Rishi Sunak on Thursday confronted MPs with some hard truths about coronavirus: that restrictions would become a fact of daily life “for at least the next six months” and the UK economy was going to change permanently.
The chancellor’s “winter economic plan” was no longer an attempt to preserve what went before, rather an effort to cushion a painful adjustment to a new way of living and working.
During the course of Mr Sunak’s statement to MPs and subsequent press conference, it became clear the chancellor believes the Treasury should no longer be throwing tens of billions of pounds into preserving jobs which are no longer viable.
He spoke of having a “more targeted” approach as the country entered “a different phase of this crisis”. For now, Mr Sunak has the qualified support of both the CBI employers’ group and the Trades Union Congress.
For MPs, the question is whether the new package, unlikely to cost more than £10bn over six months, will be enough, especially if prime minister Boris Johnson is forced to announce new Covid-19 restrictions in the coming weeks. The outgoing furlough scheme, launched in March and which expires at the end of next month, has cost £39bn so far.
Some colleagues of Mr Sunak predict the chancellor will have to come back later in the autumn with a bigger package of economic support to head off a wave of unemployment and business closures.
According to official data released last week, redundancies in the three months to July were 58,000 higher than over the same period in 2019 and 48,000 up on the previous quarter, pushing the unemployment rate up to 4.1 per cent.
“We are throwing everything at it,” the chancellor said. He said he wanted to let the new measures take effect, but added he believed in “an evolving response”.
Some in the Treasury reluctantly admit that the new restrictions announced by Mr Johnson this week — including a 10pm curfew for pubs and restaurants in England — are unlikely to be the last.
Mr Sunak pushed back hard last week against pressure from government scientists to close down the hospitality sector completely, in a sign of further skirmishes to come.
The chancellor, who wants to limit economic disruption and its associated cost to the exchequer, spoke of “the finely-judged balance between managing the virus and protecting the jobs and livelihoods of millions”.
There have been reports of strains between Mr Sunak and Mr Johnson on the extent of the latest restrictions — the prime minister is seen by some ministers as erring towards a more cautious approach.
These tensions have been strongly denied by both sides, but some MPs were surprised that Mr Johnson was not at his chancellor’s side in the House of Commons to watch his economic statement.
The prime minister was on a visit to Northamptonshire to talk about the enforcement of new Covid-19 rules, part of what Downing Street says is a concerted “carrot and stick” government message.
Number 10 said the aim was for Mr Sunak to set out economic measures to help people through the crisis while Mr Johnson talked tough. The chancellor said he “completely agreed” with the prime minister’s strategy.
Nevertheless, Mr Sunak stressed the economic and social risks of a wider lockdown. He warned of “the awful trade offs between health, education and employment”, adding: “We need to bear all of those costs in mind.”
He will have the backing of many Conservative MPs, who are demanding a say over future specific coronavirus restrictions when Mr Johnson asks the Commons to renew emergency powers to fight the virus.
An amendment tabled by Graham Brady, chair of the Tory backbench 1922 committee, would require a separate vote on what Steve Baker, former Brexit minister, called “major national measures that infringe on our liberties”.
Mr Baker told ITV’s Peston programme on Wednesday: “I am organising people to back it. I am absolutely 100 per cent certain it will pass if Labour and the SNP vote for it.”
Mr Sunak knows that any tougher Covid-19 restrictions will lead to pressure from MPs from all sides — along with business groups and the media — for more help.
Some Conservative MPs are particularly anxious about the rapid winding down of help for the self-employed. Mel Stride, Tory chair of the Commons treasury committee, said MPs would look at “support for self-employed people and those who have fallen through the gaps”.
But Mr Sunak’s winter package was generally greeted warmly by Conservative MPs, many of whom share the chancellor’s instincts on phasing out public support as the crisis drags into 2021 and accepting harsh economic reality.
Anthony Browne, a newly elected Tory MP, said: “It’s not in people’s long-term interest to keep paying them forever to sit at home doing nothing if they do not have a job to go to.”
A former cabinet minister said: “The subsidies replacing furlough seem to be targeted at establishing the true state of the economy, which has been masked by the furlough arrangements.” He added: “It's probably healthier, although sad for the people who will lose their jobs.”
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