The Corvid-19 pandemic has devastated the British economy, with GDP declining in the second quarter declined by 2.2%. Manufacturing and services are struggling and millions of workers have lost their jobs or on furlough. Boris Johnson’s government has been under pressure to deliver economic relief to a battered and nervous public, and the government is hoping that the just-released mini-budget (in reality a summer statement) will deliver the goods. If the mini-budget, announced by Chancellor Rishi Sunak on Wednesday afternoon is well received, it could restore confidence in the government and also give a needed boost to the British pound.
What are the main highlights of the mini-budget? Firstly, the mini-budget offers relief to the battered employment market. With youth (aged 18-24) unemployment at high levels, the government has earmarked some two billion pounds in programs that will help these individuals find work. This includes subsidised work placements for young workers, as well as an increase in the number of job coaches.
The summer statement also addresses the housing market, which is sagging as a result of tight consumer spending. In an effort to revive the housing market, Sunak announced a temporary suspension of the stamp duty, which means a tax exemption on the first 500,000 pounds on the price of homes. However, the exemption is limited to England and Northern Ireland.
As well, there are reductions in VAT (value-added tax). The Chancellor announced that the present VAT rate of 20% was being reduced to just 5% on food, accommodation and entertainment. The cut will be in effect from July 15 until January 12, and is expected to cost the government some four billion pounds. Sunak is banking that the sharp slash in VAT rates will increase spending on the part of nervous consumers and provide much-needed relief to food establishments and the hotel and entertainment industries, which have been battered by the economic meltdown and lockdown in the wake of Corvid-19.
It will take time to evaluate the success of the mini-budget, but with no actual budget due until the autumn, it was important for the government to be proactive during this unprecedented crisis. In announcing today’s measures, Suank and his government colleagues hope that the moves will ease the severe economic conditions which have gripped the UK.