Updated: Jul 27, 2020
By George Holt
“So, first of all, let me assert my firm belief that the only thing we have to fear is...fear itself — nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life, a leadership of frankness and of vigor has met with that understanding and support of the people themselves which is essential to victory”
Those were the famous words said by FDR during his first inauguration in 1933 after a landslide election win the previous year during the great depression. FDR then introduced America to his “New Deal”, that included colossal amounts of public spending, causing divisions in both major parties and one of the biggest political realignments in 20th Century America.
Although the Coronavirus crisis has not gone on as long as the Great Depression and hasn’t caused the same level of economic damage, we’ve still taken a major hit from this virus, economically and in morale. But the so-called “mini-budget” is here to start delivering the UK’s “New Deal” that can begin to heal our country. Let’s break down some of the details of the announcement:
A Job Retention Bonus is a great way to mitigate the risk of unemployment by making it easier for companies to bring back their employees. This will help the potential “cliff-edge” of unemployment coming for people who were initially furloughed, as the furlough scheme will be ending in October. It also casts quite a large net, with it applying to a large variety of income levels. This also has an estimated cost of over £9 Billion, this is a very generous and needed offer to the workers and employers of this country.
VAT Cut for food and non-alcoholic drinks, it is truly pleasing to have a government that
sees the value in tax cuts. Reducing the burden on businesses and consumers. Such a
great cut from 20% to 5% is something that will really help this industry get back on its feet
after how it’s been struggling with the crisis. I hope the Government sees the values in these
tax cuts for the long term and keeps these rates relatively low for the rest of their time in
“Eat Out to Help Out” aside from being an unfortunate naming choice, this is a good idea in principle. This plan is to give restaurants the confidence they need to reopen by knowing that there will be demand for their food when they open their doors. This also brings my regular Nandos order down to £6.65 which is something I am certainly a fan of! However I would urge people to use this scheme to “Eat Out” at a local business to “Help Out”, as they have certainly been hit the hardest by this. They didn’t have such large reserves of money available, when you spend this money at a local business this is actually helping a family return to normality, paying their rent and feeding their family instead of lining the pockets of large businesses. I support this policy as a temporary measure to get the industry back on its feet.
The Cut in Stamp Duty is something I welcome with open arms - removing the tax burden for those who wish to move up or get on the property ladder. This will also stimulate the housing market, which has seen a sharp decline during the pandemic.
The Green Homes Grant is another crowd-pleaser policy and something that doubles down on the government's commitment to make the country greener. I’m genuinely excited to see the long term effects of this grant - with more energy-efficient homes we can cut down on the wasted energy we produce as a nation. Simply another step to reaching “net zero”, or to take another angle, the government putting money in to help bring down your energy bills!
The Kickstart Scheme is an example of a scheme that is targeted in the right direction and I really hope and believe it will have good effects on the people who need it most. Targeting those on Universal Credit and who could be at risk of unemployment really reaffirms Conservative values of making work pay and ensuring we keep employment figures. I wonder if this is something the government would look to maintain for longer than planned, in one form or another?
There are many other schemes such as their support for apprenticeships - something that I have always thought needs further emphasis from the government as someone has used this scheme to start their own career. Their support for training school leavers is also welcomed, I just hope it will be used wisely and be focused on getting them into work or further education afterward. The new support in job hunting and career advice is also something I think many young people will see benefits from. This is certainly a new deal for the young people of this country. There is an incredible amount of extra money going out to other places too such as schools, courts, police, and town funds!
The intention of all this is to get the economy moving again and lift the spirits of the nation, after effectively being on hold for months. The original new deal restored confidence in the government (and also set a precedent for government intervention in economic/social affairs) for the American People and FDR went on to renew his mandate with a landslide election win that looked like this:
Is the new mini-budget equal to the new deal? No, and that’s a good thing. If we needed relief on the scale of the new deal, we would be in far greater trouble. This is a rescue package with measures to heal the wounded industries and families of this pandemic. By offering incentives to open your businesses and making it so much easier to get a job if you aren’t employed and offering career advice, in order to mitigate the eventual rise in unemployment after the dust begins to settle. The long term change I hope to see is a stronger country bouncing back from this crisis.
For all the reactions and political implications, I would direct you to the latest YouGov Poll, which shows the Tories back on a 10 point lead over Labour. After the announcement of this “mini-budget”, it’s safe to say the opposition didn’t know how to react. They were left clutching at straws for a response, such as mocking Rishi Sunak for his brand of coffee mug, making points unrelated to the new announcement, and Anneliese Dodds repeating the phrase “back to work budget” without any real sense of purpose or meaning behind it.
This package is costing around £30 Billion, but the nation has responded very positively to this news and most see this as a necessary cost to get us back on our feet as our economy has shrunk by 25%, which is as much as it has grown over the past 18 years. This is perhaps because the country trusts a Tory government on spending responsibly far more than it does with a Labour one (given what happened in the last Labour government). I wouldn’t be surprised if we see a rise in taxes on the wealthy once we are in the clear in order to help tie up the loose ends on spending.
In conclusion: this is not the new deal, but it certainly is the deal this country needs right now.
Disclaimer: All views expressed in this piece belong solely to the author and do not reflect the views of Demographica as a company.