A special parliamentary statement to lay out plans for helping the country through the next phases of the pandemic and shore up the economy was delivered by Chancellor Rishi Sunak yesterday.
We had previously made a number of predictions on what the content of Sunak's speech would be, and our summer mini-budget predictions were for the most part correct.
The global economy is forecast to shrink by 4.9 percent this year. In the UK this has so far translated to a quarter reduction in retail sales. The worst hit was hospitality/leisure/entertainment with an 80 percent contraction. Cashpoint usage has halved. The government's briefing states that many people have been able to pay down debts in the lock-down period with near £5 billion in consumer credit repaid in May.
A quarter of businesses have shut their doors, either temporarily or permanently, but this is skewed toward certain sectors of trade. 9 million people are on furlough, which represents a quarter of the country's working population. Job prospects are also suffering with less than half the usual vacancies available. Unemployment rate is thought to peak at around ten percent this year.
Read on below for a full summary of the announcements made in Sunak's plan for jobs:
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Stamp Duty Cut
A stamp duty holiday was leaked well before the statement was delivered, and the change announced pretty much mirrored the leaks. An increase to the nil-rate band on stamp duty from £125,000 to £500,000 from July 8th 2020 to March 31st 2021 will apply. This is a significant saving for anyone in the property market. The calculation can become complicated so we put together an easy to use stamp duty calculator to help you.
The stamp duty cut is predicted to cost the Treasury £3.8 billion.
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Hospitality, Retail and Lesiure Businesses
We thought there would be a headline grabbing 'helicopter drop' of £500 vouchers to the entire country to spend freely on the high street or other tangible venues. However the actual stimulus is far away from this. A scheme labelled 'eat out to help out', revealed to much criticism across social media, has been launched instead. Under the scheme, throughout the month of August, on Mondays, Tuesdays and Wednesdays, people can eat out and receive 50 percent off their bill (per head) up to a max of £10 per head.
Qualifying businesses would then reclaim the discount they apply directly from the government via an online form on a website.
The 'eat out to help out' scheme is predicted to cost the Treasury £500 million.
A much broader scheme predicted was a VAT cut. On this Sunak delivered, he slashed VAT from 20 percent to 5 percent for the 6 month period (13/7/20 - 12/1/21). It covers restaurants, hotels, pubs, cafes, attractions, B&B's, parks, cinemas and other establishments within this industry sector.
This VAT cut is predicted to cost the Treasury £4.1 billion.
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Grants
As part of a 'green' recovery, Sunak is funnelling money into parts of the economy that will provide long-term prosperity and benefit. Part of this is the new 'green homes grant'. Households will be able to claim up to £5,000. They will receive £2 for every £1 spent on energy-efficiency improvements to their homes. Low-income households will receive up to £10,000 fully-funded with no contribution required by the household toward costs.
The 'green homes grant' is predicted to cost the Treasury £2 billion.
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Young Worker Job Support Schemes
A number of schemes to help 16 to 24 year holds have been implemented as predicted. People in this age group have been siginificantly affected as they would normally work in the most affected hospitality, retail and leisure sectors.
Six-month work placements via a 'kickstart scheme', which will be government funded. It pays minimum wage for 25 hours a week, and covers all other employer staffing costs related to the placement.
Employers are encouraged to take on trainees in this age group with £1,000 grants per trainee. In addition, apprenticeships will receive grants of £2,000 (under age 25) and £1,500 (over age 25).
These schemes are predicted to cost the Treasury £3.7 billion.
Furlough
The existing furlough scheme has come to an end for new entrants (June 30th) and a flexible furlough scheme began July 1st. A new 'Job Retention Bonus' is now offered to further motivate employers to keep staff they bring back to work employed. Every company bringing staff back to work and keeping them in work at least until January 2021 will receive a £1,000 bonus per employee retained.
The new 'job retention bonus' is predicted to cost the Treasury up to £9.4 billion, though the number will likely be far lower.