Rishi Sunak’s summer statement: What can we expect?
Chancellor Rishi Sunak will today give a “summer statement”, a sort of mini-Budget in which he will announce schemes to support the economy as it recovers from its coronavirus-induced collapse.
Last week, Prime Minister Boris Johnson announced £5bn of infrastructure spending. He invoked US President Franklin Roosevelt’s 1930s New Deal, saying the UK will “build, build, build” its way out of the slump.
The Treasury says Sunak’s statement will build upon this, with a focus on protecting jobs and young people. It will not be huge, however, as there will be a much bigger Budget in the autumn.
So what to expect? Here are some of the things the chancellor has already trailed and some of the major topics he may also address.
Kickstart jobs scheme worth £2bn for young people
Yesterday the Treasury announced it will subsidise hundreds of thousands of new jobs for unemployed young Britons as a part of a £2bn package.
The ‘kickstart scheme’ will see the government subsidise jobs for 16 to 24-year-olds receiving universal credit benefits.
For each job on the scheme, the Treasury will pay 100 per cent of the minimum wage for 25 hours a week with employers able to top up that amount.
It comes on top of money for training and careers support for young people, who are a key focus of the summer statement.
Sunak said: “Young people bear the brunt of most economic crises, but they are at particular risk this time because they work in the sectors disproportionately hit by the pandemic.”
Green investment worth £3bn
The Treasury on Monday said Sunak will announce a £3bn green investment package to create jobs and upgrade buildings.
The Treasury said £1bn of the package will be spent on improving the energy efficiency of public buildings such as schools and hospitals.
It will fund £2bn worth of “green” home upgrades across the country. The Treasury said this will “unlock work for thousands of builders and tradespeople”.
The extra money comes after the government announced a £1.5bn support package for the arts.
Support for Job Centres in summer statement
At the weekend the Treasury announced Sunak will put aside more than £800m to double the number of work coaches at Job Centres.
More than 13,500 expert mentors will be recruited over the coming months, the Treasury said.
It is a sign that Sunak intends to stick to his promise to wind down the blanket employment support by October. Instead, the government plans to invest in careers support to help people get jobs in growing industries.
Training for young people
Again already announced, Sunak will invest £111m to triple traineeships for young people. It comes amid warnings from the Institute for Fiscal Studies that young people face economic “scarring”.
Traineeships last from six weeks to six months and provide maths, English and CV writing training. They also provide a work placement of 60-90 hours.
Businesses will also get a £1,000 bonus payment from the government for every trainee they offer a work experience placement to.
On top of this, the chancellor is set to invest £32m in the National Careers Service. It will help recruit hundreds more career advisers.
Sunak could announce stamp duty ‘holiday’
The government is reportedly likely to announce a temporary cut to stamp duty. This could help young people get on to the lower end of the housing ladder.
It could raise the threshold at which buyers start paying stamp duty to between £300,000 and £500,000 for six months later in the year. The threshold is currently £125,000.
However, some economists and estate agents have questioned the logic of announcing the tax “holiday” too early. They say this will suspend deals in the property market.
Possible VAT cut and tax changes
Sunak is reportedly considering a temporary VAT cut for the hospitality industry. It reopened on Saturday but the latest footfall figures show that high street activity remained far below pre-coronavirus levels.
The British Retail Consortium has backed such a move. It said that “a temporary reduction in the headline VAT rate and in income tax for lower earners would boost consumer demand and raise consumption”.
However, Sunak has told Tory MPs not to expect big tax cuts, according to the Financial Times.
Changes to job retention scheme
The latest figures show that 9.3m people have been “furloughed” in the UK under the job retention scheme. The programme pays 80 per cent of the wages of workers that would otherwise be laid off.
From August, the level of the grant will be gradually reduced, with companies expected to contribute more.
Johnson last week suggested that Sunak will announce more details tomorrow. “You’ll be hearing more about what we’re going to do to support people next week from the chancellor,” he told LBC.
Vouchers for worst hit sectors
Sunak is reportedly mulling a suggestion from the Resolution Foundation that would give people £500 vouchers for use in badly-hit sectors.
The Guardian reported that such a scheme is under consideration at the Treasury. It has been used in different ways in China, Taiwan and Malta,
The Resolution Foundation said it would be more effective than cash handouts and would be more targeted than VAT cuts.
Yet it could cost around £30bn, meaning the Treasury would likely give out smaller vouchers if it opts for the programme.