The events of this year have been unexpected to say the least. Coronavirus aside, even at a political level the last minute change in Chancellor before the Budget in March presented a surprise and so did the announcement of a further statement.
Kleinwort Hambros: Summer statement 2020 - Experts' analysis
While the speculation as to what would be included was typically diverse, there was a definite consensus that it would be unlikely that Mr Sunak would unveil radical, long-term changes but rather further short term measures to aid the economy during this time of uncertainty and recovery.
Perhaps the most anticipated change was the amendment to Stamp Duty, which materialised with the announcement that a Stamp Duty holiday would take immediate effect until 31 March 2021 for properties worth up to £500,000.
The predominant theme however was around job retention and creation particularly for younger workers. Whilst it was confirmed that the current furlough scheme would still come to an end at the end of October, a Job Retention Bonus of £1,000 per employee was unveiled to incentivise employers to bring back employees from furlough into employment until January 2021, as was a kickstart scheme to encourage employers to hire 18-24 year olds and in return receive up to £6,500 per employee to help cover salary costs and overheads for six months.
Furlough and the new schemes may have provided the breathing space but we have seen companies plan major job cuts and restructuring, alongside a plummet in vacancies. It is unclear how many jobs will be there for workers to go back to, and government may need to relax social distancing measures or provide continued customised help to make some sectors viable.
One of the more creative policies that was announced was in respect to the hospitality sector. In a bid to keep the momentum from ‘Super Saturday” where pubs and restaurants finally reopened, the Chancellor set out an “Eat Out to Help Out” scheme whereby the government would pay 50% of the bill up to £10 a head at participating restaurants, pubs and cafes on meals purchased Monday to Wednesday in August. Coupled with the reduction in VAT for the hospitality in tourism sector from 20% to 5% it is hoped that this will aid recovery of these sectors that have suffered in recent months as the nation emerges from lockdown.
Although on the surface such measures seem positive, the big unanswered question from the past few months still looms: how will these policies be funded and what will the impact of such funding be?
There is a sense of inevitability that in the long term taxes will increase. In the run up to the Budget in March there was discussion of a wealth tax that never materialised however it will be interesting to see whether the government’s preferred method of recouping funds will target the wealthy and tie into a wider agenda of wealth equality. The effectiveness of targeting the wealthy however is a matter for debate as there is no clear evidence such a strategy has been successful in other countries that have adopted such a method. However, with income tax, national insurance and VAT accounting for the majority of tax revenues it is perhaps only a matter of time before these taxes are re-evaluated, along with oft-discussed changes to pension tax relief that have as yet been left alone.
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Kleinwort Hambros has a wealth of experience in helping individuals, families, entrepreneurs, charities and their advisers to manage their financial assets, whether they are based in the UK or overseas.