Giving every adult in Britain a £500 voucher to spend could be the government’s key to kickstarting the economy in the wake of Covid-19, a think tank has said.
The Resolution Foundation is urging chancellor Rishi Sunak to consider giving everyone in Britain the vouchers, with children being handed £250, in order to encourage spending after lockdown.
The proposed scheme would come at a cost of around £30bn, and would specifically promote spending in the areas of the economy being hardest hit, such as face-to-face retail and hospitality.
Cafes, restaurants and pubs have only just been allowed to reopen under the government’s lockdown rules, and in many cases have gone months without any income. High street clothing shops have also borne the brunt of the crisis in the retail sector, with several big names falling into administration as spending plummeted.
The Observer reported on Sunday that the Treasury were considering the plans, with the department refusing to rule out a similar – perhaps smaller – scheme ahead of Sunak’s ‘summer update’ on the economy set to take place on Wednesday.
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.”
The scheme has seen success in other nations worldwide, The Observer reported, with China, Taiwan and Malta already handing out consumption vouchers. In April, officials in Wuhan issued £57m-worth of vouchers for residents to spend across the retail, hospitality and cultural sectors.
Such a scheme in Britain, the Research Foundation proposes, would run over a fixed-term period such as a year and could be closed down if a second wave of the virus hit.
The think tank said a tailored approach to the crisis hitting British high streets would be much more effective than VAT cuts or stimulus checks, such as those seen in the US.
The Resolution Foundation has also proposed a £17bn jobs support programme, which would include extending the job retention scheme until the end of the year for the worst-affected sectors, a £5bn investment in social care, raising the employer national insurance contributions threshold to £15,000 for new hires moving into growing companies and a job and training guarantee for young people, coupled with greater training support delivered through Jobcentre Plus.