Chancellor strikes reassuring tone in Summer Statement
Perhaps it was partly by contrast with Boris Johnson’s rather pugnacious performance in the House of Commons yesterday, but the Chancellor, Rishi Sunak’s Summer Statement struck a calm, masterful tone.
Inevitably, every announcement he has made since his maiden budget in March this year has been a response to the financial impact of the Covid-19 pandemic. The situation that he addressed yesterday – five months since the first cases of the disease in the UK – was perhaps the most challenging yet:
- Government finances are in deep deficit. In the first two months of the current financial year, the Treasury borrowed £103.7 billion - over six times as much as the same period in 2019/20, and almost double the Budget forecast for the entire year.
- The UK economy contracted by 2.2% in the first quarter of 2020, according to the Office for National Statistics, which suggests that April alone saw a further 20% shrinkage in output.
- The Chancellor’s flagship Coronavirus Job Retention Scheme, having received claims of £27.4 billion (as at 5th July), will be phased out from August, and finish at the end of October.
- The UK unemployment rate could reach 14.8% by the end of 2020 if there is a second wave of infection (Organisation for Economic Development, 7th July).
Little wonder then, that Mr Sunak set out to reassure. He praised the British people for their “fortitude and endurance” and underlined his belief in “the nobility of work”, setting out one of the big themes of his speech: jobs. Specifically, how to keep people in work and avoid a huge rise in unemployment.
He announced a job retention bonus of £1,000 per employee for businesses who keep employees on after furlough and retain them until January 2021. To this he added a Kickstart Scheme providing quality six-month work placements for 16-24 year olds, and financial incentives for employers to take on trainees and apprentices.
A temporary cut to Stamp Duty Land Tax on residential property was announced, to get the property market moving. The zero-rate band has been increased to £500,000, saving purchasers up to £15,000.
The Chancellor also outlined measures for struggling sectors. Hospitality will get a boost from a cut in VAT from 20 to 5%, in an effort to get people out booking rooms, visiting attractions and spending their pounds in pubs, bars and restaurants.
As a final incentive, said Mr Sunak, the government would like to buy you a (non-alcoholic) drink, or something to eat, shouldering 50% of the amount up to a total of £10 every Monday to Wednesday during August. A little incentive to get some of us out of lockdown and into the big wide world…
Photo by Maddi Bazzocco on Unsplash
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