Just four months after his first Budget, Chancellor Rishi Sunak has unveiled a summer economic update designed to mitigate the impact of the Covid-19 pandemic, with a commitment to encouraging job creation through a government ‘plan for jobs’ and stimulus for consumer spending
Announcing a package of measures, Sunak said the aim was to ‘give everyone the opportunity of good and secure work, so no one is left without hope.
‘Our plan for jobs has a clear goal – to protect, support and create jobs. We want to give business confidence to retain and hire.’
Coronavirus job retention bonus
Confirming that the coronavirus job retention scheme will be flexibly and gradually wound down through October, Sunak said the second phase of the economic recovery would focus on getting as many people as possible back from furlough and into jobs.
‘The economy contracted by 25% in two months, the same amount as it had grown over the previous 18 years. The most urgent challenge now is to halt job losses.
‘The truth is, calling for endless extensions to the furlough is just as irresponsible as it would have been back in June to end the scheme overnight.
‘Leaving the furlough scheme open forever gives false hope that people will return to the jobs they had before,’ the Chancellor said.
To reward and incentivise employers to bring back employees, any employer who brings back a furloughed member of staff through to January 2021 will receive a £1,000 bonus per employee. this is conditional on the employee being paid at least £520 per month in November and December, equivalent to the lower earnings limit for National Insurance contributions.
Sunak said that if all 9m furloughed employees return, then this policy will cost the government £9bn.
Highlighting that the younger generation have been hardest hit by coronavirus disruption, with 700,000 leaving education this year and many more starting out on their careers, Sunak announced the Kickstart scheme for employers who create new jobs for any 16-24 year old at risk of unemployment.
The government will pay young people’s wages for six months, plus an amount for overheads, which will give employers a grant of around £6,500 for each employee taken on. The funding is conditional on these being new jobs, paid at national minimum wage and for at least 25 hours a week.
Employers will be able to apply from next month, with the first Kickstarters in jobs in the autumn. Sunak said he is providing an initial £2bn to fund the scheme, with no cap on the number of places available.
For the first time ever, the government will pay employers £1,000 to take on new trainees, with the aim of tripling the number of level 2 and level 3 courses, at a cost of £100m.
There is also extra funding for careers advice, and a tripling of the number of places in sector-based work academies.
In addition, over the next six months the government will pay employers to create new apprenticeships, with a grant of £2,000 per apprentice hired. There is a new bonus payment of £1,500 for hiring those aged over 25.
The government is also providing £1bn to the Department for Work and Pensions, to fund additional support to help those on universal credit get back into work.
The Chancellor announced a £2bn green home grant, to support a green-led recovery. From September homeowners and landlords will be able to apply for vouchers to make housing more energy efficient and to create local jobs.
The government will cover two thirds of the cost up to £5,000 per household, and up to £10,000 for those on low incomes.
There is also £1bn of funding for developing energy efficiency in public sector building.
Stamp duty cut
The Chancellor pointed out that property transactions fell 50% in May, while house prices fell for the first time in eight years.
To boost the housing market, Sunak announced a cut in stamp duty, increasing the threshold for payment from the current £125,000 to £500,000. This is a temporary cut until 31 March 2021 and will take effect immediately. Treasury estimates suggest the average homebuyer will see their bill fall by £4,5000, and nearly nine out of ten main home buyers will pay no duty at all.
VAT cut for hospitality sector
The Chancellor said hospitality and tourism had been badly impacted by coronavirus, and with two million workers employed in the sector it was important to ‘get pubs, restaurants, attractions and b&bs bustling again’.
He announced two measures. Firstly, there is a VAT cut from 15 July to 12 January 2021, reducing the rate from 20% to 5% for six months. Described by Sunak as a ‘£4bn catalyst’, this will see the VAT cut applied to food, accommodation, eat in or hot takeaways, cinemas, zoos and theme parks.
Secondly, Sunak unveiled a final measure which he said had never been tried in the UK before, and marked a ‘unique moment’.
‘To get customers back into restaurants, cafes, and pubs and to protect the jobs of workers, for the month of August, we will give everyone an “eat out to help out” discount,’ Sunak explained.
This discount will apply to meals eaten at any participating business on Monday to Wednesday and will be 50% off to a maximum of £10 per head. The government will open a website where business can register for the scheme online, with the funds they claim back paid within five working days.