Last week Rishi Sunak announced a number of new measures to help kickstart the economy as the UK gradually eases lockdown. Here’s an overview of 8 key announcements, which were part of the Chancellor’s Summer Economic Statement given in the House of Commons.
1. £1,000 Job Retention Bonus
Businesses who keep furloughed staff on until the end of January next year will receive a £1,000 bonus for doing so.
For every employee furloughed as part of the Coronavirus Job Retention Scheme, the Government will give employers a £1,000 grant if they are retained until January 2021.
To qualify, employees need to be paid at least £520 per calendar month from October to the end of January. Accordingly, it will be of relatively small benefit to employers with higher earning staff where the total employment costs through to February will be substantially larger than the grant’s value.
Further details are to be published by the end of July, but it is thought to include staff who have already returned from furlough prior to the announcement (8 July).
The grant will be payable in February 2021.
2. £2bn Kickstart Scheme
This jobs creation scheme will see Government cover the cost of thousands of 6-month work placements for the under-25s.
Employers employing anyone under the age of 25 can claim up to 25 hours’ pay at the National Minimum Wage per week, in addition to National Insurance and employer minimum automatic enrolment contributions.
The funding will to go directly to the employer, rather than the employee, and further details are expected in coming weeks. The Kickstart Scheme, which is expected to cost £2 billion to the taxpayer, is designed to help under-25s claiming Universal Credit who are at ‘risk of long-term unemployment’ by creating new jobs.
3. Apprenticeships and traineeships funding
Separate schemes have been announced to incentivise employers to take on new apprentices and trainees.
Employers will receive £1,000 towards the cost of creating each new traineeship lasting at least 6 months (under-25s), whereas for every new apprenticeship they will receive £2,000 (under 25s) or £1,500 (25 and older).
In order to qualify for the funding, the employer needs to provide formal training and skills support – both schemes will run from 1 August 2020 to 31 January 2021.
4. Enhanced skills and employment support
Additional funding worth £101m has been allocated to fund courses for all school and college leavers aged 18-19 without a university or job offer.
There will also be a significant expansion of resources to support jobseekers. Government has signalled its intention to provide matching and job coaching services as well as bolstering the National Careers Service.
5. VAT cuts for hospitality and leisure sector businesses
The rate of VAT charged on catering and hospitality for hot and cold food (eat in or takeaway) and non-alcoholic drinks will be reduced from 20% to 5% from 15 July 2020 until 12 January 2021.
Additionally, the rate of VAT charged accommodation and visitor attractions has been cut from 20% to 5% for the same period.
Further details on how these changes will be legislated is due to be published by HMRC in the coming days. The tax reduction has been designed to support businesses and boost consumer demand, given the impact of social distancing and the number of jobs supported by these sectors.
It is worth noting that businesses are under no obligation to pass on the VAT cut to their customers by lowering their prices. This means businesses can save the equivalent of 15% on all their qualifying sales made in the period.
6. Eat Out to Help Out
Demand for eat in food and non-alcoholic drinks will also be boosted in the month of August via a voucher scheme named ‘Eat Out to Help Out’, which will provide a saving of up to £10 per meal per person at qualifying restaurants Monday-Wednesday. Details of how to register can be found here.
7. Stamp Duty Land Tax cut to zero
Given the economic multiplier effects related to the housing market, and as an attempt to support demand and house prices from the sentiment side of the economy, a reduction in Stamp Duty Land Tax (SDLT) has been introduced from 8 July through to 31 March 2021 for house purchases in England.
During the period, the rate of SDLT for purchases of homes up to £500,000 will be charged at 0%, saving up to £14,999 per property purchase. At a macro level this is intended to boost activity and transactions from current historic lows and provide wider demand stimulus to the numbers of sectors and jobs supported by house sales.
8. Green Homes scheme for household energy efficiency
The scheme provides match funding for household investment in home insulation and energy efficiency improvements carried out by accredited suppliers.
The rate of the Government’s contribution depends on whether the recipient household is in a low income group, if this is the case the Government will fully fund improvements up to £10,000. If the household is not categorised as low income the cap on the scheme is £5,000 and the government will contribute £2 for every £3 of investment.
Further detail will be published in due course and the scheme will be launched in September 2020 from which point households can apply via accredited suppliers.
The Government’s ambition is to upgrade 600,000 homes under the scheme and save substantial amounts on home energy bills into the future. The government states that 100,000 direct (and further indirect) jobs will be created or retained under the scheme.