UK government readies extreme measures to right capsizing economy

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[March 20, 2020]  By Andy Bruce

LONDON (Reuters) - Britain will take further emergency measures to stem the collapse of its economy on Friday, when finance minister Rishi Sunak will outline plans to prop up companies and workers who face hardship from the coronavirus outbreak.

Chancellor of the Exchequer Rishi Sunak speaks during a news conference on the ongoing situation with the coronavirus disease (COVID-19) in London, Britain March 17, 2020. Matt Dunham/Pool via REUTERS/File Photo

Sunak has been meeting trade unions and industry associations, which have warned that mass lay-offs are imminent unless help can be found within days rather than weeks.

Sunak is now considering tax holidays for companies and reversing the pay-as-you-earn tax system to funnel cash directly to companies so they can keep paying staff.

A government source said Sunak was expected to give details of the package at Prime Minister Boris Johnson's daily coronavirus news conference around 1700 GMT.

"We are working at pace, urgently, to see what further support we can put in place, particularly around employment support, looking at some models elsewhere and looking at what model might work best for workers here today," Sunak told lawmakers in parliament's Treasury Committee on Wednesday.

John McDonnell, the opposition Labour Party's finance spokesman, said Sunak was acting too slowly to keep people in jobs and said the government should pay the wages of workers at risk of lay-offs.

The Resolution Foundation think tank estimates it would cost about 8 billion pounds to keep one million workers on two-thirds of their normal pay for six months, while raising Britain's fairly meager unemployment benefits more broadly would cost a further 10 billion pounds a year.

Last week Sunak, 39, set out budget plans which included a 30 billion-pound stimulus. This has been rapidly overtaken by the coronavirus's spread and the government's decision to tell the public to avoid bars, restaurants and other gatherings.

On Tuesday, Sunak announced 330 billion pounds ($388 billion)of loan guarantees for business and 20 billion pounds of aid for the worst-hit firms. But these measures failed to restore confidence in the world's fifth-biggest economy.

The pound crashed to its lowest level against the dollar in 35 years on Wednesday and British government bond prices plunged as scores of companies, big and small, said they would need to cut jobs to survive.

These factors spurred the Bank of England into cutting interest rates to 0.1% on Thursday and unleashing an extra 200 billion pounds of bond purchases.

Asked on a BBC panel show what Sunak would announce on Friday, health minister Matt Hancock said: "All I can say is mark my words -- we are going to do everything we can to keep people supported at times like this."

(Additional reporting by Kylie MacLellan and David Milliken; Editing by Estelle Shirbon and Peter Graff)

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