Chancellor Rishi Sunak has been urged back a proposal for a £500-per-adult voucher scheme to encourage high street shopping.
The Federation of Small Businesses (FSB) said the measure could be “the shot in the arm the economy needs” if it helps local retailers recover from the effects of the pandemic.
It comes ahead of an update on Wednesday from the Chancellor expected to lay out a package of measures to stimulate the UK economy.
The Scottish Government has called on Sunak to commit to a stimulus package of at least £80bn, as well as a reduction in VAT – especially for the firms hit hardest by coronavirus, like retail, hospitality and leisure.
The idea of a voucher scheme, reported to be under consideration in the Treasury, was raised in a paper by think tank The Resolution Foundation which called for a £200bn stimulus – worth 10% of GDP.
It said such large-scale support is required to reverse what it claims could be the biggest shrinking of Britain’s economy in a century, with the foundation claiming a fall of 9.3% is likely.
The think tank recommends that a stimulus package, delivered over two years, should include a £17bn-per-year job support package which would see the furlough scheme extended and job guaranteed for young people.
It also calls for a £30bn “high street voucher” scheme.
The report authors said vouchers worth £500 per adult and £250 per child could be handed out to be spent in hard-hit sectors of the economy, such as face-to-face retail, hospitality and leisure.
Widely touted as a “mini-Budget”, Sunak is expected to set out plans in the House of Commons to rebuild the economy post-coronavirus.
But on Tuesday, he gave no indication he means to change current plans to wrap up the furlough scheme in October.
The FSB warned the UK Government should look to build on the furlough scheme to prevent job losses, through measures like cutting national insurance contributions for employers.
The group’s director of devolved nations Colin Borsland added that a high street voucher scheme could encourage people to do things like shop and dine out.
He said: “Ahead of the Chancellor’s statement this week, the FSB has been calling for measures to reignite consumer demand, especially in sectors most affected by the lockdown, such as a temporary VAT cut.
“Further, the proposed voucher scheme could be just the shot in the arm the economy needs if it’s designed to maximise spend in local independent businesses.
“It could also help encourage people to return to everyday activities like shopping and eating out.
“The small business community will also be looking to the Chancellor to build on the success of the job retention scheme and help reduce the costs of employment by taking bold steps to cut National Insurance Contributions.
“Steps such as these could prevent many businesses from reducing headcount – a process that no business owner wants to embark on.”