Chancellor lays out plan to revive crisis-hit UK economy

UK Chancellor of the Exchequer Rishi Sunak announced to MPs in the UK Parliament’s House of Commons on Wednesday a series of measures to create jobs, increase infrastructure spending, and boost consumer demand.

In this Summer Economic Update, Sunak said that he would “never accept unemployment as an unavoidable outcome”.

The package of measures follows the creation of the Coronavirus Job Retention Scheme for employees, which was extended until the end of October, and a similar scheme for self-employed workers as well as business support loans.

The government plans a third, “rebuilding” phase of action with announcements in the autumn budget and spending review.

Job-retention bonus

In his speech, Sunak said a one-off £1,000 job-retention bonus would be given to businesses for each furloughed worker continuously employed until at least 31 January 2021.

He said: “Our message to business is clear: If you stand by your workers, we will stand by you.”

A “Kickstart Scheme” would provide young people of ages 16–24 with six-month job placements for 25 hours a week and funded by the government to cover 100% of the national minimum wage, which employers can top up. There is no cap on the number of places available, and the scheme starts in the autumn, with applications starting in August.

Separately, employers will be given a grant of £1,000 for each trainee they take on.

Businesses will also receive £2,000 for each new apprentice they hire under the age of 25. This is in addition to the existing £1,000 payment the government already provides for new 16- to 18-year-old apprentices and those under age 25 with an Education, Health, and Care Plan, the government said.

A new bonus of £1,500 will allow businesses to hire apprentices age 25 and over.

Andrew Harding, FCMA, CGMA, chief executive–Management Accounting at the Association of International Certified Professional Accountants, said: “Measures such as additional funding for traineeships, money to fund apprenticeships, and support for young job seekers via the Kickstart scheme will be essential to aid short-term recovery.”

However, he said the government needed to go further to give “businesses and investors certainty on the tax and regulatory frameworks over the next two years to support inward investments, directing skills training towards jobs and sectors with real-wage growth potential, and designing appropriate measures to support SMEs and new startups”.

On 1 July, CIMA sent to the UK government a 20-point economic recovery plan as policy suggestions.

In Parliament, Sunak also announced government spending of £8.8 billion on new infrastructure, decarbonisation, and maintenance projects.

He told MPs: “As well as investing in infrastructure, we want to create green jobs. This is going to be a green recovery with concern for our environment at its heart.”

He announced a £2 billion Green Homes Grant scheme for homeowners and landlords to make homes more energy efficient.

VAT rate cut

To aid two sectors hit especially hard by the coronavirus crisis, the government is cutting the rate of value-added tax applied on most tourism- and hospitality-related activities from 20% to 5%. This is a temporary cut until 12 January, Sunak said, and would cover “food, accommodation, and attractions”.

He also announced an “Eat Out to Help Out” scheme to give consumers a 50% reduction in the cost of meals at participating restaurants.

The moves would help protect more than 150,000 businesses and 2.4 million jobs, he said.

The Chancellor also announced a cut to stamp duty “to catalyse the housing market and boost confidence”.

The government issued supporting documents for its announcement.

For more news and reporting on the coronavirus and how management accountants can handle challenges related to the pandemic, visit FM’s coronavirus resources page.

— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.