UK enters second stage of Sunak’s economic support

Chancellor Rishi Sunak has put forward a “Plan for Jobs” in his summer statement, moving the UK into the second stage of coronavirus-driven government economic support.

£49bn has already been provided to public services since March, and Sunak has made a further £160bn available in funding for job retention, income and business support.

“We will not be defined by this crisis, but by our response to it,” Sunak said in his speech. “It is an unambiguous choice to make this moment meaningful for our country in a way that transcends the frustration and loss of recent months.”

While the Coronavirus Job Retention Scheme (CJRS) will end in October, a £1,000-per-employee Job Retention Bonus is available to UK employers who keep their formerly-furloughed employees in work until at least January 31, 2021.

Additionally, a £2bn Kickstart Scheme will help subsidise six-month work placements for 16 – 24 year olds on universal credit. Funding is available for each placement for up to 25 hours of work per week, paying 100 percent of the National Minimum Wage, although employers can ‘top up’ this wage.

Businesses will also receive £2,000 for every under-25 apprentice they hire, in addition to the existing £1,000 payment available for certain apprentices. All told, £1.6bn will be invested in employment support schemes, with a focus on opportunities for young people.

Chris Sanger, head of tax policy at EY, said in a statement that Sunak’s measures may seem to be a minor help compared to salary costs, but are nonetheless welcome.

“Whether this is enough to stop redundancies is yet to be seen,” Sanger said. “Also, this scheme may leave a sour taste in the mouth for those businesses which have struggled on without furloughing workers and be seen as unfair in relation to those who worked throughout the lockdown.”

The Job Retention Bonus will only be available for employees who were paid at least £520 on average per month from November to January, with no cap on the number of bonuses available to businesses.

“Our message to business is clear: if you stand by your workers, we will stand by you,” Sunak said.

VAT to boost leisure, hospitality

Additionally, VAT will be cut to five percent on food, accommodation and attractions, starting July 15. This cut will run until January 12, benefitting over 150,000 businesses and protecting 2.4m jobs, according to Sunak.

In a bid to further support the heavily impacted hospitality, leisure and tourism industries, an “Eat Out to Help Out” discount has also been created. From Monday to Wednesday, with no set end date, meals eaten at participating businesses will be 50 percent off.

“I know people are cautious about going out,” Sunak said, “but we wouldn’t have lifted the restrictions if we didn’t think we could do so safely.”

A maximum discount of £10 per head has been established, including children, and businesses need to register to claim their cash back. The online portal opens Monday, July 13, and funds will be deposited within five working days.

However, Alvarez & Marsal’s head of tax, Marvin Rust, said the government has not gone far enough to support other struggling industries, such as retail and aviation.

“These sectors have been shuttered for months and are struggling with cash flow, paying their rents and retaining employees,” Rust said in a statement. “A cut to VAT and a national insurance holiday would have been a lifeline for these companies, but now they are forced to go without.”

Under Sunak’s plan, £8.8bn will also be put into new infrastructure, decarbonisation and maintenance projects, with the goal of creating several thousand jobs. Included in this package is a £3bn ‘green investment’ plan, which the government says will support around 140,000 jobs.

This package includes a £2bn Green Homes Grant, which offers vouchers, up to £10k, to homeowners and landlords who make their homes more energy efficient.

Additionally, the Nil Rate Band of Residential SDLT (Stamp Duty) will temporarily increase to £500k until March 31, 2021, in a bid to support the construction and housing sector.