Chancellor’s Announcement – July 2020

Key Points for Providers

The Chancellor’s Announcement involved a focus on a Plan for Jobs with some £30bn of underpinning investment. A number of key priorities lie within this; Protecting Jobs, Creating Jobs and Accelerating Investment. Within this, the Chancellor announced a raft of new measures including:

  • Introduction of a new Job Retention Bonus to encourage firms to keep on furloughed workers – offering a £1,000 per employee to those employers bringing back and keeping furloughed workers in employment
  • Introduction of a Kickstart programme providing funding for short term employment opportunities for young people, an expansion of Traineeships and Apprenticeships
  • Protecting jobs in the hard-hit hospitality and accommodation sectors and at attractions by supporting demand for these businesses, giving them confidence to reopen
  • Announcements on bringing forward investment in FE and School Estate, Green Schemes and Housing

The Plan for Jobs provides a framework for a next step towards economic recovery and securing the UK’s long-term prosperity. Clearly these are welcome investment programmes but, as ever, the devil is in the detail in terms of skills.

  • How will certain programmes be targeted or aligned to ensure that programmes don’t operate in silos and compete with one another?
  • Will there be an expansion of the Apprenticeship budget to meet any increased demand as a result of the new incentives? Or will we see demand for Apprenticeships and incentives outstrip the supply of training support, in particular for Apprentices employed in SMEs.

One disappointing and obvious omission at this point is the lack of any meaningful support to tackle digital exclusion and particularly for learners who will inevitably have to follow blended learning programmes in the future.

What follows in this abridged paper is an overview of the investments announced by the Chancellor today. More detail will be provided as and when it emerges.

The next or following phase of the government’s plan will be set out in the autumn with measures to support the longer-term recovery through a Budget and a Spending Review.

 

Economic Context

 

COVID-19 has led to a substantial reduction in consumption.

 

  • Retail sales were 23% lower in April than in February.4Social consumption (e.g. spending on restaurants, travel and entertainment), typically worth around a fifth of total consumption,5 had fallen by around 80% at its lowest point.6
  • With lower spending, households have in aggregate saved more and paid down debt. In May ATM transactions were 52% lower than a year earlier.7In the same month, UK household bank deposits rose by a record £25.6 billion, over five times the average monthly increase, in the six months to February.8 
  • Households also repaid net £4.6 billion of consumer credit in May,9with many households less willing to make spending on major purchases.10
  • As well as reducing consumer demand, COVID-19 has reduced the capacity of businesses to provide goods and services. During the peak of the lockdown, around a quarter of firms stopped trading. For example, over 80% of firms in the hospitality and leisure industries temporarily ceased trading in April, compared to under 5% of professional services firms.

 

With many firms unable to operate, people’s jobs have been furloughed and working hours have been reduced. Over 9 million jobs have been furloughed through the Coronavirus Job Retention Scheme.

 

Firms have reduced demand for new workers, with vacancies in May 62% lower compared to a year earlier.

 

Universal Credit claims have also been elevated, with 3.4 million individual declarations made from 1 March to 23 June,15 and real time data shows the number of paid employees falling by 612,000 over April and May.16

 

Taken cumulatively these have resulted in a large-scale reduction in total output, an increase in unemployment and an on-going risk to employment, collectively risking an unprecedented level of economic and social scarring.

 

Specific Plan for Jobs Investments

With regards to jobs the following measures were introduced:

Protecting Jobs

  • Job Retention Bonus

The unprecedented Coronavirus Job Retention Scheme (CJRS) has so far supported over one million employers to protect over 9 million jobs. The scheme has been open since March, and will wind down flexibly and gradually, supporting businesses until October.

Job Retention Bonus – The government will introduce a one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021. Further detail about the scheme will be announced by the end of July.

  • Supporting Jobs

Unemployment can have long-term impacts on individuals and families, with young people particularly vulnerable due to their lack of experience in work.

To address these challenges the government has a large-scale, ambitious plan to:

  • support people in finding jobs
  • enable them to gain the skills they need to get jobs
  • provide targeted help for young people to get into work

The Plan for Jobs provides new funding to ensure more people will get tailored support to help them to find work. People in the Intensive Work Search group on Universal Credit will benefit from a significant expansion of support offered through the Department for Work and Pensions (DWP) Jobcentres, including doubling the number of work coaches and additional intensive support to those who have been unemployed for at least three months.

Alongside this, the government will utilise private sector capacity to deliver a new online, one-to-one job finding support service.

Additional funding will also mean that over a quarter of a million more people will receive individualised advice on training and careers through the National Careers Service.

The government will also support people to build the skills they need to get into work, with a substantial expansion of existing provision, providing funding to triple the number of traineeships and sector-based work academy placements, alongside further support for apprenticeships, which enable people to work while training.

The government will introduce a new Kickstart Scheme to:

  • fund the direct creation of high quality jobs for young people at the highest risk of long-term unemployment. It will give young people the chance to build their confidence and skills in the workplace, and to gain experience that will improve their chances of going on to find long-term, sustainable work.
  • This will sit alongside a guaranteed foundation of support through an expanded Youth Offer delivered through DWP, providing a range of targeted support to help young people find lasting work.

In addition to the policies outlined in the Plan for Jobs, the government intends to support those who are out of work for a longer period with a new, large-scale employment support offer. More details about this will be available shortly

  • Kickstart Scheme – Laying the Foundations for Employment

The government will introduce a new Kickstart Scheme in Great Britain. This is a wide-ranging and ambitious programme. This will include:

  • A £2 billion fund to create hundreds of thousands of high quality 6-month work placements aimed at those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment. Funding available for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions.
  • New funding for National Careers Service – The government will provide an additional £32 million funding over the next 2 years for the National Careers Service so that 269,000 more people in England can receive personalised advice on training and work.
  • High quality and expansion of Traineeships for young people – The government will provide an additional £111 million this year for traineeships in England, to fund high quality work placements and training for 16-24 year olds. This funding is enough to triple participation in traineeships. For the first time ever, the government will fund employers who provide trainees with work experience, at a rate of £1,000 per trainee. The government will improve provision and expand eligibility for traineeships to those with Level 3 qualifications and below, to ensure that more young people have access to high quality training.
  • Immediate Payments and Incentives for employers who hire new Apprentices – The government will introduce a new payment of £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over, from 1st August 2020 to 31st January 2021. These payments will be in addition to the existing £1,000 payment the government already provides for new 16-18 year-old apprentices, and those aged under 25 with an Education, Health and Care Plan – where that applies.
  • High value courses for school and college leavers – The government will provide £101 million for the 2020-21 academic year to give all 18-19 year olds in England the opportunity to study targeted high value Level 2 and 3 courses when there are not employment opportunities available to them.
  • Expanded Youth Offer – The government will expand and increase the intensive support offered by DWP in Great Britain to young jobseekers, to include all those aged 18-24 in the Intensive Work Search group in Universal Credit.
  • Enhanced work search support – The government will provide £895 million to enhance work search support by doubling the number of work coaches in Jobcentre Plus before the end of the financial year across Great Britain.
  • Job finding support service – The government will provide £40 million to fund private sector capacity to introduce a job finding support service in Great Britain in the autumn. This online, one-to-one service will help those who have been unemployed for less than three months increase their chances of finding employment.
  • Flexible Support Fund – The government will increase the funding for the Flexible Support Fund by £150 million in Great Britain, including to increase the capacity of the Rapid Response Service.22It will also provide local support to claimants by removing barriers to work such as travel expenses for attending interviews.
  • New funding for sector-based work academies – The government will provide an additional £17 million this year to triple the number of sector-based work academy placements in England in order to provide vocational training and guaranteed interviews for more people, helping them gain the skills needed for the jobs available in their local area.

 

Protecting Jobs in Key Sectors

The hospitality sector plays a vital role in UK life.

The VE and its component sectors are amongst the highest employing sectors across the UK, with over 2.4 million workers in hospitality, accommodation and attractions, equivalent to 8% of the entire UK workforce. They have also been among the hardest hit by the pandemic and necessary restrictions.

 

Workers in the hospitality sector are disproportionately young, with fewer qualifications, and therefore more likely to be unemployed for a long time if they lose their jobs.

 

Workers in hospitality are also more likely to be female or from a Black, Asian and minority ethnic background relative to the overall workforce. Supporting these sectors is therefore crucial to the government’s objective of preventing labour market scarring and ensuring opportunities for all.

 

To help the VE Sector, the Government is introducing:

 

  • Eat Out to Help Out – In order to support around 130,000 businesses and to help protect the jobs of their 1.8 million employees, the government will introduce the Eat Out to Help Out scheme to encourage people to return to eating out. This will entitle every diner to a 50% discount of up to £10 per head on their meal at participating establishments. The discount can be used unlimited times and will be valid Monday to Wednesday throughout August 2020.
  • Temporary VAT cut for food and non-alcoholic drinks – From 15 July 2020 to 12 January 2021, to support businesses and jobs in the hospitality sector, the reduced (5%) rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK.
  • Temporary VAT cut for accommodation and attractions – From 15 July 2020 to 12 January 2021, to support businesses and jobs, the reduced (5%) rate of VAT will apply to supplies of accommodation and admission to attractions across the UK.

 

Creating Jobs

A further feature of the Plan for Jobs is job creation. Accordingly the Government wishes to fund a range of measures designed to support job creation and employment growth, much of which is housing related.

  • Temporary Stamp Duty Land Tax (SDLT) cut – The government will temporarily increase the Nil Rate Band of Residential SDLT, in England and Northern Ireland, from £125,000 to £500,000. This will apply from 8 July 2020 until 31 March 2021 and cut the tax due for everyone who would have paid SDLT. Nearly nine out of ten people getting on or moving up the property ladder will pay no SDLT at all.
  • Green Homes Grant – The government will introduce a £2 billion Green Homes Grant, providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household. For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household. In total this could support over 100,000 green jobs and help strengthen a supply chain that will be vital for meeting our target of net zero greenhouse gas emissions by 2050. The scheme aims to upgrade over 600,000 homes across England, saving households hundreds of pounds per year on their energy bills.
  • Construction Talent Retention Scheme – The government is funding a Construction Talent Retention Scheme to support the redeployment of workers at risk of redundancy. This will help retain construction skills and match talented workers to opportunities across the UK.
  • Office for Talent – The government will create a new Office for Talent based in No.10, with delivery teams across government departments. The Office will focus on attracting, retaining and developing top research and science talent across the UK and internationally.
  • Public Sector Decarbonisation Scheme – the government will invest £1 billion over the next year in a Public Sector Decarbonisation Scheme that will offer grants to public sector bodies, including schools and hospitals, to fund both energy efficiency and low carbon heat upgrades.
  • Green Jobs Challenge Fund – The government will invest up to £40 million in a Green Jobs Challenge Fund for environmental charities and public authorities to create and protect 5,000 jobs in England. The jobs will involve improving the natural environment, including planting trees, restoring habitats, clearing waterways, and creating green space for people and wildlife.
  • Direct Air Capture – The government will provide £100 million of new funding for researching and developing Direct Air Capture, a new clean technology which captures CO2 from the air.
  • Automotive Transformation Fund – Building on the announcement last year of up to £1 billion of additional funding to develop and embed the next generation of cutting-edge automotive technologies, the government is making £10 million of funding available immediately for the first wave of innovative R&D projects to scale up manufacturing of the latest technology in batteries, motors, electronics and fuel cells. The government is also calling upon industry to put forward investment proposals for the UK’s first ‘gigafactory’ and supporting supply chains to mass manufacture cutting-edge batteries for the next generation of electric vehicles, as well as for other strategic electric vehicle technologies.
  • Social Housing Decarbonisation Fund – The government will establish a new Social Housing Decarbonisation Fund to help social landlords improve the least energy-efficient social rented homes, starting with a £50 million demonstrator project in 2020-21 to decarbonise social housing. This will mean warmer homes and lower annual energy bills for some of the lowest income households.
  • Affordable Homes Programme – The government has confirmed that the £12.2 billion Affordable Homes Programme announced at Budget will support up to 180,000 new affordable homes for ownership and rent in England. The £12.2 billion will be spent over five years, with the majority of homes built by 2025-26 and the rest by 2028-29. The Affordable Homes Programme will also include a 1,500 unit pilot of First Homes.
  • Short-Term Home Building Fund extension – The government will support small- and medium-sized housebuilders that are unable to access private finance by boosting the Short-Term Home Building Fund, providing an additional £450 million in development finance to smaller firms. This is expected to support around 7,200 new homes in England, boosting housing supply and adding resilience to the market. A proportion of this fund will be reserved for firms using innovative approaches to housebuilding such as ‘Modern Methods of Construction’.
  • Brownfield Housing Fund – The government will allocate a £400 million Brownfield Housing Fund to seven Mayoral Combined Authorities to bring forward land for development and unlock 24,000 homes in England. To allow authorities to begin delivering projects quickly, 90% of the fund will be allocated immediately on a per capita basis, with 10% to be allocated through a competitive process.
  • Planning reform – The government will introduce new legislation in summer 2020 to make it easier to build better homes in the places people want to live. New regulations will make it easier to convert buildings for different uses, including housing, without the need for planning permission. In July 2020, the government will launch a policy paper setting out its plan for comprehensive reforms of England’s planning system to better support the economy and release more land for housing in areas that need it most.

 

Accelerating investment

Government will bring forward investment in certain areas including:

  • FE estate funding – Building on the £1.5 billion commitment for FE capital funding made at Budget 2020, the government will bring forward £200 million to 2020-21 to support colleges to carry out urgent and essential maintenance projects. This will be the first step in the government’s commitment to bring the facilities of colleges everywhere in England up to a good level.
  • School estate funding – The government will provide additional funding of £560 million for schools in England to improve the condition of their buildings and estates in 2020-21. This is on top of the £1.4 billion already invested in school maintenance this year.40
  • School rebuilding programme – The government has announced over £1 billion to fund the first 50 projects of a new, ten-year school rebuilding programme in England. These projects will be confirmed in the autumn, and further detail on future waves will be confirmed at the Comprehensive Spending Review. Construction on the first sites will begin in September 2021.
  • Local infrastructure projects – The government will provide £900 million for shovel-ready projects in England in 2020-21 and 2021-22 to drive local growth and jobs. This could include the development and regeneration of key local sites, investment to improve transport and digital connectivity, and innovation and technology centres. Funding will be provided to Mayoral Combined Authorities and Local Enterprise Partnerships.