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The summer economic update: what we learned from the July mini-Budget

8th July, 2020

In the summer economic update, Rishi Sunak has unveiled a raft of measures designed to boost the UK economy following the impact of COVID-19. Here, Nottingham chartered accountants Clayton & Brewill provides an overview of what was announced in the chancellor’s mini-Budget.

Job Retention Bonus: the future of the furlough scheme

We have already seen the Coronavirus Job Retention Scheme (CJRS) starting to be wound down this month, with the introduction of the new flexible furlough scheme seeking to encourage a part-time return to work for employees. Currently, the CJRS funds 80% of employees’ wages, but it will end entirely in October after being scaled back from August onwards.

The chancellor has now announced a Job Retention Bonus scheme, intending to encourage employers to keep employees on their books. Employers that bring back someone who was furloughed – and continuously employ them through to January – will be paid a £1,000 bonus per employee, providing the employee is paid at least £520 per month on average from November to the end of January.

Kickstarting employment for the under 25’s

The chancellor also unveiled a £22bn “kickstart scheme” in his economic update – an emergency package designed to combat the rising unemployment numbers in young people following the pandemic.

Through the scheme, the government will directly pay employers to create new jobs for 16 to 24-year-olds who are at risk of long-term unemployment – with the government subsidising their six-month work placements. The chancellor stated that jobs created must be a minimum of 25 hours per week and employees must be paid at least the National Minimum Wage. Employers will be able to top up that payment if they wish.

Traineeships and apprenticeships

With a large number of young people working in some of the worst hit sectors, such as hospitality and leisure, recent studies indicate one million under-25’s in the UK could be faced with unemployment in 2020.

In response to this potential threat and in addition to the kickstart scheme, the chancellor announced £111m has been allocated to triple the number of traineeships in the country, with the government pledging to pay employers £1,000 to take on trainees (per trainee). They stated they will also pay businesses to hire young apprentices, with a new payment of £2,000 per apprentice and a £1,500 bonus for businesses to hire apprentices aged 25 and over.

Stamp duty changes

In a bid to stimulate the housing market, the government has temporarily lifted the Stamp Duty Land Tax (SDLT) threshold from £125,000 to £500,000 with immediate effect, until 31 March 2021.

The standard SDLT cost on residential properties is charged on a tiered basis. Previously, no stamp duty was payable on the first £125,000 (£300,000 for first-time buyers), then 2% up to £250,000, rising through 5% and 10% to a maximum of 12%. Higher rates apply to second homes and other additional properties.

The new measure would mean that prospective buyers could potentially save £15,000 on properties costing £500,000 or more.

Help for struggling sectors: a VAT cut and the ‘eat out to help out’ scheme

The chancellor announced two new measures to help get the hospitality and tourism sectors moving again, which have been and continue to be particularly impacted by the pandemic.

1. From next Wednesday until 12 January 2021, VAT has been cut from 20% to 5% on food, accommodation and attractions, in an attempt to help prevent job losses in the sector and improve cashflow.

2. To help bring customers back to pubs and restaurants, the government will give everyone in the country a chance to take part in the ‘eat out to help out’ scheme. Meals eaten at any participating business on Mondays to Wednesdays will be discounted at 50% (up to £10 per head) throughout August. Businesses will need to register and can do so from next Monday. They can then claim the money back each week, with the funds appearing in their bank account within 5 working days.

£2bn ‘Green Homes Grant’

In an attempt to decarbonise public buildings and cut down on emissions, the chancellor also announced a £2bn ‘Green Homes Grant’ in the economic update. The package aims to create tens of thousands of green jobs in the construction industry to help the UK meet its target of being a carbon net zero economy by 2050.

£1bn of the grant will go towards investing in green heating technology and improving the insulation and energy efficiency of public buildings. The remaining £1bn will be spent on creating green employment opportunities for construction workers.

Homeowners and landlords will be able to apply for vouchers as part of the scheme, which will cover at least two-thirds of the cost of updating their property, up to £5,000 per household or £10,000 for lower income households.

A boost for the Arts

Earlier this week, the government also announced that Britain’s arts, culture and heritage industries will receive a £1.57bn rescue package to help weather the impact of coronavirus. The package is designed to help businesses stay afloat while their doors are closed, with funding to restart paused projects also helping to support employment in these sectors.

Looking to the future

The next annual Budget is expected in October this year, so there is still time for the chancellor to assess how the economy performs over the coming months as lockdown truly unwinds.

To discuss any of the measures announced in the summer economic update in more detail please do get in touch with our friendly team or call us on 0115 950 3044.

 

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