Chancellor’s Summer Statement
Reaction from Ian Kelly, Tax Partner, 8th July 2020
So now we know, the Chancellor’s Summer Statement wasn’t a Budget.
In fairness, Rishi Sunak had been at pains to quash rumours of a Summer Budget but many pundits were still holding out for, and expecting, one.
Mr Sunak had a difficult act to follow, recent months having brought us a Spring Budget almost immediately overtaken by Coronavirus initiatives but at the end of the day he was that act.
Having previously played an impressive hand of cards, including the Job Retention Scheme (JRS) and the Self Employed Income Support Scheme (SEISS), he will need to move on to explain how he might stimulate the economy and start to pay off the pandemic debt without using the ‘a’ word-austerity – which has allegedly been consigned to history by his Prime Minister.
That looks to be one for another day and, for now, Mr Sunak has pretty much skirted around the edges and made some gentle soundbites.
Interest rates and the price of petrol are both low but, despite this, there is little appetite amongst the public to buy houses and cars such is their concern over the security of their jobs, their earnings and potentially higher taxes come the autumn.
There was an immediate cut in Stamp Duty for transactions below £500,000 until 31 March 2021 but is that going to realistically stimulate the housing sector, especially in our area, with the possible exceptions of London and the South East?
There were incentives to the hospitality industry in the form of a cut in VAT from 20% to 5% for six months and an “Eat Out to Help Out” giving diners up to £10 a head off in participating restaurants on Mondays, Tuesdays and Wednesdays.
The success of these two announcements (and many had championed a broader cut in VAT) will be measured by the number of people through admission gates and sat on seats and, again, they require Joe Public to spend some money and conform to social distancing at those venues.
There was a carrot dangled to employers bringing furloughed staff back to work and working until at least next January in the form of a £1,000 payment, but alongside this businesses are now required to make a contribution under the JRS and pay the wage bill subsequently.
There is a real concern that the phasing out of the JRS is going to lead to increased unemployment and it is difficult to see employers risking a public backlash by taking on trainees and apprentices at the same time as they might be losing workers.
Government financial assistance sought by companies will be viewed alongside factors such as the levels of executive pay and commitment to climate change and at the same time Mr Sunak seemed to be closing the door on any extended help for the self-employed by effectively saying the SEISS (version two is imminent) was one of, if not the best such scheme, in the World.
March and the start of the lighter nights seems a long, long time ago now. The autumn Budget around October or November time and the onset of dark nights looks a long way off. The fact of the matter is that it isn’t and that Budget will be a much sterner test of Mr Sunak’s credentials.