The summer statement: four things we might see
VAT cut
There were rumblings last month that the Chancellor was considering a temporary cut in VAT in a bid to lure spenders back to the high street, and reports earlier this week suggest it could indeed be on the cards. According to The Times, Sunak plans to temporarily cut VAT for pubs, restaurants and cafés to help to protect jobs in the sector. It is not known how much the VAT rate, which currently stands at 20%, could be reduced by. There is a precedent for cutting VAT in a crisis. Alistair Darling, the then Labour chancellor, reduced it from 17.5% to 15% for 13 months after the 2008 crash. It was subsequently increased from 17.5% to 20% under Chancellor George Osborne in January 2011.
Stimulus vouchers
It was also reported earlier this week that the Treasury is considering a proposal to give all adults £500 and children £250 in vouchers to spend in the sectors of the economy worst hit by the Covid-19 pandemic. The scheme would cost the state approximately £30b with the vouchers valid for sectors including hospitality, face-to-face retail and domestic tourism. Drawn up by the Resolution Foundation think-tank, the proposed scheme is comparable to initiatives in China and Malta. The foundation says the giveaway would boost demand, helping both businesses and workers.
Rent support
Calls for the Government to provide more robust support for commercial tenants, who have been unable to pay rent as a result of the impact on earnings caused by the Coronavirus pandemic, have continued to grow in recent weeks. While the lease forfeiture moratorium, which was introduced in March and prevents landlords from repossessing commercial premises if businesses are unable to pay their rent, has been extended until the end of September, the only other real support provided by the Government has been a voluntary Code of Practise that encourages tenants to pay rent in full where they can, but also acknowledges that landlords should provide support to those businesses unable to do so. In a bid to find a more longterm solution to the issue, Hospitality Union's Jonathan Downey has called for a #NationalTimeOut, which would last 12 months from 25 March 2020 to 24 March 2021, and cover four rent quarters. Downey's proposals consist of a rent-free period whilst a business is closed, moving to a turnover rent once it is open again.
Easier access to state-backed loan schemes
As reported by The Telegraph at the weekend, The Treasury is considering ways of making it easier for businesses to access state-backed Coronavirus support loans. It comes after the European Commission (EC) relaxed state aid rules last week, which had previously blocked some UK firms from being able to access the vital funds. A Treasury spokesman confirmed to The Telegraph that they “are considering the implications of this [EC’s] amendment for the loan schemes” and that the change by the EC was “an important step in ensuring all viable businesses receive the help they need”.
Treasury sources said it was likely that UK firms rejected for emergency help under the EU’s financial difficulty tests could reapply if the loan schemes were altered.
Other possibilities
As well as the above, other proposals that have reportedly been considered by the Treasury in the lead up to today's summer statement include extending, for three months, a scheme under which businesses can defer VAT payments until 2021; cutting employer’s national insurance to encourage bosses to hold on to staff; introducing an employer’s national insurance holiday for new staff to encourage recruitment; and extending business rate relief.
The Chancellor will deliver his summer statement at 12:30 today (8 July), following PMQs.
