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Covid-19: Economic Support

Treasury – in the House of Commons on 18th May 2020.

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Photo of Owen Thompson Owen Thompson SNP Whip

What steps he is taking to support the economy during the covid-19 outbreak.

Photo of Amy Callaghan Amy Callaghan Shadow SNP Spokesperson (Pensions and Inter-Generational)

What steps he is taking to support the economy during the covid-19 outbreak.

Photo of Rishi Sunak Rishi Sunak The Chancellor of the Exchequer

Our plan to support businesses and individuals is one of the most comprehensive in the world. We have provided tens of billions of pounds in cash grants, tax cuts and discounted loans for businesses; deferred taxes for those who are self-employed, employed and in business; a world-leading job retention scheme to keep as many people in employment as possible; income protection for the self-employed; and a strengthened safety net to protect the most vulnerable in our society.

Photo of Owen Thompson Owen Thompson SNP Whip

Successful businesses in the tourism and hospitality industries before the lockdown will face a very different reality at the end of it, with overseas visitors gone for the foreseeable future and social distancing in place. These businesses need time to reinvent themselves for the new post-covid environment. What measures will the Chancellor introduce to enable much greater flexibility in the furlough scheme to support them as they prepare for this new reality?

Photo of Rishi Sunak Rishi Sunak The Chancellor of the Exchequer

It is precisely because of the time it takes for businesses to ramp up that last week, I announced an extension to the furlough scheme all the way through to October, to provide that runway for growth—in particular, for those who will open later in tourism and hospitality. As I said, we will introduce flexible furloughing in the extension period of that scheme.

Photo of Amy Callaghan Amy Callaghan Shadow SNP Spokesperson (Pensions and Inter-Generational)

Those on fixed-term contracts are in a particularly difficult situation where employers have placed them on furlough but are unwilling to extend it past their contract end date. One employer highlighted to me that that is because they are concerned that if they continue to furlough an employee without formally extending the contract, Her Majesty’s Revenue and Customs will deem the furlough frivolous and seek reimbursement. Can the Chancellor confirm that employers can continue to furlough those whose fixed-term contracts have ended without any financial repercussion?

Photo of Rishi Sunak Rishi Sunak The Chancellor of the Exchequer

I am happy to look at the specific example mentioned. It is important for us—and to protect the taxpayer—that we are paying furlough payments to those who are genuinely in employment and have a formal employment contract, but I am happy to look at that example.

Photo of Pat McFadden Pat McFadden Shadow Economic Secretary (Treasury)

Thank you, Mr Speaker.

Despite the interventions that the Chancellor has announced, some of our major industrial companies find themselves locked out of the lending scheme for the largest firms—the covid corporate financing facility—because they are not classed as investment grade. These companies support hundreds of thousands of jobs, either directly or through their supply chains, and are often the main employers in the towns and cities where they operate. Will the Government show the same flexibility and urgency in getting finance to these companies, which make up the industrial backbone of Britain, as they have done through the loan scheme for small companies, so that we can retain as much economic capacity as possible through this crisis?

Photo of Rishi Sunak Rishi Sunak The Chancellor of the Exchequer

The right hon. Member is absolutely right: finance should flow to the industrial base of our country. The investment grade rating, which relates to the corporate financing facility that the Bank of England runs, is important. Because that money is accessed by companies without any additional credit check by the Government, it is right that an investment grade rating is used, to protect the taxpayer. We have taken a flexible and generous interpretation of that, providing companies with the ability to use their bank rating to get access. For those companies for which commercial paper is not the right approach—many of the industrial companies he mentioned—we have a larger coronavirus business interruption loan scheme programme, and I am in conversations with various industry stakeholders to ensure that that is appropriately sized to provide finance to every part of our industrial base.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

Research by the Chartered Institute of Personnel and Development today released today has found that participants in the furlough scheme would otherwise have made up to 35% of their workforce redundant, rising to half the workers in hospitality, where the uptake of the scheme is particularly high at about 80%. Hospitality and tourism were first out and will be last back. Many of these companies have no income and are building up debt, and may feel compelled to sack workers if they are asked to pay more by the Government at the end of July. How does the Chancellor intend to prevent this and to support this part of the economy in the months ahead?

Photo of Rishi Sunak Rishi Sunak The Chancellor of the Exchequer

It is precisely the retail, hospitality and leisure sector that has received the most direct fiscal support from the Government through cash grants of £10,000 or £25,000 and a business rate holiday for the entire year—well beyond the point of reopening. That represents significant support, and the extension of the furlough scheme through to October gives those companies enough of a runway to grow back into a safe space.