Labour: Reduced lockdown business support is “short-changing the North”

Labour has criticised the government for “short-changing businesses and communities across the North” as the vast majority of businesses in areas under Tier 2 and Tier 3 Covid restrictions will receive insufficient or no government support.

Newly published party analysis has highlighted that small businesses forced to shut under the most severe level of Covid-19 measures will receive at most £500 a week of funding from local restrictions support grants.

As a result of changes to government financial aid announced by the Chancellor, this is significantly less than the average £1,666 a week that the same companies received in similar state support during the initial lockdown earlier this year.

The grants are only offered to businesses legally forced to close, which means those in Tier 2 areas are not eligible for any support despite facing massive falls in revenue due to the tough social distancing measures being imposed.

Commenting on the results of the new analysis from Labour, shadow business minister Lucy Powell said: “The government is short-changing businesses and communities across the North.

“Locking them down but offering just a third of the support given to businesses nationally during the first lockdown is a kick in the teeth that makes a mockery of the levelling up agenda.”

Labour criticised the government last week for “clawing back” unspent business grants, which would see £448m stripped from areas in Tier 2 and 3 restrictions, with Liverpool and Manchester losing £44m and £19m respectively.

The support was initially provided by the government in March to help struggling businesses cope with the consequences of coronavirus, but the money came with a ‘use-it-or-lose-it’ clause mandating that it be spent by August 30th.

Powell at the time described the government’s decision to enforce the clause and force local authorities across the country to hand back the unused grant money – which totals £1.3bn – as a “smash and grab raid on business support”.

She added: “Clawing back hundreds of millions of pounds from areas facing tougher restrictions just adds insult to injury. They need to urgently rethink their approach and ensure areas facing the toughest restrictions get a fair deal.”

The government announced a tiered lockdown system this week. Under the new approach, areas in the lowest tier follow the current national guidelines while those in higher tiers face more severe restrictions.

In Tier 3, the highest of the three categories, members of more than one household are banned from mixing in any indoor setting – meaning retail, hospitality and leisure businesses would be legally forced to shut.

The local lockdown support scheme aims to give funding to those businesses that are forced to shut, but it is significantly lower now than similar support offered when there was a nation-wide lockdown from March.

Under the economic measures, the smallest businesses in the highest tier of restrictions, with a rateable value of less than £15,000, will receive just £334 per week – compared to an average of £666 during the initial lockdown.

These companies, alongside those worth between £15,000 and £51,000 who receive £500 a week, were found by Labour to make up 90% of all the retail, hospitality and leisure businesses that would be forced to close in a Tier 3 lockdown.

Labour has also expressed concerns about the extra costs being placed on businesses and employees in regions of the North of England by the government’s newly proposed local furlough programme for Tier 3 areas.

This will see the government pay 67% of a worker’s wage if their employer’s business is forced to close under Tier 3 rules. But fears have been raised about those on minimum wage, who will see their already low income cut by a third.

The policy offers more government support than the national job support scheme, which sees employers also contribute to paying unworked hours by staff. Many firms will find it cheaper to fire half their workforce rather than save jobs.

Concerns have since been voiced that the more generous support for Tier 3 areas creates a perverse incentive for regions to seek harsher lockdowns, as opposed to cash-strapped local businesses under Tier 2 going without extra government aid.

Recent research found that only 230,000 jobs would be saved by the Chancellor’s main job support scheme and job retention bonus and predicted that just under two million people in otherwise viable work could be made unemployed.