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23 October 2020

Rishi Sunak’s U-turn means the government finally has a single coronavirus policy

The government began the week with two coronavirus policies, but the Chancellor's change of direction means it now has one.

By Stephen Bush

Rishi Sunak has made a series of far-reaching U-turns, significantly increasing the scope and the cost of his support policies. 

He overhauled the job support scheme for workers whose hours have been cut as a result of the pandemic. Businesses will now have to contribtue just 25 per cent of their full-time wages (they must be working at least 20 per cent of their usual hours, with their employers contributing a further five per cent of non-worked hours), down from 55 per cent (they had to be working 33 per cent of their usual hours, with their employer paying an additional 33 per cent of their lost hours). The state will pay 62 per cent of non-worked hours: meaning that workers in businesses whose capacity to trade is reduced but not halted will receive at least 73 per ent of their pay. It represents an increase both in what the state will pay and a reduction in the costs to the employer.

Businesses in tier two areas will now be eligible for the support grants previously only available to those in tier three – and that support will be backdated, meaning in areas that have been in tier two-type restrictions for longer, such as Greater Manchester, businesses can access support for the costs incurred during that period.  And equally significantly, workers who are rehired will also be able to claim wage support, so the redundancies already seen across the UK thanks to the imminent end of the furlough scheme will reduce slightly, too. 

[see also: Why Rishi Sunak’s most painful U-turn is the fault of George Osborne]

Businesses in tier one areas are in a cold climate: able to reduce their staff costs, but with other operational costs that they will also struggle to meet. If you’re a family restaurant, that’s fine, perhaps. If you’re a hotel, a brewery or a farm, or work in supply chains in any way, then that is less so. It seems likely that there will be a further extension of tier two measures to tier one, not least because so many of the businesses left facing the economic but not the social costs of lockdown are located in Conservative seats in commuter towns and picturesque villages. 

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The government started this week with two coronavirus policies: an economic one devised by a Chancellor desperate to start bringing government spending down to normal levels, and a lockdown policy devised by Downing Street to bring the rate of novel coronavirus infections down. It now just has one: a policy of regional lockdowns (with further parts of the country set to enter tier two this weekend) and an economic support policy to match it.