Rishi Sunak needs to get the economy moving, shore up confidence, and make a massive intervention to stop it tanking. How far did his Summer Statement go to doing all of this?
Standing up at the Despatch Box this lunchtime, as the rising star of this Government, Rishi Sunak is widely seen as Chancellor on top of his brief.
He is credited for his decisiveness and boldness in taking action to protect livelihoods with the job retention scheme, costing £60 billion.
Quoting the IMF’s figure of 25 per cent contraction of the economy, he reflected what everyone in the country was thinking: after a second outbreak, unemployment is the greatest threat facing the UK. Those with long memories will remember the early 1980s, and the impact that had on communities and towns across the UK.
So the mantra was “jobs, jobs, jobs”
This was an announcement rich Summer Statement. Sunak analysed Three Phases to tackle the crisis. The first phase, to support businesses and families, was to stop the spread of COVID-19 with lock-down and a £160 billion plan to protect jobs – saving one million business with the retention scheme. The Second Phase is to protect jobs, and the Third Phase is to rebuild the economy.
We are now in Phase Two. Sunak was clear that the furlough scheme would not continue past October as it was a temporary lifeline, not a long-term programme. Instead he had a new “Plan for Jobs”. A key plank of which is the Kickstart Scheme to help 16 – 24 year olds. Costing the Government £2 billion, it will subsidise six-month work placements for people on Universal Credit aged between 16 and 24. Another plank was his £9 billion job retention bonus: a £1000 bonus paid to businesses for each furlough worker returning to work. He also pledged money to help boost apprenticeships.
Alongside this, he made a commitment to invest in infrastructure with better schools, roads and high streets. The green agenda was high on his list with a pledge to support 140,000 green jobs with a £3bn green jobs plan – details no doubt will follow – and around £1bn has been earmarked to help make public sector buildings greener.
“Eat Out to Help Out”
To support hospitality and tourism, which employs 2 million people, often younger staff, with many women and BAME workers, and located in rural and coastal towns, he announced a cut in VAT from 20 per cent to 5 per cent on accommodation and attractions, amounting to a £4 billion intervention. His big reveal was the “Eat Out to Help Out” 50 per cent discount, with a maximum discount of £10 per head for everyone eating out between Monday – Wednesday in August. He announced; “if we project jobs, demand will be there.”
And to property…
The property sector, including home-buyers and sellers, will look closely at his announcements on stamp duty. The impact of COVID-19 on the sector has been significant, with property transactions falling by 50 per cent in May. To boost the sector, he increased the stamp duty threshold from £125,000 to £500,000 saving home-buyers an average of £4,500. With immediate effect, this temporary measure will run until March next year.
So far, business reaction seems to be positive with Dame Carolyn Fairbairn, Director General of the CBI, saying “Flattening the daunting unemployment curve about to hit our country could not be more important. Today’s jobs plan is an important step forward.” The main criticism that Rishi Sunak is facing from Labour’s Shadow chancellor Anneliese Dodds, is that he is putting off many of the “big decisions” until the autumn, saying “Today should have been the day when our government chose to build a bridge on what has been done so far and what needs to be done… we should have had a back to work budget”.
Overall, this was a characteristically confident performance by the Chancellor, in his peroration he said “we won’t be defined by the crisis but our response to it” and that this could be a story of “personal renewal.”
We shall see how the Statement lands in the coming weeks and whether this really will be the boost the UK is looking for. We all need to see further details to see if the announcement will really have a galvanising effect. And, as we get through this next stage, we are all going to be looking ahead to Phase Three and Rishi Sunak’s main set piece for the year – the Budget this autumn.