In a presentation following the Chancellors statement yesterday, the IFS have claimed that the job of mitigating the debt caused by the governments current spending plans could be a job “for not just the current Chancellor, but also many of his successors”.
At a presentation of its findings on the Chancellor’s statement, IFS director Paul Johnson said that a “reckoning, in the form of higher taxes” would have to come eventually. It also suggested that the economy will not grow as large as it could have done if the Covid-19 crisis had not hit.
“If that’s the case, and it’s very likely to be the case, revenues will still be depressed, and if we want to try then to bring the deficit back to where it would have been absent the crisis, we will need to do some spending cuts, or given a decade of austerity, perhaps more likely some tax rises,” he said.
“It’s going to take decades before we manage that debt down to the levels we were used to pre this crisis.”
The IFS has also cast some doubt on the potential effectiveness of the Stamp Duty scheme and the 50% off dining initiative warning that the temporary stamp duty holiday, announced by Mr Sunak, may in fact increase house prices while deputy director Helen Miller raised doubts as to whether the meal discount scheme and VAT cut were driven by a problem with demand, or supply – with businesses unable to accommodate customers due to social distancing constraints.
Her concern lay in the fact that many businesses may not pass on the VAT savings to customers, thus negating the purpose suggesting that “the firms that benefit most would be those who have the highest sales, who are operating closest to normal”.
This isn’t the first time Rishi Sunak’s plans have been called into question. HM Revenue and Customs chief executive Jim Harra has also raised concerns about the Job Retention Bonus scheme which gives £1,000 to firms for each furloughed employee they bring back to work and whether it actually offers enough value and benefit.
In a letter to the Chancellor, he requested a ministerial direction which is a formal order to go ahead with a scheme despite the concerns.
Mr Harra said that while there was a “sound policy rationale” for the Job Retention Schems, but that “the advice that we have both received highlights uncertainty around the value for money of this proposal”.
Mr Sunak himself said he expected a “dead weight” cost to the JRS scheme, as many companies who already plan to retain staff will reap the benefit.
Speaking to BBC Radio 4’s Today programme he stated his feelings that “without question” there has been “dead weight in all of the interventions we have put in place”. However, many economists and even the leader of the opposition, Labour leader Sir Keir Starmer voiced concerns that Government could not in fact afford the “dead weight”, stated his belief that the scheme should have been a targeted initiative and not a one size fits all payout.
However, the government have since responded through a Treasury spokesman who stated that the Government is confident the Job Retention Bonus scheme is the “right policy” to help protect jobs.