Matthew Oulton writes an analysis of the "Eat Out to Help Out" policy in retrospect.
When it was announced, I won’t lie, I thought that ‘Eat Out to Help Out’ was a masterstroke. I thought it was a politically feasible way to allow Sunak to ‘wean’ the country off the expensive furlough scheme. Obviously, the furlough scheme was far more important to our economy than £10 off a meal deal, but when I saw that discount on my restaurant bill, I thought the British public and press would be so enamoured that they would forgive the beginning of the furlough taper.
On the other hand, as a piece of economic policy, the scheme was always dubious. Not only was it not anywhere near adequate to actually ease the gap that would be left by the closing of the furlough scheme to new entrants, it was very poorly targeted. Many meals that would’ve happened anyway were subsidised – hardly an efficient use of Treasury funds. Even as a policy intended to prop up restaurants and support their staff, it was not a very direct or sensible way to do that. Medium-term threats to the way the hospitality industry operates, such as social distancing, were not addressed. Ultimately, it felt like a desperate attempt by the Conservatives to find a private sector solution to the impending unemployment crisis.
Politically, to begin with, it absolutely worked. Public opinion of the government’s economic response to the pandemic was sky-high; people were resuming economic life; things looked like they were on their way back to normal. Even the virus remained flat for a while. Nobody thought it was a sustainable policy, though. There was a palpable sense, even in August, that this sort of policy was too good to be true. As it turns out, it was.
In a recent study, Thiemo Fetzer showed that the Eat Out to Help Out scheme contributed significantly to the spread of the virus (2020), describing the policy as ‘subsiding the spread of the pandemic’. In terms of the virus, the policy represented a general hubris from the government. They clearly believed they’d beaten it, at least for a while. Along with the general encouragement to return to the office, the scheme helped usher in a premature return to a semi-normalcy. Even simple steps to help protect against the pandemic, like encouraging people to come in during less busy hours or including takeaway, were not taken.
In the end, the economic effects have been terrible. Propping up the nation’s hospitality industry with a single month of half-price meals was not only like trying to put out a wildfire with a watering can, but this new lockdown has undone any benefit seen by restaurants and cafés. The consistent narrative peddled by the government, that they face a trade-off between lives and livelihoods, has again been shown to be nonsense. When we have a grip on the virus, the economy recovers. When we lose control of it, recession resumes.
Finally, to my surprise, it’s also turned out to be a political nightmare. It’s an important lesson for Labour, as well as for the Conservatives. You can’t ever be seen to fritter money away, even when you’re in a demand slump and spending is a sensible move. Spending has to be targeted, good value for money, and spent in an intelligent way. Otherwise, the electorate will rightly question why you prioritised subsidising meals in restaurants over feeding hungry children.
What I initially viewed as a clever, if slightly deceptive, way to wean the UK off the furlough scheme, has ended up putting the Conservatives in an impossible position of trying to defend stingy allowances for countless underfunded vital services in the backdrop of record spending. Rather than succeeding in removing furlough support with minimal cost, he has ended up keeping the furlough, losing control of the virus, wasting taxpayer money, all whilst maintaining maximal uncertainty for businesses and workers throughout.
Sunak has been repeatedly responsible for short-sightedness and an ideological desire to withdraw funding too early. Rather than refine the existing schemes, to help the millions of self-employed people who never received any support, the government declared victory far too early. In their rush to return to normal, they damaged the public finances, failed to support business and the economy, and hastened a second wave. Thankfully, ‘Eat Out to Help Out’ has Rishi Sunak’s signature on it, so that we can all tell who’s to blame.
Matthew Oulton is an Economics student at the University of Warwick. A keen writer on Economics and more broadly, Matthew also works part-time at a Sales Consultancy and sings in the Choir of Coventry Cathedral.
He tweets at @matthewoulton.