy taking time to catch up with the reality that the virus is growing, not shrinking. That changes radically what we’re trying to achieve, and increases the priority of protecting people’s incomes.
“Instead of ad hoc negotiations like those we’ve seen with Greater Manchester this week, we need a national policy that’s fit for purpose.”
The TUC called for an immediate increase in basic universal credit to £260 a week, while the Federation of Small Businesses said there was a need to extend the support on offer in tier 3 to the self-employed and to supply chains.
The TUC general secretary, Frances O’Grady, said: “Tightening restrictions are going to have a massive impact on businesses – especially in sectors like hospitality. The government needs to recognise this and ensure working people have the financial support they need to get through the winter.
“That’s why we are calling for 80% of workers’ wages to be covered when firms are forced to close. And for ministers to help companies experiencing reduced demand by making the short-time working scheme more generous and lowering employer contributions.”