Sunak unveils billions to kickstart the economy

Chancellor Rishi Sunak has unveiled a multi-billion pound package to boost employment and reinvigorate housing, tourism and hospitality. In a summer statement to the House of Commons, he pledged to kickstart Britain’s economy as the country emerges from months of lockdown.

“People need to know we will do all we can to give everyone the opportunity of good and secure work”, Sunak said. “People need to know that although hardship lies ahead, no one will be left without hope. So today we act with a plan for jobs. Our plan has a clear goal: to protect, support, and create jobs.”

The furlough scheme, due to be wound down by October, is to be replaced by a new “jobs retention bonus” to incentivise firms to bring furloughed workers back to employment. The government will pay firms a £1,000 bonus per employee returned.

“We will pay the bonus for all furloughed employees, so if employers bring back all 9 million employees who are furloughed, this would be a £9 billion policy to retain people in work,” Sunak said.

There is a more comprehensive effort to ensure young people can start their career, having missed out during lockdown. The Treasury’s “Kickstart scheme” will subsidise six-month work placements for people on Universal Credit aged between 16 and 24, covering the employee’s entire national minimum wage salary at a maximum of 25 hours a week, with extra money to cover overheads.

These must be new jobs, and employers will be required to provide training and support to help Kickstarters find future jobs. In total, each Kickstarter will receive around £6,500 in government subsidies.

“I urge every employer, big or small, national or local, to hire as many Kickstarters as possible. Today I’m making available an additional £2 billion, enough to fund hundreds of thousands of jobs. And I commit today, there will be no cap on the number of places available,” Sunak said.

That is merely one part of the package for young people. The government will also increase subsidies for traineeships and triple the number of places by paying employers an extra £1,000 per new trainee. £100 million will also be invested in extra courses for 18-19 year olds entering high demand sectors, such as engineering. Bim Afolami MP recently spoke to Reaction about the importance of training in these areas to post-Brexit manufacturing.

The Chancellor is also focused on reintroducing older job seekers to the market. There will be a new subsidy of £1,500 per head for businesses hiring apprentices over the age of 25. For those seeking support in job centres, the number of work coaches will be doubled, the flexible support fund will be increased, the rapid response service will be extended, the work and health programme will be expanded, and a new scheme will be developed to support the long term unemployed. In total, this will be a £1 billion investment in the Department for Work and Pensions.

There are more eye-watering sums in the government’s effort to create local “green jobs” by subsidising insulation. Homeowners seeking to improve their property’s energy efficiency can apply for vouchers covering at least two-thirds of the cost, up to £5,000 per household. For low income households, the voucher will cover the full cost, up to £10,000 – in total costing the Treasury at least £2 billion.

There is also an extra £1 billion to improve the energy efficiency of public sector buildings, alongside an extra £50 million for projects experimenting with decarbonising housing. Taken together, the Treasury believes this will support around 150,000 “green jobs”.

Rejuvenating the housing market is also considered a priority, with the Chancellor implementing an immediate stamp duty cut. The threshold under which no stamp duty is paid will be increased from £125,000 to £500,000, meaning that almost 90% of main home buyers this year will pay no stamp duty at all. This policy will cause the most discomfort among Conservative MPs, who believe tax cuts would be more effective in other areas. One senior Tory backbencher yesterday told Reaction that a stamp duty cut would be “a ridiculous waste of money”.

The hospitality and tourism sectors will also receive a shot in the arm, thanks to a reduction in VAT on food, accommodation and attractions, from 20 percent to 5 percent, running from next Wednesday until 12 January. This amounts to a £4 billion tax cut.

Furthermore, the government will give everyone an “eat out to help out” discount voucher in August, with a 50 percent cut to the price of meals eaten at any participating business, Monday to Wednesday, up to a maximum discount of £10 per head for everyone, including children. Combined, the two policies are expected to save hundreds of thousands of jobs. “1.8 million people work in [the restaurant] industry. They need our support,” Sunak told the Commons.

The Chancellor’s list of subsidies, tax cuts and treats will add an extra £30 billion to government spending. He has sought to make the most of it by investing in areas that have already delivered results, such as apprenticeships; “we know they work” was a familiar refrain in his speech. The hope is that encouraging employment and turbocharging struggling sectors will encourage a sharper economic recovery in the immediate term, and therefore reduce longer term borrowing.

Not all jobs can be saved, however, and not all people will find new subsidised replacements. There remain large holes in the Chancellor’s economic vision. Soon, he will have to explain how the government intends to pay for the years-long economic impact of coronavirus.