In yet another unbelievable day of economic policy in action, the chancellor of the exchequer, Rishi Sunak, announced yesterday the latest measures to protect people’s income, keep businesses alive, and encourage spending in the economy.
As a result of mass business closures and people putting themselves in quarantine, the demand for goods and services is plummeting throughout the economy. This has put many businesses at risk of bankruptcy with little to no income to cover their costs.
Facing these dire circumstances, many business owners could be forced to lay off workers, leading to mass unemployment…
Or not! Step in Rishi Sunak, and his latest fiscal policy.
The chancellor has announced to the nation that the government, “for the first time in history”, will be paying people’s wages.
The fiscal stimulus promises to pay 80% of the wages for retained workers, up to £2500 a month. Open to all employers in the UK, the scheme is set to be in place for the next three months, and possibly longer if needs be.
On top of this unprecedented announcement, the chancellor has also promised to extend the interest free loan scheme to 12 months, suspend all VAT payments for three months, and boost policies which support the unemployed and those who can’t pay their rent.
After weeks of uncertainty in the UK over the government’s handling of the coronavirus, this is finally a strong and decisive move which sends a strong message to the people of the UK that the government is going to do everything they can do to protect people’s livelihoods.
THINK LIKE AN ECONOMIST!
Q1. What is meant by the term “lay off” workers?
Q2. Explain why businesses may need to “lay off” workers at this time.
Q3. Explain why the measures announced by the chancellor are an example of fiscal policy.
Q4. Analyse the impact of the above measures on businesses in the UK.
Click here to read the statement in full
