HM Treasury has announced a package of one-off coronavirus support grants to hospitality and leisure businesses in England, while a think tank has suggested that future support payments could be made on a geographic basis.
Hospitality (defined in a fact sheet as accommodation, food, and beverage services) and leisure premises will benefit from grants of up to £6,000, and more than £100 million of discretionary funding will be provided for local authorities to support other businesses, Treasury said in a December 21 release. Additional support will also include the reintroduction of a statutory sick pay rebate scheme that covered absences on or before September 30.
“At what is often their most profitable time of year, many pubs and restaurants have seen cancellations and reduced footfall as people have responded to the rise in cases ahead of Christmas, with UKHospitality reporting that many businesses have lost 40 to 60 percent of their December trade, often their most profitable month,” Treasury said. The government recognized that "the rise of the omicron variant means some businesses are likely to struggle over the coming weeks," it said.
In a December 20 release, UKHospitality Chief Executive Kate Nicholls said the industry “urgently needs grants for short-term business survival, and an extension to business rates relief and the lower VAT rate to secure longer-term survival and planning.”
About 200,000 businesses will be eligible for the new grants — worth up to £683 million in total — which will be administered by local authorities and will be available “in the coming weeks,” Treasury said, adding that the devolved administrations will receive around £150 million of funding through the Barnett formula used to calculate annual changes in the block grant.
“Ultimately, the best thing we can do to support businesses is to get the virus under control, so I urge everyone to 'Get Boosted Now,'” Chancellor of the Exchequer Rishi Sunak said, referring to the government’s booster vaccination program.
Treasury said HM Revenue & Customs stands ready "to support any businesses impacted" by the pandemic through its time to pay arrangement. Sunak has asked HMRC to offer businesses, particularly in the hospitality and leisure sectors, “the option of a short delay, and payment in installments, on a case-by-case basis,” Treasury added.
Business Reaction
“These positive measures will help alleviate the intense pressures that small firms are currently under, and hopefully arrest a significant decline in confidence over this year,” said Mike Cherry, national chair at the Federation of Small Businesses. “The encouragement of HMRC to give as much breathing space as possible to small firms as we head towards tax return season will also come as a relief to many.”
Rain Newton-Smith, chief economist at the Confederation of British Industry, said the chancellor provided “welcome breathing space to boost confidence and provide support for hospitality and leisure businesses to keep their doors open through tough disruption to their crucial winter trading.”
“Whilst these measures are a positive starting point, if restrictions persist or are tightened further, then we would need to see a wider support package, equal to the scale of any new measures, put in place,” said Shevaun Haviland, director general of the British Chambers of Commerce.
The grants of up to £6,000 may help “stem some cash flow issues” for smaller firms, but will amount to “little more than a meager sticking plaster” for many larger businesses, said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
Devolution
HMRC should consider making coronavirus support payments available on a geographic basis if the omicron variant or a future outbreak “impacts some parts of the country much harder” than others, according to the Institute for Fiscal Studies (IFS).
Researchers from the IFS, the Fraser of Allander Institute at the University of Strathclyde, and the University of Stirling Management School considered lessons from the pandemic for the funding arrangements of the devolved governments in Scotland, Wales, and Northern Ireland, the IFS said in a December 21 release.
The researchers' joint report examines options for reforming the devolved fiscal frameworks after the pandemic. The IFS noted that while HM Treasury has already provided some additional funding, two ideas “may be particularly relevant” if it is decided that more stringent measures are needed.
First, the devolved governments should be provided with minimum funding guarantees (as they were in the first year of the pandemic) or enhanced borrowing powers, according to the release. “Such measures would provide devolved governments with additional financial ‘headroom’ above the funding they receive via the Barnett formula,” the IFS said.
Second, HMRC should examine the feasibility of making the coronavirus job retention and self-employment income support schemes available on a geographic basis, the IFS suggested. “It may turn out to be impractical without risking significant fraud or error if HMRC is unable to obtain good data on where jobs are based," it said. "But if feasible, devolved governments could be given the option of paying for furlough and the [self-employment income support scheme] to be reinstated in their territories if they want to tighten public health restrictions significantly. Thresholds for hospitalizations, for example, could also be agreed, above which the U.K. government would pay for the schemes, to provide extra support to areas facing the most serious situations.”