Rishi Sunak’s Summer Economic Update today was sober in its delivery, reflecting how serious the government is taking the economic fall-out from the pandemic. Mr Sunak described the Update as a “Plan for Jobs”, consisting of numerous measures to support, create and protect employment. This jobs plan was described as a mid-point between the initial “Protection” response to the pandemic, and the well-trailed “Rebuild” phase which will begin in earnest once the autumn spending review has taken place.
Despite the sombre tone, Mr Sunak announced a number of noticeable measures. Perhaps the most eye-catching is the jobs retention bonus scheme which will reward employers with £1,000 for each employee they bring back from furlough, along with a raft of new measures aimed at getting younger people into secure employment. This positive message was balanced with the acknowledgement that the current furlough scheme cannot continue indefinitely, and will be gradually wound down between now and the autumn.
Other welcome developments announced today include an increase in the threshold at which stamp duty becomes payable from £125,000 to £500,000, and a reduction in the VAT rate from 20% to 5% for the hospitality and tourism sectors. The “eat-out-to-help-out” 50% discount scheme is likely to grab headlines, and is perfectly-timed with the summer break to encourage people to get out and spend, a key driver in the UK’s consumption-led economy.
- A £1,000 Job Retention Bonus will be introduced when the Coronavirus Job Retention Scheme ends for employees who have been furloughed.
- A new Kickstart Scheme will cover employers’ costs for new six-month work placements for trainees aged 16-24.
- A £1,000 payment will be made to employers for each 16-24-year-old on work placement and training.
- Employers who hire new apprentices will receive payments of up to £2,000.
- There will be a temporary cut to Stamp Duty Land Tax on residential property, increasing the zero-rate band to £500,000 and saving purchasers up to £15,000.
- The rate of VAT will be cut temporarily from 20% to 5% for restaurant, food, accommodation and attractions businesses.
- An ‘Eat Out to Help Out’ Scheme will offer 50% meal discounts during August.
Job Retention Bonus
The Chancellor made it clear that he intends to end the CJRS in October as planned. To encourage employers to support those people who have been furloughed, a Job Retention Bonus will be introduced.
The Job Retention Bonus will provide a one-off payment of £1,000 to UK employers for every previously furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn more than £520 a month on average between the end of the CJRS and the end of January 2021. Payments will be made from February 2021. Further details about the scheme will be announced by the end of July.
The Kickstart Scheme, which only covers Great Britain, aims to provide “hundreds of thousands of high quality six-month work placements” for those aged 16-24, who are on Universal Credit and are considered to be at risk of long-term unemployment.
Government funding for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week plus the associated employer NICs and employer minimum automatic enrolment contributions (a maximum of about £6,500).
There is to be no cap on the cost of the scheme.
Employers who provide work experience for 16-24-year-olds in work placements and training will receive a payment of £1,000 per trainee. Provision of traineeships and eligibility for them will be extended to those with Level 3 qualifications and below, to ensure that more young people have access to training.
Payments for employers who hire new apprentices
Employers in England will receive a new payment of £2,000 for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over.
The scheme will run from 1 August 2020 to 31 January 2021. These payments will be made in addition to the existing £1,000 payment the Government already provides for new 16-18-year-old apprentices, and any of those aged under 25 with an Education, Health and Care Plan.
Other supporting jobs measures
Other initiatives under this heading include:
- £895 million to enhance work search support across Great Britain by doubling the number of work coaches in Jobcentre Plus before April 2021.
- An additional £150 million in the funding for the Flexible Support Fund in Great Britain, including increased capacity for the Rapid Response Service.
- £101 million for the 2020/21 academic year to give all 18-19-year olds in England the opportunity to study targeted high value Level 2 and 3 courses when there are not employment opportunities available to them.
- £95 million in 2020/21 to expand the scope of the Work and Health Programme in Great Britain to introduce additional voluntary support in the autumn for those on benefits who have been unemployed for more than three months.
- £40 million to fund private sector capacity to introduce a job finding support service in Great Britain in the autumn.
- £32 million new funding for the National Careers Service.
Temporary VAT cut for food and non-alcoholic drinks
A reduced 5% rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. The temporary rate will apply from 15 July 2020 to 12 January 2021. Further guidance on the scope of this relief will be published by HMRC in the coming days.
Temporary VAT cut for accommodation and attractions
The 5% rate of VAT will also apply from 15 July 2020 to 12 January 2021 to supplies of accommodation and admission to attractions across the UK. HMRC will publish further guidance on the scope of this relief in the coming days.
Eat Out to Help Out
The ‘Eat Out to Help Out’ scheme will be introduced to encourage people to return to eating out. Every diner will be entitled to a 50% discount of up to £10 a head on their meal, at any participating restaurant, café, pub or other eligible food service establishment.
The discount can be used without limit throughout the UK on any eat-in meal (including on non-alcoholic drinks). It will be valid Monday to Wednesday during the month of August, and participating establishments will be fully reimbursed for the 50% discount.
Stamp Duty Land Tax
Receipts of Stamp Duty Land Tax (SDLT – covering England and Northern Ireland) have fallen precipitously in the past few months, as the graph above shows. The slowdown in transactions has been accompanied by a stalling in prices – the latest data from Nationwide showed house prices falling in June 2020 for the first time in almost eight years. A temporary cut in SDLT on residential properties was widely trailed and duly arrived.
From 8 July 2020 to 31 March 2021, there will be no SDLT on the first £500,000 slice of property value, creating a maximum saving of £15,000. However, the 3% additional rate will still apply to additional properties.
Green Homes Grant
A £2 billion Green Homes Grant will be introduced, providing at least £2 for every £1 up to £5,000 per household to homeowners and landlords who spend on making their residential properties more energy efficient. For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household.
Other creating jobs measures
Other initiatives under this heading include:
- £5.6 billion of accelerated infrastructure investment, covering hospitals, schools, courts, prisons, town centre improvements and local road maintenance.
- A £1 billion investment over the next year in a Public Sector Decarbonisation Scheme that will offer grants to public sector bodies, including schools and hospitals, to fund both energy efficiency and low carbon heat upgrades.
- By boosting the Short-Term Home Building Fund, an additional £450 million in development finance will be made available to smaller firms that are unable to access private finance.
- £400 million will be allocated via the Brownfield Housing Fund to seven Mayoral Combined Authorities to bring forward land for development of homes in England.
- £100 million of new funding will be provided for researching and developing Direct Air Capture a new clean technology that captures CO2 from the air.
- A new Social Housing Decarbonisation Fund will be established to help social landlords improve the least energy-efficient social rented homes. It will start in 2020/21 with a £50 million demonstrator project.
- £40 million will be spent to improve the environmental sustainability of the courts and tribunals estate in England and Wales, investing in initiatives to reduce energy and water usage.
- Up to £40 million will be made available in a Green Jobs Challenge Fund for environmental charities and public authorities to create and protect 5,000 jobs in England. The jobs will involve improving the natural environment, including planting trees and creating green space for people and wildlife.
- £10 million of funding is to be made available immediately to the Automotive Transformation Fund for the first wave of innovative R&D projects to scale up manufacturing of the latest technology in batteries, motors, electronics and fuel cells.
- New legislation will be introduced in summer 2020 to make it easier to convert buildings for different uses, including housing, without the need for planning permission. In July 2020, the Government will launch a policy paper setting out its plan for comprehensive reforms of England’s planning system.
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