Rishi Sunak has spent billions of pounds rescuing the economy during the year of Covid, but he needs to go further.
To start with, the chancellor, who set out his 2021-22 spending plans last week, needs to make permanent the £20-a-week increase in universal credit which is due to expire in the spring. Without that increase, about 6 million households, many of them the most vulnerable to financial shocks, will lose £1,000 a year of vital funds just as the unemployment rate is expected to hit its post-pandemic peak.
He also needs to reverse the £10bn of cuts to Whitehall departments due to take effect next year. These are spending reductions that will hammer the budgets of those areas left unprotected by his guarantees to boost spending for health, schools and the military.
An egregious freeze on pay for more than 2 million public sector workers should be reversed, not least because the cliched picture of the feather-bedded civil servant is exposed as being even less accurate than usual when a pandemic hits.
There are very few corners of the public sector that have not worked hard over the past eight months. To hold up nurses as more deserving than the police, social workers, teachers and firefighters is something only a blinkered chancellor could do.
Yet Sunak has promised 1 million health service workers an as-yet-undisclosed pay rise and those earning below £24,000 a £250 increase, worth almost 2% to the very lowest paid. The rest get nothing.
Another budget cut designed to appease the worst instincts of Tory backbenchers was the reduction to 0.5% in the proportion of GDP allocated to international aid. To maintain the UK’s vital support for developing world countries, a quick road back to 0.7% is a must.
And he should also find a way to support the self-employed workers who have fallen through the large holes in his otherwise generous support schemes.
The sums of money needed to address these omissions from the spending review are not great when set against the £394bn Sunak is already on course to borrow this year and the £164bn the Treasury’s independent forecaster, the Office for Budget Responsibility (OBR), expects will be borrowed next year.
As a percentage of annual income (GDP), the OBR says the deficit – the gap between the government’s tax income and its expenditure – will reach 19% this year. But if anything should get in the way of the expected turnaround, that figure could climb to 22%.
Britain already has one of the worst records in preventing excess deaths since the Covid-19 crisis hit. If the chancellor pinches the pennies now, the UK risks extinguishing the booster rockets of growth, harming business and consumer confidence, and winning the prize for the slowest recovery too. And that is before a destructive Brexit and its potential impact on trade with the EU is considered.
Sunak should be able to reverse his worst mistakes without too much trouble, because all it effectively requires from him is his signature on a cheque.
The more difficult task facing the chancellor is changing the course he has set himself for the next five years of capital spending, and not least marrying his devolutionary rhetoric with plans to direct almost all infrastructure spending from Westminster.
Projects across England require Whitehall’s finest to pore over them and ministers to give the OK. It is true that Sunak has agreed to tear up the Treasury’s manual for assessing projects, which in the past has favoured London and the south-east. That holds out the prospect of schemes in the north – ones that might once have been rejected – getting the go-ahead. However, it is clear that mayors and councils will be largely carved out of the process. That is a recipe for mismanagement and waste that will sit alongside the profligate commissioning of hospital supplies during the crisis.
Britain has suffered the biggest recession since 1709. To clamber out of the hole made for it by the pandemic, the Treasury needs to hand over of some of its powers as well as some extra cash.
Covid didn’t stop the cameras rolling, but a studio squeeze might
The UK film and TV industry is proving to be pandemic-proof as coronavirus sparks a boom in global demand for top-quality British-made entertainment.
Last week, Netflix revealed that a multi-month halt to production earlier this year had proved no barrier to its growth ambitions, as it raised its budget for UK-made film and TV shows by 50% to $1bn (£750m) this year. Outside its home market in the US, the UK is Netflix’s biggest market for productions, and the streaming giant is not alone.
The UK’s £2bn film production industry is already back to pre-Covid levels, with one executive saying there is now a backlog of Hollywood blockbusters wanting to book studio space. Universal’s Jurassic World: Dominion was the first major production in Europe to restart, in early July, and Robert Pattinson’s The Batman was another British filming success story.
The industry has maintained momentum thanks to a series of key measures, including a travel quarantine exemption for the cast and crew of major productions, and the government’s £500m film and TV production restart scheme, which underwrites insurance for Covid-related losses. However, John McVay of Pact, the trade body representing UK TV and film producers, warns that the scheme is not yet green-lit to continue beyond February.
There is billions at stake. Last week, Pact revealed that “exports” of UK-made TV shows hit a record £1.48bn last year, led by the global popularity of dramas such as His Dark Materials. And £3.7bn was spent on making films and high-end TV shows – those costing £1m-plus per episode, such as The Crown – last year.
In fact, the UK is proving so popular there is a looming crisis: there is not enough studio space being created to cope with demand, even when the current expansion of giant sites such as Pinewood and Shepperton Studios, and new developments such as Dagenham and Sky Studios Elstree, come online.
Industry executives say that, when they do, there will be a skills shortage of tens of thousands of staff, from production accountants to location managers, who will need to be trained if the UK is to continue to be a world leader.
Eurostar may be Franco-Belgian, but the headache is all Britain’s
Having sold its stake in Eurostar for £750m in 2015 to private investors, the British government is naturally reluctant to dip into its own coffers to bail out the cross-Channel train service, which is majority-owned by the French and Belgian state railways. Even the National Audit Office agreed the UK got good value for this bit of the family silver – long before anyone foresaw passenger numbers dropping by 99% five years later in a pandemic.
Nonetheless, it would be wishful thinking to regard Eurostar’s desperate straits as someone else’s problem. In the week when chancellor Rishi Sunak conceded that airports could apply for the equivalent of business rates relief, Eurostar has urged that its St Pancras International terminus – owned on a concession by HS1 Ltd – should also be eligible. That would lower costs passed on to the train service – which, of course, offers travel with far lower emissions than flying.
Unfortunately, despite environmental action plans cobbled together by the government, at least half of Eurostar and HS1’s “green gateway to Europe” slogan is anathema to the current ruling party. The French have understandably not prioritised saving a high-speed train service to a hostile island when they have a whole TGV network to sustain: the bailout money for French state rail company SNCF has largely gone elsewhere.
Like it or not, the UK is on the hook in various ways: contractually, for millions of pounds in track-access charges it will have to stump up anyway to HS1 should Eurostar collapse in the coming months; to avoid yet more lost jobs; and to maintain a strategic link that should mean more to Britain than France.
Before Covid-19, Brexit was Eurostar’s biggest concern. The end of the transition period could yet push it over the edge. Its loss would be a potent metaphor for a country trying hard to ignore just how close, and crucial, its neighbours in Europe truly are.
