The finance minister made his summer statement or ‘mini budget’ in parliament on Wednesday, with up to £30bn ($37.6bn) of new stimulus measures.
He set out the government’s plans to support, protect and create jobs, aiming to fight a steep downturn and feared surge in job losses in Britain’s coronavirus-hit economy.
“Although hardship lies ahead, no one will be left without hope,” Sunak told MPs on Wednesday. “I will never accept unemployment as an unavoidable outcome.”
Sunak confirmed a new “job retention bonus” of £1,000 per employee for firms who bring back furloughed staff. If every employer applied for every work it would cost more than £9bn ($11bn), though fears remain of rising lay-offs as the furlough scheme itself is cut back.
Firms can apply for a separate £2,000 bonus for hiring apprentices, and £1,500 on top for over-25s. Businesses and unions welcomed a new “Kickstart Scheme,” which Sunak said would create hundreds of thousands of work placements for unemployed 16-24-year-olds.
Sunak also promised eye-catching measures to help struggling hospitality firms. He confirmed a half-price “eat out to help out” discount on meals and non-alcoholic drinks every Monday to Wednesday in August.
Firms will have to register for the discounts, which will be capped at £10 per customer. Food, accommodation and attraction firms will benefit too from a temporary VAT cut from 20% to 5% from next Wednesday. Businesses and think tanks had called for such targeted VAT cuts, and for £500 spending vouchers for households.
— HM Treasury (@hmtreasury) July 8, 2020
The property industry will also see a significant boost to demand as Sunak confirmed an immediate stamp duty cut in England and Wales for this financial year. The tax threshold was raised from £125,000 to £500,000 ($626,000), saving buyers thousands of pounds in pricier areas. The Treasury said nine in 10 buyers would now not pay stamp duty.
Meanwhile a £3bn green energy and jobs scheme includes £5,000 vouchers for homeowners on energy-efficient home improvements, and £1bn of work on public buildings. Arts organisations welcomed £1.6bn ($2bn) of grants announced over the weekend for theatres, museums, galleries and other cultural venues hit hard by the lockdown.
The Conservative government had already launched some of the most interventionist policies in decades to save firms and jobs during lockdown in recent months. Public spending and borrowing have soared, with £45bn in business loans, £27.4bn in wage subsidies for 9.4 million furloughed workers, and £7.7bn in grants to the self-employed.
But Sunak said on Wednesday he had “never been the prisoner of ideology,” after coming under heavy pressure to do more to fuel recovery.
The OECD forecast on Tuesday UK unemployment could still hit 11.7% this year despite previous support measures, with a string of major UK firms announcing mass layoffs in recent weeks. The Resolution Foundation think tank warned this week of a 9.3% coronavirus hit to GDP in 2020, the worst in a century, saying around £200bn stimulus was needed.
Labour had also called on Sunak to extend the coronavirus job retention scheme for “viable” industries. Shadow chancellor Anneliese Dodds warned that time was running out to “avoid additional floods of redundancy notices.” She added that furlough bonuses and Kickstart Scheme funding should not subsidise jobs that would still have been maintained or created without them.
But the chancellor ruled out maintaining the furlough scheme beyond October, admitting its wind-down would be a “difficult moment” but calling further extension “irresponsible.”
Sunak signalled too that the government’s spending spree will not last, saying the country “must and will put our public finances back on a sustainable footing” in the medium-term. Dodds warned any future tax rises or spending cuts could damage recovery.