Rishi Sunak Reveals $37bn Plan To Rescue UK Economy

Rishi Sunak set out a radical blueprint to save jobs and pump life into the UK’s coronavirus-battered economy, including tax cuts on home-buying and dining out, and a new bonus for employers who don’t fire their staff.

“We face profound economic challenges,” the Chancellor of the Exchequer told the House of Commons on Wednesday, laying out a stimulus package he intends to amplify in a budget and spending review in the fall. “In just two months our economy contracted by 25% -- the same amount it grew in the previous eighteen years.”

He promised to stand by companies that keep faith with their workers and to do everything he can to save jobs and give families confidence in the months ahead. Sunak’s 30 billion-pound ($37.6 billion) package included:

• Raising the stamp duty threshold for purchases of property to 500,000 pounds, until March 31 next year. Officials said this will mean nearly 9 out of 10 people buying homes will pay no stamp duty at all
• A six-month cut to sales tax for restaurants, hotels and attractions to 5% from 20%
• A 9-billion pound bonus programme to protect workers returning from furlough
• A promise of discounted meals in restaurants across the country in August.

Sunak faces a gargantuan task in pulling the world’s fifth-biggest economy out of what may be its worst recession in three centuries. Unemployment is expected to spike upwards as he unwinds unprecedented government programs that are funding the wages of more than 12 million workers. So far, the state has already provided more than 160 billion pounds of support for the economy.

Outlining his proposals on Wednesday, the chancellor said he will not be held back by political ideology, even after calls from some within his party to avoid piling up the nation’s debts.

“Where problems emerge, we will confront them. Where support is justified, we will provide it. Where challenges arise, we will overcome them,” he said. “We entered this crisis unencumbered by dogma and we continue in this spirit, driven always by the simple desire to do what is right.”

He announced a new program to reward employers if they take back furloughed workers and keep them on continuously through the end of January. Businesses will receive a 1,000-pound bonus per employee who returns from furlough in a policy potentially worth 9 billion pounds.

Sunak cut the rate of value-added-tax on food, accommodation and attractions to 5% from 20%. The measure will last until Jan. 12, in what he said was a 4 billion-pound catalyst.

He also announced an “Eat Out to Help Out” discount, offering a 50% price cut on meals at participating restaurants between Mondays and Wednesday in August.

Young workers

The Treasury also unveiled a 2 billion-pound program to pay the wages of more than 200,000 young workers, bringing to more than 6 billion pounds the value of measures to support jobs and environmental programs announced by Sunak in the run-up to his statement.

That’s in addition to 5 billion pounds of infrastructure spending on schools, hospitals and roads, announced last week by Prime Minister Boris Johnson, who pledged the UK will “build, build, build” to emerge from the crisis.

Bond markets have shrugged off Sunak’s latest largess, which doesn’t stand out in the current climate of high spending. Yields on 10-year bonds fell 1 basis points to 0.17%. Investors are more focused on the Bank of England’s plans for asset purchases and the latest issuance plans from the Debt Management Office, which are due on July 14. Sterling erased gains to trade down 0.1% at $1.2533.

Pub company Marston’s Plc erased an earlier loss to gain as much as 3.5%, while Wagamama restaurant chain-owner Restaurant Group Plc jumped as much as 7.7% before trimming the gain.

Following is a summary of Sunak’s measures, and their costs:

Job Retention Bonus - Up to 9.4 billion pounds

Kickstart Programme - 2.1 billion pounds

Boosting work-searches, skills and apprenticeships - 1.6 billion pounds

VAT cut for hospitality - 4.1 billion pounds

Eating out vouchers - 0.5 billion pounds

Infrastructure spending - 5.6 billion pounds

Public sector de-carbonisation - 1.1 billion pounds

Green homes grant - 2 billion pounds

Stamp duty cut - 3.8 billion pounds