Today, Rishi Sunak gave details of his summer statement, with measures aimed at kick-starting the economy. To run alongside the Prime Minister’s “build, build, build” mantra, today was all about jobs and getting people to “spend, spend, spend”.
Resisting Labour’s calls to extend the job retention scheme, Sunak said that any extension would only delay the inevitable job losses and “give people false hope” that they will have a job to return to. His focus was instead on helping boost economy to ensure the best environment for those jobs to continue once furlough ends in October.
To soften the impact, his first rabbit out of the hat was the announcement that employers will be incentivised to keep staff on through a £1,000 payment for each furloughed employee retained, amounting to a potential £9bn cost, so long as the employee is kept until next January. While this might only delay job losses that will happen later down the line, it could flatten the curve of unemployment and mitigate a potential spike in joblessness.
This gave time for Sunak’s second big announcement of a “kickstart” job creation scheme, which will pay the wages of new young employees for six months at an uncapped level, costing an initial £2bn, to create enough new jobs to make up the inevitable shortfall. The Government is further making good on its pledge to boost apprenticeships, with a commitment to pay companies £2,000 for every young apprentice taken on over the next six months.
The Chancellor capitalised on the successful reopening of the hospitality and tourism sectors this month, two of the sectors most threatened by job losses. To help this part of the economy catch up, a VAT cut from 20% to 5% has been introduced from today until 12th January 2021, amounting to £4bn.
Whilst governments have long wanted people to save, these unprecedented times has led this Chancellor to call on us all to get out and spend so an eye catching announcement was an inventive 50% “eat out to help out” discount offer up to £10 for August, although how this fits with social distancing is open to question. Furthermore, alcohol drinks are exempt, meaning pubs and bars stand to benefit little from this offering, which is needed after the expected rush to alcoholic venues was notably tepid last weekend. Comparatively, nothing was offered for the retail sector, despite hints of a £500 voucher for each citizen to spend in selected industries. There was further no mention of help for other venues such as gyms, swimming pools and beauty salons, which are all still yet to reopen.
After the delay of the COP26 summit this year, the Government is still hoping for the UK to be seen as a leader in the climate change agenda. A £3bn investment to decarbonise housing and public buildings, a £2bn pot to retrofit homes with insulation to help cut carbon emissions, and £1bn to make public buildings greener make for strong bonuses for the construction industry, making good on the comprehensive infrastructure development drive promised by Prime Minister Boris Johnson last week.
Sunak further announced the threshold for stamp duty would be significantly increased from £125,000 to £500,000 to the end of March 2021. However, this would seem to mostly benefit the South East and London, where house prices are highest and therefore doesn’t seem to coalesce with the Government’s “levelling up” agenda focusing on marginalised regions.
There were no announcements for the aviation sector, one of the most prolific sufferers from COVID-19 and which is still in a very tenuous position with the relaxation of quarantine measures still to take effect in a few days’ time. Many airlines are also still dealing with a substantial backlog of refund payments. The VAT cut for tourism may encourage a revival through domestic holidays but it is uncertain how much aviation could stand to benefit from this depending on how strong the take up from foreign tourists is once quarantine restrictions are lifted.
For the majority of the economy, the measures announced today seek to stymie the oncoming wave of job losses expected from now to October and strive to kickstart the revival of select sectors. The Government hopes that the worst will be firmly behind us come January, but it isn’t a foregone conclusion that Britain’s economic situation will be considerably better and it is difficult to predict what arrangements with the European Union will be decided on by the end of December. It may be that the walk to the cliff edge in October has just been made a little bit longer. The statement also exacerbates the worrying question of the UK’s ever ballooning debt, as the promises announced since March, including today’s announcements, has put the total at £189bn.
As Sajid Javid warned his former deputy, he will have to balance the books someday.