While the Chancellor made a series of national announcements in the Summer Statement, they will play out differently across the country.
The Chancellor has unveiled a substantial package of national measures. But the scale and importance of these national measures will not be equal across cities. This blog looks at the geography of each of the six major elements of the announcement.
The Government will pay six months’ salary at the national minimum wage from October for young people taken on by firms through its £2 billion Kickstart scheme. Clearly modelled on the successful Future Jobs Fund from the last recession, this is designed to support hundreds of thousands of positions. Kickstart will be needed most in cities and large towns with the highest levels of young people out of work, such as Blackpool and Sunderland (see Figure 1).
Figure 1. Youth claimants as share of youth population April 2020
Source: Claimant count, April 2020, ONS
In addition to the Kickstart scheme, the Chancellor set out further incentives to get businesses to take on more young people through apprenticeships and traineeships. For young people 25 and under, firms will receive £2,000 per apprentice. For apprentices over 25, the funding is £1,500. This is on top of existing incentive schemes for employers, meaning up to £3,000 is available to take on young apprentices or those with extra support needs. There is £111 million support for firms looking to help young people through providing traineeships. Temporary work placements to help improve young people’s job readiness will be supported by a £1,000 grant to businesses for each one provided. Firms in northern cities and large towns where apprenticeship starts are already highest (and most apprentices are under 26) are set to benefit most from this extra cash.
Figure 2: Apprenticeship starts per 1,000 working age population, 2018/19
Source: Department for Education, Apprenticeships starts by local authority 2018/19 data.
The commitment to support 140,000 ‘green jobs’ provides some clarity on the £9 billion for building retrofit committed to at the General Election. The £2 billion Green Homes grant will give households up to £10,000 to improve the comfort of their homes and reduce energy costs by around £300 a year with insulation and other measures. As Figure 3 shows, cities and large towns like Burnley, Bradford and Blackpool have some of the least energy efficient housing stock and lowest wages in the country (as well as wetter and cooler weather). The high levels of unemployment in these places – around 9 per cent already – mean that they are also where any jobs created will be most valuable.
Figure 3: Share of homes with EPC rating E-G
|Rank||Top 10||Share of homes with EPC E-G||Rank||Bottom 10||Share of homes with EPC E-G|
Source: Energy Performance of Buildings Certificates data, MHCLG, 2020
The Government’s commitment to end the Job Retentions Scheme (JRS) in October poses serious challenges for those cities and large towns where the largest share of jobs are being funded by the JRS (see Figure 4). Cities and large towns reliant on major airports for employment, such as Crawley, Slough and Luton stand out in particular, where up to a third of the workforce have been furloughed. The question for businesses here will be whether they are still trading in January to be able to receive the promised £1000 per job bonus brought back off furlough. Up to £9 billion is available if they are. The Chancellor was emphatic in his insistence that the furlough scheme will not extend beyond October. But he may yet need to extend it for specific sectors if he is to avoid huge spikes in unemployment in some cities, or if local lockdowns, as we are seeing in Leicester, are widespread and prolonged.
Figure 4: Share of workers who have been furloughed
Source: HMRC data on take up of the Coronavirus Job Retention Scheme by local authority, claims received up to 31 May 2020
Hospitality made up the largest share of jobs in the JRS so it was no surprise that getting people back spending at pubs, restaurants and attractions to support these jobs was at the centre of yesterday’s announcements. A sectoral VAT cut from 20 to 5 per cent and a temporary ‘Eat Out to Help Out’ voucher – previously called for by Centre for Cities – will cut costs for consumers and inject demand into pubs, restaurants and other attractions.
The scheme, which the Treasury expects to cost £500 million, is smaller in scope than we recommended, being focussed only on food on certain days of the week in August. Time will tell as to whether it’s enough to get people back out on the high street. Our High Street Recovery Tracker shows the largest city centres in particular have a lot of ground to make up to get back to pre-crisis levels of footfall.
Figure 5: The drop off in footfall in selected cities and towns
Source: Locomizer footfall data, 2020
The aim of the temporary suspension of stamp duty on the first £500,000 of any house sale is to boost house sales across the country. But its effects are likely to vary. In cities and large towns such as Hull, Liverpool and Barnsley, this will likely exempt almost all house sales from the tax. As the map below shows, hardly any houses sold for more than £500,000 in these cities in 2019. Meanwhile house sales in cities in the Greater South East are most likely to get the full £15,000 on offer. In 2019, almost 40 per cent of sales in Cambridge and London were above the half a million mark.
Previous evidence suggests that this saving will go straight into the pockets of sellers who increase the price of their home in the knowledge the buyer is paying less tax. This will mean that sellers in the Greater South East will pocket a windfall, on top of the large increases they have already seen in equity in recent years. Between 2013 and 2018 homeoners in these cities saw an average increase in equity of £88,000, compared to an increase of £5,000 or less in Sunderland, Middlesbrough and Doncaster.
Figure 6: Share of house sales over £500,000, 2019
Source: Land Registry, price paid data 2019
The suite of policies announced was that they were very much focussed on the here and now of dealing with the crisis. That makes sense, with unemployment set to top three million next week. But if the Government is to ‘double down on levelling up’, as the Chancellor claimed yesterday, then the Budget and Spending Review in autumn will need some large, long-term policies on skills and infrastructure to address the long running economic divides across the country.
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