The Chancellor, Rishi Sunak, last week announced a series of measures in response to the financial impact of the Covid-19 pandemic on the British economy.
His latest statement was perhaps the most difficult, given the circumstances in which it was set:
The government finances are in deep deficit.
The UK economy contracted by 2.2% in the first quarter of 2020.
The Coronavirus Job Retention Scheme (CJRS), will start to be phased down in August. At that point, employers become responsible for the pension contributions and National Insurance Contributions (NICs) currently met by the Treasury. The CJRS, which has already been extended twice, is set to finish at the end of October. As of 5 July, the scheme covered 9.4 million furloughed jobs provided by 1.1 million employers and had received claims totalling £27.4 billion.
Parts of the UK are each emerging from lockdown, this could lead to an increased infection rate and local flare ups and lock downs.
The challenge for the Chancellor was to start the transition from the emergency employment support that has so far been the focus of his strategy. He presented his statement as a ‘Plan for Jobs’, composed of three elements promoting jobs:
1. Supporting
2. Protecting
3. Creating
The Chancellor placed a price tag on his measures of up to £30 billion.
SUPPORTING JOBS
The Chancellor announced a range of initiatives under the ‘Supporting Jobs’ heading, including:
Job Retention Bonus
CJRS, as it stands, will end in October as planned. To encourage employers to support those people who have been
furloughed, a Job Retention Bonus will be introduced.
The Job Retention Bonus will provide a one-off payment of £1,000 to UK employers for every previously furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn more than £520 a month on average between the end of the CJRS and the end of January 2021. Payments will be made
from February 2021. Further details about the scheme to follow.
Kickstart Scheme
The Kickstart Scheme aims to provide “hundreds of thousands of high-quality six-month work placements” for those aged 16-24, who are on Universal Credit and are considered to be at risk of long-term unemployment. Government funding for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week plus the associated employer NICs and employer minimum automatic enrolment contributions (a maximum of about £6,500). There is to be no cap on the cost of the scheme.
Traineeships
Employers who provide work experience for 16-24-year-olds in work placements and training will receive a payment of £1,000 per trainee. Provision of traineeships and eligibility for them will be extended to those with Level 3 qualifications and below, to ensure that more young people have access to training. Payments for employers who hire new apprentices Employers in England will receive a new payment of £2,000 for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over. The scheme will run from 1 August 2020 to 31 January 2021. These payments will be made in addition to the existing £1,000 payment the Government already provides for new 16-18-year-old apprentices, and any of those aged under 25 with an Education, Health and Care Plan.
Other supporting jobs measures:
£895 million to enhance work search support by doubling the number of work coaches in Jobcentre Plus before April 2021.
An additional £150 million in the funding for the Flexible Support Fund in Great Britain, including increased capacity for the Rapid Response Service.
£101 million for the 2020/21 academic year to give all 18-19-year olds in England the opportunity to study targeted high value Level 2 and 3 courses when there are not employment opportunities available to them.
£95 million in 2020/21 to expand the scope of the Work and Health Programme in Great Britain to introduce additional voluntary support in the autumn for those on benefits who have been unemployed for more than three months.
£40 million to fund private sector capacity to introduce a job finding support service in Great Britain in the autumn.
£32 million new funding for the National Careers Service.
PROTECTING JOBS
This focuses on the hospitality and leisure sector. Temporary VAT cut for food and non-alcoholic drinks. A reduced 5% rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. The temporary rate will apply from 15 July 2020 to 12 January 2021. Further guidance on the scope of this relief to be published soon.
Temporary VAT cut for accommodation and attractions
The 5% rate of VAT will also apply from 15 July 2020 to 12 January 2021 to supplies of accommodation and admission to attractions across the UK. Further guidance on this to be published soon.
Eat Out to Help Out
The ‘Eat Out to Help Out’ scheme will be introduced to encourage people to return to eating out. Every diner will be entitled to a 50% discount of up to £10 a head on their meal, at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used without limit throughout the UK on any eat-in meal (including on non-alcoholic drinks). It will be valid Monday to Wednesday during the month of August, and participating establishments will be fully reimbursed for the 50% discount.
CREATING JOBS
The job creation measures are mainly targeted on the housing and construction sector.
Stamp Duty Land Tax (SDLT)
SDLT receipts have fallen in the past few months. The slowdown in transactions has been accompanied by a stalling in prices. A temporary cut in SDLT on residential properties was widely predicted.
From 8 July 2020 to 31 March 2021, there will be no SDLT on the first £500,000 slice of property value, creating a maximum saving of £15,000. However, the 3% additional rate will still apply to additional properties.
The resulting revised SDLT table for residential property is shown below.
England and Northern Ireland – SDLT on slices of value from 8 July 2020 to 31 March 2021 | |
Residential property | % |
Up to £500,000 | 0 |
£500,001 – £925,000 | 5 |
£925,001 – £1,500,000 | 10 |
Over £1,500,000 | 12 |
Additional residential and all corporate residential properties £40,000 or more – add 3% to relevant SDLT rate(s) |
Green Homes Grant
A £2 billion Green Homes Grant will be introduced, providing at least £2 for every £1 up to £5,000 per household to homeowners and landlords who spend on making their residential properties more energy efficient. For low income earners, the scheme will fully fund energy efficiency measures of up to £10,000 per household.
(This summary has been prepared for general information only. The proposals are in any event subject to amendment. You are recommended to seek competent professional advice before taking any action.)
