For a man that has admitted he has concerns about the level of government funding committed to the support of businesses during the last nine months, Rishi Sunak’s disclosure last week that he is extending the furlough scheme to the end of April 2021 points to a deepening concern in government that we are not out of the woods just yet.
He also extended the deadline for making applications under the government-guaranteed loan schemes. Applications were required before 31 January 2021, this deadline is now 31 March 2021.
In his statement to parliament the Chancellor hinted that he may be offering more financial support when he stands to present his budget on 3rd March 2021.
None of us want to contemplate another year like 2020. Although the various vaccines coming online should make some difference to the efforts to control infection it is likely that these efforts will not be some magic bullet to completely tame COVID.
What is likely, is that as soon as government is able to cut-back on its furlough funding and other commitments it will turn its attention to pay-back.
This will likely involve public expenditure cuts and higher taxation. Described by the pundits in the past as austerity.
We will have wait for Rishi Sunak’s announcements on 3rd March to see how this will play out.
The options the Treasury are probably contemplating are reductions in costly tax reliefs – such as continuing higher rate tax relief for pension contributions – and increases in taxation.
Economists that have a different view of government spending and whether it needs to be paid back, will be pressing for a different fiscal agenda. They will no doubt point out that we need to kick-start the economy by encouraging investment and stimulating consumers to buy.
The Chancellor’s parting shot for 2020 will also be coloured by the outcome of the present, protracted EU trade negotiations. At the time this article was written the outcome of discussions was far from clear and mirrors the general feeling of uncertainty that has grown since the first signs of COVID appeared March 2020.
Meantime, we are required to make the best of a situation that is feeling increasingly like self-imposed house arrest and yet there is a note of optimism that 2021 will see a change in our fortunes, and for the better.