- Schemes announced for job retention bonus, training and career counseling
- Hospitality sector provided with temporary VAT relief
- Stamp duty waiver for homebuyers
Rishi Sunak, Chancellor of the Exchequer, announced a £30 billion mini budget on Wednesday, 8 July 2020 for the country to deal with the harsh effects of the coronavirus pandemic. Apart from other measures, the scheme pledged to provide dedicated funds worth more than £13 billion to help generate jobs across the nation.
The British government has been consistently supporting the sluggish economy, since the beginning of the pandemic in March 2020. It has already spent close of £300 billion by way of various schemes towards job retention, tax cuts & deferrals, and cheap loans to businesses.
Let us now discuss the details of various employment generation schemes announced in this mini budget, one by one.
Employment Generation Schemes
Job Retention Bonus Scheme: This scheme provides payment in the form of a job retention bonus worth £1000 for each furloughed employee that the companies decide to retain back and pay at least the prevailing minimum wage. This new job bonus scheme will last till January 2021. It is expected to cost £9.4 billion to the government exchequer.
Kickstart Scheme: This scheme has a budget of £2.1 billion and under this, the government will directly pay employers to create new jobs for youngsters in the age group of 16 to 24 years. These people will be offered a six-month placement (from 1 August 2020 to 31 January 2021) by their employers and government will bear their salary bill up to the prescribed UK national minimum wage limit. Rest of the salary bill shall be borne by the employers.
Trainings: The UK Treasury announced that the total number of trainings provided in the country will be trebled by March 2021. This will make people skilled and enable companies to hire them productively. Companies will be given a sum of £1000 for every training provided. The total allocation for this scheme is kept at £111 million.
Apprenticeship: Companies will be paid up to £2000 by the government towards each apprenticeship being offered by them during the period of July to December 2020, under the age of 25. Each new apprentice hired above the age of 25 will be offered a payment of £1500 by the government.
Coaching and Career Services: The mini-budget laid special emphasis on increasing the number of work coaches and career counselling services across the nation, so that people get the necessary guidance on improving their career prospects and finding a new job, especially if they have been laid off recently. To this end, the total number of work coaches will be doubled to 27,000 by the month of March 2021, and this will cost a sum of £895 million. Further, the government will also invest £32 million in the National Careers Service.
What’s the fuss about unemployment?
Over the past few months, beginning March 2020, government has supported jobs in the UK economy through many support measures, especially the furlough scheme, which has saved about 9 million jobs in the country. It has costed the exchequer more than £22 billion till June 2020. A lot of sectors are badly hit due to the widespread coronavirus disease, and have been forced to cut production. They are struggling to survive and have been forced to lay off workers in large numbers. Some of these sectors are oil & gas, travel, tourism, hospitality, retail, arts & culture, and construction. Further, with minimal hope for things getting back to normal very soon, new hirings are not expected to take place, unless the government intervenes.
The OECD (Organisation for Economic Co-operation and Development) warned on 7 July 2020 that the unemployment levels in Britain could sharply shoot up from the existing rate of 3.9 per cent to 15 per cent by the end of 2020, if it is hit by a second wave of corona infections. Even without a new wave of these infections, the unemployment rate is expected to touch 11.7 per cent for 2020, the body added.
Coming back to the mini-budget, it has given special attention to providing the required fillip to the ailing hospitality and housing sectors in Britain. It has also attended to speeding up the green initiatives in Britain. Let us take a look at these announcements briefly.
VAT Support for Hospitality
The UK Treasury announced a big support to the ailing hospitality industry, by offering a short-term VAT (Value-Added Tax) cut from 20 to 5 per cent. With hospitality firms expected to pass on this VAT reduction to customers in terms of lower food bills, the demand for eating-out might increase. This move is aimed at protecting 2.4 million jobs in the sector. It is going to cost £4 billion to the Treasury.
Sunak also announced an eating out discount scheme for the month of August 2020, whose objective is to encourage people to go out and spend money in the restaurants. The scheme will offer a 50 percent discount on the food bills, with a cap of £10 per person.
A slashed 5 per cent VAT rate will also be applicable to the sectors of hotel accommodation, and attractions such as theaters, theme parks, and zoos.
Stamp Duty Waiver for Housing
The UK Chancellor has offered a temporary stamp duty waiver, to boost the housing sector in the UK. It will cost £3.8 billion to the exchequer. The waiver will be applicable from July 2020 to March 2021.
Sunak has provided a stamp duty waiver to homebuyers, provided their property is priced at less than £500,000. Earlier, this limit was £125,000. The move is expected to push-up demand for housing across Britain.
The government has set aside £3 billion for greening public sector buildings, hospitals, schools and social housing projects. An addition sum of £50 million is being offered to provide social housing buildings with environment friendly amenities like glazing and insulation. With this move, the government expects to generate a close to 100,000 new jobs.
Finally, Rishi Sunak has been able to successfully provide the much-needed stimulus to the UK economy, struggling to survive the coronavirus pandemic. He announced a £30 billion mini-budget, focused at generating and retaining jobs, during the testing times when mass-unemployment is being feared. He has offered sector-specific initiatives in terms of a VAT cut for hospitality sector, and a stamp duty rebate for the housing market. These measures are expected to stimulate the economy, at least in the short-run. Moreover, they are also adding to the popularity of Sunak as a Counsellor of the Exchequer who understands the pain of the industry and people.
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