Chancellor outlines economic plan to prevent mass unemployment
On Wednesday, chancellor Rishi Sunak put his plans to prevent mass unemployment before MPs in the House of Commons, including newly announced measures to keep furloughed workers employed and planned temporary cuts to VAT.
Rishi Sunak described the newly announced measures as a "£4 billion catalyst" would help protect "over 2.4 million jobs".
In the run-up to his statement, Sunak had revealed a number of measures which on Wednesday were confirmed as part of the plans, including a £3 billion plan to reduce carbon emissions through energy-saving home and building improvements, the provision of 30,000 new traineeships in England, a £1.57 billion rescue package for the arts sector and additional investment in extra career advisers, work academies, and frontline staff at UK job centres.
Sunak also used his speech to confirm the £2 billion “kickstart” scheme to create more job opportunities for 16 to 24-year-olds on Universal Credit through subsidised six-month work placements.
The chancellor also outlined his stamp duty holiday plans, exempting the first £500,000 of all property sales to help reinvigorate the property market.
Other measures which formed part of the plans included fresh announcements that firms will receive a £1,000 bonus from the government firms for every furloughed employee who retains their role until January 2021.
Should every furloughed worker be covered by the scheme, its cost could rise to over £9 billion, the chancellor indicated.
Sunak said: "If you're an employer and you bring back someone who was furloughed - and continuously employ them through to January - we'll pay you a £1,000 bonus per employee.
"It's vital people aren't just returning for the sake of it - they need to be doing decent work.
"So for businesses to get the bonus, the employee must be paid at least £520 on average, in each month from November to the end of January - the equivalent of the lower earnings limit in National Insurance."
Sunak was clear that he would “never accept unemployment as an inevitable outcome” of the Covid-19 pandemic, and was unapologetic for his resolve to wind the furlough scheme down in October as planned, adding that extending it further would only offer “false hope” that people will have jobs to return to in future.
Around 9.3 million workers in the UK have been furloughed under the government’s Job Retention Scheme, with the state providing 80 per cent of their salaries.
The Labour party remained critical of the plans, warning that they did not go far enough and recommending that job retention funds are more specifically targeted to ensure they do not go to firms who were already planning to bring staff off the furlough scheme.
Labour shadow chancellor Anneliese Dodds added that the furlough scheme should be extended beyond October for certain industries which continue to feel the ill-effects of the Covid-19 pandemic.
Dodds told the Commons: "We need a strategy for the scheme to become more flexible so it can support those businesses forced to close again because of additional localised lockdowns.
"There is still time to avoid additional floods of redundancy notices. It is the government's duty to help Britain through this."
CBI director-general Dame Carolyn Fairbairn welcomed the retention bonus as a means of helping protect jobs, but warned that "with nearly 70 per cent of firms running low on cash, and three in four reporting lack of demand, more immediate direct support for firms, from grants to further business rates relief, is still urgently needed."
Another new measure announced by Sunak came in the shape of a temporary emergency cut to VAT rates, with the tax on food, accommodation and attractions reduced from 20 per cent to five per cent.
The VAT cut will apply from Wednesday July 15, and will apply to dine-in or takeaway food purchased from restaurants, cafes and pubs. VAT cuts in accommodation will be applicable for hotels, B&Bs, campsites and caravan sites, and the reduction for attractions will include cinemas, theme parks and zoos among the beneficiaries.
For restaurants, Sunak revealed that an “Eat Out to Help Out” discount scheme would be launched, meaning that meals purchased at participating businesses from Monday to Wednesday would be half-price in August, up to a maximum discount of £10 per person. Businesses will be able to register for the scheme from Monday.
In addition, employers will not be expected to pay tax on any routine coronavirus tests that are provided for staff.
Sunak stopped short on giving full details as to how the new measures will be financed through borrowing and potential tax hikes, but this is likely to be disclosed in the upcoming Autumn Budget.
Sunak said: "Over the medium-term, we must, and we will, put our public finances back on a sustainable footing."
In response to the chancellor's announcement, Kate Nicholls, chief executive of trade body UK Hospitality, tweeted: "Thank you to Rishi Sunak [for]recognising the importance of tourism and hospitality and the benefit it brings to economy - this will make a material difference for the sector as we face a long road to recovery."
Meanwhile, Mike Cherry, chairman of the Federation of Small Businesses, said that the plans "once again overlooked" newly self-employed people and company directors.