MNI POLICY: UK To Pay Workers' Wages, Defer VAT

-Sunak Says Govt. To Pay Employees Suspended From Work

-Announces VAT Suspension; Measures Designed To Support Employees

By David Robinson

     LONDON (MNI) - The UK government will pay up to 80% of the wages of those

who have stopped working but are still on their employers' books and defer

value-added tax for businesses as they contend with the coronavirus pandemic,

Chancellor of the Exchequer Rishi Sunak said on Friday.

     Following are key points from the package:

     -- Government grants will cover 80% of the salary of workers up to a total

of GBP2,500 a month, just above the median UK income. Any employer could ask

"for a grant to cover most of the wages of people who are not working but are

furloughed and kept on payrolls rather than being laid-off," Sunak told a news

conference.

     The scheme is set to run initially for three months, with Sunak saying that

he had not put any financial cap on it. The first grants should be available by

end April, suggesting payments should trickle through into some April pay

cheques.

     --The fiscal support came alongside the government's announcement that it

was forcing the closure of non-essential shops and of restaurants and bars,

which will lead to a surge in workers becoming idle.

     --The second part of the scheme was a VAT holiday, with the next quarter of

VAT deferred so that no business will pay any business from now until the end of

June.

     Sunak said business would have "until the end of the financial year to

repay those bills."

     This is simply a deferment of tax payments, which should be revenue neutral

for the Treasury over the course of the tax year ending in March 2021.

     --The government support measures, coupled with the inevitable slump in

economic activity, will lead to a sharp rise in borrowing.

     The Debt Management Office is set to issue an updated remit on April 23.

Planned gilt issuance will be raised to reflect the likely cost of the schemes

announced by the government.

     The Treasury and the Bank of England had previously unveiled a series of

measures to provide short-term loans to business, with the Bank unveiling GBP200

billion of quantitative easing in part to calm what BOE Governor Andrew Bailey

called "borderline disorderly" markets.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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