Covid crisis UK: Firms beg for more support before Freedom Day

Firms beg for more Covid support before Freedom Day: Businesses warn they have no cash reserves left to cope with ‘crushing’ delay to end of restrictions

  • Business leaders are begging the Government to extend financial support 
  • Cash-strapped firms have no reserves left to cope with delay to end of lockdown
  • Federation for Small Business is warning firms will face further pressure  
  • Ministers have ploughed more £352billion into the economy during pandemic

Business leaders are begging the Government to extend emergency financial support for cash-strapped firms which have no reserves left to cope with the ‘crushing delay’ to the end of lockdown.

Ministers had promised to ease coronavirus restrictions which have devastated swathes of the UK economy including hospitality on June 21, but chose to delay the final easing amid rising virus cases.

Chancellor Rishi Sunak has spent more than £352billion during the pandemic so far – sparking concerns among the Tory backbench of rising national debt, inflation and tax increases to meet the costs of lockdown.

The Federation for Small Business is warning there will be a gap in financial provisioning that will put more pressure on small firms that are already struggling, with many having budgeted to be able to trade from last week.

Industry chiefs are calling for further support before the five per cent of wage costs that employers pay for furloughed staff rise to 14 per cent as the Government begins to wind down the Coronavirus Job Retention Scheme. 

Companies will also have to start paying any VAT deferred from last year from Thursday, July 1, and those in the retail, leisure and hospitality sectors will lose their emergency business rates exemptions. 

FSB chairman Mike Cherry told the Times that ministers had a ‘final opportunity to update timeframes for business support measures which are set to wind up’ 18 days before the delayed lifting of trading restrictions in England.  

He said: ‘Last year the Government told us that it would do ‘whatever it takes’ to help the 5.9 million sole traders and small businesses on which our recovery will depend.

A pedestrian walks along a near-deserted Regent Street in central London on January 8, 2021

Empty Oxford Street in London before shops open at 7am, Monday, April 12, 2021

Chancellor Rishi Sunak visits Gunnersbury Park Sports Hub, a government funded sports facility in west London

Rishi Sunak has said Freedom Day will come on July 19 and that he will not tolerate further lockdowns beyond the lifting of restrictions next month.

The Chancellor was speaking at a football event with schoolchildren and said that the four-week delay to the end of restrictions was to allow for the speed up of the vaccination roll out.

He told the Sun on Sunday : ‘It was a specific extension for a specific purpose, which was to get some more jabs into more people’s arms.

‘We’re accomplishing that, so it just shouldn’t be necessary to delay any further.’

It comes as experts have warned that the Government should not rush into the easing of lockdown restrictions but that the data looks ‘encouraging’.

Mr Sunak was visiting a new government-funded sports facility in West London this week as Euro 2020 enters the knock-out stages.

‘The Treasury committed to evolving support measures to ensure they were adequate in the face of what firms were up against. But now – after a crushing delay to the reopening road map – the new support measures are limited to those which do not cost the Treasury a penny.’  

A Government spokeswoman said the furlough scheme was still in place until September and ‘is amongst the most generous schemes in the world’, providing £65billion of support and protecting 11.5 million jobs.

She told the BBC: ‘The government will continue pay 70 per cent of workers’ wages over July, with businesses asked to cover just 10 per cent.

‘They can also continue to access additional support, including restart grants worth up to £18,000 per business, and business rates relief and a cut to VAT – both in place until March 2022.’ 

It comes as Health Secretary Sajid Javid is expected to make his first Commons statement since rejoining the Cabinet as lockdown-sceptic MPs hope he breaks from the approach of his predecessor and pushes for a swift lifting of restrictions.

Mr Javid, who became the Health Secretary following cheating Matt Hancock’s resignation after he was discovered flouting social distancing restrictions with his mistress aide, said yesterday that his ‘most immediate priority’ would be ‘to see that we can return to normal as soon and as quickly as possible’.

Mr Hancock became unpopular with some Tory MPs who believed that he was an obstacle to the easing of lockdown. His resignation followed reports alleging that he withheld crucial vaccine data from Prime Minister Boris Johnson at a key meeting on extending lockdown.

As Monday marks a week before July 5, the midway point of the extension of measures and the earliest point at which remaining restrictions could be lifted, Mr Javid is expected to return to the Commons despatch box for the first time since he quit as chancellor in February last year, after being told he must sack all his advisers if he wanted to keep his job.

While it is not expected he will bring what is left of lockdown to a close any earlier than July 19, he is reported to be confident the measures will not extend past that date.

Ministers have promised to give one week’s notice to any change of restrictions.

Mr Javid is considered to be more in the so-called ‘hawks’ camp of Cabinet opinion over the approach to coronavirus, alongside Chancellor Rishi Sunak.

In a resurfaced interview from May last year with Sky News, he voiced his concerns over long lockdowns and how they would impact the economy.

In contrast, Mr Hancock had been considered a ‘dove’, who pressed for more stringent restrictions.

Asked on Sunday whether Labour would support any change of approach under the new Health Secretary, leader Sir Keir Starmer said: ‘What we’ve seen today already I’m afraid is confusion, because the incoming Health Secretary said he wants to open up as quickly as possible. The Government’s now rowed back on that.’

Contrasting Mr Javid’s comments to journalists with a similar statement issued in his name by his new department, but omitting the ‘as soon and as quickly as possible’ clause, Sir Keir said: ‘I don’t think it’s inspired confidence that already in day one, there’s been the Health Secretary saying his position this morning and then the Government rowing back on it.’  

Boris Johnson and former Health Secretary Matt Hancock during a Cabinet meeting at the Foreign and Commonwealth Office in London, September 2020

Government debt is now equivalent to around 99 per cent of GDP, the highest proportion since the 1960s

The Government was in the red by £24.3billion last month, down from £43.8billion a year earlier at the height of the pandemic – and crucially below the Office for Budget Responsibility’s forecasts

Cabinet turns its back on him: Matt Hancock had to go because Tories ‘refused to break sweat in defence of his sheer hypocrisy’… while his estranged wife steps out in public as rumours swirl about length of his affair with aide 

Boris Johnson was forced to accept Matt Hancock’s resignation after fellow Cabinet ministers warned they were unwilling to support him in public.

Tory sources said the Prime Minister, who fought to keep the Health Secretary in his job, was warned by party whips that support had ‘drained away’ after he admitted breaking his own lockdown rules over his affair with a married aide.

No Cabinet ministers voiced support for Mr Hancock on social media, even after the PM backed him to stay on Friday and said he ‘considered the matter closed’.

A Cabinet source told the Mail: ‘To be fair to the Prime Minister, his automatic reflex is to try to save people rather than throwing them to the wolves every time there’s a Twitter storm. But I think in this case it was obvious on Friday that this couldn’t end any other way.

‘What’s p****d people off is Matt’s sheer hypocrisy. He’s set the rules and not followed them. He’s put his mistress on the payroll.

‘And when Professor Ferguson was in a similar position, he tried to set the police on him.’

Mr Sunak has insisted that the Government’s books must be balanced after the pandemic amid tensions with Mr Johnson over huge spending commitments.

Mr Sunak last week renewed his pledged to ‘get the public finances on a sustainable footing’ as ministers wrangle over how to pay for social care reforms and ‘levelling up’ policies. 

Nerves over the scale of the UK’s borrowing and debt have been growing amid signs of a spike in inflation, with some Tories branding Mr Johnson a ‘very big spender’ and urging Mr Sunak to stamp his ‘authority’.

The respected IFS think-tank warned that the premier is making it ‘extremely difficult’ for Mr Sunak by vetoing most options for raising revenue.

Downing Street says the manifesto commitment not to raise income tax, national insurance or VAT in this parliament stands – even though the respected IFS think-tank says that makes it ‘extremely difficult’ for the Chancellor to find ways of raising money. 

The Treasury has been drawing up plans for a raid on pension reliefs, although sources insist that is not under ‘active consideration’ by the Chancellor and it would spark anger from the Tory benches. 

Tory former chancellor Ken Clarke warned there is a ‘big risk’ of inflation running out of control – and urged Mr Sunak to raise more revenue now to make the Government less vulnerable to a resulting spike in interest payments.

Concerns over the rebounding economy overheating and causing an inflation spike have been intensifying after the headline rate surged ahead of expectations to hit 2.1 per cent last month. 

In the US it is also at worryingly high levels, as President Joe Biden pours money into stimulating the economy.

Official figures showed the Government was in the red by £24.3billion last month, the second highest on record for the month and £18.9billion more than in May 2019 before the pandemic struck. National debt now stands at a staggering £2.2trillion, equivalent to around 99 per cent of GDP.

IFS chief Paul Johnson said in The Times that Mr Sunak would find it ‘extremely difficult’ to fund the social care reforms due to the No10 position.

‘If you’re not touching the three main levers of income tax, VAT or national insurance and you’ve already raised corporation tax your options are extremely limited,’ he said. You’d need a lot of fiddling around with lots of different taxes, it feels like a big constraint.

‘You’re really squeezing the barrel. His one possible get-out-of jail card is that the economy does better than expected in the budget, but that’s not a long-run solution.’

Ken Clarke said inflation is a ‘big risk’ over the next few years. He told BBC Radio 4’s Today programme: ‘Unless we actually take care, inflation is now the big risk over the next few years.

‘These are such unusual circumstances that no-one is quite sure how big the risk is, nor when the crunch will come, but it’s now time to start addressing the serious problem of the huge debts we have run up, which we had to run up – that was perfectly OK to stop the economy collapsing when Covid hit it – and try to make sure that we can tolerate a short little boomlet, with inflation going up for most of this year; we can act very promptly to control it once it’s obviously settled in.

‘And also you have got to start addressing the serious question of how do we pay for this fantastic amount of borrowing in a sensible and responsible way in order to be able to maintain fiscal discipline in future.’

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said borrowing is on track to hit £185billion in 2021-22 – £49billion less than forecast by fiscal watchdog the Office for Budget Responsibility.

But he cautioned: ‘The OBR’s judgment in March of a 3 per cent long-term hit to GDP from Covid-19 is about right, given the unprecedented exodus of foreign workers last year, the impending shake-out in the labour market when the furlough scheme ends and the huge collapse in capital expenditure.

‘Accordingly, we still think that the Government will have to stick to plans to hike corporation tax in 2023 and to increase the effective income tax rate by freezing existing thresholds, if it wants to ensure that public borrowing declines below 4 per cent of GDP in the mid-2020s.’

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