On the 25 September 2020, I wrote to the Chancellor of the Exchequer to express my disappointment at the recently announced economic support measures and to ask for a set of extended support schemes to prevent mass unemployment and protect businesses in the worst affected sectors.
You can see the full text of my letter below:
I write to you about the economic announcements made yesterday.
I note that comparisons have been made between the new support scheme announced yesterday and the German system of Kurzarbeit. I would like to begin by pointing out some of the ways in which this comparison fails.
I cannot help but suspect that the high level of employer contributions, in complete contrast to Kurzarbeit, where employer contribution requirements are currently zero, is designed to intentionally reduce uptake of the scheme by employers. This will, of course, cut costs for the Treasury, but it will inevitably also lead to job losses.
The requirement for an employee to work at least 33% of their previous normal hours will make this new scheme wholly unsuitable for protecting jobs in the sectors that are most terribly affected by the pandemic, such as hospitality, leisure, arts, travel and aviation, and events. This is likely to be especially true for the smallest firms, who will not have enough employees to enable the lower number of hours that are economically viable to be shared out widely to keep the maximum number of workers in employment.
Initial calculations by the Resolution Foundation suggest that under this scheme, it would cost an employer 33% more to employ two people at half time than one full time employee. As you will know, this is precisely the opposite of Kurzarbeit, which encourages, rather than discourages, the equitable sharing of available work during recessions.
You said in response to the Shadow Chancellor yesterday that the new scheme incentivises shorter time working, but then went on to explain how firms could do this, and not why they would choose to. I would appreciate any further details you can share with me as to what the levers and incentives are to encourage employers take part in this scheme, aside from their own goodwill.
Meanwhile, the Government has not announced retraining schemes or new targeted investment to stimulate the creation of new jobs in the many industries that are not inherently impacted by Covid restrictions, or are essentially important areas for future growth and social wellbeing. As we know, some areas of retail and distribution, health, social care and other public services, many areas of manufacturing, and remotely accessible services, have continuing growth potential even during this crisis.
Insulation and green conversions, telecommunications, green energy and green transport infrastructure, and environmental improvements such as reforestation, all have additional potential for job growth if the Government commits to investment for the coming years. Paid retraining for these roles could begin within weeks or months, avoiding damage to livelihoods and helping to rebuild our economy on a socially and environmentally sustainable basis.
Those who will now lose their jobs as a result of the Government’s lack of generosity will often not have new jobs opening up that they could move into. The absence of strong and strategic investment will lead to unnecessary unemployment, damage to the economy, increases in social ills, and wasted opportunities to reduce carbon emissions and create a more flourishing society.
Kurzarbeit contains a supplement of an additional 7% of income support for workers who have dependent children. Yesterday, as in March, you failed to announce specific support for children or their families. I represent a constituency in the Borough with the second highest child poverty in the country. We are also the Borough with the highest homelessness, and my constituency had the largest number of people furloughed in the country. I am desperately worried about the impact of the continuing economic crisis on families and their children. I fear that child hunger will rise and that so many more children’s life chances will be blighted by increased poverty.
I have already received a very high number of letters and e-mails from desperately worried constituents who are self-employed and have been dependent on the Self-Employment Income Support Scheme over the past months. The extraordinary reduction of the level of income protected during the extension of this scheme is a source of horror, fear and anger for many. They do not know how you expect those who are self-employed, and whose work has completely dried up since the pandemic began, to survive on just 20% of their previous income, when none of their essential living costs have been reduced. The gap in support levels between the employed and self-employed is now far wider, with most employees receiving 77% of previous income.
The support for businesses announced yesterday is also inadequate to help many of the firms most at risk in my constituency. I will mention just two examples.
Impression is an events venue in my constituency, specialising in weddings. As a large London venue, Impression has a rateable value far in excess of the limit for the Retail, Hospitality and Leisure Grant Fund. However, like most businesses they also have a level of profit insufficient to qualify for the Coronavirus Large Business Interruption Loan Scheme. Due to these and other factors, Impression and other local businesses at risk were not able to benefit from most previous support packages.
Impression estimates that around 50-60 other small businesses, and 1000 families, are closely linked to their operations. I believe the damage that will be done to the local economy in Newham if Impression and similar venues have to close permanently will be significant. I do not believe any of the measures announced yesterday will be sufficient to protect Impression from the severe risk of closure.
An even larger employer locally is ExCel London, which directly employs 208 people. As you may know, ExCel has provided premises for the first NHS Nightingale free of charge since April. However, permission to put on events, on a smaller and limited scale, which was expected to begin from the 1st October, has now been withdrawn.
The exhibitions and events sector, of which ExCel London is a major part, previously estimated that 45% of the national workforce would be made redundant during the crisis. I am told that in the light of yesterday’s announcements this estimate has risen to 80%. ExCel and many other exhibition venues have not been eligible for business rates support, have not received sectoral grants to partially compensate for the almost complete loss of revenue since February this year, and did not benefit from Eat Out to Help Out or other Government attempts to increase economic demand during the Summer.
Events and exhibitions need customer confidence in order to do business. Many weddings have a lead-in time of a year or more, and exhibitions require a minimum of three months of planning and commitment. ExCel want to see a commitment to early clarity on when the sector can re-open and a Government-backed insurance scheme for events and exhibitions to enable customer confidence and allow bookings to be made even for well into next year.
As we know, the present economic crisis extends far beyond the events sector, and the sector–specific needs of ExCel London and Impression are paralleled in other deeply affected sectors. I would be grateful for much more detail on how the Government intends to protect jobs and prevent permanent economic damage in each of the most affected sectors, given that the broad, non-sectoral support schemes announced yesterday will simply not do this.
Finally, it is deeply disappointing that there is nothing in the package of measures announced yesterday that will help the many, many constituents who were excluded from support, through no fault of their own, earlier this year. By using the same eligibility criteria as previously, you must know that you have deepened their already perilous financial situations and exacerbated the strong and rightful sense of injustice that they feel. Please urgently consider what you can do to address the severe difficulties that many of those who have been consistently excluded now face.
The Government’s job is to protect other people’s jobs. It is callous to stand by and watch people’s lives and livelihoods being wrecked, and not to step in with every possible measure. Economic changes, even those that may be unavoidable, must be enabled to occur gradually, and without the calamitous damage to families and communities that I fear we will now see.
What the country needed was a set of extended support schemes that could prevent large rises in unemployment, prevent businesses from going under en masse in the worst affected sectors, and enable new jobs to be created to make the economy greener and more resilient to Covid and the resulting economic upheaval.
I do not believe your announcements yesterday were sufficient, and I hope to see more action to protect the most vulnerable workers, families, and businesses in the coming weeks.
I look forward to hearing from you at your earliest convenience, so that I can assure my constituents that I have placed their petitions for help before you and you have recognised their needs.