Summer Statement serves up jobs-first package
9 July 2020: the Chancellor’s Summer Statement put forward a plan for jobs, green investment and a variety of targeted tax cuts, but also signalled a clear intention to wean businesses off government support.
Billed as the second part of a three-phase plan to secure the UK’s economic recovery from coronavirus, Chancellor Rishi Sunak’s statement focussed firmly on the protection and creation of jobs, aiming to avoid a spike in unemployment over the coming months.
Chief among the announcements was the Jobs Retention Bonus – a surprise measure designed to persuade employers to retain staff. The plan hands companies a £1,000 bonus for each furloughed employee who is still employed as of 31 January 2021.
The furlough scheme itself, the Chancellor said, will wind down “flexibly and gradually” by 31 October as planned. Sunak stated that calling for “endless extensions” to the scheme was irresponsible as it would give people "false hope" that they could return to the jobs they had before lockdown. Treasury data up to 5 July stated that the Job Retention Scheme had so far cost the government £27.4bn.
In a bid to head off potential mass youth unemployment, the Chancellor announced a £2bn Kickstart Scheme, which will pay employers to create new jobs for 16-24-year-olds at risk of long-term unemployment. Funding will cover 100% of the National Minimum Wage for six months, provided the jobs are new and offer 25 hours per week of work, with no cap on the scheme.
For the next six months, apprenticeships will also be supported by bonuses for companies. Firms will get a payment of £2,000 for each new apprentice they take on under the age of 25 – companies taking on apprentices aged over 25 will get £1,500.
Commenting on the summer statement measures, ICAEW Chief Executive Michael Izza said the challenge the Chancellor faced today was to engineer a “soft landing” for the economy when government support is phased out, but that he had made a good start.
“Mass unemployment would have a crippling effect on our economy and society and the Chancellor is right to make that his priority for now,” said Izza. “However, at some stage the public finances must be restored and action taken to reduce the huge debt the UK is carrying. The Chancellor must tackle this in the Budget later in the year, together with a comprehensive and sustainable strategy to bring on the long-term economic transformation we need to see over the next decade.”
Targeted tax cuts
With hospitality and tourism among the hardest-hit industries, the Chancellor has cut VAT on food, accommodation and attractions from 20% to 5% from today until 12 January 2021.
Iain Wright, ICAEW’s Director for Business, said it is “understandable” that the Chancellor has targeted hospitality and tourism with tax cuts. “They are labour-intensive, often employing young people, so it chimes in well with his priority to limit the rise in youth unemployment,” he said.
“However, it is vital that other sectors in which the UK has a strong competitive advantage are not forgotten,” Wright added. “In the long run, our economy cannot afford to see sectors like high-value manufacturing, life sciences and fintech wither and erode away. Steps to help these crucial businesses must be given in the autumn Budget at the latest.”
In a further bid to boost ailing restaurants and cafés, Sunak also announced that from Monday to Wednesday throughout August, meals at participating businesses will be 50% off, up to a maximum discount of £10 per head for everyone via ‘eat out to help out’ vouchers. Businesses will be able to register for the scheme through a website launching on Monday, with the Chancellor claiming that firms will have their money back within five working days.
The Chancellor also confirmed the much-trailed stamp duty holiday, with no SDLT to be paid on properties below £500,000 until 31 March next year. The changes take effect immediately.
Green shoots
Sunak told MPs that the government wants a green recovery with “concern for our environment at its heart”.
From September, homeowners and landlords will be able to apply for vouchers to make homes more energy efficient, with the Chancellor claiming it will create 140,000 jobs. Vouchers worth £5,000 (or up to £10,000 for low-income families) will be made available to retrofit homes with insulation – helping to cut carbon emissions – while £1bn will be allocated to make public buildings greener.
The Chancellor also sounded a warning ahead of the Budget and spending review in the autumn, stating the government “must and will” put public finances back on a stable footing.
Read further Summer Statement coverage: