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Chancellor reveals £1k bonus to bring back furloughed staff but no scrappage scheme or VAT cut to boost car sales

Time 10 months ago

The chancellor Rishi Sunak has unveiled a package of measures to help boost the economy in an address to Parliament this afternoon – but moves to boost the car industry have been left out.

In the Summer Statement address he laid out plans to help boost jobs and incentivise businesses to bring back furloughed staff with a £1k bonus for each employee bought back from furlough.

However, neither a VAT cut to boost car sales or a scrappage scheme were announced.

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Instead, a VAT cut was only introduced to boost the hospitality and tourism sectors – with the rate cut from 20 per cent to five per cent.

Mike Jones, chairman of ASE Global, told Car Dealer that there will be ‘initial disappointment’ among car dealers.

The packages the chancellor announced included:

  • A £1,000 jobs retention bonus to bring back furloughed staff which will be paid to firms if they bring them back and keep them employed until January
  • Employers who take on 16-24 year olds will have their wages paid for 6 months and get a contribution to overheads under Kickstart Scheme
  • Employers will be paid to create new apprenticeships with £2,000 per apprentice to be paid, and a new bonus of £1,500 for apprentices over the age of 25
  • Businesses offered £1k for every trainee offered a work experience placement
  • Stamp duty cut to cover homes up to £500k until March 31 – implemented immediately
  • VAT on hospitality and tourism cut – on food, accommodation and attractions – from 20 per cent to five per cent from next week
  • An ‘eat out to help out’ discount offering 50 per cent off, up to £10 per head, on meals out on certain days of the week during August

Mike Jones, of ASE Global, told Car Dealer Magazine: ‘There will be initial disappointment in the motor retail sector that there was no wide cut to VAT or new scrappage scheme in today’s announcement of £30bn of support, with the majority of the new support going to the hospitality and tourism industries.

‘The job retention bonus will provide a welcome boost, particularly if we can claim for employees already brought back from furlough.

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‘At least we now have clarity on the level of government support. The pent up demand among customers holding off on finalising a purchase to see if the government was going to provide additional support can now be released. The rumour of additional help was certainly holding back some demand.’

The Treasury has set aside up to £9.4bn to pay for the job retention bonus.

Its ‘plan for jobs’ document says the figure represents a maximum possible cost if it is paid to all 9.4m furloughed jobs claimed for as of July 5 and acknowledges the true cost ‘will likely be lower’.

In his address, Sunak said millions of people have had their jobs protected by the furlough scheme and one million government backed loans have been handed out.

‘We face profound economic challenges. Businesses have stopped trading and stopped hiring, and in two months the economy has contracted 25 per cent,’ the chancellor told MPs in his address.

The first phase of the government’s action plan was about protecting jobs, the second phase, said the chancellor, was about jobs and the third phase about rebuilding.

Sunak said: ‘People need to know we will do all we can to give everyone the opportunity for good and secure work. Although hardship lies ahead no one will be left without hope.

‘We will protect, support and create jobs and give businesses the jobs to retain and hire.’

The chancellor said furlough has been a ‘lifeline’ but it ‘cannot go on forever’ and endless extensions is ‘irresponsible’. he said he did not want to give people on furlough ‘false hope’.

‘The furlough scheme will wind down flexibly and gradually,’ said the chancellor.

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A further spending review and budget will come in the autumn too.

Sunak said the government’s response was a question of ‘values’ not just economics, concluding: ‘We will not be defined by this crisis, but by our response to it.’

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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