Summer Economic Update: summary of policies announced
Article Date: 2020-07-09
This afternoon the Chancellor announced his next package of support for the UK economy, signalling a shift into phase two of the Government’s economic response, focused on protecting, supporting and creating jobs.
Alongside comprehensive support for job retention and creation, the Chancellor announced a number of measures designed to boost consumer spending, especially in the damaged hospitality sector.
In his speech the Chancellor recognised that more hardships still lie ahead for the UK, and admitted that he will not be able to save every job, however he made clear that he will “never accept unemployment as an unavoidable outcome.”
The package of measures announced are designed to build on the previous rounds of government support, especially the Job Retention Scheme, on which the Chancellor was clear it would be “irresponsible” to continue past October, and reconfirmed that he will continue to wind down the scheme flexibly and gradually.
Despite the scale of these major interventions, the Chancellor indicated that he would still be willing to do more, and confirmed that he will hold a Budget and Spending Review in the autumn.
Sunak announced a package of measures to support the hospitality sector, including:
- VAT rate reduced to 5% for businesses in the hospitality and tourism sectors for six months, including takeaways, restaurants and bars.
- An ‘Eat out to Help Out’ scheme, which would see the Government distribute vouchers Monday-Wednesday for 50% off for people dining in in restaurants and cafés, up to the value of £10 per person during August
The Chancellor also announced policies to incentivise employment and training:
- A ‘Job Retention Bonus’, a £1,000 bonus per furloughed employee that is re-employed through to January
- Kickstart Scheme: creation of six-month work placements for 16-24 year olds, with the Government funding employees’ wages at National Minimum Wage level
- Incentives for apprenticeships and traineeships: funding of £1,000 per trainee for work experience placements for 16-24 year olds and a payment of £2,000 to employers for each new apprentice hired under the age of 25
Full details of the Chancellor’s announcements can be found here
A summary of key measures is included below.
Tax changes to boost consumer spending
- VAT will be cut from 20% to 5% for hospitality and leisure businesses, including food and drink businesses like pubs, cafés and restaurants, accommodation providers and admission to tourist attractions. This change will apply from 15th July 2020 to 12th January 2021. Further guidance on the scope of this relief will be published by HMRC in the coming days.
- An ‘Eat Out to Help Out’ scheme will see diners benefit from a 50% discount of up to £10 per head on their meals at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal (including on non-alcoholic drinks) for the entire month of August 2020 across the UK.
- The threshold for stamp duty will be increased from £125,000 to £500,000 in England and Northern Ireland. The change will come into effect immediately, and will be in place until 31st March 2021.
Jobs and training
- The Chancellor announced a Job Retention Bonus, the bonus will be introduced to "reward and incentivise" employers who have retained staff. Employers will receive a one-off bonus of £1,000 for each furloughed employee who is still employed as of 31 January 2021.
- Sunak announced the new Kickstart Scheme programme which will be open to all UK nations. The programme will directly pay employers to create six-month job placements for 16-24 years at risk of long term unemployment.
- Employers will receive £2,000 for each new apprentice they hire under the age of 25.
- The Government will also invest £111 million to triple the scale of traineeships in 2020-21, alongside this the Government has announced £17 million of funding to triple the number of sector-based work academy placements in 2020-21.
- The Government will commit nearly £900 million of funding to double the number of work coaches to 27,000.
- The Government will provide an additional £32 million funding over the next 2 years for the National Careers Service so that 269,000 more people in England can receive personalised advice on training and work.
- The Government will provide £40 million to fund private sector capacity to introduce a job finding support service in the autumn, specifically for those who have been unemployed for less than three months.
- The government intends to support those who are out of work for a longer period with a new, large-scale employment support offer, further details of which will be announced shortly.
- The Chancellor set out a package of measures as part of a pledge for a “green recovery with concern for the environment at its heart”. The measures aim to kickstart economic recovery from coronavirus by investing in building infrastructure, creating jobs in low carbon industries and cutting emissions.
- Sunak announced a £2bn Green Homes Grant, a home insulation scheme starting from September, which will allow homeowners to apply for vouchers of up to £5,000 for energy-saving home improvements. Low income households will be able to apply for vouchers of up to £10,000. The scheme aims to upgrade over 600,000 homes across England, aiming to save households money on their energy bills. The Treasury has said that this scheme could support the creation of 100,000 green jobs.
- The Chancellor also promised £1bn of investment for upgrading public building such as schools and hospitals, retrofitting to ensure carbon efficiency.
- An additional £50m funding package was also pledged for the social housing sector. The scheme aims to pilot new approaches to low-carbon retrofitting of social homes. Approaches to retrofitting could include the use of heat pumps, insulation and double glazing.
- Taken together, the Chancellor said the measures would aim to make 650,000 homes more energy efficient, save households up to £300 on their bills per year, cut a megaton of carbon emissions, and support 140,000 green jobs.
- The environmentally focused package is in addition to the £5bn ‘New Deal’ announced by the Prime Minister last week, which included funding for research into green technologies, carbon capture and conversation projects.