VAT on food, accommodation and attractions is to be cut to just 5% as one of the headline measures set out today by Chancellor, Rishi Sunak.
Giving his Summer Statement , the chancellor also set out plans for a new £2bn scheme to create thousands of job placements for young people, announced a temporary change to stamp duty that will increase the threshold to £500,000 and has set out a new job retention bonus for employers who bring back furloughed employees.
This is in addition to a £2bn “green homes grant” which was announced earlier in the week, to help people to invest in green home improvements and increase the energy efficiency of public buildings.
Consumers are also being encouraged to visit restaurants each week from Mondays to Wednesdays, with the offer of a 50% discount for diners, capped at £10 per person through August.
Further details on the new schemes are expected to be published shortly. The VAT reduction of the hospitality sector will be in place until January 12 2021, while the ‘stamp duty holiday’ will last until March 31 2021.
“I felt that this was a bold package of measures which will help to inspire spending and encourage consumers, which is just what businesses need right now.
With the focus on jobs and flattening out a future spike in unemployment, Rishi Sunak has introduced measures to move from phase one of protecting jobs with the Coronavirus Job Retention Scheme (CJRS) to phase two of job creation by promoting the economy and giving incentives to employers to recruit and train, especially the young.
By focusing on the tourism and leisure sector with a reduced rate of 5% VAT and the 'eat out to help out' discount scheme, these should help to encourage consumers to spend. The temporary increase in the nil-rate threshold for Stamp Duty Land Tax (SDLT) on houses and accelerated infrastructure projects should also help the construction and associated sectors.
As always, the Chancellor gives an upbeat message, and the UK needs it more than ever.
Business owners have been facing some difficult choices regarding the CJRS, with many employers wanting to protect the jobs of their workers despite the economic challenges affecting possible profits. The offer of the “job retention bonus” may be a great way to make the choice to bring back workers a little easier and speed up our much needed recovery.
There was lots of support for the young to get into work, which has got to be good for the economy both now and in the long term. As is the investment in job creation and infrastructure, with projects worth £5bn being accelerated.
The construction sector will benefit from the funding being invested in public buildings and the £2bn in grants for home improvements will help a wider range of businesses, from builders to green technology firms
The raising of the stamp duty threshold should help to restart property transactions which have stalled. In the East Midlands, many smaller houses are already priced below the existing threshold of £125,000 so this will have a greater benefit in cities where house prices are higher, but it will mean that even more buyers will be exempt from the duty. For purchasers of second homes, I suspect that the 3% surcharge will remain on the whole purchase price, which seems sensible at this time.
Meanwhile, the cut in VAT for the hospitality sector will make a big difference in our area. From Skegness to Melton Mowbray, hospitality businesses in our area are among the hardest hit, so this must be a big help to this sector in the months ahead.
Lastly, the offer of an ‘eat out to help out’ discount, offering 50% off up to £10 per head on Mondays to Wednesdays is a great idea. Let’s get the consumer consuming again and encourage people to visit restaurants to help them recover.”