No scrappage, but Chancellor unveils £1,000 bonus to bring back furloughed staff

Published:  08 July, 2020

Garages will not be facing the prospect of a vehicle scrappage scheme, but Chancellor of the Exchequer Rishi Sunak has announced a £1,000 bonus for every employee brought back to work from furlough.

In his Summer Statement address this afternoon (Wednesday 8 July), the Chancellor’s laid out his programme for boosting the post-lockdown economy, which included the furlough return bonus, as well as a £2.1 billion scheme to provide subsidised six-month work placements for 16-24 year olds  on Universal Credit.

There was also a promise to provide 30,000 new apprenticeships for young people in England, giving firms £1,000 for each new work experience place they offer.

Commenting on the Coronavirus Job Retention Scheme bonus, which will cost around £9.4bn if every furloughed worker returned to work, the Chancellor observed: "If you're an employer and you bring back someone who was furloughed - and continuously employ them through to January - we'll pay you a £1,000 bonus per employee. It's vital people aren't just returning for the sake of it - they need to be doing decent work.

"For businesses to get the bonus, the employee must be paid at least £520 on average, in each month from November to the end of January - the equivalent of the lower earnings limit in National Insurance."

For businesses that are looking to get COVID-19 testing for their staff there was more good news, as employers will not have to pay tax on swab tests provided for staff.

£100m has also been earmarked for improving local road networks as part of a programme that includes the building of more cycle lanes.

Wider measures included a temporary stamp duty holiday to stimulate the property market, vouchers of up to £5,000 for energy-saving home improvements as part of a £3 billion plan to cut emissions, and a VAT cut on food, accommodation and attractions from 20% to 5% from Wednesday (15 July). The Chancellor also announced a scheme to give to people dining out in August 50% off, to boost the hospitality sector.

Commenting on the measures, IMI CEO Steve Nash said: “It is welcome news that the Chancellor has focused on job creation in today’s statement as we emerge from the dark cloud of COVID-19. For a sector which represents such a significant proportion of the UK economy this is crucial.

“In particular, we are delighted to see the injection of funds – albeit only for the short-term – for the creation of new apprenticeships. Recent IMI research had suggested that 71% of automotive businesses were cutting their apprentice new starts in 2020 with a drop of as much of 65% this year. So we hope this will encourage a rethink in that area.  The introduction of incentives for trainees – with vital support from careers advisors – should also be good news for the Training Centres that have predicted a fall of on average 38% in their intake for 2020/2021.

“We also know that a large proportion of the current apprentice cohort in our sector have been languishing at home on furlough so we are delighted that employers will be incentivised to bring furloughed employees back to work – rather than lay them off.

“It is, however, disappointing that the Chancellor did not see fit to cut VAT beyond hospitality and tourism.  These sectors have, of course, been hit incredibly hard by the impact of the lockdown.  But so too has the automotive sector. A VAT cut on car sales would have made a big difference in encouraging consumers to get back into the showrooms – virtual or physical – and that would have in turn helped with the government’s ‘road to zero’ objectives.”

There were no measures specific to the automotive sector, though there had been high-level talks between government and vehicle manufacturers on scrappage during May. Carmakers were pushing for a scheme similar to the 2009 programme that took 400,000 older cars off the road and out of the aftermarket, but government reportedly cooled on the idea.

SMMT Chief Executive Mike Hawes commented: “Today’s announcements to safeguard jobs and encourage consumer spending in some parts of the economy are welcome – but it’s bitterly disappointing the Chancellor has stopped short of supporting the restart of one of the UK’s most important employers and a driver of growth. The automotive sector has been particularly hard hit, with thousands of job losses already announced and many more at risk. Of Europe’s five biggest economies, Britain now stands alone in failing to provide any dedicated support for its automotive industry, a situation that will only deter future investment.

“We urgently need government to expand its strategy and introduce sector-specific measures for UK auto to support cash flow such as business rate holidays, tax cuts, and policies that provide broader support for consumer confidence and boost the big ticket spending that drives manufacturing.”

Mike concluded: “Until critical industries such as automotive recover, the UK economic recovery will be stuck in low gear.”

NFDA Director Sue Robinson added, “It is positive that following the support provided to employers through the Job Retention Scheme, the Government has committed to continuing to help employers retain their workforce and create new roles.

“In particular, the automotive industry has invested heavily in attracting young people to the sector and providing them with unique training and development opportunities. We must minimise the impact of the current crisis and ensure it does not undermine the efforts our sector has been making to invest in its future workforce.

“Although the Chancellor did not announce any specific measure targeting the automotive sector, it is important that we continue to monitor how consumers and automotive businesses perform over the coming months to be ready to act and support the industry if and when required.”

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