QUESTION: What were the main measures introduced by Chancellor Rishi Sunak in last week's summer statement?
ANSWER: Having propped up the economy over the past four months, the chancellor had the unenviable task of trying to provide further stimulus to the UK economy against the backdrop of government finances in deep deficit.
To put the challenge in perspective, in the first two months of the current financial year the UK Treasury has borrowed almost twice the budgeted borrowing forecast for the entire year and we are now at a situation where government debt exceeds 100 per cent of GDP.
Nevertheless, the last thing the economy needs now is an austerity programme and mindful of this, the Chancellor laid out the following further incentives:
• A new job retention bonus will be created which will provide a one off payment of £1,000 to employers for every previous furloughed employee who remains continuously employed through to the end of January from the end of the Coronavirus Job Retention Scheme in October. The employees must earn more than £520 per month on average between the end of CJRS and the end of January with payments being made in February.
• A new Kickstart scheme will be created to provide hundreds of thousands of high quality six month work placements for those aged between 16 and 24 who are on Universal Credit and who are considered to be at risk of long term unemployment. The government for each of these jobs will cover 100 per cent of the relevant national minimum wage for 25 hours per week plus the associated employers national insurance and employer minimum automatic enrolment pension contributions.
• A new traineeship programme will provide work experience for 16-24 year olds in work placements and businesses providing training will receive a payment of £1,000 per employee.
All of the above measures are designed to "support" jobs.
The next area of intervention by the chancellor is around "protecting" jobs and this element of the summer statement focuses on the hospitality and leisure sector.
There will be a temporary VAT cut for food and non alcoholic drinks and a reduced 5 per cent rate of VAT will apply to supplies of food and non alcoholic drinks from restaurants, pubs, bars, cafes and similar premises across the UK with this temporary rate applying from July 15 until January 12. In addition, this new 5 per cent rate of VAT will also apply across the period to suppliers of accommodation and admissions to attractions across the UK.
Finally, a “eat out to help out” scheme will be introduced to encourage people to return to eating out with every diner entitled to a 50 per cent discount up to £10 per head on their meal valid Monday to Wednesday during the month of August.
The final area that the chancellor intervened in is around “creating” jobs, with this primarily targeted at the housing and construction sector. Stamp duty land tax has been abolished until March 31 on the first £500,000 slice of a property value.
Furthermore, a Green Homes Grant will be introduced which will provide at least £2 for every £1 up to £5,000 per household to home owners and landlords spending money making their residential properties more energy efficient.
These are the main measures that will affect many of us from a day to day perspective. There were a number of other initiatives around accelerated infrastructure programmes which will also come into force from this month.
:: Paddy Harty (p.harty@pkffpm.com) is a senior tax director at PKF-FPM (www.pkffpm. com). The advice in this column is specific to the facts surrounding the question posed. Neither The Irish News nor contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
