United Kingdom

HAMISH MCRAE: It's time to box clever, Rishi...

Could Super Saturday be followed by Woeful Wednesday? If Rishi Sunak does not pitch the next stage of his rescue operation right, then when the job furlough scheme ends in October, the outlook could be grim indeed.

There is no question that the Chancellor's initial rescue did the job. In an emergency you throw everything in. But the Government cannot keep the economy going by borrowing yet more money.

It can prime the pump but it can't keep doing the pumping. At an overall level, the bottom is now past, and the Bank of England's chief economist, Andy Haldane, may be right that the UK will have a V-shaped recovery.

With his package on Wednesday, the Chancellor has to support the viable businesses that have, through no fault of their own, been devastated by the shutdown, says McRae

But unless employment picks up – and we have had a bad week for job loss announcements – then the recovery will peter out.

This weekend gives us some feeling for the extent to which the hospitality sector, on which so many jobs depend, can pick itself up. But we should beware. 

Business was brisk on the first day that the non-essential shops opened a couple of weeks ago, but since then it seems to have fallen back. The huge change that has taken place in our habits won't suddenly reverse itself.

Take online retail sales. They were 22 per cent of the total in March before the crisis struck. They shot up to nearly 33 per cent in May. We have had ten years of structural change compressed into three months.

Or take the use of cards and the decline of cash. According to Link, withdrawals from cash machines fell by 55 per cent in May.

We will go back to using cash a bit more, just as we will go back to high street shops, and bars and restaurants. But some of the shift in our behaviour will stick. So there have been winners and losers from the shutdown, though the sad tally of losers is far longer.

With his package on Wednesday, the Chancellor has to support the viable businesses that have, through no fault of their own, been devastated by the shutdown. But he has to avoid giving yet more support to those that have either been broadly unaffected, or even have benefited from it.

This won't be easy. The people in the Treasury can pull the levers but there may be nothing attached at the other end. But there are some clues.

For a start, it makes little sense to have a temporary cut in the rate of VAT. Yes, that would bring forward some sales. But since a third of retail sales are online, that does not target help to the high street and it costs tax revenue that needs to be rebuilt.

The arts and entertainment business is a jewel in the UK's crown and has been particularly hard hit by the shutdown of live entertainment

On the other hand, the end of the furlough scheme should be buffered. It cannot go on forever and it is being tapered down from August. But it should not just stop with a bang in October. Preserving jobs will be the key. There is a case for targeting help to seasonal businesses.

The tourist trade has at best lost half its summer.

For some businesses that is half their annual revenue, revenue they rely on to get through the winter. There is a case too for special support for the creative sector. The famous actors who repeatedly denounce the Government have not done their industry any service, and hearing multi-millionaires plead for taxpayers' support does rather stick in the craw.

But the Chancellor should be big enough to rise above this. The arts and entertainment business is a jewel in the UK's crown and has been particularly hard hit by the shutdown of live entertainment. Many of the people who work in it are self-employed and see little of the millions the top-liners earn. They need help.

So the support has to continue. It has to be more targeted – cleverer, if you will.

There are two powerful reasons for urging this. One is that for social as well as economic reasons we have to try to ensure that the recovery is a job-rich one.

The other is that the Government can at the moment borrow stunningly cheaply.

There was nearly a record demand for a 30-year gilt issue last month and the interest rate on these dipped below those of Japan – around 0.6 per cent.

That is a disaster for savers, but it is borrowing power the Chancellor needs to deploy to get a lot of very worried people through the difficult months ahead.

Football news:

Juventus sacked Sarri (Nicolo Skira)
Messi sleeps on an anti-coronavirus mattress. The tissue is coated with nanoparticles that destroy the virus
Andrea Agnelli: Ronaldo will stay at Juventus. He's the mainstay of the club
Mbappe got into PSG's yawn for the match with Atalanta in the Champions League
Guardiola again played against Madrid without strikers. Zidane did not find an answer
Gattuso on the match with Barca: Napoli will climb Everest
Lampard about the game with Bayern Munich: the History of the games, when everything changed. Chelsea needs to be trusted