Summer Statement from UK Treasury

Comments from Rufus Ballaster – Partner Carter Lemon Camerons LLP

Rishi Sunak gets more and more exposure and plenty of praise – rightly so. He took the helm in the UK Treasury team at a difficult point and has achieved what seem like miracles to date with a novel Coronavirus Job Retention Scheme to try to avoid mass redundancies as a direct and immediate result of the COVID-19 pandemic in the UK.

Today he has acted again by introducing various sector-specific announcements, including a massive injection of funds for the not for profit arts and leisure venues, which have been so massively adversely affected by the social distancing restrictions needed to reduce the spread of the virus.

Today’s headlines include:

1. A temporary reduction in VAT for accommodation, attractions, food and non-alcoholic drinks from 20% to 5% to support the beleaguered hospitality and tourism sectors.

2. A temporary reduction in Stamp Duty Land Tax by increasing the residential ‘nil rate band’ from £125,000 to £500,000.

3. A Kickstart Scheme aimed at enabling young unemployed people aged 16 – 24 to get some time in work and increased access to in-work training opportunities.

4. A £1,000 Job Retention Bonus for employers who continue to employ staff who are furloughed at the end for the CJRS until January 2021.

5. More infrastructure spending on:

    • Hospitals
    • Schools
    • Roads
    • Courts.

For another day are questions like:

A) how long will all this kind of thing be needed?

B) has the UK done enough or is more going to be necessary?

C) when and how will this be paid for – can the UK ever hope to balance its books and get its National Debt under control?

What is more, you will not find many people criticising Rishi Sunak for not addressing those questions today, as the key thing to try to achieve is sufficient economic activity as the Lockdown effects wear off.

This will ensure that the situation does not get even direr in terms of tax payable on current rates before we look at which taxes may need to rise to balance the books.

If we return to the unemployment levels last seen in the 1980s here in the UK, the increased welfare spending costs and the loss of tax revenue from the lack of employment, transactions and business profit will cause even bigger budgetary nightmares for the UK. It is, therefore, credible to hear the Government of today talking in terms of investment for the future and letting decisions about what will be needed in that future era await that point in time.

The young might protest, with some justification, that yet another burden, from what will then be the past, looks like it will fall on their shoulders in the future but the unpalatable alternative is for it to fall on their shoulders today. This would likely have a disastrous effect on employment prospects for those exiting full-time education in 2020 or those trying to seek work and reduce their reliance on the benefits system.

The laudable aim of the Treasury here in the UK is to create jobs, to limit the numbers of job losses, to get ‘tills ringing’ and people spending and to try to reap such harvest as it can off the success those policies achieve.

The housing market and the jobs market may not boom but they should see less of a dramatic fall in light of today’s announcements, which Rufus Ballaster of Carter Lemon Camerons LLP comes to praise rather than seek to bury.