We should technically call it a statement rather than a minibudget – but the Chancellor’s announcement on Wednesday still contained plenty of dramatic measures designed to help the economy on the road to recovery.
There may certainly be plenty of measures required. Noting that In just two months, the UK economy has contracted by 25%, the same amount it grew in the past 18 years, Rishi Sunak described the “profound economic challenges” facing the UK as he delivered his summer statement, telling MPs he will “give everyone the opportunity of good and secure work”.
Mr Sunak announced a raft of measures to stimulate the economy and support jobs, some of which could be potentially far-reaching. They will affect many sectors of the business world – and have benefits on your finances as well as the economy in general.
A stamp duty holiday
Responding to concerns that sales in the property market are grinding to a halt as a result of the chaos and economic uncertainty caused by coronavirus, his most dramatic measure may be a stamp duty holiday.
Noting that property transactions had fallen by 50 % in May, together with a fall in house prices Mr Sunak announcement was a temporary cut in stamp duty until the end of March 2021, raising the threshold for paying stamp duty from £125,000 to £500,000. Nearly 9 out of 10 people getting on or moving up the property ladder will pay no Stamp Duty at all. Cutting stamp duty makes it cheaper to buy properties and could build confidence as well as kick-start recovery – although it will be expensive. At present, the tax raises about £12bn for the Exchequer each year, roughly equivalent to 2% of the Treasury’s total tax take.
Not planning a move? Homeowners and landlords will be able to apply for vouchers to make energy-efficient improvements to their properties up to £5,000 per household as part of a wider £3bn plan to cut emissions.
A jobs retention bonus
There have been fears that the end of furlough will see a jump in unemployment as businesses find they have staff to pay and not enough work to do. The Chancellor announced a “jobs retention bonus” of £1,000 per employee to encourage bosses to keep on staff. Firms will receive a £1,000 bonus for every staff member kept on for three months when the furlough scheme ends in October.
Young people were also given good news. Mr Sunak said he would spend £2bn on getting 16 to 24-year-olds into work by paying their wages for six months. The scheme will help out the 500,000 young people currently claiming Universal Credit. They’ll be paid at least the National Minimum Wage for 25 hours per week. It will start in autumn and run for six months with the chance of an extension.
There was also a pledge to provide 30,000 new traineeships for young people in England, giving firms £1,000 for each new work experience place they offer
A cut in VAT
The leisure industry has been suffering particularly as a result of lockdown. The Chancellor told MPs he will cut VAT on food, accommodation and attractions from 20% to 5% from next Wednesday.
This cut will apply across the board to eat-in or hot takeaway food and non-alcoholic drinks from restaurants, cafes and pubs, accommodation in hotels, B&Bs, campsites and caravan sites, attractions like cinemas, theme parks and zoos.
Rishi Sunak said this “£4bn catalyst” would help protect “over 2.4 million jobs
He didn’t stop there, and also announced an “Eat Out to Help Out” discount, which he said would help protect 1.8 million jobs, at a cost of £0.5bn.
Meals eaten at any participating business, Monday to Wednesday, will be 50% off in August, up to a maximum discount of £10 per head.
Businesses will need to register, and can do so through a website, which will open next Monday.
There was even a £1.6bn package of loans and grants for the arts and heritage sector.
Will it all work?
The Chancellor’s £30bn plan reflects the scale of the problems the economy faces after more than three months of lockdown and fear and to prevent mass unemployment as the economy is hit by coronavirus. The chancellor warned “hardship lies ahead”, but vowed no-one will be left “without hope,” in a statement to MPs. It is an enormous package, costing billions of pounds on top of the billions already spent on furlough and self-employed and business grants.
We are of course in unknown waters, but if we remember that the economy was doing well before Covid struck, there is every chance that these measures will at least help.
Mr Sunak’s measures could be very good news especially if you run a business. But for the rest of us, whether we are keen on keeping a job, eating out, or buying a new home, there is plenty to be positive about.
But it still pays to get your finances in good order, in case the future has more shocks.
Planning a move and taking advantage of the the Stamp Duty holiday, looking at ways to protect your loved ones, or to build your investment portfolio – Continuum can help
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
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