Rishi Sunak’s budget has not done enough to prevent a major surge in unemployment after the coronavirus crisis, a think-tank has warned.
The chancellor announced on Wednesday that the furlough scheme will be extended until the end of September, with employers asked to contribute to salaries from July, as he vowed to help millions through “the challenging months ahead”.
“Our Covid support schemes have been a lifeline to millions, protecting jobs and incomes across the UK,” Sunak said.
“There’s now light at the end of the tunnel with a roadmap for reopening, so it’s only right that we continue to help business and individuals through the challenging months ahead – and beyond.”
But analysis from the Institute for Public Policy Research (IPPR) found that the budget will leave as many as 750,000 otherwise viable jobs unnecessarily at risk by this time next year.
The IPPR had urged Sunak to “boost it like Biden” – calculating that a £190 billion stimulus, equivalent to around 8.6 per cent of the value of the economy, is needed to get the UK economy back on track after the pandemic has eased.
Biden and Boris Johnson have both adopted the ‘Build Back Better’ slogan as the two nations plot their recovery from coronavirus – but the scale of Biden’s plan far outweighs that of the Treasury.
The chancellor’s failure to adequately stimulate the economy means it will not return to full capacity as quickly as it could – and will leave it weakened for years to come, the IPPR said.
It called for a stronger stimulus, which would enable higher public investment, the strengthening of public services and targeted transfers for families hit hardest by Covid-19.
The cliff-edge ending fo the furlough scheme in September could mean unemployment rising to 2.7 million – 8.5 per cent – a year from now, the think-tank warned.
Dr George Dibb, head of the IPPR Centre for Economic Justice, said: “The chancellor had an opportunity to boost it like Biden, using bold public investment to drive a bounce-back from the Covid-19 crisis. What he actually set out is not enough to restore the UK economy to pre-pandemic levels and puts 750,000 jobs unnecessarily at risk.
“We welcome Rishi Sunak’s announcements of extensions to business support, but we don’t just want businesses to survive, we want them to thrive if we are to grow our way out of this crisis.”
Sunak’s total planned stimulus is only half that recommended by the IPPR. Whereas the Biden administration’s plans represent closer to nine per cent of GDP, the Treasury’s total spending plans for 2021 and 2022 amount to just 4.4 per cent of GDP.
Carsten Jung, IPPR senior economist, said: “There are serious risks around the chancellor’s support package. With only half the ambition of Joe Biden, Sunak has bet on a recovery largely driven by higher income households spending their accumulated savings.
“But two in five households are worse off than before, and the same share of small businesses is at risk. We will not see a burgeoning bounce back without a further fiscal boost.
“The chancellor also did too little to invest in future growth. The Treasury contends there will be significant long-term damage to the economy, but the budget does not address this. Higher public investment could have driven a clean recovery and boosted the care economy, creating future-proof jobs.
“Rishi Sunak needs to step up and act bigger and bolder to achieve both a strong recovery and sound public finances.”