Discussing the continuing effects of Covid-19 on the economy Rishi Sunak’s Summer Economic Statement covers several important issues, which are explained in more detail below. COVID-19 has been rife with uncertainty and financial instability for many, and H M Treasury made it clear what it believed the focus of the Statement was by the use of the hashtag #PlanForJobs.
Ultimately, “Jobs Jobs Jobs” were centre stage and represent the government’s second phase of its response to the coronavirus pandemic: Recovery. As Chancellor Rishi Sunak stated “Our plan has a clear goal: to protect, support and create jobs. It will give businesses the confidence to retain and hire. To create jobs in every part of our country. To give young people a better start. To give people everywhere the opportunity of a fresh start.” One can see the influence of Dominic Cummings’s political machine in the simplicity of the message. And as aside it is to be noted that, separate to the Statement, it has been announced that employers can now pay for Covid-19 tests for their employees without a tax charge arisng – Barnard Castle can now offer more than just eye tests!
Support To Find Jobs
A new Kickstart Scheme will also be launched to create hundreds of thousands of new fully subsidised jobs for those who are:
- Aged 16-24
- Claiming Universal Credit; and
- At risk of long-term unemployment.
The government will provide 100% of the National Minimum Wage for all 25 hour per week contracts. It will also subsidise Employer and Employee NICs.
Furthermore, the government pledged to extend the Apprenticeship scheme and will be given £2,000 bonus for each new apprentice they hire under the age of 25.
This in addition to the existing £1,000 payment the Government already provides for new 16-18-year-old apprentices and those aged under 25, employers may therefore receive £3,000 bonus payments for young apprentices. There are also £1,500 bonuses for each apprenticeship offered to employees aged over 25.
Other investments include:
- A £111 million investment to triple the scale of traineeships in 2020-21 ensuring more young people have access to high quality training;
- Government will fund employers who provide trainees with work experience, at a rate of £1,000 per trainee;
- £17 million of funding to triple the number of sector-based work academy placements in 2020-21
- Nearly £900 million to double the number of work coaches to 27,000;
- Over a quarter of a million more young people to benefit from an extra £32 million investment in the National Careers Service.
Plan to create tens of thousands of jobs through bringing forward work on £8.8 billion of new infrastructure – better roads, hospitals and schools – decarbonisation and maintenance projects.
The statement hopes to nurture a “Green Recovery” with a range of investments designed to ignite a green economy with “concern for our environment at its heart”. This is represented by a £3 billion green investment package that the Government hopes to support around 140,000 green jobs and upgrade buildings and reduce emissions.
The “Green Recovery” also extends to a package to encourage homeowners and landlords in England to apply for the Green Homes Grant scheme. A £2 billion voucher scheme to pay for green improvements such as loft, wall and floor insulation that could save some households hundreds of pounds a year on their energy bills while creating thousands of jobs for tradespeople.
In addition, £5.8 billion will be invested on construction projects to get Britain building. This includes:
- £1.5 billion for hospital maintenance and upgrades
- £100 million for our local roads network
- over £1 billion to start to rebuild schools in the worst condition in England, plus £760 million this year for key maintenance work on schools and FE colleges
- £1 billion for local projects to boost local economic recovery in the places that need it most
- £142 million for court maintenance to repair around 100 courts across England.
Perhaps it should not be a case of “Jobs, Jobs, Jobs” but “Build, Build Build”?
Finally, the green revolution also extends to initiatives designed to help the UK’s homes become more energy efficient. The Government will introduce a Green Homes Grant providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household.
For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household. In total this could support over 100,000 green jobs and help strengthen a supply chain that will be vital for meeting the UK’s target of net zero greenhouse gas emissions by 2050.
The final objective is a series of measures designed to protect jobs.
Job Retention Bonus
As a means to assist with the wind-down of the furlough support scheme (CJRS) which is due to come to an end in October, the government has pledged a one-off £1,000 bonus for each furloughed employee who is continuously employed through to the end of 31 January 2021.
The employees must be completing purposeful work during this period and must earn at least £525 per week (in line with Lower Earnings Limit for NICs) on average between the end of the CJRS and January 2021.
Payments will be made from February 2021. Further details will be announced by the end of July 2020.
Mr Sunak addressed UK employers directly saying “If you stand by your workers – we will stand by you.”
A major part of the job protection strand of the Statement refers specifically to the tourism and hospitality sectors which are massive employers in the UK and have been severely impacted by the pandemic due to necessary closures to protect public health.
To inspire consumers to enthusiastically embrace the leisure and hospitality sectors once again and safeguard these businesses the Government will introduce the following initiatives:
Eat Out To Help Out Discount Scheme
A cynical person may think that, in line with films such as “Snake on a Plane” and “Hot Tub Time Machine”, the government started with the title and thought backwards. Government policies often seem to be dictated by marketing focus groups, and so one does wonder. Whatever the process the results are as follows:
- Government will provide a 50% reduction for sit-down meals in cafes, restaurants and pubs across the UK from Monday to Wednesday every week throughout August 2020.
- This is per person and to a maximum of £10 per person;
- It can be used an unlimited amount of times;
- Businesses must register for the scheme and will be fully reimbursed for the 50% discount;
- Government has stated businesses will receive the bonus within 5 days of their claim; and
- The offer includes soft drinks but not alcoholic ones.
- The rate of VAT applied on most tourism and hospitality-related activities will also be cut from 20% to 5% temporarily for the period of lockdown;
- The temporary cut will expand from 15 July 2020 to 12 January 2021;
- Does not include alcoholic drinks;
Further guidance on the scope of this relief will be published by HMRC in the coming days.
Stamp Duty Land Tax (SDLT)
As ever, the maxim goes “An Englishman’s home is his castle” and it would not be a Budget without incentives for home owners. To encourage people to feel confident to move, buy, sell, renovate and improve their homes the Government is introducing an immediate increase in the threshold of the residential Nil Rate Band from £125,000 to £500,000 until 31 March 2021.
This could save taxpayers potentially £15,000 on the purchase of their main homes and temporarily replaces the measures for first time buyers.
These rates apply where individuals purchase or replace their “main homes” and where individuals buy second properties the 3% surcharge will still apply, however, this means landlords will still benefit from a measure of tax relief.
Interestingly, the relief does extend to companies buying properties worth less than £500,000, although the 15% surcharge may still apply.
Please note, as SDLT is a devolved tax this announcement applies to England and Northern Ireland but it is not clear if Wales and Scotland will implement similar measures for LTT and LBTT, respectively.
This alongside the Green Homes Grant outlined above are some of the measures to save homeowners money.
Robson Laidler’s Analysis
Throughout the Summer Statement Rishi Sunak emphasised his focus on supporting, creating and protecting jobs, with that small diversion to accelerate the housing market with an unprecedented (there’s that word again …) cut to Stamp Duty until 31 March 2021, extending the nil rate band to properties worth up to £500,000.
There is no doubt that the measures raise as many questions as they resolve. With regards to Stamp Duty, for example, the 3% additional charges for one’s second or subsequent property remain, and some of the measures for employers, although better than a kick in the bottom, may not be as useful as they appear. The £1,000 Job Retention Bonus will not cover the salary costs from October until January indicating a limited willingness for the government to stand alongside employers; the reduction in VAT could create an administrative headache for some business-owners – although a boon for software developers? – and, most heinously according to some of our colleagues, the reduction does not extend to alcohol – it’s food and soft drinks only! This will add to the VAT complexity when a diner’s bill includes food at 5% and alcohol at 20% – let’s hope the software developers are working on this as we write! It also remains clear that many people, with the prospect of a Second Wave, will still practice social distancing: will the reduced costs overcome any fears about their health and encourage to them sit in a café or restaurant? And there is also some cynicism around with concerns that business owners may pocket the VAT savings rather than passing them on to their customers, even if the savings aren’t swallowed by administrative complexity.
Business owners without employees may also have reason to be unhappy. The Self Employment Income Support Scheme is not being extended beyond October, and the focus on the hospitality and tourism sector, whilst welcome, ignores so many others – not least health workers who, over the last 24 hours have faced rumours that they are going to have to start paying for their car parking costs again – although this has not been confirmed. Some of the measure include some subjectivity – what exactly does “at risk of long-term unemployment” mean, and how will it be decided? What is long term? 6 Months? A year? Longer? There is also a feeling that the measures ignore employers who did not furlough staff and paid salaries from personal funds, or who topped up the 80% furlough funds. Non-resident billionaires are getting support from the public purse, but the many employers who did their best for their employees seem to have been overlooked.
The expense to the Exchequer of the many measures is unprecedented (there we go again) and Rishi Sunak is receiving plaudits from many for them …
But it has to be questioned how they are to be paid for. Gen X and millennials tend to moan about the unprecedented (!) prosperity afforded to Babyboomers, but we may be seen to be as equally privileged by Gen Z and upcoming generations who could well be still paying for these measures in 50 years’ time. Especially if the “create jobs” part of the Statement is not as successful as one would hope for. The writer has recently been a mature student at Durham University and could cry for her fellow students who are leaving education into an unknown, (unprecedented?) world.
However the measure do go further than many people would have expected from a Conservative government, even if they do not go far enough for others. Rishi Sunak is garnering plaudits for his unprecedented (sorry; we can’t resist …) spending spree and some are even seeing him as a future Prime Minister. Whatever your political thoughts, we at Robson Laidler recommend that our clients take advantage of the measures if at all possible and are looking forward to continuing to help our clients navigate this new, unknown, and (OK, last time, we promise) unprecedented time.
As ever, if you have any queries about any of the measures, please do not hesitate to get in touch with us.
You can download our Quick Reference Guide here:
This article is based on an initial understanding of the Statement and the details of the measure are subject to change.