Chancellor Rishi Sunak is considering a new £500 shopping initiative that would give all adults and children ‘free’ vouchers to help restart the economy, following the coronavirus lockdown.
Under the proposals, every adult would be handed £500 and every child £250, to help pump cash back into the high street.
The Resolution Foundation, which suggested the idea ahead of Wednesday’s Budget, said the £30billion scheme could save hundreds of thousands of jobs amid a looming recession.
It said the vouchers would be valid in sectors that have been hit the hardest by the pandemic, such as the arts and hospitality.
The vouchers would be universal, delivered as coupons or smartcards and activated over 12 months.
It would be a one-off, non-refundable £500 – as opposed to several monthly payments.
“The voucher scheme can target the parts of the economy where the problems are – bricks and mortar consumption in shops and restaurants, rather than online sales – and recognises the different impact of the crisis on poor and rich families,” the report said.
It said the money would be delivered as vouchers, instead of cash, to encourage people to ‘spend not save’.
“The Foundation notes that cash transfers risk being simply being saved by higher income households, who are already boosting their balance sheets through ’enforced savings’,” the report said.
Has it been done before?
Yes, similar versions of the scheme have already been introduced in China, Taiwan and Malta to help rebuild their economies.
In Taiwan, the vouchers can be used to purchase goods and services at retail shops, restaurants, markets, cultural venues, hotels, and rail transport. They cannot be used online or to purchase goods such as cigarettes, stocks, or coupons.
In Malta, residents are being given €100 (£90) in five €20 vouchers to spend at bars, hotels, and restaurants which have suffered from the collapse in global tourism.
The vouchers – which are valid for six months – are being mailed to all residents over the age of 16 and 80% of them have to be spent in the hospitality sector.
How could it work in the UK?
If introduced in the UK, the Resolution Foundations says the vouchers would equate to £500 an adult and £250 a child.
Households would then be given a time limit to spend them – such as 12 months.
They would also have to be spent on the high street – as opposed to online.
In the event of a second outbreak, the vouchers would be deactivated electronically, and reactivated when businesses reopen.
James Smith, 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.”
A Treasury spokesman said Rishi Sunak will unveil new measures to protect the economy on Wednesday.
He refused to speculate on whether the scheme could be introduced.
“The swift and targeted action we’ve taken has protected millions of jobs and livelihoods across the country. Our support package is one of the most comprehensive in the world – with generous income support schemes, billions paid in loans and grants, tax deferrals and more than £6.5bn injected into the welfare safety net.
“The Chancellor will make a summer economic update next week, outlining the next stage in our plan to secure Britain’s recovery.”