Mini Budget A Plan for jobs
On the 8 July 2020, the Chancellor of the Exchequer, Rishi Sunak, (the United Kingdom’s finance minister) delivered a “mini-budget” which he described as a “Plan for Jobs” to the UK Parliament.
As you may recall, the Chancellor of the Exchequer gave his maiden speech to Parliament on 11 March 2020 and in the intervening time has delivered numerous statements with a view to keeping the UK economy afloat during this period of uncertainty caused by the adverse economic effects of the coronavirus.
The backdrop to the Chancellor’s mini-budget is an economy which has seen, as at 5 July 2020, 1.1mn employers utilising the government’s Coronavirus Job Retention Scheme, furloughing 9.4mn employees and economic growth falling by 10.4% in the 3 months to April 2020 (the latest official figures which are likely to have worsened given that UK economic activity remained constrained by the lockdown throughout the months of May to July).
It was against this economic backdrop that the Chancellor delivered his mini-budget clearly designed to encourage businesses to retain their staff as the Coronavirus Job Retention Scheme is unwound and to encourage consumers to spend again. The Chancellor also announced a range of measures to buttress the UK hospitality sector.
The key measures announced by the Chancellor are as follows:
Job Retention Bonus
- This is a measure designed to encourage firms to retain employees who have thus far been furloughed.
- The government will introduce a one-off payment of £1,000 to UK employers for every furloughed employee who remain continuously employed through to the end of January 2021.
- Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021.
- Further details about the scheme should be announced by the end of July.
Encouraging placements, traineeships and apprenticeships
- To mitigate against the adverse effects of the coronavirus on the job prospects of young people, the government have introduced a series of measures to encourage placements, traineeships and apprenticeships.
- Kickstart Scheme: The government will introduce what it describes as a Kickstart Scheme in Great Britain, a £2bn fund to create hundreds of thousands of high-quality 6-month work placements aimed at those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment.
- Funding available for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance contributions and employer minimum automatic pension enrolment contributions.
- High quality traineeships for young people: The government is to provide an additional £111mn this year for traineeships in England, to fund high quality work placements and training for 16-24 year olds. This funding is expected to triple participation in traineeships.
- For the first time ever, the government will fund employers who provide trainees with work experience, at a rate of £1,000 per trainee.
- The government will improve provision and expand eligibility for traineeships to those with Level 3 qualifications and below, to increase the number of young people who have access to high quality training.
- Payments for employers who hire new apprenticeships: The government is to introduce a new payment of £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over, from 1st August 2020 to 31st January 2021.
- These payments will be in addition to the existing £1,000 payment the government already provides for new 16-18 year-old apprentices, and those aged under 25 with an Education, Health and Care Plan – where that applies.
Supporting the hard hit hospitality sector
- The hospitality sector employs over 2.4mn workers in hospitality, accommodation and attractions, equivalent to 8% of the UK workforce. The decline in this sector has been the starkest, with a 41% decline in the 12 months to April 2020.
- To support this sector, the government have reduced the rate of VAT from 20% to 5% as from 15 July 2020 to 12 January 2021 for food and non-alcoholic drinks from restaurants, pubs, bars, cafes and similar premises and accommodation and attractions.
- To provide added support for the restaurant sector the government announced the “Eat Out to Help Out” scheme to encourage people to return to eateries.
- The scheme will entitle every diner to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café, pub or other eligible food service establishment.
- The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal (including non-alcoholic drinks) for the entire month of August 2020 across the UK.
- Participating establishments will be fully reimbursed for the 50% discount.
Supporting the residential property sector
- To inject consumer confidence into the residential property sector, the government will temporarily cut Stamp Duty Land Tax (“SDLT”) for homebuyers in England and Northern Ireland until 31 March 2021. From 8 July 2020 to 31 March 2021 SDLT will only be chargeable on the consideration in excess of £500,000, rather than the current ceiling value of £125,000.
- The government will also introduce a £2bn Green Homes Grant, providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household.
- For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household.
Whist these measures, in conjunction with capital spending previously announced (£85.5bn in 2020-21), are warmly welcomed, the reality is that the UK faces the likelihood of a prolonged and severe recession. Additional budgetary measures are likely to be announced to support target sectors of the economy in the following weeks and months.
If you would like to discuss any of the measures, or how we can assist you during these turbulent times, please reach out to your usual Arnold Hill & Co LLP contact or call our mainline 0207 306 9100 .
The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice. No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.