Insight

The Chancellor’s Plan for Jobs – Summer Economic Statement Summary

The Chancellor’s Plan for Jobs (Jobs, Jobs)

Having won widespread applause for his initial £160bn response to the pandemic back in March, today the Chancellor set out a comparatively smaller and targeted £30bn package focused on delivering his Plan for Jobs. With interventions divided between protecting, creating and supporting jobs, this package is about mitigating the inevitable rise in unemployment following the end of the Furlough Scheme in October – currently supporting 9 million UK workers.

Employer incentives to retain their workforce and take on new young employees (the most likely to work in hard-hit sectors) were underlined by a clear terms of use: “support your workers and we will stand by you”. This was matched by a push to create jobs in shovel-ready projects and greening infrastructure – delivering on productivity-focused manifesto commitments around levelling up and decarbonisation. We can expect more of this in the forthcoming National Infrastructure Strategy.

The weight on Treasury to deliver creative solutions came to the fore in the government’s “eat out to help out” discount scheme for the hospitality sector. Rapidly badged as a “meal deal” by the Opposition, questions remain on their short validity for just 13 days in August and the exclusion of alcoholic drinks. Coupled with a £4.1bn VAT reduction to 5% for hospitality, accommodation and attractions – the Chancellor showed determination to support the 80% of hospitality firms who were forced to stop working in April.

The consumer facing nature of these announcements, coupled with signed social media graphics, adds further to the ‘Santa Rishi’ brand in the public mindset. The Chancellor will be acutely aware of the dangers associated with this and included a notable warning in his address to the Commons:  come the Autumn, “we will deal too, with the challenges facing our public finances” – hinting at new fiscal rules to come. And in a warning to businesses benefiting from government support, he later noted that future interventions – like the latest large business loan scheme – will come “with obligations” on tax, executive pay and green commitments.

Nonetheless, this (predominantly English) spending package will have been well-received across the backbenches, particularly in those critical “blue wall” seats where the economic impact of the deepest global recession on record will be felt acutely. It also lays a gauntlet down to the devolved administrations as they consider their own responses. But with borrowing rates likely to rise again before too long, the question now and for the Autumn Budget is: who pays for it, and how?

This note provides a summary of the measures announced by the Chancellor in his “Plan for Jobs”, also referred to as the summer economic statement, or the “mini-budget”. It also provides further information on existing measures set out by the Prime Minister on 30th June. It does not include a breakdown of measures already announced by the government, which are outlined in Chapter 3 of the government’s “Plan for Jobs”

Introduction

  • Building on the action taken in the face of the immediate threat posed by the virus, the government is now proceeding with the second phase of its response with a targeted Plan for Jobs.
  • This will support the UK’s economic recovery while continuing to prioritise people’s health by:
    • introducing a new Job Retention Bonus to encourage firms to keep on furloughed workers
    • supporting jobs with direct help to find work and to gain the skills people need to get a job
    • protecting jobs in the hard-hit hospitality and accommodation sectors and at attractions by supporting demand for these businesses, giving them confidence to reopen
    • creating jobs with action to get the property market moving, to increase and bring forward infrastructure investment, and to make homes greener, warmer and cheaper to heat
  • The third phase of the government’s plan will be set out in the autumn with measures to support the longer-term recovery through a Budget and a Spending Review. These will detail further plans to invest in public services, to support innovation and growth-enhancing infrastructure with a National Infrastructure Strategy, to seize global opportunities and to level up opportunity across every region and nation of the UK.

Chapter 1 – Economic and Fiscal Context

  • COVID-19 has led to a substantial reduction in consumption, the largest component of the UK economy. Retail sales were 23% lower in April than in February. Social consumption (e.g. spending on restaurants, travel and entertainment), typically worth around a fifth of total consumption, had fallen by around 80% at its lowest point.
  • With many firms unable to operate, people’s jobs have been furloughed and working hours have been reduced. Over 9 million jobs have been furloughed through the Coronavirus Job Retention Scheme – more than a quarter of the UK workforce. Working hours in April were 27% lower than a year earlier, and early data releases point to a fall in total pay. Firms have reduced demand for new workers, with vacancies in May 62% lower compared to a year earlier. Universal Credit claims have also been elevated, with 3.4 million individual declarations made from 1 March to 23 June, and real time data shows the number of paid employees falling by 612,000 over April and May.
  • The Office for National Statistics (ONS) estimates that Gross Domestic Product (GDP) in April was around 25% below the level recorded in February.
  • The immediate focus for the government’s economic and fiscal strategy is now on ensuring that it continues to support workers and businesses as the UK recovers from the COVID-19 pandemic. The targeted and temporary support set out in this update in particular aims to support employment through the recovery period, and by doing so will help to minimise structural damage to the economy and public finances.

Chapter 2 – Policy Decisions

Job Retention Bonus

In place of the Coronavirus Job Retention Scheme (CJRS), the government announced a new Job Retention Bonus to incentivise employers to keep on previously furloughed employees.

This scheme will introduce a one-off payment of £1,000 to UK employees for every furloughed employee who remains in continuous employment until the end of January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021. Further detail about the scheme will be announced by the end of July.

Supporting jobs

  • Kickstart Scheme – The government will introduce a new Kickstart Scheme in Great Britain, a £2 billion fund to create hundreds of thousands of high quality 6-month work placements aimed at those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment. Funding available for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions.
  • Funding for National Careers Service – The government will provide an additional £32 million funding over the next 2 years for the National Careers Service so that 269,000 more people in England can receive personalised advice on training and work
  • Traineeships for young people – The government will provide an additional £111 million this year for traineeships in England, to fund high quality work placements and training for 16-24-year olds. Under this scheme, the government will fund employers who provide trainees with work experience, at a rate of £1,000 per trainee.
  • Payments for employers who hire new apprentices – The government will introduce a new payment of £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over, from 1st August 2020 to 31st January 2021. These payments will be in addition to the existing £1,000 payment the government already provides for new 16-18-year-old apprentices, and those aged under 25 with an Education, Health and Care Plan – where that applies.
  • High value courses for school and college leavers – The government will provide £101 million for the 2020-21 academic year to give all 18-19 year olds in England the opportunity to study targeted high value Level 2 and 3 courses when there are not employment opportunities available to them.
  • Expanded Youth Offer – The government will expand support offered by DWP in Great Britain to young jobseekers, to include all those aged 18-24 in the Intensive Work Search group in Universal Credit.
  • Enhanced work search support – An additional £895 million will be provided to enhance work search support by doubling the number of work coaches in Jobcentre Plus before the end of the financial year across Great Britain.
  • Expansion of the Work and Health Programme – Up to £95 million will be provided to expand the scope for the Work and Health Programme to introduce voluntary support in the autumn for those on benefits that have been unemployed for more than 3 months.
  • Job funding support service – An additional £40 million will be made available to fund private sector capacity to introduce a one-to-one job finding support service in the autumn, to help those who have been unemployed for less than three months.
  • Flexible support fund – The government will increase the funding for the Flexible Support Fund by £150 million, including increasing the capacity of the Rapid Response Service. It will also provide local support to claimants by removing barriers to work such as travel expenses for attending interviews.
  • New funding for sector-based work academies – The government will provide an additional £17 million this year to triple the number of sector-based work academy placements in England in order to provide vocational training.

Protecting jobs

  • Eat out to help out – The government will introduce the Eat Out to Help Out scheme to encourage people to return to eating out. This will entitle every diner to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal (including on non-alcoholic drinks) for the entire month of August 2020 across the UK. Participating establishments will be fully reimbursed for the 50% discount.
  • Temporary VAT cut for food and non-alcoholic drinks – From 15 July 2020 to 12 January 2021, the reduced (5%) rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. Further guidance on the scope of this relief will be published by HMRC in the coming days.
  • Temporary VAT cut for accommodation and attractions – From 15 July 2020 to 12 January 2021, the reduced (5%) rate of VAT will apply to supplies of accommodation and admission to attractions across the UK. Further guidance on the scope of this relief will be published by HMRC in the coming days.

Creating jobs

  • Temporary Stamp Duty Land Tax (SDLT) cut – The government will temporarily increase the Nil Rate Band of Residential SDLT, in England and Northern Ireland, from £125,000 to £500,000. This will apply from 8 July 2020 until 31 March 2021 and cut the tax due for everyone who would have paid SDLT. Nearly nine out of ten people getting on or moving up the property ladder will pay no SDLT at all.
  • Green Homes Grant – The government will introduce a £2 billion Green Homes Grant, providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household. For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household. In total this could support over 100,000 green jobs and help strengthen a supply chain that will be vital for meeting our target of net zero greenhouse gas emissions by 2050. The scheme aims to upgrade over 600,000 homes across England, saving households hundreds of pounds per year on their energy bills.
  • Construction Talent Retention Scheme – The government is funding a Construction Talent Retention Scheme to support the redeployment of workers at risk of redundancy. This will help retain construction skills and match talented workers to opportunities across the UK.
  • Public Sector Decarbonisation Scheme – The Clean Growth Strategy set out the government’s ambition to halve greenhouse gas emissions from the public sector by 2032. To help achieve this and support economic recovery, the government will invest £1 billion over the next year in a Public Sector Decarbonisation Scheme that will offer grants to public sector bodies, including schools and hospitals, to fund both energy efficiency and low carbon heat upgrades.
  • Social Housing Decarbonisation Fund – The government will establish a new Social Housing Decarbonisation Fund to help social landlords improve the least energy-efficient social rented homes, starting with a £50 million demonstrator project in 2020-21 to decarbonise social housing. This will mean warmer homes and lower annual energy bills for some of the lowest income households.

Further details have now been provided on measures announced by the Prime Minister last week, including:

Jobs

  • Office for Talent – The government will create a new Office for Talent based in No.10, with delivery teams across government departments. The Office will focus on attracting, retaining and developing top research and science talent across the UK and internationally. Delivering a green recovery.
  • Green Jobs Challenge Fund – The government will invest up to £40 million in a Green Jobs Challenge Fund for environmental charities and public authorities to create and protect 5,000 jobs in England. The jobs will involve improving the natural environment, including planting trees, restoring habitats, clearing waterways, and creating green space for people and wildlife.

Research and Development

  • Direct Air Capture – The government will provide £100 million of new funding for researching and developing Direct Air Capture, a new clean technology which captures CO2 from the air.
  • Automotive Transformation Fund – Building on the announcement last year of up to £1 billion of additional funding to develop and embed the next generation of cutting-edge automotive technologies, the government is making £10 million of funding available immediately for the first wave of innovative R&D projects to scale up manufacturing of the latest technology in batteries, motors, electronics and fuel cells. The government is also calling upon industry to put forward investment proposals for the UK’s first ‘gigafactory’ and supporting supply chains to mass manufacture cutting-edge batteries for the next generation of electric vehicles, as well as for other strategic electric vehicle technologies.
  • World-class laboratories – The government will provide a £300 million investment in 2020-21 to boost equipment and infrastructure across universities and institutes across the UK.

Housing and planning

  • Affordable Homes Programme – The government has confirmed that the £12.2 billion Affordable Homes Programme announced at Budget will support up to 180,000 new affordable homes for ownership and rent in England. The £12.2 billion will be spent over five years, with the majority of homes built by 2025-26 and the rest by 2028-29. The Affordable Homes Programme will also include a 1,500 unit pilot of First Homes.
  • Short-Term Home Building Fund extension – The government will support small- and medium-sized housebuilders that are unable to access private finance by boosting the Short-Term Home Building Fund, providing an additional £450 million in development finance to smaller firms. This is expected to support around 7,200 new homes in England, boosting housing supply and adding resilience to the market. A proportion of this fund will be reserved for firms using innovative approaches to housebuilding such as ‘Modern Methods of Construction’.
  • Brownfield Housing Fund – The government will allocate a £400 million Brownfield Housing Fund to seven Mayoral Combined Authorities to bring forward land for development and unlock 24,000 homes in England. To allow authorities to begin delivering projects quickly, 90% of the fund will be allocated immediately on a per capita basis, with 10% to be allocated through a competitive process.
  • Planning reform – The government will introduce new legislation in summer 2020 to make it easier to build better homes in the places people want to live. New regulations will make it easier to convert buildings for different uses, including housing, without the need for planning permission. In July 2020, the government will launch a policy paper setting out its plan for comprehensive reforms of England’s planning system to better support the economy and release more land for housing in areas that need it most.

Healthcare infrastructure and the NHS

  • NHS maintenance and A&E capacity – The government will provide £1.05 billion in 2020-21 to invest in NHS critical maintenance and A&E capacity across England.
  • Modernising the NHS mental health estate – The government will provide up to £250 million in 2020-21 to make progress on replacing outdated mental health dormitories with 1,300 single bedrooms across 25 mental health providers in England.
  • Health Infrastructure Plan – The government will provide a further £200 million for the Health Infrastructure Plan18 to accelerate a number of the 40 new hospital building projects across England.

Education

  • Further Education (FE) estate funding – Building on the £1.5 billion commitment for FE capital funding made at Budget 2020, the government will bring forward £200 million to 2020-21 to support colleges to carry out urgent and essential maintenance projects. This will be the first step in the government’s commitment to bring the facilities of colleges everywhere in England up to a good level.
  • School estate funding – The government will provide additional funding of £560 million for schools in England to improve the condition of their buildings and estates in 2020-21. This is on top of the £1.4 billion already invested in school maintenance this year.
  • School rebuilding programme – The government has announced over £1 billion to fund the first 50 projects of a new, ten-year school rebuilding programme in England. These projects will be confirmed in the autumn, and further detail on future waves will be confirmed at the Comprehensive Spending Review. Construction on the first sites will begin in September 2021.

Justice

  • Courts sustainability – The government will invest £40 million to improve the environmental sustainability of the courts and tribunals estate in England and Wales, investing in initiatives to reduce energy and water usage.
  • Court modernisation – The government will invest £102 million to modernise the court estate in England and Wales. This will include £55 million for essential court maintenance, £37 million for technology to fast-track the digitalisation of the courts, and £10 million for local regeneration projects outside London and the South East which will support employment and economic growth.
  • Prison and probation estate funding – The government will invest £143 million to improve the prison and probation estate in England and Wales. This will include £20 million to accelerate the digitalisation of prisons, £60 million for 1,000 temporary prison units to expand the capacity of the estate, and £63 million in additional maintenance.
  • Local infrastructure projects – The government will provide £900 million for shovel ready projects in England in 2020-21 and 2021-22 to drive local growth and jobs. This could include the development and regeneration of key local sites, investment to improve transport and digital connectivity, and innovation and technology centres. Funding will be provided to Mayoral Combined Authorities and Local Enterprise Partnerships.

Local investment

  • Towns Fund capital acceleration – The government will accelerate £96 million of investment in town centres and high streets through the Towns Fund this year. This will provide up to 101 towns across England with funding for projects such as improvements to parks, high streets, and transport.
  • Local road maintenance – The government will invest £100 million to deliver 29 local road maintenance upgrades across England in 2020-21, including eight bridge and viaduct repairs and improving local roads. This is in addition to the government’s plans to spend £1.5 billion in 2020-21 on filling potholes, resurfacing roads and improving local highway infrastructure.
  • Unblocking Manchester’s railways – The government will provide £10 million to develop plans for improving the reliability and capacity of the Manchester rail network.

 

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