On 8 July, the Chancellor announced further measures to support the economy as the lockdown is eased, which we were not notified of in sufficient time to incorporate into our scenarios. This box described the measures included in the package and the costs as estimated by the Treasury.
On 8 July, the Chancellor announced further measures to support the economy as the lockdown is eased. The Treasury described these as costing “up to £30 billion“. We were not notified in sufficient time to incorporate them into our scenarios, so will return to them in due course. The Treasury categorised the measures under four headings:
- A ‘Job Retention Bonus’ that offers employers a one-off payment of £1,000 “for every furloughed employee who remains continuously employed” to the end of January 2021 (subject to conditions). The Treasury shows a maximum cost of £9.4 billion if it were to be claimed in respect of every furloughed job. The actual cost is likely to be rather lower.
- A ‘supporting jobs’ package of labour market interventions. The largest is a n initial £2.1 billion fund for a new ‘Kickstart Scheme’ of work placements for universal credit (UC) recipients aged between 16 and 24. The actual cost will depend on the level of take-up, and the Chancellor indicated that the cost will not be capped. The package also includes £1 billion of additional funding for DWP, which includes doubling the number of UC work coaches. The Treasury’s estimated cost for this package is £3.7 billion.
- A ‘protecting jobs’ package to support the hospitality and accommodation sectors, and ‘attractions’. This includes a temporary cut in the rate of VAT from 20 to 5 per cent that will apply from 15 July to 12 January 2021. Under the ‘Eat Out to Help Out’ scheme, the Government will in effect pay half of diners’ bills (up to £10 per head) at participating establishments on selected days in August. The Treasury estimates this package will cost £4.6 billion. In practice, expenditure will depend on how consumers respond.
- A ‘creating jobs’ package composed of spending on infrastructure, ‘green’ investment and a stamp duty holiday. The latter increases the nil-rate band for residential stamp duty land tax transactions from £125,000 to £500,000 from 8 July to 31 March 2021. Its cost is subject to the wider economic uncertainties around house prices and transactions. The infrastructure package largely represents the bringing forward of previously announced spending commitments, so it reprofiles, rather than increases, expenditure over the medium term. The Treasury estimates this package will cost £12.5 billion.