U.K.’s Sunak Cancels Fall Budget as Coronavirus Worsens

Chancellor of the Exchequer Rishi Sunak canceled his planned fall budget and prepared to set out a fresh round of job-support measures as the coronavirus pandemic worsens.

A government official said Wednesday that now is not the right time to outline long-term plans -- a sign the Treasury is preparing for months of economic disruption amid a fresh wave of infections.

Sunak will set out his plans to protect jobs from the economic fallout of the virus in a statement to the U.K. Parliament on Thursday, days after Prime Minister Boris Johnson imposed new restrictions on the British public to bring the resurgent virus under control.

The Chancellor is facing intense demands to extend his furlough program, or set out plans to replace it, amid predictions unemployment could surge to levels not seen since the early 1980s. France and Germany have both already extended their wage-support programs as the pandemic drags on.

“As our response to coronavirus adapts, tomorrow afternoon I will update the House of Commons on our plans to continue protecting jobs through the winter,” Sunak said in a tweet on Wednesday.

Ministers say the chancellor is drawing up plans for a “targeted” program of support to replace the policies that paid 80% of workers’ wages and supported more than 10 million jobs during the first peak of the pandemic.

German-Style Plan

The furlough program is due to close at the end of October, and Sunak has said he won’t extend it beyond that date. But he is weighing up other forms of support, including a German-style program to top up wages of workers who return to their jobs part-time.

Employers would pay staff for the hours worked, and the cost of the remaining hours not worked would be split between workers, employers and the government, people familiar with the discussions said.

The Treasury declined to comment on the specific proposals but an official emphasized that Sunak has promised to “act in creative and effective ways” to support jobs.

So far, Sunak has spent more than 50 billion pounds ($64 billion) on wage subsidies, according to figures published on Tuesday.

On Tuesday, Johnson appealed to Britons to obey new restrictions and work from home where possible to halt a surge of infections. He also ordered restaurants and bars to close earlier each night and scrapped plans to allow live audiences back into sporting events next month.

The government’s Chief Scientific Adviser Patrick Vallance warned this week that without action, the U.K. is on track to register 50,000 new Covid-19 cases a day by mid-October. The government reported 6,178 new cases in the latest daily figures published Wednesday.

©2020 Bloomberg L.P.

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