Summer Economic Update from the Chancellor

Today there was a further announcement of measures from the Chancellor, Rishi Sunak in response to the Coronavirus impact on the economy. There had been speculation that there could even be a summer budget, but this was ruled out and therefore it left Mr Sunak the opportunity to put forward measures that he feels will help reinvigorate the economy in these times in his Summer Economic Update.

In speaking today, he stated there would be further steps to come as the economy develops and recovers. He noted that the economy had contracted by 25% – being the equivalent of the last 18 years of growth.

The major areas announced were:

Furlough Scheme updates

  • Confirmed there would be no extension to the scheme – stating that it was in danger of giving people false hope.
  • There will be a retention bonus paid to employers for anyone who returns to work and ‘kept on’ as an employee, until January 2021. This will be £1k per employee brought back to work, provided they earn £520pm or more.

Employment Incentives

  • Launch of a new ‘Kickstarter’ scheme to employers to take on 16-24 year olds. The government will subsidise 6 months salary up to £6,500, assuming the individual works at least 25 hours per week at NMW or greater. Starting August.
  • Extra grants of between £1,500 and £2,000 to take apprentices in to new roles.
  • An acceleration of Government infrastructure spending (as the Prime Minister had announced last week) of £5bn.

Green incentives

  • There will be £3bn set aside for helping the Green economy, with £1bn focused on spending to make public buildings more efficient.
  • £2bn will be spent on vouchers for home owners to help make their homes more efficient, with vouchers between £5,000 and £10,000 being available.

Stamp Duty

  • The 0% band for stamp duty will be increased to £500k until 31 March 2021 (be careful that this only relates to changes in your main home and not any second home purchases).

Hospitality and Tourism

  • Around 80% of businesses stopped completely in April. There are two major measures to address this.
  • VAT Cut to 5% (from 20%) on Food, Hot Takeaways, Accommodation, Attractions. This will be for 15 July 2020 to 12 January 2021.
  • In August, the government will give everyone a 50% discount for meals out between Monday and Wednesday (up to a max of £10 per person). This will be run via a reclaim system (which will go live next week) and under which the restaurant/pub will need to register for. The money should be refunded back to the restaurant owner within 5 days of a claim.

Overall, these have been the targeted approaches various bodies have called for. However, where this is a moving target to some degree he also noted that further actions could follow. It is thought that the overall packages above will cost around £30bn. There will of course be a time for all of these items to be paid for, with the Chancellor likely to cover this further in the Autumn budget. But for now, the measures seem reasonable, with the only question being whether they will be sufficient.

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