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UK's Summer Economics Booster: Reactions
Tom Burroughes
9 July 2020
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. Reactions Professor Syed Kamall, academic and research director at the 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?”
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.
“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 , 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.
John O’Connell, chief executive of the , 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.”