Chancellor Rishi Sunak will not hand out any additional funding to English regions under tier 2 lockdown restrictions as speculation grows that areas are going to be pushed into the stricter tier 3 level by the government within days.
The government’s job support scheme and business loans to help firms through the pandemic “cover all bases” already, according to senior Treasury sources.
The push back from government comes after a third English region, the West Midlands, led by one of the country’s most high-profile metro mayors, Conservative politician Andy Street, demanded the government provide more financial support.
Among the four demands he made in a direct letter to Sunak were for the government to increase its contribution to the wages of those on the Job Support Scheme and an extension to VAT rate reduction beyond January 2021.
One regional mayor has told PoliticsHome they are now convinced the government is holding out on extra cash for tier 2 areas, which include vast parts of the north west, north east and west Yorkshire, in a bid to force them into accepting the ‘very high’ risk or tier 3 restrictions.
This involves pubs, restaurants, betting shops and beauty salons closing, but would come with a financial package.
A Treasury source said: “Places in tier 2 would be covered by the Job Support Scheme, and it’s for places that stay open but are facing lower demand. There are loans businesses can access. We have covered all bases.”
Tier 2 means pubs and restaurants must close at 10pm, the rule of six applies outdoors but people should not meet with another household inside.
In practice that means people from different homes cannot go to the pub or out for a meal together, a rule that has upset landlords, restaurant and café owners, who are concerned about having far fewer customers.
It has been announced today that London and Essex will be placed in tier two restrictions from Saturday.
Newcastle, and other local authorities in the North East, had been using an extremely similar set of rules for several weeks already, notably the no household mixing in indoor hospitality venues.
It comes after a day of intense speculation that Greater Manchester were about to join the Liverpool City Region in moving to “very high” level 3 but local leaders said they did not want to and rejected the pressure being piled on them to significantly enhance restrictions.
In a joint statement, its leaders said tier 3 was "fundamentally flawed".
Mayor of Greater Manchester Andy Burnham said he would consider legal action if tier 3 was imposed on them. He wants an 80 percent furlough scheme instead of the government's offer of an enhanced Job Support Scheme, which in the case of tier 3, would mean the government paid two-thirds percent of wages for viable jobs.
PoliticsHome reported yesterday how West Yorkshire has asked the Treasury for grants of up to £5,000 every three weeks for retail, leisure and hospitality businesses that have lost at least 25% of their income.
South Yorkshire City Region, where Dan Jarvis MP is elected regional mayor, wants the government to contribute up to £1,400 a month to the Job Support Scheme rather than the current cap a £697.92.
Street’s letter to the chancellor said he needed “urgent reassurance” and that appropriate support is given to people in the West Midlands.
In a fast-moving day, it emerged Northern Ireland will close schools from Monday and pubs and restaurants should expect new restrictions from Friday evening to try and tackle coronavirus spread.
The Welsh first minister also claimed he would ban people from the UK with high rates of Covid-19 travelling to Wales.
The Treasury has said it has provided a range of support measures for the hospitality sector so far, including VAT cuts, business rates holidays and cash grants of up to £25,000.
The government is also introducing the 'Pay as you Grow' terms on loans, to help people who have Bounce Back Loans repay them over ten years, and give them the option of temporarily to interest-only repayments, or pause payments entirely.
A HM Treasury spokesperson said they had provided “a toolkit of support for all situations”.
They said for local authorities at tier 2 and tier 3, they have already committed to supporting public health and local economic initiatives with funding of up to £465m.
Kate Proctor is the political editor of CSW's sister titke PoliticsHome, where a version of this story was first published.