Chancellor slashes VAT for hospitality industry and launches his ‘plan for jobs’

Rishi Sunak preparing for the summer economic update statement (Credit: HM Treasury / Flickr / Creative Commons 2.0)

The Government is to cut VAT for the hospitality industry to 5% and introduce an “eat out to help out” discount scheme for diners as part of its plans to restart the economy.

The measures came as part of a wider programme to limit mass unemployment in the months ahead.

Chancellor Rishi Sunak said “the job has only just begun” as he unveiled his own “plan for jobs” this lunchtime.

Sunak told Parliament: “I will never accept unemployment as an unavoidable outcome.”

He detailed a “£4bn catalyst for the hospitality and tourism sector” by slashing VAT for those businesses by three-quarters on food, accommodation and attractions for the next three months.

He also launched a new scheme, “eat out to help out”, which will give a £10-per-head discount for every diner eating out between Monday-Wednesday in August.

Participating businesses will be able to claim the money back each week and have the funds in their account within days, the Chancellor said.

The hospitality sector had 1.4m workers furloughed and remains under huge pressure but Sunak encouraged consumers to find “that new balance between safety and normality”.

Sunak, who has been Chancellor for less than five months, also sought to find a new balance between huge financial support from Government that is deemed necessary and the traditional economic thinking his Conservative predecessors in Number 11.

The Government has already spent £35bn on furloughed and self-employed workers and guaranteed business loans worth nearly £45bn.

Sunak confirmed the furlough scheme would wind down as previously announced, ending in October.

But he launched a new jobs retention bonus that is potentially a £9bn policy to retain people in work.

“If you stand by your workers, we will stand by you,” said Sunak.

Businesses that bring a furloughed worker back will receive a £1,000 bonus if the employee is paid an average of at least £520 per month from November to January.

He confirmed the well-trailled kickstarter scheme, a £2bn programme to pay the wages of 16-24 year-olds starting new jobs that provide training and support.

There were further financial measures for employers taking on apprentices and trainees.

Unemployed people will also be supported, with the DWP getting £1bn to support people back to work alongside funding to double the number of careers advisors.

Other economic stimulus measures were confirmed by the Chancellor in his 25-minute summer economic statement.

A £3bn green investment designed to cut carbon and create jobs will provide vouchers for up to £5,000 for people to insulate their homes while £1bn will be spent on public buildings.

Sunak also increased the stamp duty threshold to £500,000 to March 31, which will take effect immediately. The average cut is worth £4,500 but purchasers can save up to £15,000.

Northern Powerhouse Partnership director Henri Murison said: “The numbers of unemployed 16-24-year-olds in the Northern Powerhouse are some of the highest in the country – the worst being the North East, followed by Yorkshire and the Humber and the North West half way down the list.

Henri Murison

“We need to see businesses in the Northern Powerhouse step up and offer opportunities through the Kickstart Scheme as we have greater demand for it here.

“We, as a Partnership will ourselves commit to do this, because we need to see the young unemployed getting experience in leading capabilities like energy, health innovation, advanced manufacturing and digital as well as creative industries that have secure longer-term prospects.”

Mike Ainscough, managing director at Wirral-based national fire and security firm AinsCo Fire & Security, also welcomed the kickstarter package, saying: “Those aged 16-24 are the future of our industry and it is incredibly important that these talented individuals with a hunger to learn and work have now been thrown a lifeline by the Government, which, at AinsCo, we will be able to facilitate up to four new apprentices.

Mike Ainscough

“It is imperative now that these 30,000 traineeships are fully utilised to kick-start employment in the country.

“With a proud reputation already for bringing through up and coming apprentices, AinsCo are ready to welcome those looking to hone their skills in the fire and security industry.”

Anthony Stankard founder of Manchester property agency Reside said, regarding the stamp duty initiative: “It’s a great idea and only logical to introduce immediately as otherwise it would have stalled everything for three months.

“To run it to next April rather than the end of this year gives it longevity and will help people plan and make sensible decisions.”

He explained: “Our average sale price is £275,000. This transaction would currently attract the following tax bill: First Time Buyers would pay £0; Normal Buyer would pay £3,750; BTL investor would pay £12,000.”

He said: “First time buyers are already exempt up to £300,000, so it will not have a massive effect on this part of the market, which is probably the most active and most important sector right now.

“The Help to Buy Scheme on new build homes is probably more important than a stamp duty holiday.

“Second time buyers will have a big incentive, depending on where their next step up the property ladder comes.

“This includes downsizers and we are still seeing a number of these buyers selling up in the country to have a home in the city so selling a ‘family home’ at, say, £700,000 and downsizing to a property without having a big tax bill will be attractive.”

Barry White, chief executive of Transport for the North, said: “The Chancellor’s update today is welcome news, demonstrating the Government’s will to create jobs and support economic recovery.

Barry White

“The commitments to creating green jobs and supporting young workers into skilled roles are particularly essential to ensure the UK bounces back in a sustainable way. Transport and other infrastructure projects will play a vital role in making that a reality.

“We welcome the Government’s ongoing commitment to levelling up and continue to stress the need for confirmed funding for a Northern Infrastructure Pipeline of road and rail projects, including the delivery of HS2 and Northern Powerhouse Rail in full.

“It is vital that the Spending Review and National Infrastructure Strategy later this year set out a sustained pipeline of investment to breathe life into our Northern economy and form the bedrock of job creation, closing the productivity gap.”

Mark Hammond, founder of Lancaster-based carbon offset service iOffset, said: “The Chancellor’s announcement today of a £3bn green investment package is welcome, but is only the first step in the nation’s green recovery and in further supporting businesses and consumers in reducing their carbon footprint.

“There is still a significant way to go and, as a nation and global community, there needs to be a step change in how we tackle this issue.

“Individuals and businesses must be assisted in reducing their carbon emissions, offsetting those that are unavoidable and sharing the message to ensure we all play our part.

“We, therefore, urge the Chancellor to build on today’s commitment and facilitate a wider-scale green recovery strategy that includes the regulation of carbon offsetting schemes to ensure that they are transparent and legitimate.

“This strategy must bring the nation in line with the significant investments being made by many of our European counterparts and ensure that the UK meets its target of being a carbon net zero economy by 2050.”

Richard Roberts, head of retail at independent law firm Brabners, said: “Bricks-and-mortar retail has suffered greatly during the lockdown period for obvious reasons, which has only accelerated the general trajectory of consumers moving online.

“Whether the announcement today will be enough to change consumer attitudes is another question, but it does offer a much-needed glimmer of hope for the sector.

“Footfall will be a crucial stimulus for the economic recovery. As such, the VAT cuts announced today will play an important role in re-energising the future of physical retail, particularly in those locations which have developed a blend of leisure and hospitality offerings that turn town centres and shopping districts into destinations for consumers.

“Some clothing or furniture outlets may be concerned that valuable spending will be diverted from their doorstep to pubs and restaurants but, on balance, the uptick in consumer activity should swing the numbers in their favour as well.”

TUC General Secretary, Frances O’Grady, said: “Mass unemployment is now the biggest threat facing the UK, as shown by the thousands of job losses at British Airways, Airbus and elsewhere.

Frances O’Grady

“The Government must do far more to stem the rising tide of redundancies. We can’t afford to lose any more good skilled jobs.

“The Chancellor should have announced targeted support for the hardest-hit sectors like manufacturing and aviation. Struggling businesses will need more than a one-off job retention bonus to survive and save jobs in the long-term.

She added: “The Government should have announced extra investment in jobs across all public services – starting with filling the 200,000 vacancies in the NHS and social care. And if the Chancellor wants people to have the confidence to eat out, he should have announced a pay rise for hard-pressed key workers rather than dining out discounts for the well-off.”

Steve Rotheram, Metro Mayor of the Liverpool City Region, said: “Over the last few months I have spoken with the Prime Minister and Chancellor about the need to introduce a Young Person’s Guarantee with the guarantee of a job, training or apprenticeship for every young person out of work, so I welcome today’s announcement, but will be looking at how and when funding will be distributed.

“I also welcome the short-term measures to support hospitality and the visitor economy, which are vital for our city region.

“As the Chancellor acknowledged, the country still faces hard times ahead. Many of today’s measures are short-term and month-to-month, but really our local councils and businesses need a properly funded, longer-term plan, and many will not be able to wait until the Budget in the Autumn.

Steve Rotheram

“We’ve already seen record numbers of applications for Universal Credit over the course of this crisis and, I fear that unemployment will continue to rise as the furlough scheme comes to an end, unless there is further targeted support beyond what was announced today.

“I will continue to work with local business and trade union leaders to lobby government for the extra support we need, beyond the measures announced today, to protect as many jobs possible in the coming months.”

Maggie O’Carroll, chief executive liverpool social enterprise The Women’s Organisation, said: “We urgently need to see more financial support in place for SME’s which are viable in the long-term but are facing an immediate cash flow problem.

Maggie O’Carroll

“These are the very businesses which would stand to benefit most from schemes like the re-employment bonus but might not have the financial capacity to operate even with this support. Without the right financial injection now, we risk losing these enterprises altogether, along with the creation of decent jobs down the line.

“When it comes to the Chancellor’s plan for jobs, supporting start-ups will be crucial in creating new quality employment opportunities. Programmes like Enterprise Hub here in the Liverpool City Region offer an incredibly valuable resource in equipping aspiring entrepreneurs with the skills, knowledge, and support to successfully launch and grow new enterprises. A major scale-up of investment into small business support schemes like this will be essential to aiding long-term economic recovery.”