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Summer economic update 2020

The Chancellor’s summer economic update confirmed the phasing out of furloughing, but announced a range of measures to encourage job retention and creation, training for the young, tax sweeteners to unlock spending and an unprecedented discount scheme to help restaurants. 

However, nothing was said about how the government’s economic response to COVID-19 will be paid for. 

Rishi Sunak made his summer economic update earlier today and focused on re-starting the economy to create and protect jobs, particularly in the sectors worst hit by the COVID-19 pandemic. In the Chancellor’s words, we are moving from phase 1 of the economic response to phase 2. 

Furloughing under the Coronavirus Job Retention Scheme (CJRS) will phase out between now and October and the focus will move to supporting the return to work of as many affected employees as possible. This will be in the form of the Job Retention Bonus, alongside encouraging the creation of new jobs under a Kickstart Scheme for 16 to 24-year-olds, and payments to employers taking on new trainees and apprenticeships. 

Significant support will also be provided to help those seeking to return to work. 

Large scale infrastructure spending has been announced over recent months, aiming to ‘level up’ the country and create a range of jobs throughout the UK. Today saw the announcement of a Green Homes Grant to encourage spending and, so, employment. 

Further help for the housing market came with the announcement of an immediate cut in English Stamp Duty Land Tax (SDLT) which will run until 31 March 2021. The threshold for SDLT on main homes will increase from £125,000 to £500,000. 

Many suggestions had been made to help out the ailing retail sector, including VAT reductions and retail voucher schemes. The Chancellor got part way there by announcing a cut in VAT for hospitality and tourism, which will reduce to 5% on food, accommodation and attractions. The cut applies from 15 July 2020 until 12 January 2021. 

Retail vouchers were a step too far. Instead, an ‘Eat Out to Help Out’ scheme was announced, allowing participating businesses to offer a 50% discount on eat-in meals in August 2020. The discount will then be reclaimed from the government. 

How phases 1 and 2 of the economic response are to be paid for will be addressed another day. Further tax changes may come in the Autumn Budget, although no mention was made today of a possible wealth tax. 

The question is: is this enough? 

The Chancellor believes in “the nobility of work”, “the inspiring power of opportunity” and “the British people’s fortitude and endurance”. He finished his statement claiming that “we will not be defined by this crisis, but by our response to it”. 

In her response, Shadow Chancellor, Anneliese Dodds referred to “.. the failure to match soaring rhetoric with meaningful action”. 

Is one right? or both? 

Updates for businesses, not for profits and individuals
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