AAT gives its reaction to the Chancellor’s Summer Economic Update.
AAT welcomed the short-term stimulus for jobs and training from the measures announced in the Summer Economic Update.
But we are also focussing attention on the fact that more action is needed to re-skill the country and address the long-term challenges of rebuilding the crashed economy.
Adam Harper, Director of Strategy & Professional Standards at AAT, welcomed the Chancellor’s support for the economy:
“The Chancellor has outlined measures 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.”
He also gave his analysis of three key areas in the action plan.
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1. Money for training – but no change in strategy
From August to January, any firm that hires an apprentice aged 16 to 24 will receive £2,000, while those that hire apprentices aged 25 and over will be paid £1,500.
“AAT welcomes the proposals to support apprenticeships, even if it is only for a limited 6-month period,” says Harper.
However, he adds that these measures alone are insufficient to deal with the aftermath of a huge shock to the economy.
“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.”
Since 2016 AAT has campaigned for the apprenticeship levy to be turned into a broader ‘skills levy’, including traineeships and other forms of high-quality training. We think this approach would put the country on a much sounder footing.
“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.
“Widening the remit of the levy would help address the fall in apprenticeship starts, the frustrations of many employers and the future skills needs of the UK,” said Harper.
2. Targeted cuts in VAT – will they work?
VAT will be cut from the current rate of 20% to 5% on food, accommodation and attractions. The cut lasts from Wednesday 8 July until 12 January 2021.
“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,” says Harper.
“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.”
3. Stamp Duty cut – but not overhauled
Stamp Duty will be cut on transactions below £500,000 until 31 March, which AAT believes is good news.
“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.”
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,” says Harper.
“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.”
- What do apprenticeship subsidies mean for employers?
- Apprenticeship levy reform brought into sharp focus.
David Nunn is Content Manager at AAT.