New Resolution Foundation research published this Tuesday will call on the Chancellor to give every household in Britain High Street Vouchers worth £500 per adult and £250 per child, in order to kickstart the economic recovery by focusing support on the firms and workers hardest hit by the covid-induced economic crisis.
The proposal, which forms part of wider fiscal stimulus package put forward by the Foundation, would involve the delivery of up to £30 billion worth of consumption vouchers for households to spend in the areas of the economy being hardest hit, such as face-to-face retail and hospitality.
Activity in hospitality was down more than 90 per cent in April and sectors reliant on face-to-face contact will continue to be significantly affected while social distancing remains in place. It notes that in countries such as Germany or France, where lockdown restrictions have already eased, leisure and retail trips remain over 10 per cent down on pre-crisis levels.
The ‘High Street Voucher’ scheme would be universal, delivered via vouchers or smartcards, activated over a fixed time period (the Foundation recommends 12 months) and can easily be deactivated if the sectors benefitting from the scheme need to be closed down in the event of a second wave of the infection.
The Foundation says that its innovative voucher scheme proposal is tailor-made for the nature of the current crisis – which is focused on specific sectors, rather than spread across the whole-economy – and far better than repeating policies from the very different experience of the financial crisis (such as VAT cuts) or adopting those used in the United States (such as flat rate cash payments to households).
That’s because the voucher scheme can target the parts of the economy where the problems are – bricks and mortar consumption in shops and restaurants, rather than online sales – and recognises the different impact of the crisis on poor and rich families.
The Foundation notes that cash transfers risk being simply being saved by higher income households, who are already boosting their balance sheets through ’enforced savings’. A VAT cut meanwhile would do less for lower income households, whose finances are most likely to constrain their consumption, because they tend to spend more of their income on VAT exempt, reduced, or zero-rated goods. It also risks being completely wasteful if its timing coincides with a second lockdown.
James Smith, Research Director at the Resolution Foundation, said:
“While every part of the economy has been affected by the current crisis, the stand out feature of this recession is that some areas are far more affected than others.
“Social distancing has huge implications for firms in sectors like retail, hospitality, tourism and leisure that will last into the forthcoming reopening phase. That is why the jobs of so many workers in these sectors are in the firing line. The Chancellor’s recovery package on Wednesday should reflect this unique economic challenge.
“As well as setting out the biggest ever peacetime job support programme, the Chancellor should get Britain spending in places where it’s needed most. A universal ‘High Street Voucher’ scheme – worth £500 per adult and £250 per child – to be spent only in these sectors would kickstart demand in the right parts of our economy, boost living standards and deliver targeted support to the businesses that need help the most.
“The Chancellor has already shown that big, bold measures like the Job Retention Scheme are welcome and necessary in the current economic climate. He should take this same approach as we enter the crucial recovery phase of the crisis.”