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Plan for jobs – Mini Budget 8 July 2020 – The second “s” is for Stimulus…

9 July 2020 No Comment

So here’s the situation:

  • “The International Monetary Fund (IMF) estimates that the global economy will contract by 4.9% in 2020, having previously expected growth of 3.3% in its January forecast.1 World Bank analysis suggests this will be the deepest global recession since the Second World War and the broadest collapse in per capita incomes since at least 1870. As an open economy, the UK is exposed to contractions in global demand, with global spillover effects estimated to account for around a third of the outbreak’s impact on the UK economy.”
  • Retail sales were 23% lower in April than in February. Spending on restaurants, travel and entertainment, typically worth around a fifth of the total economy, fell by around 80% at its lowest point.
  • Because of the lower spending,  households have saved more and paid off debt. In May cash machine transactions were 52% lower than a year earlier. And in the same month, UK household bank deposits rose by a record £25.6 billion, over five times the average monthly increase. Households also repaid net £4.6 billion of consumer credit in May, with many households less willing to make spending on major purchases.
  • During the peak of the lockdown, 25% of all firms stopped trading, albeit with substantial variation across sectors. Over 80% of firms in the hospitality and leisure industries temporarily ceased trading in April. The intentions of businesses on future investment have deteriorated, with the worst affected firms cancelling or postponing investment. Reported cash flow difficulties have reached record highs.
  • People’s jobs have been furloughed and working hours have been reduced. Over 9 million jobs have been furloughed through the Coronavirus Job Retention Scheme – more than a quarter of the UK workforce. Universal Credit claims have also increased dramatically with 3.4 million individual declarations made from 1 March to 23 June, and RTI filings show the number of paid employees falling by 612,000 over April and May.

Result; misery – and the creation of a new raft of government acronyms – CJRS, CCFF, CBILS, CLBILS, BBLS, SEISS. Without which we, as a country, would have been screwed!

I have written about these schemes and how to access them in our original post which you can find here, the revised furlough scheme which is here and finally another blog post on the second SEISS here.

So having “saved” the country with the first round of ammunition, Rishi Sunak has donned a second super-hero cape and started his new role as Captain Stimulus and don’t we just need him now! I know we had Boris doing his “spend, spend, spend” thing the other day but, to be honest, after all that crap with the bus during the “B” word campaign, I don’t think I believe much he says unless it has “specific action” next to the promise. The statement by Rishi yesterday had that in spades. I know that the Opposition carped on about him doing the wrong thing in their response, but I actually thought that what they meant was that he was doing the right thing with the economy but hadn’t done enough with “Track, Trace and Isolate” which we can probably all agree on? Anyway, I’m sure you’re not reading this to find my views on politics, you probably know how to spell cynical already…

So what goodies does Rishi have in his Superhero Stimulus Sack (SSS for those of you into TLA’s)? Well, the Plan For Jobs starts with “Supporting Jobs“:

  1. Job Retention Bonus (reckon that’ll be the JRB then) – The government will introduce a one-off payment of £1,000 to UK employers for every furloughed employee who remains 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 detail about the scheme will be announced by the end of July. Personally, nice though it will be for businesses to receive £1k per employee brought back from furlough in January next year, I don’t see how this actually makes any difference to retention rates. If someone is coming back to work, £1k is not a decision changer! And at a cost of up to £9bn, I would think that this is a waste of money – probably a good job I’m not in the Treasury!
  2. Kickstart Scheme – The government will introduce a new Kickstart Scheme in Great Britain, a £2 billion fund to create 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 enrolment contributions.
  3. New funding for National Careers Service – The government will provide an additional £32 million funding over the next 2 years for the National Careers Service so that 269,000 more people in England can receive personalised advice on training and work.
  4. High quality traineeships for young people – The government will provide an additional £111 million this year for traineeships in England, to fund high quality work placements and training for 16-24 year olds. This funding should, they estimate, be enough 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 ensure that more young people have access to high quality training.
  5. Payments for employers who hire new apprentices – 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.
  6. High value courses for school and college leavers – The government will provide £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.
  7. Expanded Youth Offer – The government will expand and increase the intensive support offered by DWP in Great Britain to young jobseekers, to include all those aged 18-24 in the Intensive Work Search group in Universal Credit.
  8. Enhanced work search support – The government will provide £895 million to enhance work search support by doubling the number of work coaches in Jobcentre Plus before the end of the financial year across Great Britain.
  9. Expansion of the Work and Health Programme – The government will provide up to £95 million this year 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 that have been unemployed for more than 3 months. This is on top of the existing provisions for those with illnesses or disabilities in England and Wales.
  10. Job finding support service – The government will provide £40 million to fund private sector capacity to introduce a job finding support service in Great Britain in the autumn. This online, one-to-one service will help those who have been unemployed for less than three months increase their chances of finding employment.
  11. Flexible Support Fund – The government will increase the funding for the Flexible Support Fund by £150 million in Great Britain, including to increase the capacity of the Rapid Response Service. It will also provide local support to claimants by removing barriers to work such as travel expenses for attending interviews.
  12. New funding for sector-based work academies – The government will provide an additional £17 million this year to triple the number of sector-based work academy placements in England in order to provide vocational training and guaranteed interviews for more people, helping them gain the skills needed for the jobs available in their local area.

Phew. While you could argue forever about what is the best way to get people, especially the young, into jobs, there’s no doubt that they’ve thrown the kitchen sink at the problem in the hope that something will stick.

The second tranche of measures is “Protecting Jobs“:

  1. Eat Out to Help Out – In order to support around 130,000 businesses and to help protect the jobs of their 1.8 million employees, the government will introduce the Eat Out to Help Out scheme to encourage people to return to eating out. This 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 on non-alcoholic drinks) for the entire month of August 2020 across the UK. Participating establishments will be fully reimbursed for the 50% discount. To qualify for the ‘Eat Out to Help Out Scheme’ you will need to register with HMRC first to offer this and get the refund, the link is here. You can only register from 13 July (just imagine the government elves scurrying around trying to write software for it now!).
  2. Temporary VAT cut for food and non-alcoholic drinks – From 15 July 2020 to 12 January 2021, to support businesses and jobs in the hospitality sector, the 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. Further guidance on the scope of this relief will be published by HMRC in the coming days. Well, we will need to see the guidance but it’s a pretty hefty help – will it reduce prices temporarily or be used to prop up margins in this under-fire sector?
  3. Temporary VAT cut for accommodation and attractions – From 15 July 2020 to 12 January 2021, to support businesses and jobs, the reduced (5%) rate of VAT will apply to supplies of accommodation and admission to attractions across the UK. Again, we’re expecting further guidance in the coming days.

This is a really welcome approach to this beleaguered sector. There’s not long to get the detail out, work out what will have to be changed and reprogramme systems to deal with the changes but I don’t expect that many will complain!

The final tranche of measures comes under “Creating Jobs” and rests upon the premise that the Housing market, Construction and Investment are the bedrock upon which a stimulated economy can rest. Without these areas performing well, confidence is low and the desire to take on risk is consequently reduced.

  1. Temporary Stamp Duty Land Tax (SDLT) cut – The government will temporarily increase the Nil Rate Band of Residential SDLT, in England and Northern Ireland, from £125,000 to £500,000. This will apply from 8 July 2020 until 31 March 2021 and cut the tax due for everyone who would have paid SDLT. Nearly nine out of ten people getting on or moving up the property ladder will pay no SDLT at all. And yes, you’ve guessed it, Landlords and 2nd homeowners still pay the additional 3% on the whole of the purchase price.
  2. Green Homes Grant – This is a £2 billion scheme, 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. In total this could support over 100,000 green jobs and help strengthen a supply chain that will be vital for meeting our target of net zero greenhouse gas emissions by 2050. The scheme aims to upgrade over 600,000 homes across England, saving households hundreds of pounds per year on their energy bills. Whilst this is not the Green New Deal which many have argued for, at least it’s a start. Personally, I would prefer to see some much more radical thinking in the “green” area on transport, energy production, environmental care but don’t get me started on that. See further schemes below.

Then the Chancellor used the opportunity to provide some detail that goes a long way to back up Boris’s “Spend, spend, spend” message from last week. It’s almost as if someone thought “bloody hell, we better find something of substance to take advantage of this opportunity!” Some of this is aimed squarely at opportunities and skills and one measure is the setting up of the Office for Talent to be based in Number 10. Some of the tabloids have previously accused BoJo of using his position to attract “talent” of a slightly different kind in the past so perhaps someone in Downing Street has a sense of humour? Maybe the same team that came up with the Office of Tax Simplification?

The second area is “Green recovery” and covers a myriad of schemes from decarbonisation and direct air CO2 capture to automotive transformation and the sustainability of the UK Courts services. Within Housing, there are five schemes covering everything from brownfield sites to housing decarbonisation. And finally within Investment, there are a large number of infrastructure, modernisation and capital acceleration projects such as £10m for “unblocking Manchester’s railways”. Who knew? 

Anyway, it all amounts to a fiscal stimulus and encouragement programme the like of which the country has not seen since the end of WW2. And clearly that’s to be welcomed. We’ll let you have the details of the various schemes, especially those relating to VAT reductions, as we get the information that is promised.

Are we all looking forward to increasing our BMI during August to help the cause? I’ll be the one with the chipmunk cheeks!

If you need any further information please give either Bernice (01752 203651)| or Jenna (01752 203645) a call and they’ll be happy to trawl through the detail for you.

Jon

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