Sunak hands out sops to stimulate jobs and economy

UK Chancellor slashes VAT on tourism and hospitality from 20% to 5% until January

UK Chancellor of the Exchequer Rishi Sunak
UK Chancellor of the Exchequer Rishi Sunak

LONDON — The UK Chancellor of the Exchequer Rishi Sunak announced cuts to VAT worth over £4 billion (€4.4 billion) as a lifeline for the struggling British tourism and hospitality sector, as one of the initiatives in the mini budget announced on Wednesday.

The government’s latest round of targeted economic stimuli in a “protect, support, create” jobs package includes vouchers for meals out, a 15% VAT cut on hospitality and tourism offerings, and a £1k bonus to employers who bring back furloughed employees,

It also includes an additional £1bn investment in the Department for Work and Pensions for additional hires in Job Centers, among other expenditures.

In a statement to the House of Commons on Wednesday, the Chancellor told MPs that VAT would be slashed from 20 percent to 5 percent until January, according to euronews.

Sunak announced these measures in a bid to get two of the sectors hardest hit by the COVID-19 pandemic to get back on its feet, saying he wanted to see pubs, restaurants, cafes, and B&Bs "bustling again."

The cuts will apply to food, attractions (including zoos and cinemas) and accommodation for the next six months. The cuts will be complemented by a 50% “eat out to help out” discount on eating in restaurants and cafes, which will run from Monday to Wednesday throughout August.

Sunak said: "This has never just been a question of economics, but of values: I believe in the British people’s fortitude and endurance. And it is that value, endurance, more than any other, we need to embody now. We will not be defined by the crisis but our response to it."

He added that the measures were "a plan to turn our national recovery into millions of stories of personal renewal."

Other measures outlined include a £2 billion (€2.2 billion) youth job creation scheme, with the government looking to fund 350,000 paid six-month job placements for young people.

Sunak also announced the doubling of the number of work coaches at Job Centers across the UK in a bid to stop unemployment rising further as a consequence of the coronavirus pandemic.

The Treasury has also proposed a £1,000 (€1,100) bonus for employers for each member of staff currently furloughed — some 9.4 million across the UK — who return to work.

The philosophy behind giving employers the bonus for retaining their workers is, he said, “if you stand by your workers, we will stand by you”.

A new £2bn Kickstart Scheme will help employers create jobs for young people at risk of long-term unemployment. Funding available for each six-month job placement will cover 100% of the National Minimum Wage for 25 hours a week.

Businesses will also be given £2,000 for each new apprentice they hire under the age of 25 between August 2020 and January 2021.

The government also announced a cut in stamp duty to stimulate the stagnating housing market, temporarily raising the threshold from £125,000 to £500,000 (€139,000 to €555,000) until March 31, 2021.

Responding to the Chancellor's statement, Labour's Shadow Chancellor, Annelise Dodds blasted the government for not announcing a "back to work Budget," adding, "It has taken them almost 10 years to catch up."

She also urged the government to "recognize the challenge faced by old job seekers who are facing unemployment for the first time."

Rural groups have welcomed the government's move to cut VAT on food, accommodation and attractions from 20% to 5% from next Wednesday (July 15).

The Country Land and Business Association (CLA) said the announcement would help diversified farm businesses and rural tourism firms 'fight back' from a 'devastating start of the year'.

CLA president, Mark Bridgeman said: “Until now VAT on tourism businesses has been much higher than in other comparable countries, putting domestic tourism businesses at a competitive disadvantage to holiday providers overseas.

"This welcome change from government means more people will be able to afford to enjoy a holiday in the Great British countryside whilst also helping to revive rural economies across the country."

The Countryside Alliance welcomed the chancellor's measures, saying the government had 'listened to the concerns of the countryside'.

Sarah Lee, the group's head of policy, said: "Measures announced today will help the rural economy, in which tourism plays a central and core role.

‘The chancellor has listened to calls from the Countryside Alliance that if the countryside is to open, it must be able to fully open.

"At a time when so many in rural areas have felt incredibly anxious about the future of their business, these announcements make it possible for businesses to open and welcome all." — Agencies