Tax
UK's Summer Economics Booster: Reactions

The UK's finance minister set out his "Summer Statement" yesterday on how the government wants to help businesses, consumers and households weather the aftermath of the lockdowns. It drew a mixed response from a variety of commentators.
The UK’s wealth management industry gave a cautiously positive
response to a range of measures by Rishi Sunak, Chancellor of the
Exchequer, that are designed to revive economic growth and aid
sectors hit particularly hard by COVID-19.
Sunak unveiled the following main measures: a “job retention
bonus” to encourage companies not to fire furloughed staff; a
one-off £1,000 payment to firms for every furloughed employee
kept until the end of January 2021; a six-month VAT cut for
restaurants, hotels and certain other venues; a temporary rise in
the threshold at which people pay stamp duty on property deals ;
discounts on restaurant meals, and measures to encourage hiring
of young adults.
One of the most eye-catching measures, given the moribund nature
of the present property market, was the finance minister’s move
to hike the threshold on stamp duty for a period from yesterday
through to 31 March 2021.
The statement, unveiled in parliament yesterday, didn’t refer to
a one-off wealth tax or similar levy on high net worth
individuals. There had been a flurry of media speculation that
such an idea might be entertained by a government that in some
ways is pitching to the political “centre” rather than adopting a
more traditionally free market stance.
In the background is a worry that the escalation of UK public
spending and debt will have to be paid for, hopefully from either
faster growth, tax hikes or by cuts in other parts of the State.
Even ahead of the coronavirus pandemic, the UK government was
still borrowing rather than bearing down on the stock of public
debt.
Reactions
“There is little doubt that unemployment will rise over the
coming months; if this can be curbed to a meaningful extent, then
the prospects for an economic and corporate profits recovery over
the next 18 months or so could rise commensurately,” Richard
Buxton, head of strategy, UK alpha at Jupiter Asset
Management, said. “The various directly employment-related
announcements in the Summer Statement are by no means unhelpful,
and it would be churlish to suggest that the “jobs retention
bonus” and `kick-start scheme’ (supporting the return of
furloughed workers to their old jobs, and the creation of new
roles for 16-24 year-olds, respectively) will not go some way
towards supporting employment levels.”
“That being said, the stock market’s muted initial reaction can
be taken as an indication that these will not be seen by
investors as the answer to all of the nation’s economic woes,”
Buxton added.
Professor Syed Kamall, academic and research director at the
Institute
of Economic Affairs, a think tank, said: "We are in an
unprecedented situation and there remains the issue that many
individuals and families are fearful of leaving their homes to
resume everyday activities. The Chancellor can only do so much in
terms of measures introduced to get the economy moving.
"The cut to Stamp Duty is welcome but why isn’t it permanent? It
is a destructive, regressive tax that clogs up the housing market
and limits labour mobility. Making it permanent would get the
property market moving and encourage those who want to downsize
as well as those looking for family houses, freeing up homes for
first-time buyers.
"It is disappointing more was not announced to encourage private
investment in infrastructure – such as re-opening old railways or
re-zoning to allow homes to be built in places being vacated by
shops, such as high streets."
“The Chancellor of the Exchequer has revealed a targeted package
of measures that attacks some of the most pressing needs in this
recovery. That said, the overall envelope is not particularly
large by international comparison and effective spending will be
markedly below the headline number,” Andreas Billmeier, Sovereign
Research Analyst, Western Asset,
said.
“The overall envelope is not particularly large by international
comparison and effective spending will be markedly below the
headline number. We think that the real challenge will come when
the furlough scheme runs out and structural change in the economy
due to this pandemic but also the fall-out from Brexit could
cause a marked increase in the unemployment rate. We don’t think
the announced retention bonus will have any impact on those
structural forces,” Billmeier said.
“The Chancellor delivered an innovative Summer Statement as he
laid out his plans to help the economy recover and rebuild after
COVID-19. He announced measures such as cutting stamp duty, VAT
reductions, meal vouchers and a furlough bonus scheme,” Franklin
Templeton’s UK Equity Team Colin Morton, said. “In our view,
these are all reasonable steps to increase consumption and create
a bridge to support the economy through the next few months. The
Chancellor understands that increasing consumption and getting
consumers to spend more will be central to the UK’s economic
recovery and he has focused his support on the most impacted
sectors.”
Daniele Antonucci, chief economist and macro strategist at
Quintet
Private Bank, said: “The Chancellor has revealed a number of
supportive measures - from stamp duty and VAT cuts to job schemes
- for workers and businesses across the UK. Measures supporting
sectors that are big employers, along with those that have been
disproportionately affected by the crisis, are the best way to
get the `biggest bang for your buck’. If not an outright boost,
all this should at least engineer a most needed support to key
parts of the economy ranging from housing and construction to
hospitality and tourism.”
Elizabeth Bradley, partner and leader, tax advice and
controversy, at Bryan
Cave Leighton Paisner, said: “The immediate increase in the
stamp duty threshold to £500,000, lasting until 31 March 2021, is
welcomed to get Britain moving again. It is reassuring that
Sunak has seen the sense to not delay the introduction of this
measure to the autumn now that the post lockdown market has
re-opened.”
John Stephenson, partner at BDB Pitmans said: “The
stamp duty holiday will be a welcome boost to home buyers, but
more important will be their confidence (and that of their
lenders) in their continued employment; the job cuts across a
wide area of the economy will have weakened that confidence for
some time to come. Who wants to take on a big loan if their job
might be at risk?”
John O’Connell, chief executive of the TaxPayers'
Alliance, said: "Stamp duty is a terrible tax and this
measure will help get Britain moving again. The tax on moving
gums up the housing market and locks down homeowners at a time
when many more people are ready to move. Raising the
threshold to half a million pounds is a great first step towards
ensuring only millionaires pay by raising the threshold further,
or preferably just abolishing it completely.”