UK government to pay companies to bring workers back from furlough

Rishi Sunak has slashed stamp duty, cut VAT for the hospitality industry and promised to pay companies for each worker they bring back from furlough in a £30bn package of stimulus measures designed to stave off economic disaster.

The UK chancellor’s new spending pledges — in a one-off summer statement on Wednesday — take the total cost of the Treasury’s Covid-19 support measures to about £189bn since March.

Mr Sunak said that a new “job retention bonus” of £1,000 per worker — paid to companies that bring staff out of the government’s furlough scheme — could cost up to £9bn if all 9m people currently furloughed were re-employed before January.

The VAT cut from 20 per cent to 5 per cent for the tourism and hospitality industry — including restaurants, pubs and cafés — will last for six months and will cost about £4bn.

Mr Sunak also announced a novel plan for an “eat out to help out” discount — unprecedented in the UK — involving a 50 per cent discount for meals and non-alcoholic drinks in cafés and restaurants during the month of August. “The final measure I’m announcing today has never been tried in the UK before, this moment is unique, we need to be creative.”

However the discounts will only apply on Mondays, Tuesdays and Wednesdays and are limited to up to £10 per diner.

Meanwhile, Mr Sunak announced that he would raise the stamp duty threshold on all home purchases from £125,000 to £500,000 until the end of March to help kick-start the struggling housing market — at a cost of £3.8bn.

The British government has introduced a swath of interventionary measures to avoid economic calamity after imposing a lockdown to prevent the spread of coronavirus — after GDP fell 25 per cent in March and April.

Mr Sunak insisted that the government’s furlough scheme, which has supported 9m jobs, will still finish at the end of October — prompting fears that unemployment will spike in the autumn.

“The truth is, calling for endless extensions to the furlough is just as irresponsible as it would have been in June to have ended the scheme overnight . . . leaving the furlough scheme open forever gives people false hope,” he said.

But he insisted that the government would help people stay in work or in training until the recovery is under way.

The centrepiece of that “plan for jobs” was a £2bn “kick-starter” work creation scheme to stop the UK’s young people becoming part of a blighted “Covid generation”.

Mr Sunak said the Treasury would create a pool of “free labour” for companies, paying the minimum wage to up to 300,000 people aged 16-24 — at an average of £5,500 each — for six months from August.

As well as the £1,000 bonus for each worker taken out of furlough, the chancellor also promised to pay companies £2,000 for every young apprentice they take on over the next six months while tripling the number of places on sector-based work academies.

He also announced £3bn of energy efficiency measures including a “green homes grant”.

“Although hardship lies ahead no one will be left without hope,” Mr Sunak told the House of Commons. “Where challenges arise we will overcome them.”

Mike Cherry, chair of the Federation of Small Businesses, applauded the chancellor for taking a “jobs first approach” in the statement but warned that further help could still be needed before the autumn. “The chancellor is absolutely right to stress that the job of getting the economy back on its feet has only just begun,” he said.

Anneliese Dodds, shadow chancellor, welcomed the jobs retention bonus but asked Mr Rishi whether the bulk of the money could “just go to employers who were already planning to bring people back to work.”

Mr Sunak said the government had introduced huge, comprehensive economic measures during the early phase of the pandemic.

Now the UK was entering a new phase where the economy still faced “profound economic challenges” with significant job losses predicted, he warned. “We haven’t done everything we have done so far just to step back now and say ‘job done’,” he said.

He promised the government would help the economy “rebuild” with further measures in a third, future phase.

Frances O’Grady, general secretary of the Trades Union Congress, said Britain still faced the threat of “mass unemployment” and called for targeted support for specific sectors such as aviation and manufacturing.

“Struggling businesses will need more than a one-off job retention bonus to survive and save jobs in the long-term,” she said.