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The Chancellor’s Plan to Reactivate the UK Economy Divides Opinion

The highlights of Rishi Sunak’s summer statement included some interesting moves to try and reactivate the British economy. While the Chancellor’s plans look impressive, they have divided opinion since he revealed them.

The Basic Details

One of the main points covered in this statement was around the gradual winding down of the furlough scheme. Sunak confirmed that it will run until the end of October, saying that leaving it open forever would give workers “false hope” of returning to their jobs.

However, a jobs retention bonus will be used to reward those businesses that keep on staff after the scheme ends. Companies will get a £1,000 payment for keeping on employees once the furlough scheme is over, and up to January. The chancellor pointed out that this would cost the Treasury over £9 billion if all of the furloughed jobs were retained.

Another key point was the kick-start job scheme. This will see the government covering the cost of younger workers in the first 6 months in their new jobs. £2 billion has initially been put aside for this, providing funding for potentially hundreds of thousands of jobs for young people. No cap on the number of positions has been put in place.

Another bonus scheme to help companies get the economy back up and running will see the government support new apprenticeships. This plan involves each business get £2,000 for each new apprentice, or £1,500 for those that are over the age of 25. It runs from August to January 2021.

Other major changes included a green recovery plan and a cut to stamp duty. The hospitality sector has also seen their VAT rate chopped from 20% to 5% for the next 6 months, covering accommodation, food and attractions.

Perhaps the most controversial and talked-about part of the statement was the so-called “eat out to help out discount”. This move was created to stimulate more activity in the restaurant and pub trade, by giving a discount of £10 per person on Mondays to Wednesdays through August, in participating businesses.

What Has the Reaction Been Like?

To date, the reaction to these changes has generally been positive. The huge amounts of money being put into these schemes shows that the government is serious about getting the economy back on its feet after an incredibly difficult period.

In terms of negative reaction, some analysts have doubted the eating out discounts, labelling them as a gimmick. Meanwhile, there have also been calls to gradually end the furlough scheme on a sector by sector basis, with some industries currently more reliant than others on the debt collection process to survive.

It was also reported HMRC’s permanent secretary, Jim Harra, wrote to the chancellor about these measures. He took the rather unusual step to point out that it isn’t possible to accurately predict how efficient or good value for money the new schemes will be. Harra asked Sunak for “ministerial direction” to proceed, but confirmed the “sound policy rationale” behind the changes.

The next few months will be crucial for the British economy, and it is to be hoped that these extreme measures will provide the kick-start needed to lead us into a better 2021.