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.
 

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“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.”