The Chancellor today made his statement, titled “A Plan for Jobs” to the House of Commons, below, PLMR run through some of the key themes:
- Full speech can be found here.
- HM Treasury press release can be found here.
- The supporting policy paper can be found here.
Break with traditional Conservative thinking – The Chancellor’s statement further reinforces this Government’s clean break with austerity. It also represents a shift away from traditional Conservative thinking on how best to respond to a crisis. Tory Chancellors of old might have opted for tax cuts or improvements to the ease of doing business – not Rishi Sunak. Instead, his response is centred around continued state subsidy aimed at stimulating demand. This transition away from Conservative orthodoxy was also acknowledged by the Chancellor in his preamble, when he said the Government had “entered the crisis unencumbered by dogma.” The measures that followed certainly pay testimony to this and show how willing the Boris Johnson administration is to break with conventions, defy expectations around ideology, remain activist and interventionist in the economy and ultimately, spend money to deliver on the Government’s wider levelling-up agenda. This approach is causing some concern amongst Conservative backbenchers and the tensions between the more traditional Conservative approach of championing a small state, lower taxes and free markets, and actions taken by this Government are likely to play out over the coming months ahead of the Budget and Spending Review in the Autumn.
Jobs, Jobs, Jobs – Sunak said his plan aimed to protect, support and create jobs, while providing confidence to businesses and affording millions of people opportunity. He said the Government would “never accept unemployment as an unavoidable outcome.” Citing the success of the Job Retention Scheme (JRS), Sunak said the country had come too far to see unemployment increase drastically after the crisis. He said today’s suite of measures would focus on jobs, and the need to rebuild, adding that a Spending Review and Budget would take place in the Autumn. The Government is acutely aware of the longer-term impact of the Covid-19 pandemic on younger people and is keen to avoid “a lost generation” or a skills gap in the future, so it has been particularly focused on framing interventions as an offer for young people. The Chancellor also noted the importance of sound public finances, and the need to return to “sustainable footing” – adding that the package would be the start of a long “rebuilding process.”
Job Retention Scheme (JRS) – Sunak said that furloughed status cannot and should not go on in perpetuity. He said endless extensions to the scheme is as irresponsible as prematurely ending it. He justified this by citing the reduction in skills that takes place during prolonged period outside of work, and announced it was therefore necessary to wind the scheme down flexibly and gradually, with support ending in November. This measure has been particularly costly and the Government is keen to impress that we are now in Phase 2 of their recovery plan, which is designed to move away from the somewhat artificial safety net that the furlough scheme provides and towards the onus going back to businesses and people getting back to work.
Job Retention Bonus – In terms of getting people back to work, the Chancellor announced plans for a ‘job retention bonus’ – whereby for every worker brought back from furlough, the Government will pay the business £1000 per employee, encouraging retention. Sunak said to businesses, “if you stand by your workers, we’ll stand by you.”
Protecting jobs – Sunak said the British economy relied on consumption, arguing that the best measure to support jobs is to allow pubs, restaurants, etc to reopen. In order to “get the sector moving”, he announced a VAT reduction on food, accommodation and attractions such as hotels to 5% until January 2021. He said this would stimulate demand and help to protect 2.4 million jobs. By bringing forward this measure, the Government is keen to encourage confidence in the economy and encourage people to go out and spend again, which is a key part of a sustainable long-term recovery.
Kick Start Scheme – Highlighting the focus on support for young people, the Chancellor said it was vital to provide under-25’s with opportunity. In order to achieve this, he announced the ‘kick start scheme’ – which pays businesses to create new jobs for young people with training and support. On the condition that certain criteria are met, the Chancellor said this would entail the government paying the wages of the employee for 6 months. He declared initially that £2bn would be made available for the scheme, saying there would be no cap on the number of places. Sunak also said the government would pay employers £1000 to take on new trainees and announced funding for career advice for over 250,000 more people. He also announced an expansion of the apprenticeship and interview guarantee.
Apprenticeships – Emphasising the need to provide young people with training and skills and the longer-term economic benefits of this, the Chancellor said the Government would finance companies to take on apprenticeships. Sunak also said he’d introduce a new bonus for businesses taking on apprentices that are 25 or over, with a payment of £1500 for every place. In justifying the policies, the Chancellor said the longer people are out of work, the harder it is to return. To address this, Sunak said the Government would double the number of work coaches in job centres and implement a new scheme to support job creation by investing £1bn in DWP.
Infrastructure – Sunak said the creation of jobs would be based on infrastructure investment and “double down” on the Government’s ambition to “level up the country.” Sunak also said the recovery would be green – announcing a new £2bn green homes grant. The public sector will also receive financing for improved energy efficiency in buildings. The construction sector is very much seen in Government as the area where a significant amount of jobs, apprenticeships, traineeships will be created in the immediate to mid-term.
Housing – On housing, the Chancellor said millions of jobs were underpinned by the construction sector. In order to revive the housing market, the Chancellor announced plans to cut stamp duty, raising the threshold to £500k running to 31 March next year – with effect of immediately in order to dissuade people from deferring transactions. The Government has chosen to highlight housing as it believes it has positive knock-on effects on wider parts of the economy – people moving house for example are then likely to spend more money on renovation.
Eat out to help out – Despite using the slogan five days ago, Sunak has transformed this phrase into a policy – announcing unprecedented support to restaurants and businesses serving food. This involves a bill discount for customers at participating restaurants of 50%. Businesses will then be able to subsequently apply for a refund from the Treasury. The Government is desperate for the economy to bounce back and for people to spend money again and this is a very practical, and for Government unprecedented way of trying to make that happen.