On Wednesday, the Chancellor Rishi Sunak made a speech entitled “Summer Economic Update” where he unveiled further Government supports and he unveiled the Government’s plan for jobs which he described as the “Second phase in in the Government’s economic response to the crisis.”
The “Plan for Jobs” PDF can be seen:
Plan for Jobs
The Chancellor, Rishi Sunak delivered a plan of support for SMEs with an aim to protect, support and maintain jobs across the UK. Job retention and creation was at the heart of the statement. The key points being:
- A Kickstarter scheme will be introduced to directly pay employers to create new jobs for any 16-24 year olds at risk of long term unemployment.
- UK employers will receive a one-off bonus of £1,000 for each furloughed employee who is still employed as of 31 January 2021.
- For the next six months businesses will be paid £2000 to hire young apprentices and a payment of £1500 to hire apprentices aged 25 and over.
- Employers will be paid £1000 to take on trainees
- VAT will be reduced to 5% for good and services supplied by the tourism and hospitality sector.
- The introduction of ‘Eat out to help out’ – 50% off sit down meals and non-alcoholic drinks Monday to Wednesday, up to £10 a head.
- The threshold for paying Stamp Duty will be increased to £500,000.
This has been generally accepted as a positive plan, giving a long awaited and required boost for hospitality and socially led businesses. The Government shows a positive and joined up approach.
This, however, is the start and a short-term boost and incentive but the Government and the Treasury need to keep up the momentum with a bold and clear comprehensive plan in the Autumn statement which needs to address the concerns that businesses owners currently have. The business community is very nervous and fragile at the moment. In the medium and long-term we need to understand how this will be paid for. Without confidence of economic growth and a return to somewhere near a near normal economy, there will be a reluctance and fear to commit to hiring more staff through the schemes announced this yesterday.
Help to get 16-24 year-olds into the workplace through support of apprenticeships schemes and placement funding to create new jobs is positive for those young people. It will get them into the work place, giving them confidence and improving self-worth.
Consumer, customers, the general public need to have confidence to be able to return to the hospitality and leisure sector, to start spending money. This has to be underpinned with the confidence that appropriate safety measure are in place and are working, together with seeing a continued reduction on the cases of Covid-19. The VAT reduction to 5% to boost the hospitality and tourism industry, along with the introduction of the ‘eat out to help out’ £10 refund/discount during August aims to help the hospitality sector by boosting confidence for people to get out and start spending as it is about the financial injection.
As has been seen in past economic slumps, in the 2008 financial crisis, a reduction in stamp duty and the property supply chain moving is a key way to re-starting the economy.
As with the earlier Covid-19 support measures, the implementation of the stimuli will take some trial and error and they may need tweaking. Lessons, however, have been learnt already and
In old economics terms, this stimulus is demand led and somewhat Keynsian, with a spending focus. The Plan for Jobs does go a long way to getting people back to work and spending.
It will, however, require a robust Autumn budget to outline more medium and long-term measures and commitments to rebuild the economy and bring sustained confidence back to businesses and consumers rather than just short-term incentives.
July 2020
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https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/898421/A_Plan_for_Jobs__Web_.pdf
Further details can be found on SDLT changes here: https://www.gov.uk/guidance/stamp-duty-land-tax-temporary-reduced-rates