Thursday 9 July 2020
Mini-budget a curate's egg
Even with a seemingly bottomless purse it was probably impossible for our Chancellor of the Exchequer, Rishi Sunak, in his summer splash out to keep the economy going beyond the pandemic, to please everybody.
One disgruntled group are the aviation industries, who have received no extra help at all. I welcome this. In the short run, until the pandemic is firmly under control, it is clearly vital to keep travel, and particularly international travel, down to a minimum. In the longer run, given that air travel is both a major polluter and a major conduit for spreading disease (and there will be more pandemics) it is obviously responsible to severely restrict air travel and shrink the industry. Hard lines on those who work in it, but from boatmen on the Thames to miners in the 80s, industries have been forced to bow out, gracefully or otherwise, when their time has come.
The cut in VAT for the food, accommodation and attraction services is to be welcomed. It would have been a good idea to give a special extension of the furlough scheme to those involved in these industries, which will take time to rebuild as, we hope, the public gain confidence.
The VAT cut also applies to tourism. I hope this is restricted to domestic tourism and does not include overseas travel (see second paragraph.)
The bribe of £1 000 for each furloughed employee retained at the end of the scheme seems wasteful. Most of these employees would have been retained anyway, thus giving rise to what is known in the jargon as "dead weight cost," (paying for something that would have happened anyway.) It would have been more effective to double or treble the amount but restrict it to those retained beyond the first, say three-quarters.
A job creation scheme for the 16 to 25 year-olds, so that none experience unemployment, is very welcome These are the years when young people, full of energy, enthusiasm and hormones, need to be planning their futures both social and economic, and not idly skulking around and venting their spleens on society. I hope there are not too many pointless retraining schemes and dead-end occupations. Much can be learned from the shortcomings of the Youth Training Scheme, YTS, of the 80s.
The cut in stamp duty on house exchanges up to the value of
£500 000 doesn't affect the strapped first time buyer struggling to reach up to £250 000,(or the more modest £100 000 in this part of the country) because those are exempt already. But the established house-owner trading up to half a million saves up to £14 500. This seems to be a generous bung to those who already have plenty of money.
The argument is presumably that those who pay less in exchanging their houses than they expected will increase their demand for furniture, redecoration or improvements, thus stimulating the economy (but also stimulating the house-exchange market, which those of us who are not estate agents can do without)
Better to use the money to promote the building of social housing, preferably on brown-field sites. Or use the money to increase social security payments, the recipients of which would be highly likely to spend the money at home, thus stimulating their local economies.
All Chancellors of the Exchequer like to have a headline-grabbing gimmick. In my younger days it used to be a penny off beer. Sunak's gimmick is a half-price pub lunch, but only in August, and only on Mondays, Tuesday and Wednesdays. I might try it if there's a decent test, track and trace system in operation by then, but I'm not holding my breath.