Cooking up an economic recovery? Reviewing Rishi's plan
Rishi Sunak’s summer statement was found to be underwhelming by many professional economists, with many of the macroeconomic decisions left for the Autumn budget. Rather, Sunak focussed on sector-specific interventions to ensure the economy survived through the summer. One of these sector-specific interventions was a glamorous sounding but relatively cheap scheme: Eat Out to Help Out. Customers throughout August received 50% off up to £10 every Monday, Tuesday and Wednesday The scheme came in relatively cheaply for the government, making up around 2% of the total spending announcements, however the societal impact is large. August has become a mini food festival with foodies and restaurants benefitting, however the scheme has been criticised for threatening a second wave.
The primary logic behind this scheme is to give the struggling food and drink industry a boost after the COVID-19 lockdown. These sector-specific interventions are commonplace during a recession to boost key strategic industries, usually to protect against surges of unemployment. The “cash for clunkers” scheme in 2009 is one example: when you scrapped your old car you’d receive a £2,000 subsidy split 50:50 from the government and the manufacturer to buy a new car. It is unusual however to see such a scheme applied to restaurants, this is because restaurants, and services generally, have been very resilient over the last few decades and historically are a small fraction of total employment. Both these facts have been challenged recently. Even before COVID-19 restaurants were struggling with increasing rents, business rates and decreasing footfall in town centres, being forced to close for lockdown threatened, and still threatens, to be a final fatal blow to many businesses. In the last ten years there has been a 50% increase in restaurant employees, and with now over a million workers the sector is getting the attention it deserves from the Treasury. This led to a much needed rescue mission: £522 million was subsidised giving the industry much needed respite and protecting low-paid staff from unemployment.
Not only did the scheme give vital assistance to the restaurant sector but it kickstarted the UK to move out of its lockdown slumber. For many, the end of lockdown appeared daunting and when shops and restaurants opened they stayed away. By reducing the price of restaurants Sunak enticed these people out of their homes, into restaurants and hopefully into town centres.This crucially helps boost the bricks and mortar businesses who have suffered during lockdown and whose decline threatens the High Street at the heart of local communities. This festival feeling brought back a sense of normality and comfort to the British people, restoring the confidence to head to the high street - evidence by the 7% year on year growth in consumer spending.
While Sunak’s scheme has undoubtedly been an economic success the attached health effects are worrying. Fully booked restaurants with expectant diners caused stressful weeks for low-paid hospitality staff who worked in conditions ripe for the spread of infectious diseases: enclosed, crowded and close-range conversations. As autumn approaches there appears to be more signs of a second wave emerging, and if this comes to fruition we may look back on the scheme as one that bred complacency rather than confidence.
Eat out to Help out has symbolised Sunak’s chancellorship thus far: politically canny, economically shrewd but PR driven. Assisting a vital economic sector with a wide spillover effect to the broader economy partnered with a carnival feeling was always going to please the public. However, the scheme’s popularity relies on avoiding a second COVID wave this Autumn, something that is far from guaranteed.
Image - Flickr (HM Treasury)