Chancellor Rishi Sunak today announced a raft of measures in his Summer Statement in a bid to help the UK economy recover from the worst effects of coronavirus.
The Treasury boss revealed massive public spending to bolster the UK economy in what people are calling his mini-Budget.
While he did not extend the government’s furlough scheme beyond October, he vowed to pay employers £1,000 for every member of staff they keep on in a move that could cost £9bn.
And the chancellor outlined a host of other employment measures including traineeships and £2bn to get young people into work.
Meanwhile, stamp duty will be abolished for properties worth under £500,000 until 31 March 2021.
The government also promised to slash VAT from 20 per cent to just five per cent to help Britain’s teetering hospitality industry.
And the Treasury will pay for meal vouchers that let Brits eat out for half price in many UK restaurants throughout August.
Check out our handy summary of everything Sunak announced, or view our infographic below:
The key points
– Stamp duty threshold raised to £500,000 until March 2021
– Hospitality VAT cut to 5 per cent
– Extra £30bn of public spending
– Inc. £9bn end-of-furlough bonus
– £2bn for youth employment
– £3bn green infrastructure budget
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4.45pm Thanks, and goodbye
Thanks everybody for following our live blog today.
We’ll leave you with some links to the big City reaction and our coverage of all today’s announcements as we all begin to wonder just how, and when, we’ll pay for all this unprecedented government largesse.
Here’s what Sunak announced in his Summer Statement today:
- £3bn green investment package
- £2bn scheme to tackle youth unemployment
- Diner delight: Treasury will pay half your restaurant bill
- £9bn scheme to re-employ furloughed staff
- A new stamp duty threshold of £500,000
- VAT cut from 20 to five per cent
- £5bn in infrastructure spending
4.35pm IFS warns of ‘huge uncertainty’ for public finances
We heard from Institute for Fiscal Studies director Paul Johnson earlier. Here’s his deputy, Carl Emmerson, warning of “huge uncertainty” in what all this spending means for UK debt.
There is a huge amount of uncertainty around the public finances – but these measures are likely to push the deficit further above £300 billion, which would be easily the highest as a share of national income since the Second World War. Of course this additional borrowing is all currently being borrowed at very low interest rates. What matters more for the public finances will be the extent to which the economy manages to bounce-back strongly. If – as is likely – the economy does not fully recover then future fiscal events are likely to involve a less pleasant set of announcements over the extent to which taxes need to rise to restore the health of the public finances. But those decisions can – and should – be left for another year.IFS deputy director Carl Emmerson
4.15pm FTSE 100 remains muted despite spending spree
Rishi Sunak’s stimulus failed to lift London’s FTSE 100 out of the red this afternoon.
The chancellor’s huge spending plans couldn’t drag the UK index off a 0.7 per cent drop to 6,147 points.
Housebuilders enjoyed an increase from the stamp duty tax cut, but wider global concerns about the rising risk of a second spike dragged stocks lower.
However, as Sunak himself noted, this is likely not the last of his coronavirus-induced spending plans. An autumn Budget later this year will likely see more public support measures – especially with unemployment set to rocket once furlough ends.
Chris Beauchamp, chief market analyst at trading platform IG, said pubs, estate agents, retailers and housebuilders were the main beneficiaries today.
But he added: “Today’s statement is clearly not the last word Mr Sunak will have on the subject. The initial virus spread may have been contained but the economic shockwaves continue to resonate, requiring further spending injections to support the economy.
“It might not be much, but it is a start, and it is encouraging to see monetary and fiscal policy going hand-in-hand, especially now that the former has done its job in staving off a crisis over the past three months.”
2.23pm Is £1,000 enough to stave off unemployment?
And Matt McDonald, an employment law senior associate at Pinsent Masons, warned the £1,000 cash incentive to recall furloughed staff is not enough to tempt struggling firms from making redundancies.
“Whilst the furlough scheme undoubtedly avoided widespread redundancies at the outset of lockdown, in recent weeks we have seen a rise in employers forced to resort to redundancies,” he said.
“As such, any attempt to mitigate this trend is welcomed. However, redundancies are generally carefully considered decisions which take into account the medium to long term future of the business. It is unlikely that, in the vast majority of cases, a relatively small cash injection such as this is going to significantly change employers’ plans.”
2.05pm CBI: SMES face ‘maximum jeopardy’
Meanwhile, CBI director-general Carolyn Fairbairn backed Sunak’s stance on prioritising jobs.
But while she welcomed the VAT cut and meal voucher scheme, she called for more support of SMEs, referencing the CBI’s own recent growth indicator data.
“Many viable firms are facing maximum jeopardy right now,” she said. “The job retention bonus will help firms protect jobs. But with nearly 70 per cent of firms running low on cash, and three in four reporting lack of demand, more immediate direct support for firms, from grants to further business rates relief, is still urgently needed.
“The chancellor must continue to balance the need to invest in a long-term, sustainable recovery while responding to the urgent challenges that companies are experiencing today.”
1.55pm IFS: Much of £9bn end-of-furlough cash will be wasted
Director of the Institute for Fiscal Studies, Paul Johnson, told the BBC he was shocked at a huge increase in public spending.
Sunak today announced £50bn in public services spending, with a massive £15m being spent on PPE for public sector staff.
“Last time we looked that number was about £18bn – suddenly an extra £30bn has appeared in his numbers,” Johnson said.
“There is another £10bn allocated to testing and tracing. It is quite surprising that very big amount of money was skated over so quickly.”
He also appeared sceptical of the government’s £9bn scheme to reward employers who bring staff back off furlough.
“Surprising aspect of the jobs retention bonus is it’s payable in respect of any employee furloughed at any point even if already back at work,” he said on Twitter.
“You’d think a lot of this spending will be pure deadweight – going to employers who have already/would anyway bring workers back.”
Johnson also questioned the effectiveness of the VAT cut and vouchers to eat out.
He believes the impact of those measures could be hurt by social distancing rules limiting restaurants’ capacity.
1.37pm Diners to receive 50 per cent restaurant discount through August
Sunak has also announced a 50 per cent discount on meals in participating restaurants in August.
The half price meals, from Monday to Wednesday, will see the discount extend to £19 oer head for adults and children as he hopes to encourage people to eat out as the hospitality sector tries to recover.
Torsten Bell, of the left-leaning Resolution Foundation think tank, welcomed the initiative, but said it was “far too small in scale to have the lasting macro impact we need”.
1.33pm Dodds – SMEs ‘could go to the wall’
Shadow chancellor Dodds also criticised Sunak for failing to announce sector-specific support for industries like travel and tourism.
And she took aim at the chancellor for failing to outline any new support for struggling SMEs.
Instead Sunak has, she said, left major decisions on support until the autumn Budget. “This will risk many SMEs going to the wall,” she added.
1.24pm Anneliese Dodds says today needed a ‘back to work Budget’
The shadow chancellor is quick to admonish the government for not having an even more detaild plan through a full Budget.
“Today should have been the day when millions of British people worried about their jobs and their prospects had a load taken off their shoulders,” she said.
“It should have been the day when we got the UK economy firing again.
“Britain should have had a back to work budget, but instead we got this summer statement with many of the big decisions put off until later as the benches opposite know full well.”
1.15pm Stamp duty reaction
Some reaction to the stamp duty holiday – which will remove the tax on properties under £500,000 until 31 March.
Jonathan Hopper, CEO of Garrington Property Finders, said the stamp duty cut shows the housing market is “once again being enlisted to prop up the economy”.
“Chancellors through the ages have used the housing market as a stimulus, and Mr Sunak made clear this radical cut in Stamp Duty has one goal in mind – to boost confidence and get people, and the economy, moving again,” he added.
“Such a big cut in the cost of buying a home will give a welcome shot in the arm to a property market which is still reeling from the impact of the pandemic, and there is huge relief that the changes are effective immediately.”
However, he pointed out that the stimulus is “another demand-side measure” like Help to Buy.
“While the jury is out on how much such schemes boost sales, it’s generally agreed they push up prices,” he warned. “While rising house prices are a great tonic for voters’ confidence, they shouldn’t be an end in themselves.”
1.14pm VAT cut on hospitality and tourism cut from 20 to 5 per cent
VAT will be cut for all hospitality and tourism businesses from 20 per cent to 5 per cent until 12 January.
Sunak says it will be a “£4bn catalyst” that will benefit over 150,000 businesses and consumers and help protect 2.4m jobs.
“We need to give these businesses the confidence to know if they open up…demand will be there and be there quickly,” he said.
1.08pm Stamp duty cut for home buyers until 31 March
Stamp duty will only be paid on houses worth more than £500,000 until 31 March next year.
Sunak says the measure will save an average of £4,500 for each buyer and that nine out of ten people will pay no stamp duty thanks to the temporary change.
The stamp duty threshold is currently £125,000, so today’s announcement marks a substantial increase from this level.
Sunak hopes it will massively boost the housing market at a time when the two major house price indexes respectively found UK house prices have suffered their longest dip since 2010, and their first fall since the financial crisis.
1.06pm Green energy funding confirmed
An already announced £3bn green jobs plan is also confirmed.
The government will spend £2bn to subsidise households to make their homes more energy efficient.
A further £1bn will be spent on “funding for energy efficiency of public sector buildings”, Sunak says.
1.03pm New apprentice and trainee funding
The chancellor has announced a swathe of expected announcements on traineeships and apprenticeships.
Companies will get up to £2,000 to take on apprentices, while companies will receive £1,000 to take on new trainees.
The Department for Work and Pensions will also get another £1bn in funding to deal with increased unemployment.
12.58pm Sunak confirms jobs scheme for young Britons
Sunak goes on to announce the already trailed Kickstart Scheme.
The £2bn scheme will see the government create an estimated 350,000 jobs for young Britons.
It is available for 16-24-year-olds on Universal Credit who will receive 25 hours of pay a week from the government on the National Minimum Wage.
The scheme will last six months and Sunak says there will be no cap on places or funding for the scheme.
Companies involved will receive £1000 for administrative costs.
12.50pm Sunak unveils bonuses for companies that bring back furloughed employees
The government’s economic plan will include an incentive for companies to bring back furloughed employees.
Employers will receive £1,000 per employee they bring back from furlough and keep employed until January.
“It is vital people aren’t returning for the sake of it – they need to be doing decent work,” he said.
“For businesses to get this bonus the employee must be paid 520 pounds on average each month from November to January.
“If employers bring back all 9m people that have been furloughed, this would be a £9bn policy to retain people in work.”
12.46pm Furlough scheme ‘cannot and should not’ go on forever
The chancellor confirms there will be no extension to the government’s wage subsidy scheme beyond October.
“The truth is that calling for endless extensions to the furlough scheme is just as irresponsible as it would have been to end the scheme overnight in June,” he said.
“Leaving the scheme open forever gives people false hope that they will be able to return to the jobs they had before.”
12.41pm ‘No one left without hope’
Sunak takes the despatch box and says that “no one will be left without hope” in the country’s economic recovery plan.
“Our plan has a clear goal – to protect, support and create jobs,” he said.
“We entered this crisis unencumbered by dogma and we continue in this spirit, driven by the simple desire to do what is right.”
12.18pm Prime Minister does not back down from hospital charges
Starmer finishes his questions by asking if the government will U-turn on its decision to re-implement NHS parking charges for frontline workers after the pandemic ends.
He said that after the pandemic the government will “get on” with their manifesto commitment to make parking free for all patients who need it, but no mention of workers.
He also unleashed an attack on Starmer for alleged flip-flopping.
“May I suggest he take his latest bandwagon and parks it free somewhere else,” he said.
“We know how it works – he takes one brief one week, one brief the next.
“He’s consistent only in his opportunism while we get on with our agenda.”
12.08pm Boris Johnson takes responsibility for care home deaths at Prime Minister’s Questions
Before today’s economic statement we have got the weekly duel between Boris Johnson and Sir Keir Starmer at Prime Minister’s Questions.
Starmer opened the proceedings by demanding an apology for the Prime Minister’s comments effectively blaming care homes for the 20,000+ deaths in social care settings from Covid-19.
Johnson refused to apologise, but takes full responsibility for the fallout of coronavirus.
“The last thing I want to do is blame care workers for what has happened or for any of them to think i was blaming them,” he said.
“I take full responsibility for what has happened. The one thing nobody knew early on in this pandemic is that the virus was being passed asymptomatically from person to person as it is.”
11.43pm Labour’s expected response
Shadow chancellor Anneliese Dodds will give Labour’s response to the mini-Budget immediately after Sunak finishes delivering his statement.
Dodds is expected to demand a guarantee that no new taxes are imposed during the coronavirus recovery, despite earlier speculation that Labour would call for wealth taxes.
Dodds is expected to respond to the chancellor’s mini budget by saying that Labour is “not calling for tax rises – we are calling for growth”.
The shadow chancellor is expected demand the Tories’ manifesto promise of a tax triple lock – no rises in income tax, National Insurance or VAT – is fulfilled, despite the government’s ballooning budget deficit.
The comments come as a surprise, after she told the Mirror that those with the “broadest shoulders” should be forced to help pay for the government’s wide ranging spending programmes.
Dodds’ statement marks a break from the party’s 2019 election manifesto, which proposed the UK’s top tax bracket be slashed from a threshold of £150,000 to £80,000.
She is expected to say: “The Tory manifesto committed to no rises in income tax, National Insurance or VAT and therefore it is for them to set out how any additional spending will be paid for.
“It’s the chancellor’s job to make sure the economy bounces back from this crisis so there is money in the coffers to protect the public finances.”
The shadow chancellor is also expected to call for an extension to the government’s furlough scheme to provide targeted support for the most vulnerable industries.
The government’s coronavirus wage subsidy scheme will begin to wind down in September and end in October for all sectors.
Dodds is expected to say: “The money sunk into the Job Retention Scheme must not have merely served to postpone unemployment.
“The scheme must now live up to its name – supporting employment in industries which are viable in the long term.”
Summer Statement: What we know so far about Rishi Sunak’s plan
£2bn package for youth unemployment
Sunak last night announced a massive £2bn unemployment scheme focused on creating hundreds of thousands of jobs for Britain’s young people.
The coronavirus support package will 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 National Minimum Wage for 25 hours a week. That would see young people earn up to £205 a week, and employers can top that sum up.
The scheme could result in 350,000 jobs for young people, according to the left-wing Resolution Foundation think tank.
Stamp duty cut
Another much-reported announcement is that Sunak may order a temporary stamp duty holiday to bolster the housing market.
Currently buyers pay the tax on any properties worth over £125,000. But Sunak’s reported plans would see the threshold raised to either £300,000 or £500,000, offering a huge incentive to buyers to act now.
Initial reports suggested the stamp duty cut would not take place until October. But the Telegraph reported today that it could take effect immediately.
Rishi Sunak’s £3bn green stimulus
The chancellor is also set to reveal a £3bn green investment package to create jobs and upgrade buildings.
Energy efficiency in schools and hospitals will be the target of £1bn of the cash. The £2bn will be spent on making UK homes more environmentally friendly, something the Treasury hopes will provide work for thousands of construction workers.
Training for young people
Another trailed announcement is a £111m investment to triple traineeships for Britain’s youth. The Institute for Fiscal Studies has warned young people face the worst economic scarring from the crisis, and firms will get a £1,000 bonus for each trainee they take on.
Boris Johnson’s FDR-style ‘New Deal’
Last week the Prime Minister compared his own £5bn infrastructure spending pledge to a Franklin D Roosevelt economic splurge.
While economists were quick to point out that Johnson’s sum was far smaller, industries welcomed his promise that the UK would “build, build, build” its way out of its economic crisis.