UK chancellor Rishi Sunak will unveil a raft of measures designed to lift the UK economy out of its coronavirus-induced slump as part of his summer statement on Wednesday.
Many of the moves — such as a new green jobs initiative and a cash bonus scheme for firms that hire trainees — have been flagged in advance by the Treasury.
The chancellor has reportedly been attempting to temper expectations about the economic package, warning MPs not to expect wide-ranging tax cuts and sweeping initiatives ahead of his Autumn budget.
But a six-month stamp duty cut, potential adjustments to business rates, and the possibility of a temporary value-added-tax (VAT) reduction are among several extensive measures that could boost the country as it emerges from lockdown.
Here is a rundown of what could be announced by Sunak in the House of Commons on Wednesday. His statement is expected to begin around 1pm.
Furlough scheme and job creation
Sunak has faced calls to extend the government’s mammoth wage-subsidy scheme on a sector-specific basis, which has so far cost the state upwards of £25bn ($31bn).
The Treasury has already started to wind down the government’s wage-subsidy programme by introducing a new flexible furlough scheme designed to encourage a part-time return to work for employees.
Some 9.3 million people have been furloughed at 1.1 million firms under the main furlough programme, which currently subsidies up to 80% of an employee’s wage.
The scale of the subsidy will be reduced from August onwards, and the scheme is expected to end completely in October.
The Treasury is reportedly opposed to a sector-specific scheme, and instead favours the introduction of job creation programmes.
One such job creation initiative is Sunak’s plan to announced a £3bn package designed to help create tens of thousands of jobs in order to achieve the country’s environmental ambitions.
The Treasury said that the package of measures come “as part of a drive to power up the nation’s workforce and protect the environment.”
The scheme, it said, will help to create thousands of jobs in industries such as construction. Some £1bn will be spent on a programme to make public buildings, including schools and hospitals, greener.
Sunak is also expected to unveil £50m to retrofit social housing with heat pumps, insulation and double glazing.
While calling it a “welcome” first step, the Institute for Public Policy Research said that the package “falls far short of the £30bn public investment gap that needs to be filled to get the UK on track to meet net zero.”
As the furlough scheme is scaled back, Sunak is expected to announce further details of a government scheme that will give £1,000 bonuses to firms in England that take on young people as trainees.
The move, which marks the first time that companies would receive subsidies for hiring trainees, is expected to cost around £111m.
The scheme’s criteria will see firms receive a £1,000 cash bonus for taking on up to 10 trainees aged between 16 and 24, meaning that companies could receive up to £10,000 under the scheme.
Traineeships can last from six weeks to six months, and employers are not required to pay trainees, who can complete a maximum of 240 hours of work experience under the scheme.
“Expanding traineeships will be part of a wider package to support young people and to ensure they have the skills and training to go on to high quality, secure and fulfilling employment,” the Treasury said in a statement flagging the plan.
Sunak is reportedly considering giving “restart vouchers” to adults to boost consumer spending as the economy emerges from lockdown.
The Resolution Foundation, one of the think tanks that has recommended such a scheme, said that it could involve the government shelling out up to £30bn on £500 vouchers for households that could be spent in hard-hit areas of the economy, such as the high street and hospitality sector.
In a statement, the think tank said that the vouchers could be delivered via vouchers or smart cards and activated over a fixed time period.
According to the Guardian, the Treasury has not yet ruled out introducing such a scheme, but may instead opt for smaller vouchers.
Sunak is also expected to announce a stamp duty holiday for home buyers, in the hopes that such a move could boost the housing market.
According to reports, the Treasury is weighing up raising the threshold for the tax to between £300,000 and £500,000, leaving the average property exempt from the tax.
Stamp duty land tax (SDLT) is levied on property buyers as a percentage of the purchase price. Home buyers pay between 2% and 12% of the value of the property above £125,000 in England and Northern Ireland. Thresholds are already higher for first-time buyers.
The tax has been devolved to the Scottish and Welsh governments, which have renamed it and varied the rates. The reports did not make clear how the changes being floated could affect Scotland and Wales.
Tax and VAT cuts
According to the Financial Times, Sunak has warned Conservative MPs not to expect big tax cuts as part of the summer statement.
But the Treasury has considered introducing a temporary reduction to the VAT rate, which currently stands at 20%. Sunak has also been considering a potential deferral of VAT spending for a further three months.
UK firms had already been given the option to defer VAT payments until the end of June, and the British Retail Consortium has called for a rate cut to encourage consumer spending.
In a letter to the chancellor, Helen Dickinson, the CEO of the British Retail Consortium, said that “a temporary reduction in the headline VAT rate and in income tax for lower earners would boost consumer demand and raise consumption.”
While lower VAT will cost the exchequer, Sunak is also reportedly working on plans for deferred tax rises and cuts to public spending that will be unveiled as part of his Autumn budget.
Business rate adjustments
Industry groups have been calling for an extension of the rate holidays given to retail, leisure, and hospitality firms to other sectors.
The rates, which are an annual tax on properties used for business purposes, bring in around £25bn for the Treasury each year, and are considered an “important source” of funding for local services such as adult social care.
Sunak is reportedly mulling an adjustment to the system ahead of a “fundamental review” of business rates in the coming months that will aim to reduce the overall burden on firms from April 2021.
The rates system has been repeatedly criticised by businesses, with the Confederation of British Industry calling them “uneconomical, unsustainable and frankly unintelligible.”
According to the Observer, however, sweeping changes to the system are unlikely to be announced on Wednesday by Sunak.