Chancellor’s summer economic update round-up

The Chancellor provided a summer statement… but will it be autumn payment?

The Chancellor set out measures to be viewed as a stimulus to economic activity (particularly segments closed by lockdown) and a self-styled “plan for jobs”. What did he say? And will the fiscal story of Covid-19 have a second, significant chapter in the autumn Budget?

For a start, ‘kickstarter’… on youth employment

At a £2bn cost, the Chancellor laid out the ‘Kickstart Scheme’ aimed at youth employment. Businesses will receive a payment to help employ 16-24 year olds who are at risk of long-term unemployment. The scheme will fund six-month work placements for young people who are on Universal Credit and will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions.

Let them eat…

Marie Antionette suggested cake. Rishi Sunak is encouraging dining out. Monday to Wednesday can be quiet for the hospitality industry at the best of times. The Chancellor will provide a 50% discount (up to £10 per person) on food and non-alcoholic drinks at participating restaurants on those days during August. Restaurants must sign up for the scheme and are promised they will be paid the discounted amount within five days of a claim.

VAT cut on hospitality… but you will not drink to it

From next Wednesday (15 July) until 12 January 2021, a VAT cut from 20% to 5% hospitality and visitor attractions will apply. Again, designed to encourage spending in areas that have been particularly closed-off during lockdown. This is likely to work as a boost for businesses and hoped to encourage people to re-start getting out and consuming. While aimed at hospitality and tourism, other sectors could benefit that provide the particular supplies covered by the scheme.

The cut is broadly on food, accommodation and attractions. It does not affect alcohol. As with the logistics of social-distancing measures, the hospitality trade and tourism sector will need to get to grips with the logistics and administration associated with the change.

Golden “nice to have you back”? Furlough return ‘bonus’

Heralded, by the Chancellor, as a ‘bonus’ of £1,000 to be paid to a business for each employee returning from furlough. To be eligible the employee will need to return from the Coronavirus Job Retention Scheme, be employed through October to the end of January 2021 and be paid an average of £520 per month during that period. The Chancellor’s statement also ended any speculation the wider furlough scheme would continue beyond October.

An Englishman’s home is his castle… with less stamp duty to pay now

From 8 July to 31 March 2021, there will be no stamp duty land tax to pay on the first £500,000 of a house purchase in England, Wales and Northern Ireland. A direct move to stimulate housing market activity.

Scottish funding choices

The stamp duty land tax move is one of a handful of measures that do not apply to Scotland. However, where particular schemes do not cover Scotland, the Scottish Government will have funding allocated. We will wait to see what the Scottish Government does generally and whether it would cut Land and Buildings Transaction Tax in a similar way to SDLT.

A two-parter… the autumn Budget

The summer statement was the “plan for jobs”. A spending round that the Chancellor hopes will boost beleaguered industries, spark consumer confidence and protect and even create jobs. But the autumn Budget could well be the real show. The summer economic update was quite targeted, and many sectors were not directly covered. There is also the issue of government raising funding to cover the pandemic economic packages and which taxation tools it might use. For some, the period to the autumn Budget will be the time to review their affairs.

This blog was written by Alan Eccles – alaneccles@bkf.co.uk