The Summer “Budget” 2020

I wrote on Monday about what I was hoping for from yesterday’s statement from the chancellor: in one word, Confidence.

I am not entirely sure we got it.

 

The Good the Bad and the Chubbily (VAT)

I have mixed views on the cut in VAT for the hospitality sector: mixed as I am not sure that it is targeted as well as it could be.

The Good: It has happened, and it will encourage people to get out and spend. But if we get a surge in the virus, the Chancellors efforts will be thwarted.

The bad: If I owned a private equity firm who has bought one of the many food chains out of liquidation in the last two month’s I would be rubbing my hands together. I don’t though, and I do have two local pubs that lead with wet sales (beer et al). the Eat Out to Help Out Scheme does nothing for them.

The Chubbily: According to the Times this morning “The combined measures mean that the cost of a Big Mac meal at McDonald’s will fall from nearly £5 to little more than £2 if the chain decides to take part. The price of an individual Big Mac could fall to £1.36, cheaper than anywhere else in the world.” Now how does that fit with our Prime Minister’s drive to reduce obesity to help guard against an Autumn spike in Coronavirus cases?

 

A forgotten litany (PAYE)

There are no good, long-term, subsidised jobs, because they always lead to fraud and market distortions. Deregulation, tax cuts for entrepreneurship and lower debt. These are the essentials for recovery.

I am pleased that there are measures in place to protect and create jobs. Included within these, companies who bring back furloughed workers will be paid a £1,000 bonus per employee as long as they are paid a minimum of £520 on average each month between November and January.

My concern is that, is £1,000 subsidy enough to encourage employers to keep employees through to February? Possibly for lower paid employees, less well for higher. And, does the policy just push the furlough cliff edge from October to February? 

I said on Monday a better method, less open to fraud and manipulation would be to increase the NIC thresholds to match that of PAYE.

 

One in the black, but two in the red (Stamp Duty)

It is great that there had been a raising of the threshold. On the feared deferral of a few months to the Autumn Budget did not happen

But why, oh why, oh why was this extended to cover buy to let and second homes? (For those of you that do not remember Jim Bowen and Bullseye, these were the two darts that went into the red!)

House-buyers, especially first-time house-buyers want confidence. The lack that as he availability of mortgages is still low, for those with a deposit of less than 15%.

Second home buyers and buy-to-let investors will seek properties in the sub £500,000 market. Therefore, by including them in this relief the effect will be to increase house prices in this market, as there will be more buyers.