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Chancellor’s summer statement review

 

The economic impact of Coronavirus is having a clear impact on the region’s economy. Nearly three in every ten jobs in the region (28.08%) are currently being supported by either the Coronavirus Job Retention Scheme or the Self-Employment Income Support Scheme.

The crisis will not be felt evenly across the country, in the North East, nearly three quarters (72.4%) of businesses have seen a fall in turnover as a result of the crisis, compared to 64.8% nationally. The underlying weaknesses in the region’s economy, from employment to public health and skills, have been brought into focus by this crisis. The region will need substantial and sustained investment to narrow the gaps between the North East and the UK on measures like unemployment, growth and pay as part of the recovery process.

Jobs and skills

Much of yesterday’s announcement was clearly focused on jobs and skills which will be crucial in the recovery process.

One of the key announcements was the job retention bonus scheme. The Government will pay firms a £1,000 bonus for every staff member kept on for three months when the furlough scheme ends in October, staff would need to be paid at least £520 a month and employed through to January. Whilst this measure is welcome, for some of the hardest hit sectors the £1000 bonus might not be enough to encourage businesses considering redundancies to retain staff.

Another key announcement was the Kickstart scheme, the scheme will subsidise six-month work placements for people aged between 16 and 24 who are at risk of long-term unemployment. The jobs will be a minimum of 25 hours a week on the national minimum wage with firms able to top up the wages.

Support focussed on younger people is welcome as they are more likely to be working in sectors hardest hit by Covid such as hospitality, meaning many face increased job insecurity. Data from April has shown that one-in-ten 18-24-year-olds have lost their main job, more than double the 4 per cent average across all age groups.

In order for the Kickstart scheme to be effective it will need to be linked to growth sectors in local areas which will help to lead to jobs. Younger people on the scheme will need to be trained and supported leading to long-term employment rather than the scheme only offering short-term job.

Other announcements included that the Government will pay businesses £1000 to take on new trainees and a new payment of £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over from 1st August 2020 to 31st January 2021. A potential scheme to support the long term unemployed was also mentioned but there are no details as yet. Any scheme around long term unemployment would be vital for the North East as we face higher rates of unemployment and economic inactivity.

The grant for businesses to take on trainees is welcome but again might not be enough for businesses if they are already in financial difficulty. As the traineeships are unpaid this creates issues around accessibility with only some young people able to take advantage of this if they have other forms of financial support, this will create problems around social mobility and limit where people will be able apply if they are only able to afford to travel locally. As with all the schemes there needs to be Government oversight to ensure that young people aren’t being exploited and are doing work which will improve their skills

The apprentice scheme offers a smaller grant to hire apprentices over 24 but there will need to be more measures taken to help older people, one in six 60-64 year olds are furloughed and one of the lessons leant from the SSI retraining scheme in the region is that it was often harder for older people to find employment.

Overall, we will need all of these schemes linked to growth sectors in the region such as around digital and energy sectors and schemes around the social care sector, an important sector in employing women. We will need more sector specific and local measures to encourage job creation to provide opportunities for long-term employment in the region.

Town centres and sector specific measures

The Summer Statement included specific measures for some of the hardest hit sectors including a VAT cut to 5% for food and drink, attractions and accommodation. The economic crisis is very sector based with data from the ONS in April showed that the highest proportion of workforce being furloughed was the accommodation and food service activities industry (80%) and in the art, entertainment and recreation industry (68%). We need measures to increase demand to help these industries.

Another measure from the statement to increase demand was the Eat Out to Help Out. The scheme entitles every diner to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal for the entire month of August 2020 across the UK, participating businesses will be fully reimbursed for the 50% discount. Sector specific support is welcome, but the scheme is complicated and limited to food rather than including other sectors as well.

The Government have said it will accelerate its investment in town centres through the towns fund, getting funds out quickly will be important but there will need to be additional investment to ensure that town centres are able to adapt to this crisis.

Housing and infrastructure

One of the key announcements on housing was around making homes more energy efficient. From September, owner-occupiers and landlords will be able to apply for vouchers through the £2bn scheme to make their homes more energy efficient. The grants will cover at least two-thirds of the cost of the work with a limit of £5,000 per home. Low-income households will be eligible for vouchers covering the full, cost up to £10,000. There will also be £1 billion to improve energy efficiency in public sector buildings and £50 million to pilot the right approach to decarbonise social housing.

This is a positive step as it will both help the UK to reach its net zero targets and help to create jobs for businesses involved in the insultation process and providing extra support to those on lower incomes is welcome. Deciding on how landlords will access the scheme and whether this will include private landlords will be important in whether renters benefit and whilst the scheme to pilot ways to decarbonise social housing is welcome there will need to be more funding in the future to roll out larger schemes for social housing to help cut emissions and to help residents with their fuel bills.

Another announcement was the temporary stamp duty cut due to last until the end of the year. This will benefit some people in the house buying process and help with some confidence but this will not benefit first time buyers, renters or those not as far along the house buying process.

The statement also set out a construction talent retention scheme that will support the redeployment of workers at risk of redundancy. There will be an online portal to redeploy staff at risk of redundancy across the sector and enable temporary employee loans between businesses. This will help retain construction skills and match talented workers to opportunities across the UK. This is a good example of an innovative approach to protect jobs and how Government can work with sector bodies to offer sector-based support. Online portals to share apprenticeships and other training opportunities could be useful as well.

There is also some funding to support SME housebuilders with an additional £450 million in development finance for smaller housebuilding firms. A proportion of this fund will be reserved for firms using innovative approaches to housebuilding such as ‘Modern Methods of Construction’ which can help with sustainable development and increase productivity. This is welcome and further support on incentivising firms to move to more modern methods and supporting SMEs will be important for the construction sector.

The government will allocate a £400 million Brownfield Housing Fund to seven Mayoral Combined Authorities to bring forward land for development and unlock 24,000 homes in England. 90% of the fund will be allocated immediately on a per capita basis, with 10% to be allocated through a competitive process. The North of Tyne Combined Authority has been awarded £24 million and are bidding for more. This funding will help the region in allowing for sites to developed, however areas without a Mayoral Combined Authority are left out and will still need support.

In terms of planning the Government said that they will introduce new legislation in summer 2020 including measures to make it easier to convert buildings for different uses. In July 2020, the Government will launch a policy paper setting out its plan for comprehensive reforms of England’s planning system to better support the economy. We will need policies that link housing and infrastructure to the ‘levelling up agenda’ and we will be consulting with our members on the impact of any reforms in the future,

In terms of other infrastructure projects, the Government have said that they will provide £900 million to LEPs and Mayoral Combined Authorities for shovel ready projects in England in 2020-21 and 2021-22 to drive local growth and jobs. This could include the development and regeneration of key local sites, investment to improve transport and digital connectivity, and innovation and technology centres. There was also £100 million to deliver 29 local road maintenance upgrades across England in 2020-21. These measures are welcome however long-term infrastructure investment in needed especially around digital infrastructure and some of the larger projects such as Northern Powerhouse Rail. An infrastructure strategy and more investment at the next spending review will be needed.

In terms of sustainable transport and infrastructure there was an important announcement around battery technology. The Government have said that they will make £10 million of funding available immediately for the first wave of innovative R&D projects to scale up manufacturing of the latest technology in batteries, motors, electronics and fuel cells. The Government is also calling upon industry to put forward investment proposals for the UK’s first ‘gigafactory’ and supporting supply chains to mass manufacture cutting-edge batteries for the next generation of electric vehicles, as well as for other strategic electric vehicle technologies. The North East already has plenty of companies working on battery technology with Avid technology working on electric vehicles and Hitachi and Hyperdrive Innovation working on battery technology for trains. R&D funding could help the region become a hub for innovation around battery technology and create new jobs.

Overall, there were some welcome measures in the Chancellor’s statement that will provide short-term boosts to parts of our economy, but we need more detail around jobs creation and longer-term action to ‘level up’ regions such as the North East.