Economic impact of coronavirus: gaps in support and economic analysis Contents

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Introduction

1.This report is the third report in our continuing inquiry into the Economic Impact of Coronavirus.

2.Our first report focused on gaps in the Government’s key pandemic support schemes, the Coronavirus Job Retention Scheme and the Self-Employment Income Support Scheme.1 We are disappointed that the Chancellor responded that he was unable to address these gaps largely due to operational difficulties and the risks of fraud.2

3.Our second report, published in September 2020, focused on the emerging medium-term challenges as the Government reduces restrictions and the economy comes out of lockdown. The conclusions from that report are still relevant and we urge the Chancellor to take them into account at the time of the Budget. In that report, we noted that:

• The Government faces a daunting challenge in preventing rising long-term unemployment while enabling sufficient labour flexibility to allow structural change and movement of labour from shrinking to growing sectors;
• The Treasury should play a key role in ensuring that the quality and reputation of reskilling and vocational schemes is monitored to ensure they increase employment prospects and provide value for money;
• The Government should consider extending the measures which were put in place in March 2020 to increase the generosity and accessibility of Universal Credit, and should conduct a study to examine the adequacy of sick pay;
• Viable SMEs struggling with debt will prolong the recession so the Government must develop solutions for ensuring the recapitalisation of their balance sheets;
• The Chancellor should, at the next fiscal event, set out an initial roadmap of how he intends to place Government finances on a sustainable footing. The milestones for that roadmap should be flexible—tax increases imposed too early are likely to stifle economic recovery;
• “Levelling up” needs to be properly defined. At the next fiscal event, the Government should set out how it will be measured and implemented.3

4.This Report:

• Provides a brief summary of how coronavirus has impacted on the economy and examines the limitations of GDP in providing comparisons of the economic performance of different countries at this time;
• Revisits the gaps in support and examines opportunities for the Treasury to provide additional help to those previously excluded from support; and
• Examines how the Treasury approached the economic analysis of lockdowns and social restrictions and its sharing of that analysis, as well as looking at how the Treasury can use modelling to inform the re-opening of the economy in the months ahead.

5.We are taking a broader view of economic challenges in our Tax after coronavirus inquiry and our Budget 2021 inquiry.

6.We would like to thank all those who have provided written and oral evidence throughout the course of the inquiry.