Chancellor Rishi Sunak is to cut VAT for hospitality and tourism as part of a package to prevent mass unemployment as the economy is hit by coronavirus.

The government will also pay firms a £1,000 bonus for every staff member kept on for three months when the furlough scheme ends in October.

And he announced a scheme to give 50% off to people dining out in August.

Mr Sunak warned “hardship lies ahead”, but vowed no-one will be left “without hope,” in a statement to MPs.

He rejected calls to extend the furlough scheme beyond October, saying it would give people “false hope” that they will have a job to return to.

But he said he would “never accept unemployment as an inevitable outcome” of the pandemic.

Cut to 5%

The “job retention bonus” could cost as much as £9bn if every furloughed worker is covered, he said in his statement.

“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.

“So 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.”

He told MPs he will cut VAT on food, accommodation and attractions from 20% to 5% ,from next Wednesday.

This cut will apply to eat-in or hot takeaway food from restaurants, cafes and pubs, accommodation in hotels, B&Bs, campsites and caravan sites, attractions like cinemas, theme parks and zoos.

Rishi Sunak said this “£4bn catalyst” would help protect “over 2.4 million jobs”.

Mr Sunak also announced an “Eat Out to Help Out” discount, which he said would help protect 1.8 million jobs.

Meals eaten at any participating business, Monday to Wednesday, will be 50% off in August, up to a maximum discount of £10 per head for everyone, including children.

Businesses will need to register, and can do so through a website, open next Monday and apply in the month of August, the chancellor said in his statement.

Stamp duty holiday

The chancellor also announced a £2bn “kickstart scheme” to create more jobs for young people.

The fund will subsidise six-month work placements for people on Universal Credit aged between 16 and 24, who are at risk of long-term unemployment.

Mr Sunak also announced a temporary stamp duty holiday to stimulate the property market.

This would exempt the first £500,000 of all property sales from the tax.

The chancellor outlined a number of other measures in the build-up to his statement, including:

  • Vouchers of up to £5,000 for energy-saving home improvements as part of a wider £3bn plan to cut emissions.
  • A pledge to provide 30,000 new traineeships for young people in England, giving firms £1,000 for each new work experience place they offer
  • A £1.6bn package of loans and grants for the arts and heritage sector
  • The doubling of front line staff at job centres, as well as an extra £32m for recruiting extra careers advisers and £17m for work academies in England
  • Employers will not have to pay any tax on coronavirus swab tests provided for their staff

Details of how the package will be paid for – through borrowing and possible tax rises – are likely to be unveiled in the chancellor’s Autumn Budget.