July 2020 United Kingdom summer statement

The July 2020 United Kingdom summer statement (also known as the coronavirus mini-budget[1]) was a statement from the British Government, or mini-budget statement, delivered on 8 July 2020 by Rishi Sunak, the Chancellor of the Exchequer. It succeeded the budget held earlier in the year, and proceeds the budget scheduled for the Autumn. The purpose of the statement was to announce measures aimed at helping to promote economic recovery following the impact of the COVID-19 pandemic. The statement was delivered to the House of Commons, where Sunak unveiled a spending package worth £30bn. Concerns were subsequently raised by organisations including HM Revenue and Customs and the Institute of Fiscal Studies about the statement's impact, as well as its cost-effectiveness, while at least one major retailer declined to take advantage of a financial bonus scheme intended for rehiring employees placed on furlough during the pandemic.

 () July 2020 United Kingdom summer statement
Parliament58th
PartyConservative Party
ChancellorRishi Sunak

Background

Rishi Sunak delivered his first budget as Chancellor in March 2020, as the COVID-19 pandemic was in its early stages in the UK. The country went into lockdown, requiring all but essential services to close. The government announced a series of measures to protect companies, and the jobs of employees whose firms were required to close as part of lockdown, including a furlough scheme that would see the government pay 80% of the wages of workers who were furloughed. The scheme was initially to run until the end of July, but later extended to October. By June, 9.3 million people were being financially supported by the scheme. There were concerns about unemployment, which, by the end of June was nearing 3 million, and threatening to exceed the previous highest unemployment figures last seen in 1986, and fears of a deep recession. In May 2020 it was announced that Sunak would deliver a summer statement in July aimed at helping to reduce the potential impact of a recession. Sunak delivered the statement to the House of Commons on 8 July.[2][3]

Key points

The statement included the following provisions:

  • A temporary increase of the stamp duty threshold on property purchases from £125,000 to £500,000 with immediate effect until March 2021
  • A £1,000 jobs retention bonus for employers who bring back furloughed employees from the end of October 2020 until at least the end of December 2020; the bonus to be paid for each employee and applies to those earning over £520 a month
  • The creation of a kickstart scheme that will pay employers to train 16–24 year-olds "at risk of long-term unemployment"
  • The distribution of vouchers to every person in the UK as part of the "Eat Out to Help Out" scheme to encourage customers back into restaurants, bars and cafes; customers to receive a 50% discount worth up to £10 a head on meals from participating outlets from Mondays to Wednesdays throughout August 2020
  • A six-month reduction in value-added tax from 20% to 5% for the hospitality sector – food outlets, accommodation and attractions from 15 July 2020 to 12 January 2021.
  • A "green homes grant" to help make properties more energy efficient; the scheme to be extended to public sector buildings[4]

Reaction

Responding to the statement, Anneliese Dodds, the Shadow Chancellor, accused Sunak of putting off the "big decisions" by choosing to present a statement rather than a full budget.[5] Keir Starmer, the leader of the opposition Labour Party, said the bonus scheme "should be targeted in the areas which most need it, not across the piece", while Bridget Phillipson, Labour's Shadow chief secretary to the Treasury, wrote to HM Revenue and Customs to ask them to publish their modelling for the job bonus scheme.[6]

The Institute of Fiscal Studies (IFS) warned that taxes would have to rise to pay off the support measures put in place by the government.[7] The IFS also suggested that raising the stamp duty threshold would adversely affect first time buyers, who are largely exempt from paying it, while benefiting sellers who could take advantage of the situation with higher property prices. Helen Miller, deputy director of the IFS described first time buyers as "a group that might actually be made worse off by the policy".[8] The warning of tax rises was echoed by David Gauke, a former Conservative Party minister with HM Treasury, who said that either tax increases or spending cuts would be needed to pay off a £40bn public deficit built up during the pandemic.[9]

In a series of letters sent to the Chancellor before the statement was delivered, Jim Harra, the director of HM Revenue and Customs, questioned whether two of the schemes announced were value for money. He raised concerns about paying companies a £1,000 bonus to retain furloughed workers, a scheme estimated to cost the Treasury £9.4bn, and whether the 50% meal discount, estimated to cost £0.5bn, was cost effective, describing both at "sound policy rationale" but the effectiveness of which would be difficult to measure. In response the Chancellor said that action was needed to protect jobs, but admitted there would be a "dead weight" cost of the job retention bonus from firms who would retain their staff anyway.[6] In a BBC interview the day after delivering the statement, Sunak said that he would not be able to protect "every single job" and that the UK was entering a "severe recession".[10]

Aftermath

On 12 July, the High Street clothes retailer Primark became the first major company to say it would not take advantage of the jobs retention bonus, which would allow it to claim up to £30m from the government. Primark had placed 30,000 of its employees on furlough during the pandemic, but had since brought them all back to work. The company's announcement put pressure on other large employers to make similar announcements.[11] On 19 July, property website Rightmove and catering firm Compass announced they would also not claim money from the scheme.[12]

The temporary cut in Value-added tax for the hospitality industry, worth £4bn, came into force on 15 July and will last until 12 January 2021. Nando's, Pret a Manger, KFC and McDonald's were among the firms to announce price reductions as a result.[13]

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References
  1. Murray, Warren (8 July 2020). "Wednesday briefing: Rishi Sunak to deliver coronavirus mini-budget". Archived from the original on 8 July 2020. Retrieved 8 July 2020 – via www.theguardian.com.
  2. "Sunak unveils £30bn plan to save jobs". 8 July 2020. Archived from the original on 11 July 2020. Retrieved 12 July 2020 – via www.bbc.co.uk.
  3. Pickard, Jim (31 May 2020). "Rishi Sunak set for July stimulus package to stave off recession". The Financial Times. The Financial Times Co. Ltd. Archived from the original on 18 June 2020. Retrieved 8 July 2020.
  4. "Rishi Sunak's emergency mini-budget at a glance". The Independent. 8 July 2020. Archived from the original on 9 July 2020. Retrieved 8 July 2020.
  5. "Shadow Chancellor Anneliese Dodds accuses Rishi Sunak of dodging 'big decisions' by failing to deliver full Budget". Politics Home. 8 July 2020. Archived from the original on 9 July 2020. Retrieved 9 July 2020.
  6. "Tax boss questions value of Sunak job schemes". 9 July 2020. Archived from the original on 11 July 2020. Retrieved 12 July 2020 – via www.bbc.co.uk.
  7. "Taxes will rise to pay for virus, says think tank". 9 July 2020. Archived from the original on 11 July 2020. Retrieved 12 July 2020 – via www.bbc.co.uk.
  8. "First time buyers will be left 'worse off' by Rishi Sunak's stamp duty axe, think-tank warns". The Independent. 9 July 2020. Archived from the original on 10 July 2020. Retrieved 10 July 2020.
  9. "David Gauke: tax rises and cuts only way to pay for Covid-19". the Guardian. 11 July 2020. Archived from the original on 11 July 2020. Retrieved 12 July 2020.
  10. "Sunak 'sorry' for not being able to save every job". 9 July 2020. Archived from the original on 11 July 2020. Retrieved 12 July 2020 – via www.bbc.co.uk.
  11. "Primark says no to £30m job retention bonus". 12 July 2020. Archived from the original on 12 July 2020. Retrieved 12 July 2020 – via www.bbc.co.uk.
  12. "Rightmove and Compass say no to job retention bonus". 19 July 2020. Archived from the original on 19 July 2020. Retrieved 19 July 2020 – via www.bbc.co.uk.
  13. "KFC, Nandos and Pret lower prices after VAT cut". 15 July 2020. Archived from the original on 16 July 2020. Retrieved 19 July 2020 – via www.bbc.co.uk.
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