How much has Eat Out to Help Out really helped the UK economy?

When the chancellor Rishi Sunak announced his Eat Out to Help Out meal subsidy scheme in early July there were doubts over how effective it would be in stimulating the economy.

Some wondered if a £10 discount on a meal would really encourage people out to cafes, pubs and restaurants if they were afraid of being infected with coronavirus.

Others suggested the scheme would merely encourage people to eat out on the days that the offer applied rather than increasing the total number of diners over the week.

Government officials themselves were doubtful about it.

The top civil servant at HMRC, Jim Harra, wrote to the chancellor pointing out the “uncertainty surrounding the value for money of this proposal” and he required Sunak to provide a “ministerial direction” to make it operational, effectively absolving the civil service for any blame if it proved wasteful.

The last subsidised meal is due to be handed over next Monday.

The Treasury has already hailed the scheme as a success.

But has Sunak’s decision to give people a free lunch really been vindicated?

Eat Out to Help Out is an entirely new scheme offering a 50 per cent discount on meals for the month of August at establishments that sign up.

It excludes alcoholic drinks and imposes a maximum discount of £10 per diner.

The outlet passes on the discount directly to the customer – meaning they pay a lower amount than otherwise when they settle their bill – and the vendor claims the money back from the Treasury.

It began in August and has been operational between Monday and Wednesday.

This means the last day of the offer will be Monday 31 August.

The Treasury estimated that the scheme would cost the public purse around £500m, although it stressed this would depend on take-up.

The chancellor said the purpose was to persuade customers back into restaurants, cafes and pubs and to protect the jobs of the 1.8 million or so people who are employed in the hospitality sector.

The Treasury further suggested the scheme would “spur the country’s economic recovery from coronavirus”.

Figures released by the Treasury show that as of 23 August some 84,000 restaurant premises had registered for the scheme and had made 87,000 claims amounting to £336m.

That, apparently, equates to 64 million meals.

“With more than 64 million meals discounted so far, that’s equivalent to nearly every person in the country dining out to protect jobs,” said Sunak, although we do not know how many individuals have used the scheme. Some people are likely to have used the scheme more than once, if not several times.

On the face of it, the scheme has certainly encouraged people to eat out.

Figures from the website Open Table show a clear jump in the number of reservations and walk-ins this month at UK restaurants using the platform, with levels often higher than on the same days last year.

Many have been positive about the impact.

The Federation of Small Businesses is even suggesting the scheme should be extended beyond August, perhaps for places that have been hit by recent local lockdowns.

The Centre for Cities think tank has used mobile phone data to gauge the impact and concludes that the scheme has indeed encouraged more people to visit city and town centres.

On Monday to Wednesday evenings in late July average footfall was 35 per cent of pre-lockdown levels. But in early August it was 43 per cent, 8 percentage points higher.

In small cities, footfall was up by 10 percentage points and 14 percentage points in medium-size localities.

Seaside towns also seem to have benefited, with Bournemouth’s footfall up an impressive 23 percentage points.

However, the think tank notes that the scheme seems to have been much less effective in boosting visitor numbers to large cities such as London, where footfall was only three percentage points higher.

“Good weather and the Eat Out to Help Out scheme have helped increase the number of visitors to city and town centres,” says Andrew Carter of the Centre for Cities.

“But a question mark remains over whether the footfall increase that we have seen this summer can be sustained into the autumn without the good weather and government incentive.”

In his letter to the chancellor, Jim Harra of HMRC said that “it has proved difficult to establish a counterfactual for this scheme, which depends on the future demand for eating out in the absence of this scheme, which is currently highly uncertain.”

This is the key question: what would have happened in the absence of this scheme?

Would people have stayed at home? Or would they have returned to restaurants and pubs in any case as the lockdown was eased?

The weather is also a factor. Did the heatwave encourage people out as much as the meal subsidy?

There is some survey evidence from restaurants that custom has, indeed, shifted from weekends to weekdays, and the Open Table data suggests the same, with a dip in custom visible in the second half of the week.

Other evidence, however, suggests this “cannibalising” impact has been negligible.

It’s also difficult to judge what would have happened to those hundreds of thousands of hospitality sector jobs in the absence of the scheme.

The final verdict will have to wait until we have more data – and may never be fully conclusive.

Yet it would be fair to say that analysts are, so far, generally positive about the impact on the hospitality sector.

And many are attributing a general pick up in economic activity in August – as measured by surveys – at least in part to the meal subsidy scheme.