Summer Economic Update 2020; The Chancellor’s ‘plan for jobs’

On 8 July, the Chancellor delivered his Summer Economic Update, bringing to the table a ‘Plan for Jobs’ [1]. In doing so, he set in motion the second part of a three-phase plan to repair the economy post-pandemic and offer direction to the many thousands of people who still have concerns about the immediate future of their jobs, their income and their ability to retain staff.

The package of measures that has been announced is intended to support jobs country-wide, to encourage businesses to confidently retain and hire staff, and to provide individuals with the tools and training that they need to secure quality jobs.

Supporting Jobs

The Coronavirus Job Retention Scheme (CJRS) has clearly been a lifeline for many millions of employees and businesses, during the pandemic. However, indicating that it would be careless (by which he means too expensive) to approve continual extensions to the scheme, the Chancellor confirmed that it will still come to an end in October.

Of importance is getting as many people back to work as possible and so, to incentivize employers to bring furloughed employees back, the Government has announced a Job Retention Bonus. Employers will receive a one-off payment of £1,000, for every furloughed employee who remains continuously employed through to the end of January 2021.

Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the CJRS and the end of January 2021, and payments will be made from February 2021. We expect further details to be announced by the end of July 2020.

In addition, a new £2bn ‘Kickstart Scheme’ will fund the provision of high quality 6-month placements to young people (16-24-year old’s) accessing Universal Credit and deemed to be at the highest risk of long-term unemployment.

Funding available for each job will cover 100 per cent of the relevant National Minimum Wage (NMW) for 25 hours a week, plus the associated employer National Insurance (NI) contributions and employer minimum automatic enrolment contributions.

Alongside these policies, there will also be increased funding for apprenticeships, the National Careers service, traineeships, sector-based work academy placements, high value courses for school and college leavers and work search support.

Protecting Jobs

In a bid to secure jobs in the hospitality sector, one of the industries worst affected by lockdown restrictions, the Government has announced a temporary VAT cut for food, non-alcoholic drinks, accommodation and attractions.

From 15 July 2020 to 12 January 2021, a reduced 5 per cent rate of VAT (currently 20 per cent) will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, across the UK, and to the supplies of accommodation and admission to attractions.

We anticipate further guidance on the scope of this relief from HMRC in the coming days.

It is hoped that this, in combination with the ‘Eat Out to Help Out’ voucher scheme, will boost demand for what these businesses have to offer and give the sector greater confidence to reopen.

The voucher scheme will entitle every diner to a 50 per cent discount of up to £10 per head on their meal, at any participating restaurant, café, pub or other eligible food service establishment.

The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal (including on non-alcoholic drinks) for the entire month of August 2020 across the UK.

Participating establishments will be fully reimbursed for the 50% discount.

In theory, this means that a Burger and Chips that cost £12.00 this week should be reduced to £10.50, and on Monday Tuesday and Wednesday will only cost £5.25! Good for the country’s health?

Creating Jobs

Besides the hospitality sector, the property market and construction industry have also seen an abrupt slump in activity.

With the intention of boosting the property market, the Chancellor has announced a temporary Stamp Duty Land Tax (SDLT) cut, from 8 July 2020 until 31 March 2021. He is doing this by increasing the nil rate band from £125,000 to £500,000. SDLT will no longer be payable on property transactions with a value between £125,000 and £500,000.

Unlike the current £500,000 limit for first time buyers, this reduction will apply to all residential properties not just those costing up to £500,000.

In line with the Governments ‘green’ objectives, homeowners and landlords will also be eligible to receive a ‘Green Homes Grant’ of between £5,000 and £10,000 (dependent on income) to make their homes more energy efficient.

As for the construction industry, Boris Johnson outlined details of ‘Project Speed’ at the end of June; a programme that encompasses accelerated capital investment for hospitals, schools, rail and roads, a plan to strengthen the union between England, Scotland, Wales and Northern Ireland, radical reforms to the UK planning system and plans to build a ‘greener’ and more sustainable economy.

What’s next?

The third phase of the Government’s plan will be laid out later in the year, alongside the Autumn Budget (the second of 2020) and a Spending Review.

How can George Hay help?

Whilst the Chancellor has made his headline announcements, in most instances we await further details to accompany them. In the coming days and weeks, we will be keeping our ears to the ground and our eyes on the Government website to ensure we can report on developments accordingly.

Partner, Barry Jefferd, will also be joining John Bridge OBE DL of Cambridgeshire Chambers of Commerce for an online discussion about the Chancellor’s announcements, Thursday 9 July at 4pm. You can book to join the free event here.

If you are immediately concerned by any of the announcements, or you are curious as to what the measures could mean for you or your business, please contact your usual adviser, or any of our three offices in Biggleswade, Letchworth and Huntingdon.

[1] ‘A Plan for Jobs 2020’ – HM Treasury, July 2020. This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated.

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