What the chancellor’s summer update could mean for you

A statement from the chancellor always comes with the potential to have an immediate impact on our lives.

But in a time of a global health and economic crisis, this statement is even more important.

Boosting the UK’s economy and supporting our personal circumstances when there’s still a virus rampaging across parts of the country is one of the biggest challenges Rishi Sunak will ever face. Get it right, and he saves us mere mortals from financial disaster. Get it wrong and he will be blamed for bringing down a nation.

So what might Sunak come out with tomorrow when he delivers his “summer economic update” to the Commons? There have been more rumours, rants and recommendations about this statement than any other in recent years – and the rule book was tossed out months ago as we tried to deal with the crisis of a lifetime. In other words, the possibilities seem endless. Here are just a few.

The £500 giveaway

Understandably, this one has received a lot of attention even though there’s no actual evidence that it is being seriously considered.

The Resolution Foundation has suggested that every adult should be given shopping vouchers worth £500 and every child £250 in a move to kick-start high-street retail that would cost the government £30bn.

The vouchers would need to be spent within a year and be restricted to struggling sectors like face-to-face retail, hospitality and tourism.

Sadly for shoppers, there’s no strong suggestion this is something Sunak is seriously considering, though we can all daydream.

A VAT cut

Perhaps more likely than everyone in the country being given a wad of vouchers to get out and spend is a cut in VAT.

The tax is currently at 20 per cent and it has been cut in the past during the aftermath of financial crises. It was cut from 17.5 per cent to 15 per cent as the UK recovered from the 2008 financial crash.

As the tax is not levied against essentials like certain foods and children’s clothing, a cut would potentially reduce the prices of more discretionary purchases – encouraging people to get out and shop.

Tom Selby, senior analyst at AJ Bell, says: “Cuts to VAT rates are perhaps the most straightforward way to increase demand and would provide a much-needed lifeline to the UK high street. Among the key questions here are whether any reduction in VAT will be temporary or permanent and which industries it will benefit.”

A stamp duty holiday

It’s being widely speculated that the government is considering offering a six-month stamp duty holiday.

One idea is that the chancellor might announce that up to the first half-million pounds of a property’s value would be stamp duty free, in England and Northern Ireland at least – this is a devolved tax.

While that wouldn’t make any difference to most first-time buyers who can already buy a home worth up to £300,000 without paying stamp duty, it could have an impact on willingness to move and keep the housing market chugging along. It could encourage people whose children have grown up and left home to downsize without paying a hefty tax bill.

Of course, one issue with the suggestion that a stamp duty holiday could be in the pipeline is that it risks freezing up the housing market in the meantime. If you know a big tax break could be coming, you may be less likely to move before it does.

So the rumour that the chancellor may signal the tax break tomorrow but not enact it until the autumn Budget has caused some concern.

Support for jobseekers

Unemployment has risen dramatically and is set to continue rising as the furlough scheme is gradually wound down over the next few months. This is something the chancellor will need to address if he is to prevent a temporary virus-caused downturn becoming a long-term economic catastrophe.

One tactic that has already been pledged is funding for 30,000 new traineeships. These will give young people in England 90 hours of unpaid work experience plus lessons in maths, English and CV development.

It will see companies in England being offered £1,000 for every work experience place they are able to offer, with funding being provided to the devolved parliaments for similar schemes.

As well as that, there will be funding to double the number of work coaches designed to help the rising number of unemployed people find new work or transfer their skills to new sectors.

Green investments

One plan that the chancellor may be hoping will boost spending and create jobs is to invest in greener homes.

It’s thought Sunak will announce plans for hundreds of thousands of households to receive grants worth up to £5,000 to make their homes more environmentally friendly, with larger vouchers available for poorer households.

This would help the country make its housing stock less environmentally damaging and also create work for builders, plumbers and other tradespeople by encouraging investment in things like more energy-efficient doors and windows.

There could also be big spending on making public buildings more energy efficient.

Money for the arts

Growing numbers of theatres and museums have warned they are on the brink of collapse and so over the weekend the government announced a £1.57bn fund for arts and culture, including £880m in grants.

The funding has been announced but not how it will be allocated, so there could be more details revealed when the chancellor makes his statement.

But…

This government has been keen to separate statements from Budgets and has consistently downplayed the importance of anything other than a full Budget event.

So there could well be some big announcements tomorrow or it could be a steering event designed to get us through to the main Budget in the autumn. The chancellor has a serious balancing act to carry off and may opt to delay some of the decisions until the economy is more unlocked and the future clearer to read.