To put the challenge in perspective, in the first 2 months of the current financial year the UK Treasury has borrowed almost twice the budgeted borrowing forecast for the entire year and we are now at a situation where government debt exceeds 100% of GDP.
Nevertheless, the last thing the economy needs now is an austerity programme and mindful of this, the Chancellor laid out the following further incentives:
- A new job retention bonus will be created which will provide a one off payment of £1,000 to UK employers for every previous furloughed employee who remains continuously employed through to the end of January 2021 from the end of the Coronavirus Job Retention Scheme in October 2020. The employees must earn more than £520 per month on average between the end of CJRS and the end of January 2021 with payments being made in February.
- A new Kick Start Scheme will be created to provide hundreds of thousands of high quality 6 month work placements for those aged between 16 and 24 who are on Universal Credit and who are considered to be at risk of long term unemployment. The Government for each of these jobs will cover 100% of the relevant National Minimum Wage for 25 hours per week plus the associated Employers National Insurance and Employer Minimum Automatic Enrolment pension Contributions.
- A new Traineeship Programme will provide work experience for 16 – 24 year olds in work placements and businesses providing training will receive a payment of £1,000 per employee.
All of the above measures are designed to “support jobs”.
The next area of intervention by the Chancellor is around “protecting jobs” and this element of the Summer Statement focuses on the hospitality and leisure sector. There will be a temporary VAT cut for food and non-alcoholic drinks and a reduced 5% rate of VAT will apply to supplies of food and non alcoholic drinks from restaurants, pubs, bars, cafes and similar premises across the UK with this temporary rate applying from 15 July 2020 until 12 January 2021. In addition, this new 5% rate of VAT will also apply across the period to suppliers of accommodation and admissions to attractions across the UK.
Finally, a “eat out to help out” scheme will be introduced to encourage people to return to eating out with every diner entitled to a 50% discount up to £10 per head on their meal valid Monday to Wednesday during the month of August.
The final area that the Chancellor intervened in is around “creating jobs”. With this primarily targeted at the housing and construction sector. Stamp duty land tax has been abolished for the period 8 July 2020 until 31 March 2020 on the first £500,000 slice of property value. Furthermore, a Green Homes Grant will be introduced which will provide at least £2 for every £1 up to £5,000 per household to homeowners and landlords spending money making their residential properties more energy efficient.
These are the main measures that will affect many of us from a day to day perspective. There were a number of other initiatives around accelerated infrastructure programmes which will also come into force from July 2020.
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