Boris Johnson’s ‘build’ speech was disastrously timed. Now all eyes are on Rishi Sunak for the good news

It is calculated that 1 million furloughed workers could lose their jobs when the scheme is wound down this autumn. Johnson’s plans won’t fix this

Andrew Grice
Wednesday 01 July 2020 17:07
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Boris Johnson refuses to commit to unemployment remaining below 3 million

In politics, timing is everything. When Downing Street planned Boris Johnson’s relaunch speech, making it four days before the lockdown relaxation in England on “super Saturday”, it seemed the right moment to turn the page from health emergency to economic recovery.

But events beyond Johnson’s control turned it into the wrong moment. The first city-wide lockdown in Leicester trumped his upbeat “build, build, build” message, stealing the newspaper and TV bulletin headlines. It was a painful reminder that coronavirus is far from beaten. Even Johnson conceded that some would find a speech about Britain after coronavirus “a bit premature”.

That impression has been reinforced by a wave of job cuts since the speech – 1,700 at Airbus (and perhaps twice as many in supply chains); up to 1,300 at easyJet and today, 5,000 at SSP, which owns Upper Crust, and 600 at shirt-maker T M Lewin. With many more to come, the grim news exposed the fundamental flaw in Johnson’s £5bn of building projects. Even if they are speeded up as he hopes, they might make very little impact on the country’s biggest unemployment crisis for a generation.

The Resolution Foundation calculates that 1 million furloughed workers could lose their jobs when the scheme is wound down this autumn.

Crucially, the think tank’s analysis casts down on the idea that people leaving the hardest hit sectors – such as hospitality, retail, leisure and tourism – will switch swiftly to other jobs. Such moves are relatively rare: in the past 10 years, three-quarters of those who have lost their jobs return to work in the same sector.

Johnson needs to do much more to address this mismatch. Although a guarantee of an apprenticeship or job placement is welcome, it might only scratch the surface.

Rishi Sunak, the chancellor, must beef up the government’s response to the jobs crisis in his July economic statement. He has had a relatively low profile in recent weeks. It’s not unusual for chancellors to adopt a “submarine” strategy, surfacing for big announcements. But it’s not an option in such an economic emergency.

I don’t think Sunak is being kept in his box by Downing Street. More likely, he is agonising over what to say next week and what to leave until his second Budget this autumn. There might come a time when Team Boris wants to take the chancellor down a peg or two if he continues to outshine him and looks like his successor. But for now, he needs Sunak to succeed, as he’s one of the few stars in a pretty poor team performance on coronavirus.

The job cuts now being announced are a direct, inevitable consequence of the chancellor’s decision to phase out his job retention scheme. At a cost of about £14bn a month, it can’t go on forever. But it would be wrong to squander its remarkable success, so it should be replaced by a wage subsidy scheme in the worst-hit sectors like hospitality. I expect Sunak to please the Tory MPs demanding tax cuts to stimulate the economy by reducing national insurance contributions for employers, perhaps when they take on young workers.

He should go further, by giving firms longer to repay government loans, or converting them into grants if necessary. He should live up to Johnson’s pledge to be an interventionist by saying the government is ready to take a stake in viable companies to keep them afloat. Sunak is sceptical. But if it was good enough for the banks, why not the rest of the economy in an even deeper crisis? Sunak could also create jobs in the public sector, with health and social care at the front of the queue. Such measures would provide the immediate response so lacking in Johnson’s “jam tomorrow” package.

Sunak should resist calls for a temporary cut in VAT. This is not a normal recession; the better off have saved money. The problem is a different version of consumer confidence, and whether people want to return to their pre-crisis way of life. The VAT cut from 20 to 17 per cent urged by his predecessor Sajid Javid would cost £20.6bn over a year, which could be better spent on wage subsidies to keep people in jobs.

The Tories will pay a heavy price unless they act more decisively to limit the damage caused by the gathering unemployment storm. It’s not about GDP but livelihoods and even lives. It’s about the Tories’ narrow party interest as well as the national interest. Unemployment peaked at 3.3 million in 1984 as a result of Margaret Thatcher’s harsh economic medicine. Deindustrialisation hit constituencies in Labour’s red wall in the north and the Midlands hardest. The Tories’ brand was tarnished and many of those seats remained unwinnable until Brexit helped Johnson turn them blue in December.

With predictions that unemployment could again top 3 million, these areas are again in the eye of the gathering storm. Johnson and Sunak must do much more to limit the damage.

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