Rishi Sunak is preparing to announce a wide-ranging package of tax and spending measures to kickstart Britain’s economic recovery from the coronavirus lockdown. Designed to cushion the blow from rising unemployment and to help businesses back to their feet, the summer economic update on Wednesday comes as Britain grapples with the worst recession in living memory. Here are the key announcements to look out for from the chancellor.
Job creation scheme The chancellor will use the summer economic update to announce a £2bn temporary job creation scheme for the under 25s. In a three-point plan confirmed ahead of the statement, the government will fund six-month job placements for an estimated 350,000 18- to 24-year-olds, who are viewed as being at most risk of suffering the long-term consequences of unemployment during the crisis. Branded as the “Kickstart” job scheme, the package will include the government covering 100% of the national minimum wage for each young employee, for 25 hours a week. Employers will also be able to provide wage top-ups. Stamp duty A temporary cut in stamp duty – a tax levied on home purchases – could be announced by the chancellor to reboot the housing market after from three months of lockdown. Waiting until the autumn budget to implement the tax cut in England and Northern Ireland – it is devolved in Wales and Scotland – could dent property sales until then, meaning Sunak could announce an immediate cut on Wednesday. Sunak has drawn up plans to increase the threshold at which homebuyers start paying stamp duty from £125,000 to as much as £500,000, according to reports. VAT The rate of value added tax could be cut to boost consumer spending in order to kickstart Britain’s economic recovery, while supporting households that have experienced reductions in income during the crisis. Sunak has come under pressure to announce the change from former chancellors Alistair Darling and Sajid Javid. Targeted cuts for sectors of the economy hit harder than others could be used – with pubs, restaurants and cafes reportedly under consideration. However, a cut across the board from the current level of 20% to 17% would be expensive, costing the exchequer around £21bn in lost income.
Employer NICS Business leaders are urging the chancellor to cut employers’ national insurance contributions (NICs) to encourage firms to take on new staff. The chancellor is thought to be considering NICs holidays for employers as part of the stimulus package. Reducing employer NICS could be targeted to help companies in sectors hardest hit by the Covid-19 crisis, such as in hospitality, leisure and retail. Jobcentres Faced with a sharp rise in unemployment, Sunak is expected to announce that the government will double the number of work coaches, with more than £800m of funding. The extra spending, however, does come after a decade of cuts to support for unemployed people, with as many as one in 10 Jobcentres closed in the past decade. The new funding settlement will double the number of work coaches to 27,000, with 13,500 new recruits. Traineeships The chancellor will announce £111m of funding for new traineeships. These programmes for young people last up to six months and help teach key job skills, as well as offer work experience. The government will also offer businesses an £1,000 bonus to give work experience placements. Green spending Sunak is set to confirm the launch of a £3bn green investment recovery package to decarbonise public buildings and cut emissions from poorly insulated homes. It includes £1bn for public buildings – such as schools and hospitals – and a £2bn scheme to retrofit people’s homes. Under the plans, homeowners will be able to apply for vouchers of up to £5,000, with up to £10,000 available for some of the poorest families. Heating buildings accounts for almost a fifth of UK greenhouse gas emissions. However, campaigners have said £3bn falls significantly short of requirements to combat global heating.
Arts funding Britain’s beleaguered arts, culture and heritage industries will receive a £1.57bn rescue package to help weather the impact of coronavirus. Boris Johnson announced the plans over the weekend, although Sunak is expected to include the funding package in his economic update as evidence of the government stepping in with additional support for the hardest-hit sectors of the economy. The support pot for cultural organisations in England will consist of £270m in loans and £880m in grants. Funds will also be extended to cultural institutions and English Heritage, as well as to devolved administrations in Scotland, Wales and Northern Ireland. Funds for capital investment worth £120m will be made available to restart construction on cultural infrastructure and heritage construction projects paused because of the pandemic. Furlough scheme Business leaders, trade union leaders and Labour have urged Sunak to extend the biggest government support scheme launched since the onset of the pandemic. Since March, as many as 9.4m jobs have been furloughed at 1.1m companies, at a cost to the exchequer of £27.4bn so far. It is due to be scaled back from the end of July, and closed entirely by the end of October. Sunak has so far refused to allow an extension for especially hard-hit sectors. Voucher scheme The Treasury has been exploring plans to give all adults £500 and children £250 in vouchers to spend in sectors of the economy worst hit by the Covid-19 crisis. The idea, floated by the Resolution Foundation thinktank, was used in China in April, and could be used by Sunak to help reboot Britain’s retail, leisure and hospitality sectors.