The U.K. government is “looking at all potential measures” to provide cash flow support to businesses and preserve employment and the productive capacity of the economy, U.K. Chancellor of the Exchequer Rishi Sunak said.
Sunak sought to reassure Treasury Select Committee members over his government’s budget and coronavirus measures at a March 18 hearing during which he said the government is looking at delivery mechanisms that could be targeted as well as and as quickly as possible. The hearing took place the day after the chancellor announced a £330 billion package to soften the blow of the COVID-19 pandemic to U.K. businesses.
Sunak told the committee that “tax levers” can be used at scale and at speed, but it is harder to target them to the businesses, sectors, and workers that need them most. However, he did not rule out committee Chair Mel Stride’s suggestion for implementing “some kind of ‘reverse-National Insurance’ approach . . . rather than charging employers 13.8 percent [in contributions] to employ someone.” Stride admitted that this approach, targeted at preserving employment, would be expensive for the Treasury.
“We are looking at every conceivable tool at our disposal as we speak,” Sunak said. "[If] the scale of what we’re grappling with increases, we’ll be left looking at more macroeconomic solutions, than targeted solutions, anyway.”
Sunak reiterated that the business rates holiday for the leisure, retail, and hospitality industries was announced because they are “on the front line of what [is] happening,” and he confirmed that airlines and airports are an “obvious” sector that he has asked secretaries of state to look at.
Felicity Buchan, a Conservative member of Parliament, said that nurseries and dental practices are also under great pressure. Although Sunak did not announce any measures targeting those sectors during the hearing, he later tweeted that the government had decided that nurseries will also be eligible for a business rates holiday for one year from April 1, 2020.
HMRC Help and Staff
Regarding help for freelancers and the self-employed, Labour Party MP Alison McGovern asked whether the government would, for example, provide flexibility regarding self-assessment deadlines. Sunak said the self-employed could call HM Revenue & Customs’ dedicated COVID-19 Time To Pay helpline, noting that 2,000 HMRC staff had recently been shifted to the hotline. He said staff fielded 745 calls on the first day and 1,000 on the second. Sunak also said he was “fairly sure” that the Time To Pay scheme would include VAT.
Dan York-Smith, HM Treasury’s director of strategy, planning and budget, added that a Time To Pay initiative had been set up – and worked well – during the 2008-2009 financial crisis. He added that in some situations, HMRC can agree to waive interest and penalties on late payments.
McGovern also expressed concern about the health and safety of HMRC staff during this time. Sunak said he was “cognizant that if the models are right, a significant number won’t be in the workforce in a short period of time,” and that the government is bearing this in mind when designing schemes. York-Smith confirmed that every government department has updated its business continuity plans.
“We have a range of processes in place to protect our people at this time, and these will be kept under continual review to ensure people’s safety going forward,” an HMRC spokesperson told Tax Notes, adding that the agency is following guidance issued by the government, the National Health Service, and Public Health England.
The spokesperson also said all HMRC staff are able to work flexibly or from home, with “widespread use of Microsoft Teams so people can conduct meetings remotely.” HMRC is also following Foreign and Commonwealth Office advice on foreign travel and has “detailed business continuity plans in place, which include people working in alternative locations if necessary.”
Loans or Grants?
Labour MP Angela Eagle told Sunak that workers are not getting the support they need, and that there is no support for the self-employed or those on a low income. She noted that many businesses have said they cannot take on loans even if they are as generous as the government’s £330 billion loan guarantee scheme, which suspends interest for the first six months. British tax justice campaigner Richard Murphy said in a March 18 blog post that he would be “astonished” if small businesses were to “[use] £1 billion of the £330 billion government loan guarantee scheme … because it’s written so that they can’t get access to it.”
Responding to Eagle’s query whether additional loans for business, rather than grants, would drive them into even bigger trouble, Sunak said grants could not be targeted so easily, and that he believes loans would be more likely to ensure businesses had the funds to pay their expenses and employees. However, he acknowledged that the government is considering grants alongside loans.
“The duration of what we’re dealing with will be driven by the epidemiology of this situation; that will dictate the timing of the impact of any measures we bring in, and that can change,” Sunak said. He also said he is discussing the topic with many different organizations and bodies, including trade unions, which he met with after the hearing, adding: “We outlined comprehensive support yesterday, but we are working to do more.”
When Labour MP Liz Kendall said that other European countries are doing more to help their economies and people, Sunak defended his government’s response.
“The totality of what we’re doing is very significant. Our £330 billion package is 15 percent of the U.K.’s GDP. As we know more, we will reveal more, but the overall quantum is a very comprehensive package,” Sunak said.