Late last week PM Boris Johnson announced that England would be going back into lockdown for a month. With effect from 5 November, a nationwide lockdown will be enforced until 2 December. Pubs, restaurants, non-essential shops and indoor spaces such as museums will be shut, as will hairdressers and gyms. The furlough scheme, due to end on 31 October, will be extended for a month with some nuances which are mainly helpful to employees in particular; or that at least was the initial announcement. But later in the week the scheme was extended again, this time to March 2021 though it will be reviewed in January to see if it needs to be modified due to changed economic conditions. The late extension of the scheme to March, following on so soon after the announcement that it was only going to be extended until November 2020, suggests a sudden change of heart and also has led to some observers to comment that it may presage an extension of lockdown after 2 December.
Like the second version of furlough which came into effect in July 2020, employees can be furloughed on a part-time basis; but in contrast to that previous extension employees can be furloughed even if they have not been previously. Furloughed employees will have 80% of their salary paid for by government and of course employers may make up the difference if they wish. Employers will continue to be responsible for paying NI and pension contributions for furloughed staff. The scheme, as per the previous versions, is eye-wateringly expensive at £5 billion a month. In related developments, self-employed individuals will be able to claim support for up to 80% of their average trading profits in November, double the 40% that it was previously – this scheme is expected to cost an additional £1.4 billion a month. Devolved administrations across the UK have had a war chest of £2 billion set aside for them to fund the various schemes in their own specific countries. Government loan schemes will also be extended to the end of January, a welcome boost to cash-strapped businesses who may have been wondering where their working capital was going to come from.
These are welcome developments for businesses no doubt but they are limited compensation for the economic disaster that in some eyes the new lockdown represents. Retailers were particularly upset at the announcement and one business representative called it the nightmare before Christmas. They and others such as hospitality venues have collectively spent millions of pounds implementing social distancing measures only in the event to be shut down anyway. Some of them are wondering why they bothered and indeed if they can continue to trade for much longer. The counter-argument of course is that the infection rates and associated deaths are rising exponentially and that something needed to be done to halt these trends. But a significant complication for the government is that scientists recommended a so-called circuit break at the end of September to coincide with school holidays in October but the government did not follow that advice at the time. A number of commentators are wondering whether the ongoing rise in cases might have been brought under control earlier if lockdown had been introduced a few weeks ago.
Mr Johnson is currently in an extremely uncomfortable place. He is under assault from all directions. The Opposition led by the Labour party and vocally reinforced by the Scottish National Party has castigated him for not taking these measures earlier whilst the representatives of devolved governments in Wales and Scotland have criticised him for coming late to the party and also for not financially supporting the levels of furlough required in their own countries when they tightened restrictions earlier. Even the Scottish Conservative party leader Douglas Ross went on the attack when, perhaps concerned by increasing levels of support for Scottish independence in opinion polls, he was extremely critical of the approach the Westminster party has taken, both with regards to Brexit and also in terms of developing relationships with the devolved administrations during the pandemic. Business too is seemingly extremely perturbed by the government's pandemic management with the Confederation of British Industry (CBI) boss Carolyn Fairburn saying that companies face a 'bleak midwinter' though they responded positively to the later news of the longer extension to the furlough scheme.
Perhaps most worryingly from Mr Johnson's perspective even his natural allies are becoming more difficult to manage. A number of Conservative MPs have expressed their alarm at the economic impact of the new measures and in 34 cases voted against the reimposition of a national lockdown in Parliament this week. There may not be enough of them to persuade Mr Johnson to change his mind but it is politically embarrassing to have to rely on the votes of the Opposition to get these new measures through – and some Conservatives who did not vote against the government this time have made it clear that they will do if the lockdown goes beyond the current end date of 2 December. On a related topic, Chancellor Rishi Sunak, once widely praised for his actions, has come under increasing pressure for his alleged lateness in responding to the financial fallout of lockdown. The PM was reportedly annoyed when the Cabinet Office minister Michael Gove said that it was possible that the lockdown may be extended as Mr Johnson is determined that it will be limited to the proposed duration of one month and will be desperately hoping that by the beginning of December the data on Covid is more encouraging. That is not to mention the ticking time-bomb of the EU withdrawal process which is due to be finalised by 31 December. The last thing Mr Johnson needs is yet another complication at a time when there are so many others to manage. He is in danger of becoming increasingly isolated and torn in two directions between on the one hand managing the health impacts of the pandemic and on the other keeping the economy afloat. There is a real risk that in trying to keep supporters of both sides of the argument happy, he ends up upsetting everyone.
Wayne Bartlett is an author for accountingcpd. To see his courses, click here.
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