What Rishi Sunak Got Wrong in the Pandemic
Much has been made of Rishi Sunak’s record as Chancellor during the global healthcare emergency but, as Sian Norris reports, he didn’t get all the big calls right
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Cast your minds back to 13 February 2020. Johnson’s new Government was two months old, Brexit has been “done” for a fortnight, there was increasing chatter about some kind of pneumonia-like virus in China, and Rishi Sunak entered No 11 Downing Street as the new Chancellor.
The Brexit-voting, sharp-suited former banker, who had only become an MP five years earlier, could not have known that soon his free-marketeer, small-state ideology would be trampled by a global emergency that required the Treasury to pay millions of people’s wages during multiple lockdowns.
An initial mini-budget failed to grapple with the scale of the problem caused by the COVID-19 pandemic. As the need for lockdowns and mass shutdowns became clear, however, Sunak announced a furlough scheme that paid up to 80% of temporarily laid-off workers’ wages.
According to the Resolution Foundation, “without the job retention scheme, unemployment would have risen very sharply whenever significant economic restrictions were imposed; as it was, the scheme’s continued existence throughout the crisis prevented catastrophic increases in unemployment”.
It also succeeded in making Rishi Sunak the most popular politician of the moment: after all, this was the man handing out the cash and paying the country’s wages.
But while he, as the phrase goes, got this “big call right”, Sunak’s pandemic was filled with missteps, last-minute decisions that fuelled uncertainty, and a blind spot when it came to see that the country’s economic and health outcomes go hand-in-hand.
We know what Rishi Sunak got right. But what did he get wrong?
Are We Paying for the Government’s COVID Waste?Sam Bright
Where Did All The Money Go?
The money spent on furlough was enormous – in the first six months of the scheme being introduced, 9.6 million people were furloughed, at a cost to the Treasury of £40 billion. Alongside this, the Government provided £47 billion of bounceback loans to businesses badly impacted by the pandemic.
“Our £400 billion Covid support schemes were implemented at unprecedented speed and protected millions of jobs and businesses at the height of the pandemic,” said a Treasury spokesperson. “Thanks to these interventions and reforms since, the UK now has the lowest unemployment rate on record”. Unemployment peaked at 5.9%, as opposed to the 12% predicted by the Office of Budget Responsibility.
However, it later emerged that some of the money claimed was done so fraudulently.
In terms of bounceback loans, it’s estimated that £17 billion will never be repaid, while nearly 10% (£4.9 billion) has been lost to fraud. A further 2.5% of the £19.7 billion delivered through self-employed support was also lost. Some 8.7% of furlough payments were made either to fraudsters or by mistake, as well as 8.5% of payments to the Eat Out to Help Out scheme.
But rather than respond with robust measures when the scale of the fraud was revealed, the Treasury said it expected its anti-fraud taskforce to write off the payments lost to fraud. Treasury minister Lord Agnew accused the Treasury of having “little interest in the consequences of fraud to our society” and of making “schoolboy errors” over the awarding of loans.
The Treasury confirmed it had stopped nearly £2.2 billion in potential fraud from the Bounce Back Loan Scheme, and £743 million of overclaimed furlough grants. It also either blocked or recovered more than £1.2 billion claimed in relation to the other schemes.
A Government spokesperson told Byline Times: “We are not writing off any fraud from these schemes, and have blocked or recovered billions in fraudulent activity. We continue to root out those who have abused the system, including by bringing together counter-fraud and data experts as part of the £25 million Public Sector Fraud Authority”.
Eat Out To Help Out
With the UK’s ‘independence day’ from lockdowns declared on 4 July 2020, Rishi Sunak launched an initiative designed to boost the hospitality sector and get people dining out again.
The rather eyebrow-raising entitled Eat Out To Help Out scheme allowed diners to get 50% off their meal at participating restaurants on certain days of the week. After months cooped up indoors, cooking our own dinners day in, day out, while on reduced wages, little wonder many families jumped at the opportunity to have an evening out at half the price. Others, still nervous about being inside crowded restaurants in the pre-vaccine era, kept away.
The scheme cost £500 million but despite the fanfare with which it was announced, by October the hospitality industry was questioning its success. A survey conducted by the British Chambers of Commerce found that Eat Out To Help Out had a “fairly marginal” impact on the sector as a whole.
But the biggest failing of the scheme was health. Thiemo Fetzer, an economist at the University of Warwick, wrote a paper that found the scheme was closely linked to an increase in COVID-19 cases over the summer 2020, and that Coronavirus spread more rapidly in areas with a lot of participating restaurants, before slowing down in those areas after the scheme ended.
The Treasury rejected the paper’s findings and said that brought back 400,000 people from furlough while safely restoring consumer confidence.
Some bereaved families believe their loved ones died after embracing the offer, such as the family of Bob Pape, who died on 22 September 2020.
Dither and Delay
By September 2020, Coronavirus infection rates were on the rise again, and the Government was locked in a debate as to whether to introduce a circuit-breaker lockdown to avert longer lockdowns over the winter.
Sunak opposed the circuit-breaker lockdown plan, as he was concerned about the “impact” it would have on “people’s jobs and livelihoods”. He believed it would be “bad for the economy” and “long-term health”. The opposition accused the Government of “dither and delay”.
Boris Johnson’s former adviser Dominic Cummings defended Sunak, saying that the delay to autumn lockdowns came from the Prime Minister. During a Q&A, he said that the “September decision not to act seriously was a PM decision against the advice of scientists, data team, me and others in No10, it wasn’t a Cabinet decision or ‘cos of Sunak”.
Labour leader Keir Starmer, however, accused Sunak of being a “key player” in delaying the second lockdown, which led to 27,000 additional Coronavirus deaths according to the Resolution Foundation. The scientist Professor Devi Sridhar has accused Sunak of handling the pandemic response “badly” when he was Chancellor.
As this paper reported, Sunak organised a summit between Johnson and several lockdown-sceptic scientists, in an attempt to offer a counter-narrative to those in Whitehall who supported a circuit-breaker. The guest list included Professor Carl Heneghan, director of the University of Oxford’s Centre for Evidence-Based Medicine, who claimed that lockdowns slow down the progression of the virus “slightly,” and then lead to a “resurgence”.
During this summer’s leadership contest, Sunak claimed that he was ignored when he warned about the dangers of lockdowns and said that scientific experts had too much power over decision-making during the crisis. In response, Dominic Cummings said Sunak “seems to be suffering … from rewrite-history-syndrome”.
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Help for Whom?
While the success of the furlough scheme was vital for saving lives and securing livelihoods, holes in the policy left some struggling to make ends meet.
Delays to support self-employed workers were heavily criticised, and when the scheme was finally introduced, helping three million self-employed workers, gaps meant that some were not eligible for help at all. These included workers who had only recently become self-employed and women who had taken maternity leave.
Around 75,000 new mothers received a payment that was well below what they should have, argued the campaigning organisation Pregnant Then Screwed, while 750,000 self-employed workers in total missed out on help.
Sunak was also accused of creating uncertainty around extensions to the furlough scheme.
As for those who had lost their jobs, or were on low incomes and therefore needed to start claiming Universal Credit, there was some good news. As Chancellor, Sunak introduced the £20 uplift for new claimants. By October 2021, however, the £20 was cut, leaving 5.5 million families more than £1,000 a year worse off. A decision to change the Universal Credit taper rate from 63% to 53% helped two million households. The Treasury described this as “effectively a tax cut for the lowest paid in society worth around £1.9 billion in 2022-23”.
Now Sunak has warned that the country faces difficult financial decisions and is expected to usher in spending cuts and tax rises in a continuation of the austerity approach of the previous decade. It’s probably worth remembering, at this point, that austerity meant the UK was not as prepared for an international pandemic as perhaps we could have been.
Indeed, austerity policies were called “Covid’s little helper”.
This article was produced by the Byline Intelligence Team – a collaborative investigative project formed by Byline Times with The Citizens. If you would like to find out more about the Intelligence Team and how to fund its work, click on the button below.