FINANCIAL ADVICE CENTRE NEWS
Your Summer Newsletter 2020
Update on the Chancellor's summer statement
In his summer statement, the chancellor Rishi Sunak announced a series of measures designed to create and protect jobs and encourage confidence in a longer-term recovery from the coronavirus crisis. However, many of the harder questions around who will end up footing the bill will have to wait until his autumn budget.
This is the first time that Britons have heard from the chancellor in detail since his budget in March, before the start of lockdown, when there was a series of major announcements to support businesses in the face of coronavirus; most notably, the introduction of the furlough scheme.
While nobody was expecting the chancellor to detail such large-scale government interventions in this summer statement, he continued to focus on stimulating measures to support businesses, and most importantly to shore up jobs amid the winding down of the furlough scheme.
The focus, for now, is on preventing a spike in unemployment and reducing the impact of the pandemic on the next generation. The less economic scarring incurred now, the lower the ultimate bill.
However, any question of how that bill will be paid has been put off for now – decisions on tax rates and allowances which may be examined to help pay for the crisis could play a prominent part in the autumn budget later in the year.
On of our partners, Smart Accountancy have prepared a helpful synopsis of the announcement which we have featured here.
Furlough scheme
• The furlough scheme will wind down flexibly and gradually until the end of October. See more on the Coronavirus Job Retention Scheme below.
• A jobs retention bonus will help to wind down the scheme: businesses will be paid £1,000 to retain furloughed staff providing they are employed up to January 2021.
Training and jobs
• Apprenticeships will be supported by bonuses for companies. Companies will get a payment of £2,000 for each apprentice they take on. Companies taking on apprentices aged over 25 will be given £1,500.
• “Kickstart scheme”: £2bn fund to pay for six-month work placements for 16 to 24-year-olds on universal credit.
• Payments cover national minimum wage for 25 hours per week, plus national insurance and pension contributions for Great Britain.
• £1,000 grant per trainee for employers who take on new trainees aged 16-24 in England, aiming to triple trainee numbers.
Discounts on eating out
• The chancellor announces an “eat out to help out discount” to encourage consumers to spend at pubs, restaurants and cafes.
• Meals eaten at any participating businesses, from Mondays to Wednesdays in August, will be 50% off up to a maximum discount of £10 per head for everyone, including children.
• Businesses will be able to register through a website launching on Monday. Firms can claim money back to have money in their bank accounts within five working days.
VAT cut for hospitality
• VAT will be cut from the current rate of 20% to 5% for the next six months on food, accommodation and attractions. The cut lasts from 13 July until 12 January 2021.
• Food and non-alcoholic drinks in restaurants, pubs and cafes, as well as hot takeaway food will be covered.
Stamp duty
• The chancellor announces he will cut stamp duty to reinvigorate the housing market.
• The threshold for stamp duty will increase from £125,000 to £500,000. The cut will be temporary, running until 31 March 2021, and will take effect immediately.
Looking ahead
The summer statement provided fresh impetus and reinforced the commitment that government has already demonstrated in dealing with the economic impact of the coronavirus.
However, for many the question will still be how the unprecedented government support will ultimately be paid for in the aftermath of the crisis.
It’s not an immediate problem as borrowing costs for the government are negative for bonds (loans) of up to five years.
However, the chancellor was clear that phase three of his Covid-19 response involves rebuilding, and that includes the rebuilding of the public finances.
It will be the autumn budget when we get a stronger sense of how the cost will be met, and there is a widespread view that those with the broadest shoulders will be asked to bear the greater load.
There has already been press speculation about wealth taxes, although prime minister Boris Johnson denied any intent to introduce one during prime minister’s questions shortly before the summer statement.
Reducing current tax allowances, such as higher rate pensions relief, has however been speculated upon previously, and there is little reason to think areas like these will not be revisited now.
In the meantime, many people will look to ensure they make use of their allowances while they remain available.