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CLASS Panel Reacts To Summer Statement

Our expert panel reflect on what Rishi Sunak's Summer Statement means for workers, the environment, inequality and tax. 

Think again Chancellor

Steve Turner - Assistant General Secretary, Unite the Union

We’ve just witnessed a Tory chancellor who has learned little from the damage his party has done over the last decade.  Alongside their many failures to prepare and act quickly enough during this crisis, it is ten years of tory austerity that has created the inequalities that have killed people during this pandemic.  Yet today, Rishi Sunak has protected private wealth and homeowners, done nothing for renters, the asset-poor, the low-paid and the vulnerable, and, like Thatcher before him, abandoned our industrial heartlands so desperately in need of support.

Support for hospitality and tourism is, of course, welcome, but where were the sector-specific packages to prevent the collapse of our automotive, aerospace, and aviation industries for which we know demand will return, but immediate support is desperately needed.  Instead of French and German-style ambition and action, countries in which “phase two” furlough schemes have been extended by two years to support short-time working, job share, and work rotation to keep everyone in work, we have bonuses for employers who can afford to bring people back from furlough. For those who can’t afford to due to social distancing, confidence, and short-term demand issues – nothing.

The chancellor’s £30 billion package pails into insignificance judged against the €130 billion earmarked by Ms. Merkle. His justification for not extending the job retention scheme, that the longer someone is on furlough the harder it is for them to get new job opportunities because they are “trapped in jobs that only exist because of the government’s subsidy” is chilling.  He’s effectively writing off tens of thousands of jobs as unviable and the summer tsunami of job losses leading to 1930’s levels of unemployment we’ve been warning of, as unavoidable. 

What France and Germany are doing isn’t radical, its economically sound and good politics. By extending their furlough schemes and taking those long-term, creative approaches to protecting jobs, buying space for businesses to repair the pandemic damage, and build back demand. 

As for the fanfare about kickstarting the economy and jobs for the young, short-term bonuses for employers who take on trainees and create new apprenticeships amount to very little when there are billions of pounds of apprenticeship levy money sitting in the Treasury’s coffers right now, doing nothing. It could be used now to support the upskilling and retraining of workers during downtime as well as proper, genuine, quality apprenticeships for young people. 

The chancellor had the opportunity today to set out his vision for economic revival with targeted support to recover our strategically vital industries with a determined, joined-up programme to embrace a transition to a greener, fairer economy. Yet there was no commitment to making the hydrogen buses, the heat pumps, electric vehicles, turbines and batteries that we so desperately need, and just £3 billion for energy-efficient measures. Compare that with the £36 billion and £13.5 billion Germany and France have invested, respectively.

For all Rishi Sunak’s talk today of being unencumbered by dogma, he seems to have abandoned his ‘whatever it takes’ approach in favour of soundbites for his backbenches. Chancellor, rediscover your purpose of March, think again and we will continue to work with you to deliver a package of targeted support that really will see you standing by businesses who stand by their workers. In the absence of that, the reality is that today you have abandoned both.

 

We needed ambitious tax reform

Robert Palmer - Executive Director, Tax Justice UK

Today Rishi Sunak announced a £30bn package to support jobs. This is on top of £160bn in spending already announced to deal with the crisis. In usual circumstances, this would be a lot of money, especially from a Conservative chancellor. But many have already questioned whether it’s enough given the scale of the economic turbulence we’re facing. The Labour shadow chancellor Anneliese Dodds dismissed it as “barely touching the sides”.

As well as more spending, Sunak revealed £8bn of tax cuts. Firstly, he has cut stamp duty on houses worth less than £500,000 until next March. This is an expensive policy, coming in at £3.8bn. The main result is likely to be higher house prices, as opposed to helping people get on the property ladder or doing anything for renters. It appears that the cut is structured in such a way that property investors and those buying second homes will also benefit. Shelter estimates that up to 230,000 people face eviction when the Covid-19 ban on evictions is lifted in August. Stamp duty is a bad tax, but this cut does very little to solve the broader problems with the housing market.

Secondly, the chancellor has cut VAT from 20% to 5% for six months for the hospitality sector. The impact of this is more nuanced. It’s likely to put more cash in the pockets of hard-hit businesses who are struggling and have spent money on making their premises suitable for social distancing. This is good. However, the big barrier to recovery for cafes, restaurants and hotels is people holding back from spending because of fear of catching coronavirus. While infections are still relatively high, and a second wave is possible, it’s hard to see things returning to normal.

Today demonstrated that there is a new consensus emerging in favour of higher government spending. The Prime Minister has repeatedly claimed that “austerity is over”. We must hold him to this promise. This means we’ll need a public conversation about how to support a bigger state. As Anneliese Dodds pointed out in her response to the budget announcements, tax rises in a recession are a bad idea as they dampen demand. But in the long run, higher taxes are on the cards. As I argued in the Huffington Post this morning, politicians should look to taxing wealth as part of the solution. In the UK, wealth inequality is double that of income inequality, and we under-tax wealth. That’s why Tax Justice UK, along with 16 other organisations, are calling for ambitious tax reform to support a fairer and greener future.

 

Chancellor could have put this country on a new economic course

Dr Faiza Shaheen - Director of CLASS

Today, the Chancellor could have put this country on a new economic course - one that prioritises people and the planet. Instead, we got a sticking plaster on the same old failing economic system.

Given the scale of the economic downturn, Rishi Sunak was extremely timid in his use of fiscal stabilisers and job investment programmes. While a recent TUC paper spoke about an £85bn government green investment programme to create 1.24 million long-term and well-paying jobs, the Chancellor spoke about six-month minimum waged placements for young people and £3bn on greening homes and buildings. Young people will not look back kindly on a government that had a clear mandate and opportunity to transform Britain for the better but didn't.

The cancelling of the stamp duty for homes up to £500k was another signal that this government intends a return to the same old normal. Interventions like this will continue to stoke an already unaffordable housing market. Instead of cutting stamp duty that disproportionately benefits the top end of the housing market, we need to be building green and affordable homes implementing rent controls.

The hospitality sector is indeed in need of support, but the £10 voucher scheme for use Monday to Wednesday was both weak in monetary terms and dangerous from a public health perspective. It would have been better to vow to continue a flexible furlough scheme for the hospitality and tourism sector, and double efforts to ensure the government's test, track and isolate programme is functioning better.

The government should have also looked at creative ways of reducing unemployment like a four-day week, not just a furlough retention bonus. So many have felt the benefits of spending more time with family in recent months, providing this as an option would help tackle our unhealthy working culture.

In all, the 'mini-budget' today seems to be about political insulation from future public anger at rocketing unemployment rather than learning the lessons of the pandemic. We need a new normal, not a pathway to the old normal.

 

Economic gloom will have increased

Richard Murphy - Tax justice campaigner. Professor of International Political Economy, City, University of London

What to make of the Sunak Summer Statement? There are a number of immediate thoughts. First, never before has so little been held back for the announcement to the Commons. Only two real new issues were announced today - and those were the furlough bonus scheme (which is an extension of the scheme in all but name) and the restaurant voucher scheme.

Second, what is staggering is how small the sums involved are. It appears that we have £9 billion extra for what looks like a furlough extension to January; just £1 billion for the unemployed; a subsidy for house prices via stamp duty, £3 billion for green schemes (but that already had been announced in March and if anything seems to have shrunk since then), £4 billion of VAT subsidy for tourism and some small sum for a cheap outing out in August.

Third, it seems that once again Sunak has massively underestimated the scale of the issue he is facing. The scale of this is just so small - and even naive. The suggested cost of the furlough bonus scheme presumes no one now furloughed will lose their job, and that is absurd: those jobs are already disappearing.

So what did we get? Some token gestures. And that is it. Literally, all we got here is some wallpaper to keep Sunak going until we get an autumn statement. There was no big idea. There was no evidence of a philosophy behind any of this. And nor was there a clue that there was any real commitment to an industrial policy - indeed, even the green scheme feels like nothing more than a reannounced version of previous plans.

A deep sense of disquiet overwhelmed me as Sunak sat down. I wanted to yell 'is that it?' The hollowness was what struck me.

So let me offer a contrast. Anneliese Dodds' response was technically very sound. She opposed tax cuts. She discussed SME cash flow issues. She highlighted the real risks. And she made clear there was no plan. Tories will be worried and Labour delighted. But that is the best I can offer from a miserable statement.

The economic gloom in the U.K. will have increased after this dismal performance from Sunak.

 

Pace of action would decarbonise UK homes by 2100 - 50 years late for net zero

Mika Minio-Paluello - Energy Economist with Transition Economics

Rishi Sunak’s Summer Statement today was trailed widely as delivering a green recovery, with Johnson having promised the Chancellor would tell us how the government will “Build Back Better”.

But the green components fail to scratch the surface of the necessary climate action, exacerbate inequality, and don’t deliver the scale of job creation needed to achieve recovery. At this rate of change, it would take 80 years to retrofit all UK homes - and the majority would still be leaky. The programme will give homes a couple of new windows, rather than the whole-house retrofits needed to hit net zero.

The Chancellor’s primary green announcement focused on decarbonising buildings - where the UK has been struggling to reduce carbon emissions. He committed £1 billion for public buildings, and £2 billion to retrofit and insulate domestic homes. The latter will come as vouchers for home-owners to insulate lofts, install double glazing, and replace old boilers.

The government claim this will lead to 600,000 homes receiving energy efficiency upgrades. At that rate, it will be 2060 before all UK homes receive an upgrade. 

To make matters worse - our analysis shows the government is planning for an average grant of £3,300 per home. As some homes will be contributing part of the cost, that means an actual investment of £4,200 per home. But upgrading UK homes to EPC level C will cost more like £10,000 per home (and that’s not enough to hit net zero.). So these homes receiving the ‘Green Homes Grant’ will still need an additional retrofit in the next decade.

Alternatively, if all households take out the maximum grant, the amount per home goes up to £8,750. But only 300,000 homes are retrofitted by 2021, and we’ll be waiting until 2100 to reach every home. 

Add to this - these grants are only for home-owners, not renters. There’s a mere £50 million for a social housing pilot, and nothing to push the private rental sector. Across society, this means the grants will go to those who already have the most assets, increasing inequality.

The scheme will create and protect some green jobs - the government claim 100,000. But unemployment is spiraling. Our analysis for the TUC showed that clean infrastructure alone could create 1.2 million jobs in the immediate term, with IPPR proposing a broader recovery package creating 1.6 million jobs.

Some will welcome the announcement - “it’s better than nothing”. And government support for decarbonising homes has been dreadful, pushing people to accept ‘more than nothing’. 

But in the face of the climate and Covid emergencies, this is like painting the house while the foundations crumble.

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