Closing summary
Rishi Sunak has told the Covid-19 inquiry that the government was initially advised by the “medical and scientific community” not to move “too early” on Covid decisions. He said the view at the time was that measures needed to be sustained for a “period” and that the timing had to be “right” to keep the public onside.
Sunak, speaking from an economic standpoint as the chancellor during the pandemic, said the government was successful in “preventing mass unemployment”, which he described as the “biggest fear” in the early stages of lockdown. He suggested that widespread job losses could have led to a breakdown in social order.
Reflecting on the turmoil of the early days of Covid, Sunak said he was at one point worried “about the UK’s ability to fund itself”, describing that experience as “acutely stressful”. Speaking about fluctuations in the gilt markets, he said the period “was intense and filled with anxiety, certainly for me”.
He said officials spent a “huge amount of time” examining whether they could change the conditions of the self-employed scheme to capture workers left out of it. The scheme, he said, “was imperfectly targeted because that’s all we could do”, adding there was “constant looking” at what might be tweaked as new information reached the Treasury.
Sunak said he initially believed there would be a temporary “economic shock”, lasting “several weeks to a few months”. Officials, he said, understood that the impacts would be “temporary”, and the focus was on ensuring the shock did not lead to long-term economic consequences. He also said he had been “particularly worried” about young people’s job prospects, including those targeted by the Kickstart scheme launched in September 2020.
Sunak added that there was not a “toolkit” to deal with the pandemic and noted he was surprised to be made chancellor. Having become chief secretary to the Treasury in July 2019, he said he did not have a “huge amount of time in that context” before his appointment in February. His “immediate job”, he said, was to prepare a budget in the “space of a few weeks”.
Youth unemployment is a huge problem for the current government, owing in part to the continued impact of Covid and the cost of living crisis.
Ministers have been especially concerned with the rising number of young people classed as Neets (not in employment, education or training), which experts suggest is on course to exceed one million for the first time since the aftermath of the 2008 financial crisis.
Many young people are applying for jobs alongside hundreds of applicants, for low-paying entry-level positions that ask for years of experience.
Bosses are prioritising automation through AI to plug skills gaps and allow them to reduce headcount, instead of training up junior members of staff, a report by the British Standards Institution (BSI) found.
Along with a series of other measures, the government has launched an expansion of youth apprenticeships to 50,000 places over the next three years as it tries to grapple with the issue.
A report by the National Audit Office (NAO), the spending watchdog, published in the autumn of 2021, found that the £2bn Kickstart scheme may not have been delivering value for money for the taxpayer.
As my colleagues note in this story, the NAO report said the Department for Work and Pensions (DWP) had only “limited assurance” that the scheme was working as intended.
Private sector firms that received state subsidies to hire young people might well have done so anyway, the NAO said, because the economy was reopening just as the scheme began to ramp up.
The report also found that there was relatively little early take-up for Kickstart due to successive lockdowns depressing demand for workers.
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Sunak says he was 'particularly worried' about young people's job prospects throughout pandemic
The counsel lawyer asked Sunak about the Kickstart scheme, launched in September 2020, which offered government-funded “high-quality” job placements for 16- to 24-year-olds who were on universal credit and at risk of long-term unemployment.
The former chancellor was asked if there was “particular significance” in trying to target 16 to 24 years old. Sunak said there was, explaining it was something that weighed on him “heavily” throughout the pandemic.
He said this age group were two-and-a-half times more likely to work in the sectors worse affected by Covid, such as hospitality.
“And we also know that if young people have a bad interaction with the labour market early in their careers, if they are not able to find stable work when they’re young that has an impact on them for a long time to come.”
“I was particularly worried about this cohort throughout,” Sunak added.
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Self-employed scheme was 'imperfectly targeted' as that is all 'we could do' - Sunak
Sunak says officials spent a “huge amount of time” looking at whether to change the conditions in the self-employed scheme in order to capture workers who had been left out of it.
“It was imperfectly targeted because that’s all we could do,” he told the Covid-19 inquiry, adding there was “constant looking” into what could be tweaked as new information came into the Treasury.
“And then you spend a huge amount of time with all the people who are not captured and feel that they should be, and then trying to figure out if you can tweak the design,” Sunak said.
The former chancellor said SEISS – which had to be designed with lots of different type of criteria – was “more imperfect” than the furlough scheme.
Sunak says there was huge pressure on the HMRC system during the height of the pandemic to process all of the claims from individuals and businesses looking for support from the government. He said the system’s simplicity meant things operated relatively smoothy.
“It’s easy to kind of abstract that away. Particularly for people who are not used to having to deliver things on the frontline. And the scale of these things is enormous,” Sunak said.
“You have to remember that 10 million people were furloughed, a million businesses were interacting with the HMRC’a CJRS system, and then 10 million people were getting the rebates through. On SEISS: 3 million people.
“It is not just a kind of simplicity for speed, a simplicity for communications and reassurance, which we just touched on. There’s also a simplicity because what you don’t want is for the organisation to be overwhelmed.”
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Counsel lawyer Richard Wright KC moved on to ask Sunak about the self-employment income support scheme (SEISS), which formed a major part of the government’s economic rescue plans after the first lockdown.
The SEISS provided self-employed workers whose finances had been hit by the pandemic with a cash grant of 80% of their average monthly trading profits up to a cap of £2,500, backdated to cover the last three months.
The chair said the total benefits created by the scheme were estimated to be £19.3bn, with an accompanying “social cost” of £5.1bn.
Sunak was asked why he thought the scheme was a necessary one.
He said:
Everyone was going about their day to day lives trying to work hard, provide for their families, build a better life.
Government comes in and says, no, sorry, we’re not gonna let you do that any more, and I just didn’t think it would be right to then not have something to say to those people to support them through it.
And that really what that is what the self-employment support scheme was about, and it broadly, not perfectly, but broadly was designed to give comparable support to those who are self-employed as, as those who are in employment.
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Sunak says he was under pressure from members of the opposition (Labour at the time) and from some finance ministers and leaders of the devolved administrations, as well as unions (like the TUC), to keep the Coronavirus job retention scheme (furlough) for longer than he did.
The former chancellor said these figures were telling him that winding down the furlough scheme was too “premature” as he faced criticism for focusing too much on “balancing the books”.
He said the Treasury’s approach was “about right” as when the scheme ended there was not a big spike in unemployment as some people had feared (the furlough scheme applied from 1 March 2020 and ended on 30 September 2021).
“If this thing happens again, it’s not obvious to me that there’s some learning from that period that would make it easier for someone in my position to make that balance,” Sunak said.
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The afternoon session has now begun. Richard Wright KC is the counsel lawyer and is asking Rishi Sunak, the former chancellor, about the furlough scheme and economic planning.
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The morning session of the inquiry has finished and the afternoon session will begin at about 14:00 GMT after a lunch break.
UK fraud prevention 'still lacking' after Covid-related scams and errors cost £11bn
Ministers have been warned that fraud prevention efforts are falling short across government, as a major Covid report found that fraud and errors had resulted in a £10.9bn loss to UK taxpayers during the pandemic.
The report, by the independent Covid counter-fraud commissioner Tom Hayhoe, found that government schemes designed to support struggling businesses and their staff were rolled out at speed with no early safeguards, resulting in huge fraud risks that cost the public purse.
Weak accountability, bad quality data and poor contracting were the main failures behind the £10.9bn loss, but Hayhoe also concluded that fraud prevention was “insufficiently embedded in thinking and practice across government”.
The losses mounted on a series of schemes launched by the previous, Conservative government during the pandemic, including bounceback loans, small business grants, furlough payments and the eat out to help out programme.
Some of the problems stemmed from the fact that government departments generally worked independently to design their own schemes from scratch.
Many public bodies also never made payments on this scale before, meaning that counter fraud capabilities “varied significantly”, the report said. Hayhoe found that most schemes prioritised speed when designing and delivering support, resulting in a “high level of fraud risk”.
You can read the full story by my colleagues, Kalyeena Makortoff and David Conn, here:
Sunak says the furlough scheme was difficult to 'police'
At the start of the first lockdown, Sunak introduced the coronavirus job retention (furlough) scheme, whereby the government provided grants to employers to cover 80% of employees’ wages for workers who would have lost their job in the pandemic. About 11.7 million employees were furloughed, at a cost of £70bn.
Sunak is asked by the counsel lawyer if he thinks it is a good idea to have “part-time furlough” from the outset in a future emergency similar to the Covid-19 pandemic.
The former chancellor says he does not have a strong opinion either way but said the scheme was quite difficult to “police” and that there could be some “nervousness” about its implementation incentivising people “on the margin” to have “less economic activity” than they otherwise should or could have.
Sunak says the scheme’s simplicity was vital in enabling the Treasury to “move quickly” because “speed was of the essence” at the time.
Sunak also said that it may be a good idea to publish a list of recipients of the furlough scheme at the outset of any future emergencies (in part to reduce fraud). There was a delay of publishing such details when Sunak was chancellor.
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Sunak says he wants (scientific/economic/data) models given to politicians to come with more context about the “assumptions” that underlay them.
He said he wanted to understand the underlying assumptions that go into the model in the same way he would if he was looking at one in his “old life” (Sunak worked for investment bank Goldman Sachs and at two hedge funds before becoming an MP).
“I’m someone who’s comfortable with models and as you know, I spent a career before politics having to build them, interpret them, use them to make decisions,” he said.
“It’s all very well projecting things to happen in the future. The model says X. The model says Y. Well, that’s a function of the assumptions that have been fed into the model. And as policymakers, ultimately these things are judgments – those assumptions are judgments.”
“And it should be for the elected politicians to be the ones that ultimately say, well, I want to see a base case where the assumptions are this, this, this, and this. And because on each of those assumptions, they will be reasonable people who can disagree.”
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Sunak says he was worried 'about the UK's ability to fund itself' at one point
Reflecting on the chaos in the early days of the pandemic, Sunak says he was worried at one point “about the UK’s ability to fund itself”, an experience he described as “acutely stressful”.
Speaking about the fluctuations in the gilt markets at the time, the former chancellor said the period “was intense and filled with anxiety, certainly for me”. The market for UK government bonds, also known as gilts – the oldest major asset market in the world – was witnessing unprecedented turmoil in early spring 2020).
Sunak said:
I’d been chancellor for, you know, what felt like five seconds and then you could see a very material tightening in UK financial conditions …
And in the end, we, you know, we organised with the, the Bank of England something called the Ways and Means facility, which I’ve, talked about in my evidence, which thankfully we never needed to, to use, but essentially as a backstop for the government if it can’t raise the money it needs on the bond markets, it can go to the Bank of England, instead for a temporary period of time. And it was last used again in the financial crisis.
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Sunak knew there was 'no such thing as a free lunch' and taxes would need to rise due to high levels of state support
Sunak says it was right for the state to intervene so heavily during the pandemic, something that he says went against his instincts as a fiscal Conservative who prefers low government borrowing and spending.
He said it was not time “for ideology” during the pandemic – a “unique crisis”– which required a high level of state intervention that Sunak said would be in the country’s long-term interests.
“Of course, I knew that, you know, there’s there’s no such thing as a free lunch,” he said, adding that in the 2021 spring budget he implemented tax rises to put public finances on a “sustainable trajectory” (he announced a freeze to income tax thresholds in his 2021 spring budget among measures to help the economy recover from the pandemic).
Sunak says he didn’t leave the tab to be “picked” up by future administrations.
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Sunak says government's 'biggest fear' going into the pandemic was 'mass unemployment'
Sunak says the government was successful in “preventing mass unemployment”, which was the “biggest fear” in the early stages of the pandemic, as he suggested this could have led to a breakdown in social order.
He said there were projections that had about 12% unemployment rates, which would mean millions of people without a job.
The number of people in work fell by 825,000 people between January-March 2020 and October-December 2020, while unemployment rose by almost 400,000 and the number of people who were economically inactive rose by 327,000, according to House of Commons library research.
Sunak says the impact of the pandemic on household incomes and living standards, particular for the most vulnerable people in society, were not as negative as had been forecasted. He said he would get into the details in a later section of the hearing.
It wasn't going to be possible to save every single job during the pandemic, Sunak says
Sunak says that in the early days of the pandemic his priority was to protect people’s jobs, household incomes and to ensure businesses did not fail.
He said there was no “perfect science” to the decisions he made and acknowledged he was constantly weighing difficult economic trade offs when formulating policy.
“It wasn’t going to be possible to save every single person’s job, and people were going to experience economic hardship as a result of what was happening,” Sunak said.
“I thought it was important to be honest with people about that upfront.”
Government advised against moving 'too early' on Covid decisions, Sunak says
Sunak recalls that in early conversations the “medical and scientific community” were advising the government against moving “too early” as they wanted the Covid measures to be sustained for a “period” of time so the timing had to be “right” in order to keep the public onside.
He said:
Then ultimately, even at the end that last few days, I think the prime minister said to people it was a voluntary social distancing and to avoid, hospitality and leisure on the basis, on the advice from the scientists. And schools were not closed at first. Then the advice was that they should be closed. And that was followed, immediately.
And then even at that point, there was a belief that that voluntary social distancing, together with school closures, if there was, I think the number was 75%, compliance, would be sufficient to manage the virus, to deliver the health outcomes.
And then 2 or 3 days after that was said, it was decided that wasn’t going to be, achievable, which is why you had to move to a full mandatory lockdown.
He stressed that the scientific advise was rapidly changing in the early period of the pandemic in 2020 and there was thinking that the virus could be contained.
Sunak says officials were not set up with Teams in early days of pandemic
Sunak said in the early couple of weeks people were “all new to working from home” so had to adjust to the new technology.
“We were not set up with all the things like teams and everything else. There wasn’t, I think, even the right set of plug sockets … in the Chancellor’s meeting room in number 11 Downing Street,” he said.
Sunak said people, in the first couple of days, were “crowding round kind of almost sitting room” because that was where you could “plug in all the various things and have a conference call”.
He went on to express his gratitude to his team who got him what “he needed'” to do his job.
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The government 'couldn't let perfect be the enemy of the good', Sunak says
Responding to a question from the counsel lawyer about having to devise policies quickly, Sunak says the government “couldn’t let perfect be the enemy of the good”.
He said:
There was an acknowledgment early on when I was talking to the team that, of course we weren’t going to get everything right straight away.
That would have been, you know, surprising given the speed at which we were operating and the scale of the interventions we were designing, and putting in place.
And so there was a recognition upfront and I, you know, encouraged the team to be comfortable with that, that that was OK. Right? We couldn’t let perfect be the enemy of the good. And we were going to have to acknowledge that we would iterate as we go.
Sunak has stressed that one of the priorities was to prevent unemployment and said that in the context of a pandemic there should have been a recognition that things had to get “out fast” as otherwise the consequences would have been “severely negative”.
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Key event
Sunak cautiously says the government will be in a better position to deal with a future pandemic, but stresses that all pandemics will be unique and will require an agile response to specific circumstances.
Sunak said:
My overarching reflection would be we have learned an enormous amount, having been through this once, and we have a set of tools that we developed, we iterated and no doubt can be improved in the future.
But I would slightly guard against the idea that whatever happens next time, you can pull something off the shelf.
And as you said, just kind of go right, line one line two, plug it into a machine and off you go. Each economic shock. Each economic crisis is going to be slightly different. And it’s important for policymakers at that moment to be agile and responsive to the situation they face and not be so mechanically thinking, OK, just as we did this last time, it’s the right thing to do in exactly the same way.
Sunak says he initially thought there would be a temporary 'economic shock' lasting 'several weeks to a few months'
Sunak says officials knew there was “going to be an economic shock” from the pandemic but they understood these impacts were going to be “temporary”.
The former chancellor told the Covid-19 inquiry:
I think our understanding at the beginning was that it would last several weeks to a few months. And what we were focused on, on doing is making sure that the temporary shock did not have long term serious economic consequences.
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Sunak said speed was “paramount” as “one thing that was crystal clear that this was happening very quickly” and was to have an “extraordinary impact” on millions of people across the country.
A damning official report on the handling of the pandemic found the UK’s response to Covid was “too little, too late”. It said the introduction of a lockdown even a week earlier than happened could have saved more than 20,000 lives.
The document criticised a “toxic and chaotic” culture inside Boris Johnson’s Downing Street – which it said the then prime minister actively embraced. You can read more about the finding’s here.
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Sunak says there was not a 'toolkit' to deal with the pandemic and he was surprised to be made chancellor
Sunak, who had been appointed chief secretary to the Treasury in July 2019, admitted he did not have a “huge amount of time in that context” when appointed chancellor.
“I was obviously very new to senior government. And then it was a surprise to be made chancellor in the middle of February,” Sunak said.
He said his “immediate job” was to prepare a budget in the “space of a few weeks”.
Sunak told the inquiry:
As it turned out, that was really the one of the easier things I had to do, given what then unfolded over the next few days, weeks, months, and at that moment things were moving very quickly. So even during the budget preparations, it was clear that what was happening with the pandemic was escalating.
Sunak added that there was not a “toolkit” to deal with the pandemic amid a huge amount of uncertainty, including around what the public’s behavioural response would be and the potential economic impacts of lockdowns.
“There was not a playbook that you could pull off the shelf that said, well, this is how you, you know, tend to deal with pandemics in the same way you somehow have with other economic shocks or financial shocks.”
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Sunak will be asked about a range of issues today including preparedness, the economic shock the country faced, funding for the devolved administrations, the Coronavirus Job Retention Scheme, the self-employed income support scheme, the economic impact of Long Covid, loans and the uplift to both the universal credit and working tax credits.
This is Sunak’s second appearance at the Covid inquiry.
Sunak confirmed that he was appointed as chancellor on 13 February 2020. He says he looks forward to providing evidence today and extends his condolences for all those who lost loved ones due to Covid during the pandemic. He said the inquiry should help with the UK’s preparedness in the future.
Covid inquiry starts with Sunak set to be grilled over economic response to pandemic
The hearing in Dorland House in central London, where the Covid inquiry is taking place, has just started.
You can watch the broadcast of today’s hearing in this feed, which is also attached to the top of the blog. We are expecting Sunak to appear in about ten minutes or so:
The Covid inquiry, which, according to the IFS, is likely to end up costing in excess of £200m, got under way in 2022 and its final report is not expected until 2027.
It covers decision-making by the UK government, and the administrations in Scotland, Wales and Northern Ireland, across a range of topics, including procurement, the care sector, children and young people, vaccines and the impact the pandemic had on the healthcare system.
Rishi Sunak will be grilled on the government’s economic response (module 9).
Just under 227,000 people in the UK died with Covid-19 listed as one of the causes on their death certificate between March 2020 and May 2023.
The pandemic caused a severe recession, with a huge drop in GDP during the first national lockdown in 2020.
As part of the Coronavirus Job Retention Scheme, known as furlough, the government subsidised the wages of employees hit by the pandemic as sectors – such as hospitality, nightclubs and the travel industry – closed down to prevent the virus from spreading.
This massive level of state intervention covered about 11.7 million jobs between March 2020 and September 2021, at a cost of roughly £70bn.
The Covid inquiry has previously heard that furlough is estimated to have directly preserved four million jobs across the UK workforce.
The Treasury has estimated that total spending by the government across all its support measures amounted to £373bn.
Rishi Sunak to face questions on economic impact of the Covid pandemic
Former British prime minister, Rishi Sunak, is to give evidence at the Covid-19 inquiry today as it looks into the government’s economic response to the pandemic.
Sunak, who was chancellor at the height of the pandemic, has previously defended his “eat out to help out” scheme, rolled out in the summer of 2020, saying it prevented job losses.
He has denied that the £850m policy – which gave diners a state-funded £10 discount – drove a second wave of Covid infections, despite research showing it caused a rise of between 8% and 17%, while the economic benefits of the scheme were short-lived.
Sunak is due to be questioned between 10.30am and 4.30pm (with a lunch break), so stick with us as we provide you with the latest lines. We will have a feed attached to the top of the blog shortly.
