There has been much rumour leading up to this week of a possible emergency Budget and of us seeing widespread tax raising measures being put in place to start to pay for the Covid-19 support package. That hasn’t happened. The Chancellor remains committed to an annual autumn Budget and obviously wants to see how the country fairs in coming out of lockdown before making any sweeping changes.
This was a statement predicated entirely on trying to rapidly warm up the UK economy when it has been virtually dormant for over 3 months, together with trying to protect existing jobs and create new ones.
Faced with a population that has become institutionalised in their own homes and cautious of venturing out even to go shopping for the essentials, the government rightly felt the need to give everyone a strong nudge to embark on a new normal way of life that involves spending money again. The measures being introduced with this aim are:
- A temporary cut in stamp duty on residential property transactions applying with immediate effect until 31 March 2021. The 0% rate threshold will be increased from £125k to £500k, meaning that many transactions will suffer no stamp duty at all and buyers of properties costing in excess of £500k will save stamp duty costs of £15,000. This is designed to get the property market moving again, which will in turn fuel the sectors that support property renovation.
- A reduction in the rate of VAT from 20% to 5% for the hospitality industry. This includes food and drink served by restaurants and cafés, accommodation and attractions (such as cinemas, theme parks, zoos, etc).
- The ‘Eat out to help out’ scheme which will allow people to dine out at participating venues at half price, up to a maximum discount of £10 per person. As always with such ‘promotions’, you have to read the small print because this offer will only be available on Mondays, Tuesdays and Wednesdays in the month of August.
There are fears that the ending of the job retention scheme in October will see a huge spike in unemployment. The sectors of the economy that have been most heavily impacted by the Covid-19 crisis are significantly biased towards employment of young people.
To attempt to avoid vast numbers of under 25s becoming long term unemployed and to create fulfilling jobs, the following measures are being introduced:
- There will be a job retention bonus of £1,000 payable to employers in respect of each furloughed employee brought back into employment and retained until at least 31 January 2021 (conditions will apply).
- A Kickstart Scheme will fund minimum 6 month placements for under 25s as an incentive for employers to create new jobs for 16 – 24 year olds who are currently on Universal Credit and deemed to be at risk of long-term unemployment. For the first 6 months, the government will fund 25 hours a week of salary costs at the minimum wage rate.
- £1,000 grants to employers for each new 16 to 24 year-old trainee given a work placement. £2,000 grants for new apprenticeships for under 25s and £1,500 grants for 25s and over.
Finally, to encourage a green recovery, there is a package of measures costing £3bn to improve the energy efficiency of properties in the UK. £2bn of this will be directed towards green homes grants to subsidise thermal cladding and cavity wall insulation for poorer households.