Chancellor Rishi Sunak cuts VAT in emergency plan to save jobs

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Media captionChancellor Rishi Sunak: “We cannot lose this generation”

Chancellor Rishi Sunak must cut VAT on hospitality as part of a £ 30 billion plan to prevent mass unemployment while the economy is hit by coronavirus.

The government will also pay companies a £ 1,000 bonus for each staff member retained for three months when the leave program ends in October.

And Mr. Sunak announced a plan to give 50% off to restaurant eaters in August.

The chancellor warned of “the difficulties ahead,” but promised that no one will be left “hopeless,” in a statement to MEPs.

He dismissed calls to extend the leave program beyond October, saying it would give people “false hope” of finding a job.

But he said he “would never accept unemployment as an inevitable outcome” of the pandemic.

Details of how the package will be paid – through borrowing and possible tax increases – will likely be revealed in the chancellor’s fall budget.

‘Decent work’

The “job retention bonus” could cost up to £ 9.4 billion if every worker on leave is brought back.

Explaining how it will work, the Chancellor said: “If you are an employer and you bring back someone who has been on leave – and you keep them working until January – we will pay you a bonus of 1,000 £ per employee.

“It is vital that people don’t come back just for fun – they have to do decent work.

“So for companies to get the bonus, the employee has to be paid at least £ 520 on average every month from November to the end of January – the equivalent of the lower salary limit of national insurance. ”

He told MEPs that he would reduce VAT on food, accommodation and attractions from 20% to 5% starting next Wednesday.

  • What is VAT and how is it changing?

This reduction will apply to take-out or take-out food and non-alcoholic beverages from restaurants, cafes and pubs, hotels, guesthouses, campsites and caravans, and attractions such as cinemas, theme parks and zoos .

Rishi Sunak said the “£ 4 billion catalyst” would help protect “over 2.4 million jobs”.

Image copyright
Getty Images

Legend

VAT reduction aims to boost theme parks and other attractions


Sunak also announced an “Eat Out to Help Out” rebate which he said would help protect 1.8 million jobs at a cost of £ 0.5 billion.

Meals at any participating business, Monday through Wednesday, will receive a 50% reduction in August, up to a maximum discount of £ 10 per person for everyone, including children.

Companies will have to register and can do so via a website, which will open next Monday.

Kate Nichols, Managing Director of UK Hospitality, which represents bars, restaurants and tourist attractions, tweeted: “Thanks to Rishi Sunak (for) for recognizing the importance of tourism and hospitality and the benefits it brings to the economy – this will make a material difference to the sector as we face a long road to recovery. ”

Stamp leave

The Chancellor also announced a £ 2.1 billion “start-up program” to create more jobs for young people.

The fund will subsidize six-month work placements for people with universal credit aged 16 to 24 who are at risk of long-term unemployment.

Sunak also announced a temporary suspension of stamp duties, costing £ 3.8 billion, to boost the housing market.

This would exempt the first £ 500,000 from all property sales from the tax.

The Chancellor described a number of other measures in the preparation of his statement, including:

  • Vouchers of up to £ 5,000 for energy retrofits as part of a wider £ 3 billion plan to cut emissions
  • A commitment to provide 30,000 new internships for young people in England, giving companies £ 1,000 for each new place of work experience they offer
  • £ 1.6 billion in loans and grants for the arts and heritage sector
  • Doubling of front-line staff in employment centers, as well as an additional £ 32 million for the recruitment of additional guidance counselors and £ 17 million for labor academies in England

  • Employers Will Not Pay Tax on Coronavirus Swab Tests Provided to Employees

Shadow Chancellor of Labor Annaliese Dodds said the Chancellor should maintain the leave regime in certain areas.

Record unemployment

She told MEPs, “We need a strategy to make the system more flexible so that it can support companies forced to close again due to additional localized blockages.

“There is still time to avoid further flooding of layoff notices. It is the government’s duty to help Great Britain get through this situation. “

She said the unemployed “number of job seekers” was on track to exceed three million people in June, “the highest number since the previous record in 1986”.

Some 9.3 million workers receive 80% of their government-paid wages – up to £ 2,500 per month – under the leave scheme, which was originally scheduled to end in July, before being extended until in October, with employer contributions.

Starting in August, employers have to pay national insurance and pension contributions, then 10% of wages from September, reaching 20% ​​in October.

Dame Carolyn Fairbairn, Executive Director of the CBI, said: “The job retention bonus will help businesses protect jobs, but with almost 70% of businesses running out of cash and three in four reporting a lack of demand, more immediate direct support to businesses, subsidies for further business rate relief, is still urgently needed.

Mike Cherry, president of the Federation of Small Business, said the new freelancers and entrepreneurs have “been forgotten once again”.


The Chancellor has just described another big chunk of spending to try to support the economy, in particular to keep millions of people from joining unemployment.

Many measures go against traditional conservative instincts. And there is no clue how it will all be paid for at least a few months.

But it is against the backdrop of the biggest economic downturn in generations, with the fortune of what will happen next depending on the course of a deadly disease.

Opposition parties are already suggesting that the scale of what the government is proposing does not match what will be necessary.

Rishi Sunak admitted in his statement “our plan will not be the last – it is the next,” knowing full well that the profound economic impact of the coronavirus crisis is far from over.

Read more analysis by Laura Kuenssberg


Will the start-up program benefit you? You want to buy a house, what do you think of the changes in stamp duty? Will reducing VAT benefit your business? Have you recently become unemployed? Send your thoughts to

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