Dubbed the economic Jedi, Rishi Sunak’s Summer Economic Statement on 8 July was nothing short of mystical. Harnessing the power of the Force (in this instance his position), he unleashed a slew of measures to help jump-start the UK economy.
The Furlough Scheme and Jobs Retention Bonus
The Chancellor of the Exchequer opened with his decision of “gradually and flexibly” winding down the furlough scheme in October, a scheme that has undoubtedly kept millions of heads above the water for the past few months. The scheme was an innovative stopgap measure which prevented many from being laid off and gave them hope of returning to their jobs once the pandemic alleviated. In addition, the government will pay a £1,000 Jobs Retention Bonus to businesses for every employee that they bring back from furlough through to January, in a £9 billion policy.
As Sunak notes, continuing the scheme would provide a false sense of hope if it continued for much longer. Although winding down the scheme in October will lead to a surge in unemployment, the surge is inevitable even if the scheme were to be wound down later which neutralises any arguments against the timing of the winding down by critics. The Jobs Retention Bonus should, however, stem the flow as it incentivises businesses to bring all their furloughed employees back and hence scale back up their operations to pre-pandemic levels.
Continuing the scheme would provide a false sense of hope if it continued for much longer
The Kick-Start Scheme
The programme will directly pay employers to create new jobs for any 16 to 24 year-olds at risk of long-term unemployment. To qualify, these jobs must be proven to be additional jobs, at least 25 hours a week, must be paid at least the national minimum wage, as well as mandatory training, and must support to help “kick-starters” find a permanent job. Provided certain qualifying conditions are met, the government will pay 6 months of wages and an amount to cover overheads in an initial £2 billion policy and a promise towards not capping numbers for this scheme.
In addition, the government will pay employers £1,000 to take on new trainees as well as funding careers advice for over 250,000 people. The number of sector-based work academy places will be tripled in a £100 million scheme. Employers will also be paid £2,000 to create apprenticeships over the next 6 months.
The message is clear from the current government – “the youth is our future.” The combination of measures announced is quite remarkable, that too just to support once age group of the population. By not only having more people in jobs in the near future, but by also having those people much more skilled than in previous generations, Sunak is no doubt setting the foundation for a much stronger economy in the post-Brexit era.
The program will directly pay employers to create new jobs for any 16 to 24 year-olds
Stamp Duty Land Tax (SDLT)
Prior to the Statement, Stamp Duty Land Tax (SDLT) had to be paid over all residential property transactions over £125,000. The Chancellor quadrupled the threshold to £500,000 until 31 March. This change means that 9 out of 10 people buying a main home will pay no SDLT at all for the duration of the increased threshold.
Keeping in mind falling disposable incomes, housing prices and property transactions over the past few months, this measure is specifically directed towards rekindling the property market in the UK, which should have a consequential knock on effect on other markets in the near future.
9 out of 10 people buying a main home will pay no SDLT
Green Homes Grant
In a £2 billion policy move, the government will offer vouchers to homeowners and landlords that will cover more than two-thirds of the cost up to £5,000 per household to make their properties more energy efficient. For low income households, vouchers will cover the full cost up to £10,000. £1 billion will be set aside to improve the energy efficiency of public sector buildings and £50 million to decarbonise social housing. The scheme will start from September onward.
If Sunak’s claim that the above measures will create around 140,000 “green” jobs is true, the move is a win-win situation for the government and people as it pushes the UK’s climate change agenda even further whilst stimulating income flowing through households and revenue through businesses.
Measures will create around 140,000 ‘green’ jobs
“Eat out to help out” discount
The “eat out to help out” scheme involves a 50% discount on all meals at participating F&B outlets for the month of August from Monday to Wednesday up to a maximum discount of £10 per head including children.
Undoubtedly, one of the hardest hit sectors due to the nationwide lockdown was the F&B sector that employees close to 1.8 million people. This innovative scheme incentivises the public to regain their confidence in going out, and, if successful, benefits of a rise in consumer expenditure, and hence employment, in the sector will last well beyond the twilight of the scheme in August.
Sunak’s comprehensive stimulus package has a piece for everyone
The hospitality sector was the hardest hit, with 80% of businesses halting trading during the lockdown and around 1.4 million workers being furloughed as a consequence. Sunak’s final measure was a 6-month cut in VAT from 20% to 5% on food, accommodation and attractions aimed specifically at restarting the hospitality sector.
Another measure to encourage people to gain their confidence of going back out again, the knock-on effect will undoubtedly lure tourists back into the country as and when the situation alleviates. This is also indicative of the government’s growing confidence that the worst of the pandemic has passed and that the UK is ready for business (and Brexit) once again.
Sunak’s comprehensive stimulus package has a piece for everyone, which will undoubtedly win him many hearts. The measures not only aim to get the UK economy back to where it was pre-pandemic, but rather is utilising the pandemic recovery as a means of going further to a much greener and up-skilled economy.