26 May 2022

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As lockdown starts to unwind, the financial options get more complex. Money pouring out like a waterfall.
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As lockdown starts to unwind, the financial options get more complex. Money pouring out like a waterfall.

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Complex balancing act going on at the Treasury.

It must come as some surprise to hear HMRC praised for giving money back to the people but here we are hearing the Chancellor of the Exchequer praise HMRC for dealing so efficiently with the furlough payments. The truth is that HMRC’s work has hardly begun because the furlough scheme has been extended to the end of October and at the same time different rates of payment are being talked about as well as discussion on allowing employers to take back furloughed employees on a part time basis and a system from August whereby employers take responsibility for a share of the payments as time goes on.

Once again the hospitality industry has been cited – they are in the main unlikely to have any income at all until they re-open fully so how are they going to be able to afford to make a payment of part of the furloughed staff salaries? The Chancellor is going to have to take a very selective view of the hospitality industry if he wants it to survive in anything like its present form.

The government is worried that once the furlough finishes employers may make their staff redundant anyway. Of course that has always been a possibility, if for no other reason than no one had the slightest idea how long this would all go on for, and indeed do they know now? The changes mentioned are all still dependent on whether the virus continues to recede or whether the relaxing of restrictions brings about a resurgence of the pandemic, something greatly feared by many.

Also a scheme for the self-employed is unveiled. Traditionally the self-employed have never fared well when it comes to benefits and hand-outs even though in the UK they represent a significant body of the working population. The Chancellor announced this a while ago and made the point that there would be a need to pay for it. I think this means that there will be some form of levelling up of national insurance contributions between the employed and self-employed. If the benefits are harmonised then so should the contributions be. I expect we shall only learn what these provisions will be when the next budget is announced.

While all the talk of grants and furlough extension sounds like good news, the reality is that until the crisis is past and the economy in a position to get itself restarted, the damage to the country can only be estimated. Even with the extensive financial help, there will certainly be many thousands of businesses going out of business, even if there will be those which will rise like the phoenix, hopefully stronger and more effective than before. It is already possible to see that the stronger businesses are making plans to re-establish on a stronger basis, perhaps clearing out dead wood and inefficient practices. The weaker, and that will largely include those who run out of cash, will not be so fortunate. Redundancies are inevitable. As they are saying on television, the redundancies are all but made already.

Ryanair reckons they will have 40% of the flights back up and running in July. I admire their sense of get up and go but exactly who will be getting up and going with them? We have no idea how the pandemic will be faring in other parts of the world and it is unlikely that the authorities will be allowing free and unfettered travelling across borders world-wide. The suggestion that people will want a holiday to get over the lockdown before going back to work and school seems more like wishful thinking than anything. This desire on the part of Ryanair is not supported by government views at the moment.

What is a certainty is that money is pouring out of government coffers like a waterfall and the Chancellor of the Exchequer will have to keep his nerve for some while to come.

Adrian Leopard 12-05-20

Photo Eric Johnson

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