2.00pm: Bigger spending decisions remain
As more reaction to the statement continues to feed through, some have noted that larger spending decisions have been conspicuously absent from today’s agenda, possibly being staved off until the budget in the Autumn or later.
Nathan Long, senior analyst at Hargreaves Lansdown, has said pension and investment reforms remain on the Chancellor’s to-do list.
“Many people have been calling time on the triple lock [state pension] for years, but reducing the potency of the State Pension increase remains too politically unpalatable, at least for now. I don’t expect this to be the last we hear of it though. We’re expecting earnings to fall this autumn, and then recover slowly into 2021. The worry is that the triple lock would give state pensioners a huge pay rise at a time when the working population will likely be still clawing their way back from the economic effects of [coronavirus]”, he said.
“The Chancellor was quiet on the topic of changes to pension tax relief despite rumours that it was in the crosshairs. Savers still need to navigate the Autumn Budget, but whatever happens, one thing is clear: things aren’t going to become more generous for higher rate tax payers in future. For anyone paying tax at 40% or 45%, bringing forward planned saving could be worthwhile”, he added.
Meanwhile, Hargreaves personal finance analyst Sarah Coles said the ‘eat out to help out’ discount scheme in August seems to be aimed at not just giving a temporary boost to hospitality but also “help tempt people who were teetering on the edge of going out – and get them back in the swing of things permanently”.
“The success of the scheme will depend on how hard we find it to resist a bargain, and whether businesses can remain profitable given social distancing requirements”, Coles said, adding that the changes to stamp duty may not make as a big a difference as hoped due to tighter criteria among mortgage lenders which have pushed up deposit requirements.
1.41pm: Analysts give mixed response
Initial analysis coming from the market around Sunak’s announcements seems to be tepid at best, with some saying the measures don’t appear to go far enough and the Chancellor will need to provide similar measures in the Autumn budget and potentially into next year to keep the economy afloat.
“At first glance the market reaction has been positive, with sterling rallying against the dollar and the euro, investors evidently deciding an activist government with money to spend is better than one looking to save money at the risk of an even deeper recession. £9 billion for a job retention scheme and £2 billion job creation scheme for young people are two of the big ticket measures announced, but it still seems like tinkering around the edges when set against a 25% contraction in GDP”, said IG’s chief market analyst Chris Beauchamp.
“Pubs and housebuilders have been boosted by the news of additional programmes to boost consumer spending on meals out, a cut in VAT for tourism and hospitality and a stamp duty holiday. But for an economy so reliant on consumer spending, these are just trifles, of little use if consumers remain worried about the longer-term outlook for jobs and spending. Mr Sunak gets 5 out of 5 for effort today, but he will need to repeat the performance later this year and again in early 2021, since as he himself admits, we have only just begun the journey to recovery”, he added.
Meanwhile, Samuel Tombs, chief UK economist at Pantheon, said the measures were “not enough to underpin a V-shaped recovery” and despite the injection of spending they still expected UK GDP to be about 5% below its pre-coronavirus level by the end of the year.
1.26pm: Stamp duty move boosts housebuilders and estate agents
Looking to the market, some of the Chancellor’s announcements have caused segments of the market to pick up.
1.15pm: And that’s it
Sunak has wrapped up his statement after just about thirty minutes, the Labour Shadow Chancellor Anneliese Dodds is now responding to the announcement.
Here is a quick summary of the key parts of the statement:
- The government has spent £49bn so far to support the public sector during the pandemic
- The furlough scheme will be wound down from October
- Companies will receive a £1,000 bonus for each furloughed employee they bring back to work
- £2bn will be provided to help firms create jobs for young people at risk of long-term unemployment
- The government will expand traineeships and increase spending on careers advice and jobseeker services
- £2,000 will be provided to employers for each apprentice they hire between August and January
- £2bn will be spent to provide grants for homes to make green home improvements
- The stamp duty threshold will be raised to £500,000 from £125,000 immediately until March 31 next year
- The rate of VAT for tourism and hospitality-related activities will be cut to 5% from 20% for six months
- Each Monday and Wednesday in August, customers in restaurants, cafes and pubs can receive a 50% reduction on meals and non-alcoholic drinks up to £10 per head
1.04pm: Green investment, tax cuts and restaurant vouchers
Moving to job creation, the Chancellor says the government is focusing on its “level up” pledge.
He announces a £2bn green homes grant, previously flagged, to help homeowners improve energy efficiency. Up to £5,000 per household and £10,000 for low income homes. Another £1bn is unlocked to improve energy efficiency for public buildings.
Sunak goes on to say he will cut stamp duty to boost the housing market. Until March 31, 2021, the stamp duty threshold will be immediately raised to £500,000 from £125,000.
To support sectors hit hard by the pandemic such as hospitality and tourism, the Chancellor says he is aiming to “restart” these industries by cutting VAT on food, accommodation and attractions to 5% form 20% from next Wednesday until January next year.
He adds that in August the government will reduce the cost of eating out by 50% up to a value of £10 per head to help encourage people to visit restaurants.
12.53pm: Furlough bonus
Turning to the details, Sunak says the government furlough scheme will be wound down in October, and that a new jobs retention bonus will be made available for businesses that bring back employees from furlough.
Businesses will be given £1,000 for each employee they bring back from furlough, subject to salary thresholds.
The Chancellor is also announcing that a kickstart scheme to help young people get jobs. The scheme will incentivise firms to create new jobs with minimum requirements for working hours and quality, with the government to pay these worker’s salaries for up to six months. There will also be no cap on the number of places funded.
He also reveals bonuses for firms to take on apprenticeships.
12.46pm: Statement begins
Sunak has begun to deliver his statement. He says that the government has “a plan for jobs” to support the economy and provide opportunities.
He adds that the government has supported 11mln people through its job retention scheme as well as supporting businesses and public services with funding packages of over £40bn.
The UK is now entering the second stage of its pandemic response plan, adding that the IMF is now predicting the biggest slowdown since records began, with the UK economy having contracted by the same amount it grew in the last 18 years.
At around 12.30pm the Chancellor of the Exchequer Rishi Sunak is scheduled to address the House of Commons with his summer statement, also known as the ‘mini-budget’, which is expected to contain a number of policy announcements to help boost the UK economy amid the pandemic-induced downturn.
Some announcements already telegraphed include a £2bn scheme to create jobs for young people as well as around £3bn that has been earmarked to help boost the green economy and help the UK cut down on its emissions.
There is also the possibility that Sunak could unveil cuts to VAT, a stamp duty holiday and more relief for business, as well as bringing in a voucher scheme to help encourage consumer spending in some of the sectors hit hardest by the recession.
All will hopefully be made clear within the next hour…