Rishi Sunak considering giving all UK adults £500 to help boost the economy

The treasury is considering plans to give adults £500 and children £250 vouchers to spend in the sectors worst hit by coronavirus. 

Resolution Foundation thinktank has drawn up the proposals and has been in talks with the treasury about its ideas that aim to kickstart the economy through highly targeted spending. 

Under the plans, vouchers could be spent in specific sectors such as hospitality, and face to face retail rather than online shopping.

The scheme is similar to successful ones already in place in China, Taiwan and Malta. In Wuhan – where the COVID-19 outbreak is believed to have started – 500 million yuan (£57m) worth of consumption vouchers for use in restaurants, shopping malls, convenience stores, and cultural, sports and tourist venues were issued, the Guardian reports.

The treasury has refused to rule out introducing a similar scheme in the short or medium-term. 

Resolution Foundation claims the proposed idea is more effective at jump-starting the economy than a temporary slash in VAT or on-off cash gifts to individuals, ideas which have been discussed by the government. 

Economists explain that cash gifts will be stashed away into a savings account, particularly in higher-income households, rather than being put back into the economy through spending. 

Similarly, a VAT cut will have less of an impact on lower-income households as they tend to spend more money on VAT exempt items, or reduced/zero-rated goods such as food and drink.

The thinktank explains that the scheme – if a one-year limit on spending the voucher is put in place – would cost the government £30bn. The proposed idea could be allocated via vouchers or smart cards and transactions carried out on mobile phones. The scheme could also be postponed or closed down in the event of second wave.

The hospitality industry is one of the hardest hit sectors, down more than 90% in April, and many industry experts fear it will continue to be badly hit due to social distancing measures.

James Smith, research director at the Resolution Foundation, said: “Social distancing has huge implications for firms in sectors like retail, hospitality, tourism and leisure that will last into the 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 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 is set to outline ‘the next stage in our plan to secure Britain’s recovery’ on Wednesday.

The next stage is expected to include the announcement of an extra £32m for a National Careers Service, to allow a quarter of a million more people benefit from expert career advise. 

Labour has warned of ‘ghost towns’ developing across the country as the latest figures show 80,000 hospitality, leisure and retail businesses missed out on government grants.

Shadow business minister Lucy Powell said: “Unless the government steps up to save the high street many will become ghost towns, with thousands laid off, as a result. Labour is calling on the government to have a back-to-work budget this week, with the focus on protecting and creating jobs.”

This comes with the news that 44% of businesses who have participated in the Coronavirus Job Retention Scheme reported they will have to lay off some, more or all of their furloughed staff when the scheme comes to a close at the end of October.