‘A huge relief’: Workers welcome plans to slash taxes and give diners free meals

The chancellor had attempted to play down the significance of Wednesday’s “summer statement” but it contained more significant announcements than some recent Budget speeches.

There was a cut to VAT, a suspension of stamp duty, a multi-billion-pound programme to make homes more energy efficient, a raft of measures to prevent spiralling youth unemployment and a £10 discount for restaurant diners.

Restaurant workers, estate agents, and would-be homeowners were among those who welcomed Rishi Sunak’s speech, but what is the likely impact of the new measures?

VAT cut for hospitality

VAT will be slashed from 20 per cent to 5 per cent for hospitality businesses until January 12.

The cut is “massive news” and a “huge relief” for about two million workers in the sector, said the Hospitality Professionals Association (Hopa).

“It’s not often that I can say I’ve felt a rush of emotion following a House of Commons announcement, but today I certainly have,” said Jane Pendlebury, chief executive of Hopa. “That’s something that just serves to underline how much of a huge relief the latest measures are.

“The reduction will provide businesses operating on wafer-thin margins with some essential breathing space, helping them to recover and rebuild, as well as to retain more jobs – with the £1,000 job retention scheme offering yet further assistance here.”

“The chancellor’s announcements today are wonderful news for our industry, and offer not just light at the end of the tunnel but a real blaze of sunshine, helping to deliver hope to hospitality businesses up and down the country.”

Russell Nathan, senior partner at accountancy firm HW Fisher, cautioned that while a temporary VAT reduction would boost consumer demand and raise consumption, many businesses may fear the measures announced today are not enough.

“To have a lasting impact and bring back confidence, VAT should be reduced for the hospitality sector for a minimum of two years – January isn’t enough time to create long term certainty,” he said.

Mr Nathan called for further measures including a grant to cover six months of rent for struggling businesses.

Restaurant discounts

Undoubtedly the most eye-catching policy was £10 off meals in restaurants during August. The aim is to get concerned diners back into Britain’s struggling eateries.

Deliveroo chief executive Will Shu said the discount plus the VAT cut for restaurants was “hugely welcome”. Many restaurants would have gone out of business without government support, he said.

“This tax cut will be an important lifeline for both small independents and high street family favourite restaurants.

“It is also a recognition from the government of just how important this sector is to our economy and to our communities.”

Labour’s shadow chancellor Anneliese Dodds was less impressed, pointing out that people are thinking twice about visiting restaurants because they fear the virus, rather than because they cannot afford to dine out.

Stamp Duty

The much-criticised tax on buying houses has been suspended immediately for all property sales at less than £500,000, meaning the majority of transactions will not be taxed.

That may be good news for buyers and sellers in the short term. The former could save thousands of pounds while the latter will likely find the pool of potential purchasers has increased.

However, Sean Randall, a partner at Blick Rothenberg, warned that the eight-month stamp duty holiday would merely postpone a fall in property prices without solving the underlying problem.

“Evidence from previous stamp duty holidays shows that it is unlikely to increase sales volumes and will merely bring them forward,” he said.

“Those that are wary of a possible 10 per cent fall in the market, prompted by the deepest global recession since records began and rising unemployment, are unlikely to change their plans until confidence returns.

“The chancellor has put a mask on the face of the housing market. The real story is what the face look will like when it is lifted. That depends on the success of the plan for jobs announced today.”

Furlough scheme

The Job Retention Scheme, which has paid the wages of more than 9 million people, is to wind down as expected by the end of October.

The surprise element was that employers will receive £1,000 for each furloughed worker that they take back on and keep until the end of January.

The measure may not be enough, said Garry Young, head of the National Institute of Economic and Social Research. “The one-off payment of £1,000 per employee is a relatively small amount compared to the average wage of £530 per week. With many employers facing weak demand, cash-flow pressures and uncertainty about prospects throughout the rest of this year, there is a high chance that they will decide now not to take back furloughed workers now that they know the coronavirus job retention scheme will not be extended.”

Labour’s Anneliese Dodds asked what was to stop firms claiming the money for workers they had planned to take back on regardless. Her question went unanswered by the government.

A £1,000 grant per employee would not solve the cash flow problems of some firms, Ms Dodds said. She advocated targeting the job retention scheme at sectors that remain viable in the long-term but are struggling because of the pandemic.

Youth unemployment

A new “kick-start” scheme will pay employers for wages of new staff aged between 16 and 24 for up to six months, while businesses can also apply for grants.

Kirstie Donnelly, chief executive of the skills business City & Guilds, warned that the measures could end up being a “sticking plaster” on long-term problems of youth unemployment and skills shortages.

“These interventions may have the potential to tackle unemployment and help boost productivity, but only if they genuinely lead to new skills and real jobs at the end,” Ms Donnelly said.

“The kickstart scheme in particular is a concern if the young people offered [jobs] do not come out with some official recognition of the skills gained to allow them to get a job elsewhere, or better still, the guarantee of a job at the end of it.

“If this is not the case it’s just a sticking-plaster solution, or even a ‘revolving door’ back to the unemployment queue.”

Labour criticised the government, saying that many big decisions had been “put off until later”.

Ms Dodds pointed to the UK’s Covid-19 death rate, which is among the highest in the world.

She welcomed the vouchers for restaurants and VAT cuts for hospitality but pointed to the chancellor’s own recent comments that the best thing the government could do would be to give consumers the confidence that they can go out and shop safely.

“Fear is corrosive; fear is hurting our economy,” Ms Dodds said.


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