On Wednesday 8 July Rishi Sunak, the Chancellor of the Exchequer, presented to the House of Commons a package that he had dubbed “a plan for jobs” during his Summer Statement. These statements normally act as economic updates rather than significant fiscal events themselves but, with the UK looking to recover from the huge economic downturn caused by COVID-19, this statement was expected to wield a number of policy announcements intended to kickstart the UK economy. Below, we have summarised the key announcements and what they mean for business in the UK.
Job retention bonus
During the two digital events we held in June – one on the next steps for British business and the other on the impact of COVID-19 on the aviation sector – the job retention scheme received unanimous praise. There was, however, concern from some industries that when the scheme winds down in October there would be mass job losses.
The job retention bonus is designed address these concerns. The Chancellor said businesses that bring employees back off furlough and continuously employ them until the end of January will be paid a bonus of £1,000 per employee. To be eligible, the employee must be paid a minimum of £520 each month from November to January.
Whilst this measure will not save all jobs – the Chancellor admitted as much during his statement – it does add an incentive for employers to keep hold of staff in the medium-term. The Government will hope that by January, the economy will have improved enough for businesses to be able to keep staff for longer. If every worker currently furloughed is brought back, this bonus could cost the Government as much as £9bn.
It has been well observed that employment amongst young people has been hit particularly hard during the coronavirus crisis. This is due to a few factors. Many young people will be entering the job market for the first time to find opportunities limited. Others will have been working in sectors, like leisure and hospitality, that came to a standstill.
To address this, the Chancellor announced to MPs a £2bn “kickstart scheme” for young people. The scheme will pay the first six months of wages for people aged 16-24 who are currently on universal credit. Once again, the Chancellor will hope that after this period some employers will be in a position to keep some of these young people on for longer.
In addition to this, the Chancellor announced a £1,000 grant for employees who take on new trainees aged between 16-24 and a £2,000 grant for businesses that take on apprentices younger than 25. Apprentices aged 25 or over will result in a £1,500 grant for employers.
Homes under the green hammer
Possibly the marquee announcement of the Chancellor’s Summer Statement was the cutting of stamp duty, effective immediately. The threshold for stamp duty will increase from £125,000 to £500,000 meaning even sales in some of the UK’s most affluent postcodes could end up being ‘tax free’. This measure is intended to invigorate the housing market following a freeze in sales during the pandemic.
Also in housing, the Chancellor gave MPs further details on the green infrastructure measures previously announced by the Prime Minister. This includes £3bn of funding to decarbonise housing and public buildings, a £1bn pot of redeemable vouchers worth either £5,000 or £10,000 for people to retrofit their homes and make them more energy efficient, as well as a social housing decarbonising fund. As well as encouraging spending, these measures work towards the Government’s net zero by 2050 target.
Leisure and hospitality
In order to encourage consumers to go out and spend money in a hard-hit sector employing up to 1.8 million people, the Chancellor announced an “eat out to help out discount”. The discount will allow diners, from Monday to Wednesday, to receive a 50% discount up to £10 when they eat at participating restaurants. The discount will run throughout August. Though the hospitality sector will welcome this support, it does come with caveats and relies on firms to claim the money back through a website that launches on Monday.
Perhaps more significantly, Sunak announced a six-month reduction in VAT for restaurants, hotels and other attractions. In this period VAT will be cut from 20% to 5% and it will apply to food and non-alcoholic drinks in restaurants, pubs, and cafes. Hot takeaway food will also be covered. The Chancellor called this a £4bn catalyst that will benefit more than 150,000 businesses and consumers.