08/07/2020

Covid-19 – Rishi Sunak unveils new measures to boost economy in summer statement

08/07/2020

Covid-19 – Rishi Sunak unveils new measures to boost economy in summer statement

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Chancellor Rishi Sunak has today announced a package of fresh measures to bolster the UK’s economic recovery from coronavirus and shield furloughed workers from redundancy.

Headlining the Chancellor’s summer budget statement is a new £1,000 job retention bonus designed to prevent redundancies. The bonus scheme will pay out £1,000 to businesses for every furloughed employee they decide to keep on payroll.

While the furlough scheme is still on track to end on 31 October, it’s hoped the bonus package will incentivise employers to keep employees on payroll who may otherwise have been made redundant.

Affirming his decision to end furlough, Sunak said, “Leaving the furlough scheme open forever gives people false hope that it will always be possible to return to the jobs they had before. The longer people are on furlough, the more likely it is their skills could fade, and they will find it harder to get new opportunities. It is in no-one’s long-term interests for the scheme to continue forever, least of all those trapped in a job that can only exist because of government subsidy.”

However, the new support does come at a cost; if every person currently furloughed were to be kept on by their employer, the total cost to the UK government would be £9 billion.

Early careers boost for young people

Apprentices and the developing workforce have also been central to the Chancellor’s statement. A new, ‘kick-start’ government placement programme will fund the first 25 hours a week of employment for under 25s for at least six months.

Firms that create apprenticeship positions will be given a government grant of £2,000, while those businesses that bring in young trainees will be awarded £1,000.

Businesses can register for the new schemes via a government portal which opens next Monday, 13th July.

Although plans haven’t yet been outlined for the long-term unemployed, it’s believed that the Treasury is still developing a separate plan of action yet to be announced.

VAT cuts for the tourism and hospitality sectors

Several measures have been announced to ease the strain on the country’s hospitality industry, which has been devastated by months of lockdown and social distancing.

The additional support includes a 15% VAT cut for the sector, including the food industry, tourist attractions and accommodation, which will remain in place for six months, until January 2021.

It’s hoped this will make it cheaper and more attractive to UK residents to choose a staycation and in turn, bolster the local economy. It comes with a £4 billion price tag – but is estimated to help 150,000 businesses get back on up and running after months of inaction.

Adam Marshall, Director General of the British Chambers of Commerce tweeted, ‘Chamber business communities all across the country have campaigned for additional support for hard-hit hospitality and tourism firms – and will welcome the reduction in VAT for these sectors to help them restart and rebuild.’

Discounts for diners announced

In a further effort to safeguard the hospitality industry, the government has announced its new, ‘eat out to help out’ initiative. Throughout August, from Monday to Wednesday, participating restaurants can offer 50% off for diners, up to a value of £10. The cost will be subsidised by the government.

It’s hoped that the fresh support will go some way towards saving the jobs of the almost two million people who currently work in the UK hospitality industry.

Concerns have been raised, however, that some households will still be wary of eating out despite the more relaxed restrictions that have come with easing lockdown.

Home improvement boost

The government has also made a £3 billion fund available from September to both homeowners and landlords for reducing the carbon footprint of housing.

Families will benefit from up to £5,000 towards insulating properties and reducing the carbon emission of their homes. A further £1 billion will be made available to make public buildings greener.

Lower-income households will be able to claim up to £10,000 to cover the full cost of energy-saving upgrades that could pocket them up to £300 per year.

Boost for property market… in England

The housing market will also be given a boost by the introduction of a change to stamp duty, which will now only have to be payable on the sale of properties valued at £500,000 and over until 31 March. This temporary measure has become effective immediately.

It’s thought by one think tank, CEBR, that the stamp duty relief will create as many as 41,000 extra home sales, and help first time buyers get on the first, crucial rung of the property ladder. Currently, the cut only applies in England and Northern Ireland.

“Jobs in the short-run… opportunities for the long-run”

Generally, the new measures have been well received by the business community. CBI Director General Dame Carolyn Fairbairn said, “Today’s jobs plan is an important step forward. For young people, the kickstarter scheme will help create jobs in the short-run that can turn into opportunities for the long-run, and firms look forward to working with government to get it up and running quickly and well. It is also good to see direct support for apprenticeships and careers advice, which will help build the skills as well as the jobs of the future.”

However, some parties maintain the furlough scheme has been withdrawn too early, including Mike Bell, Global Market Strategist at JP Morgan, who said, “Removing the furlough scheme before activity has recovered is like building three-quarters of a bridge and not finishing it because it is becoming expensive. Prematurely winding down the scheme risks having merely delayed job losses for millions of people, particularly in the worst-affected sectors such as hospitality and retail.”

Similarly, SNP MP Alison Thewliss warned against withdrawing the furlough scheme prematurely, citing analysis that it could cut GDP by 2.5%.

Are you in debt and worried about what the end of furlough will mean for your finances? There’s already enough to adjust to without adjusting to life with money worries. Get in touch with the money professionals at Carrington Dean on 0808 253 3474 for free, confidential advice and support with your debt.  

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