What Does the Summer Statement Mean for Students?
What Does the Summer Statement Mean for Students?
As the UK government eases lockdown measures, attention has turned to the potential economic ramifications of the pandemic, and what steps can be taken to prevent mass layoffs and economic hardships. Chancellor Rishi Sunak has announced a range of new policy measures at several points throughout the year, and on Wednesday 8th July he unveiled his “Summer Statement” to the House of Commons – a £25bn package that serves as a prelude to his upcoming Autumn budget. Rishi Sunak made clear that the primary aim of these measures is to “protect, support and create jobs” to stave off the worst potential consequences of what the IMF expect to be “the deepest global recession since records began”. The aims and impacts of the plans outlined are varied, but how will the Chancellor’s new announcements impact upon the finances of students?
The most expensive proposal announced by Sunak is the ‘Job Retention Bonus’, estimated to cost up to £9.4bn. The scheme means that employers who bring back workers from furlough will receive a £1000 grant per employee brought back, provided they are still with the company in January. For students with part-time jobs who were placed into the furlough scheme in March this may persuade their employers to keep them employed. Retail footfall in English high streets and shopping centres is down 48% compared with this time last year however, and many businesses will not be able to justify keeping high levels of staff with their reduced revenues – evidenced by the fact that Boots and John Lewis announced the day after the Summer Statement that they will be laying off 4000 and 1300 employees respectively. The scheme will also only apply to those who earn at least £520 per month, and as students cannot work large numbers of hours many will fall below this threshold – meaning that they may be the first workers to be made redundant. The scheme has already come under fire from Labour leader Keir Starmer for having too much “dead-weight” and giving out money for employees that were almost certain to be brought back regardless.
As well as the Job Retention Bonus, the government is also looking to expand investment and staff numbers at Jobcentres in order to enable more people to find work and will fund 6-month work placements for 16-24-year olds that are currently claiming Universal Credit. Students are exempt from this scheme, but new graduates that have been unable to find work due to the current lack of employment opportunities may find this useful. However, for students that have just accumulated tens of thousands of pounds of debt to attain a degree, a 6-month minimum wage work placement at the end of it may not seem like a great return on investment.
The hospitality sector has been one of the hardest hit by the Coronavirus pandemic, and the government is clearly keen to ensure that as much of it can be propped up as possible. Businesses in the hospitality sector will receive a 6-month reduction in VAT from 20% to 5% to stimulate spending, and throughout August visitors to restaurants will receive 50% off (up to £10 per person) food and non-alcoholic drinks. These measures appear consumer friendly on the surface, and many students may want to take advantage of potentially cheaper food and attractions – particularly as takeaways, a staple of student life, qualify for the VAT reduction – but many businesses in the sector may keep the reductions for themselves in order to protect their finances from the insecurity of the current crisis. The biggest obstacle for the hospitality industry currently appears not to be cost, but instead consumers that lack confidence in the safety of returning to restaurants and pubs and will instead stay home. Despite there being questions around the effectiveness of these measures in terms of stimulating consumption, potentially increased profit margins from the VAT cut may enable some businesses to stay operational and keep their staff employed. Students that have a part-time job to supplement their income tend to work in hospitality industries and these measures may go some of the way to protect the jobs of students concerned about keeping up with rent payments in a way that the Job Retention Bonus is unlikely to.
Throughout the current pandemic the treasury has repeatedly attempted to provide security to homeowners by providing measures such as the 3 month mortgage holiday, and on Wednesday Rishi Sunak reaffirmed his commitment to people who own their own home (A demographic that tends to support the Conservatives) by increasing the threshold for stamp duty payments to £500,000 and reducing the rate of stamp duty paid above that amount. When it comes to renters however (A group that most students are part of) there has been nothing from the Conservatives to ease their concerns. Many students rely on either their own work or parental incomes to subsidise their incomes and pay their rent, but with unemployment set to rise and job opportunities harder to come by it is increasingly likely that more students will struggle to keep up with rent payments. The BBC claimed that a government plan to subsidise up to two-thirds of the cost of household energy efficiency measures “could” benefit renters as it would reduce their gas and electricity bills, but this would rely on landlords investing significant sums as well whilst not reaping the benefits personally; anyone who has experience dealing with landlords of student properties knows how likely that is to happen.
Boris Johnson promised the country a “New Deal” for the new decade, but it appears that what has instead happened is a small collection of handouts to the Conservative Party’s key demographics. Rishi Sunak’s Summer Statement has kept true to the recent Conservative trend of focusing on short-term gains and sacrificing long-term ambition, and by the time he gets to the apparently more substantial stimulus measures being planned for the Autumn Budget he may wish he had been more proactive earlier on in order to keep Britons in work and get the country’s economic performance back up to speed.