Summer Economic Update – “A Plan for Jobs”
The Chancellor, Rishi Sunak, was backed into a corner by the coronavirus which is testing the depth of the government’s pockets. The Job Retention Scheme has been converted into a one off bonus scheme deferring decisions about some redundancies until January when hopefully the economy will see a bounce back.
The assistance for the property market and for the hospitality / tourism sectors worst hit by COVID-19 had been heavily trailed but this was primarily an announcement focused on jobs, jobs, jobs.
The government are balancing people’s fear of social mixing with the real need to get them out spending so that the economy can recover.
Offering SDLT holidays, VAT discounts and eating out discounts are relatively cheap giveaways as the government would otherwise get nothing if houses are not sold and families do not go out to eat. The harder and more costly support was targeted at the generation of young people facing an uncertain future where jobs will be difficult to come by.
More measures will follow in the Autumn Budget when we will see how these giveaways will be paid for but for now Rishi Sunak is trying to help create a new normal where people can feel safe enough to go out and secure enough about their work prospects to start spending.
Below we cover some of the key announcements made today.
Supporting employers to retain existing jobs
A new Job Retention Bonus will be introduced to help firms keep furloughed workers employed. UK Employers will receive a one-off bonus of £1,000 for each furloughed employee who returns to work from being furloughed on 1 November and is still employed at 31 January 2021. There is no cap on the number of employees covered by this measure.
Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021. Further detail about the scheme will be announced by the end of July.
Employers will need to weigh up the benefit of receiving the £1000 bonus against a cost of keeping someone on furlough until the end of October with no NIC/Pension recovery from 1 August, and then only 70% and 60% furlough wage being recovered from 1 September and 1 October, respectively and then paying a wage thereafter.
A new £2 billion Kickstart Scheme will also be launched to create new, subsidised jobs for young people who are aged 16-24, claiming Universal Credit and at risk of long-term unemployment. Government funding for employers is available for each six-month job placement, will cover 100% of the National Minimum Wage for 25 hours a week and employers will be able to top this wage up.
Helping young people to find new jobs
The government are providing £1.6 billion of support to scale up employment support schemes, training and apprenticeships to help people looking for a job.
Businesses will be given £2,000 for each new apprentice they hire under the age of 25. This is in addition to the existing £1,000 payment the Government already provides for new 16-18-year-old apprentices and those aged under 25 with an Education, Health and Care Plan.
There will be £111 million invested to triple the number of traineeships in 2020-21, £17 million of funding to triple the number of sector-based work academy placements in 2020-21 and nearly £900 million to double the number of work coaches to 27,000 with over a quarter of a million more young people able to benefit from an extra £32 million invested in the National Careers Service.
Creating new jobs
The Plan for Jobs is intended to create tens of thousands of jobs by bringing forward work on £8.8 billion of new infrastructure, decarbonisation and maintenance projects.
This includes a £3 billion green investment package that could help support around 140,000 green jobs by upgrading buildings and reducing emissions.
Homeowners and landlords in England will be able to apply for vouchers from a £2 billion Green Homes Grant scheme to pay for green improvements such as loft, wall and floor insulation which should create thousands of new jobs for tradespeople.
There will be a £1 billion programme to make public buildings, including schools and hospitals, greener. In addition, £5.8 billion will be spent on shovel-ready construction projects including:
- £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,
- £760 million this year for key maintenance work on schools and FE colleges,
- £1 billion for local projects to boost local economic recovery, and
- £142 million for court maintenance to repair around 100 courts across England.
Temporary Stamp Duty Land Tax (SDLT) cut
In a bid to boost the housing market, the Chancellor has introduced a temporary increase to the nil band for SDLT on residential property in England and Northern Ireland, moving this from £125,000 to £500,000. This change takes effect immediately and applies to house purchases completing on or after 8 July 2020. The temporary rates will remain in place until 31 March 2021.
The temporary rates effectively replace first time buyer’s relief but are not limited to those buying their first home. In fact, the saving is not restricted to those who are purchasing their own home as equivalent reductions are also available to companies and individuals who are buying as landlords.
The new rates are as follows:
Note, there is no change to the flat rate of 15% that applies when companies buy high value dwellings that do not fall within a prescribed relief.
It was always anticipated that there would be a temporary reduction in the rate of VAT targeted at those industries most badly affected by the impact of COVID 19. The Chancellor did not disappoint with the rate slashed from 20% to 5% for certain goods and services provided by businesses in the hospitality, leisure and tourism sectors.
The temporary VAT cut from 15 July 2020 to 12 January 2021 will apply to food and non- alcoholic drinks sold in restaurants, pubs, bars, cafes and similar premises. Supplies of accommodation and admission to events will similarly benefit from a six-month 15% VAT cut.
HMRC will be releasing further guidance regarding the scope of this welcomed change shortly.
Eat Out to Help Out
In a bold attempt to support around 130,000 businesses with over 1.8m employees, the Chancellor has announced the Eat Out to Help Out scheme which will entitle every diner to a 50% discount (up to a maximum of £10 per head) on meals in eligible pubs, restaurants, cafes and other food service establishments.
This discount can be used from Monday to Wednesday on any eat in meal for the whole of August 2020, and any participating establishment can make a weekly claim for the discount through a simple website, with payments expected to be made within 5 days.
What is the catch?
As with a lot of the government support that has been offered throughout the COVID-19 pandemic, we do not expect the grants received to be ‘free from tax’.
It is therefore likely that the grants for jobs and Eat out to Help Out scheme contributions will be subject to tax in the hands of the businesses receiving them.
Local impact of government measures
The Cambridge Colleges will be interested in the Further Education (FE) estate funding. In addition to the £1.5 billion commitment for FE capital funding made in the March 2020 Budget, the government will bring forward £200 million of spending to 2020-21 to support colleges to carry out urgent and essential maintenance projects. This will be the first step in the government’s commitment to bring the facilities of colleges up to a good level.
The Cambridgeshire and Peterborough Combined Authority Local should be well placed to take advantage of local infrastructure projects. The government is providing £900 million for shovel-ready projects in England in 2020-21 and 2021-22 to drive local growth and jobs. This could include the development and regeneration of key local sites, investment to improve transport and digital connectivity, and innovation and technology centres.
Local property developers will be eager to hear more about the planning reform including new legislation in summer 2020 to make it easier to build better homes in the places where people want to live. New regulations should make it easier to convert buildings for different uses, including housing, without the need for planning permission. In July 2020, the government will launch a policy
paper setting out its plan for comprehensive reforms of England’s planning system to better support the economy and release more land for housing in areas that need it most.
With housebuilding in the region restarting, along with the additional support and funding announcements that have been made, the increase in the threshold of the 0% Stamp Duty Land Tax rate should bolster the local housing market.
With tourism and hospitality also playing a key part of the Cambridge economy, some of the measures put in place today should start to benefit the local businesses in Cambridge and the surrounding areas, encouraging people to support local businesses in a safe and socially distanced manner.
If you have any questions regarding any of the points raised in this article and would like to discuss them further, please contact us.