AAT response to the Summer Economic Update 2020

Following today’s (Wednesday 8 July 2020) summer statement from Rishi Sunak, Chancellor of the Exchequer, Adam Harper, Director of Strategy & Professional Standards at AAT (Association of Accounting Technicians), said:

“With the Office for National Statistics (ONS) reporting in June that the number of people out of work and claiming work-related benefit in the UK had jumped by 23% to 2.8m, and widespread predictions about the further rise in unemployment as a result of the economic implications of Covid-19 and lockdown, the Chancellor announced a number of measures seeking to support the economy in bouncing back from the current crisis.”

“The need to create jobs, to stimulate spending and engender confidence amongst individuals and businesses are crucial ingredients in an economic recovery. The Chancellor has outlined measures that are designed to protect existing employment roles, as well as creating new jobs and encouraging spend in sectors amongst those worst hit by the Covid-19 pandemic.” 

Adam Harper also responded further on other key issues arising from the announcement:

Money for training

“AAT welcomes the proposals to support apprenticeships by offering businesses £2,000 for each apprentice they take on, with £1,500 being offered to firms taking on apprentices over 25, even if it is only for a limited 6-month period. It is clear that more funding for reskilling or upskilling of adults will also need to be found to cope with the challenges that lie ahead.”

“AAT has long been calling for a reformed training and skills levy, allowing employers to spend their levy funds more flexibly, which would in turn allow millions more workers to benefit from quality training and career progression opportunities. This would boost the UK economy just as it needs it most. AAT has campaigned for the apprenticeship levy to be renamed the ‘Skills Levy’ and broadened to include traineeships and other forms of high quality training since 2016. Widening the remit of the levy will help address the fall in apprenticeship starts, the frustrations of many employers and the future skills needs of the UK.”

Tax cuts

“The 6-month VAT cut to 5% for the hospitality sector does recognise the fact that it has been hit particularly hard, and on the face of it should encourage much higher levels of consumer spending. However, there is research to suggest that when similar measures were applied to restaurants in France in 2009 the impact of the cut was only partially passed on to consumers.”

Stamp Duty

“Increasing the stamp duty threshold to £500,000 was a measure that was expected. Even if only a relatively short-term temporary measure running until March 2021, it will address concerns that the housing market could be significantly affected.”

“The Chancellor highlighted that these measures, including the infrastructure spending announced by the Prime Minister last week, would cost a further £30bn.In that sense, the long period of recovery to address the unprecedented financial support packages put in place by HM Treasury will have to be outlined in the autumn statement.”

“As a longer-term solution,  AAT has repeatedly called on stamp duty liability to be switched from buyer to seller, saving the taxpayer £700 million each year (by rendering First Time Buyers’ Relief redundant), while also being cost-neutral to the Treasury. This is a far more progressive solution, as it means Stamp Duty will be paid on the (normally) lower-priced property being sold, rather than the higher-priced property being bought. While downsizers would be affected, they account for just 7% of all house purchasers, are typically older, likely to have little or no mortgage and so are better placed than many others to pay a little more.”

Today’s statement follows Mr Sunak’s first Budget on 11 March shortly before the country was put into lockdown. The annual autumn Budget is still expected to take place later this year.

AAT will be sharing further insight from AAT members shortly in response to the Summer Economic Update.