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Sunak pledges 30 billion pounds to stem unemployment crisis

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Britain’s finance minister has promised an additional £30 billion to head off an unemployment crisis, funnelling money to employers, homebuyers and beleaguered hospitality firms to drive a recovery, write Andy Bruce and David Milliken.

Rishi Sunak (pictured), who was already on course to take state borrowing to World War Two levels with £133bn of initial coronavirus emergency measures, said he would return the public finances to a sustainable footing over the medium term.

But the former Goldman Sachs analyst promised to press on with using the power of the state to shore up the economy, which has forced his Conservative Party to suspend its traditional pro-market instincts.

“I want every person in this House and in the country to know that I will never accept unemployment as an unavoidable outcome,” Sunak told parliament on Wednesday.

The world’s sixth-biggest economy shrank by 25% in March and April and could be heading for its biggest fall in 300 years in 2020, with the unemployment rate on course to more than double to about 10%, according to official projections.

Under a new bonus plan, employers will be paid 1,000 pounds ($1,256) after the furlough scheme expires at the end of October for every worker who returns to their job, provided they are kept on through to the end of January.

With more than 9 million jobs covered by the scheme, the cost of the bonuses could be as much as £9.4 billion pounds.

To help hospitality and tourism, hampered by social distancing rules, Sunak announced a cut in value-added tax for the sector to 5% from 20% for six months.

People eating out in August between Monday and Wednesday will receive a 50% discount of up to 10 pounds each, paid for by the government.

Shares in pubs and restaurant firms rose.

With close to 45,000 confirmed coronavirus-linked deaths, Britain has been hit harder by the pandemic than any other European country, leaving many people reluctant to return to life as before.

Sunak’s plan includes a £2bn ($2.5bn) fund to create six-month work placement jobs for unemployed 16-24 year-olds and more government-funded apprenticeships.

A further £3bn will be spent on improving the energy efficiency of homes and public buildings, which would support more than 100,000 jobs.

The £30bn cost of the plan includes around £5.6bn in accelerated infrastructure spending announced last week by Prime Minister Boris Johnson.

Some employers had urged Sunak to go further by cutting the social security contributions they must pay for their workers.

In a bid to breathe life into the housing market and the broader economy, Sunak raised the lower threshold for a tax on property purchases to £500,000, four times its current level, with immediate effect until 31 March.

Economists said the plan was unlikely to accelerate Britain’s recovery from the crisis.

“Overall this wasn’t a massive fiscal package, with other countries like Germany announcing much larger fiscal packages,” Jing Teow, an economist at PwC, said.

As well the uncertainties about how the pandemic will proceed, Sunak has to contend with the possibility London and Brussels fail to agree a post-Brexit trade deal by the end of this year.

“The chancellor is likely keeping his powder dry until the autumn,” Teow said, referring to a formal budget statement Sunak is due to deliver in late 2020.

Brexit

EU negotiators expect to resume trade talks with UK, EU sources say

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Negotiators from the European Union travelled to London on Thursday (22 October) to resume talks with Britain, two EU sources said, a move that could mark a new push to protect billions of dollars worth of trade, write and

Both the EU and Britain have spent days calling on the other side to offer more concessions in talks, which have been all but deadlocked since the summer, after Prime Minister Boris Johnson walked away from the negotiations last week.

A no-deal finale to Britain’s five-year Brexit drama would disrupt the operations of manufacturers, retailers, farmers and nearly every other sector - just as the economic hit from the coronavirus pandemic worsens.

Earlier, European Council President Charles Michel told the European Parliament that time was “very short”.

“We stand ready to negotiate 24/7, on all subjects, on legal texts. The UK has a bit of a decision to make and it’s their free and sovereign choice,” Michel said.

He said Britain’s answer would determine its level of access to the EU’s internal market of 450 million consumers. The EU’s Brexit negotiator Michel Barnier told the parliament an agreement was still “within reach”.

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“Time is of the essence...along with our British counterparts, we must find solutions to the most difficult areas,” Barnier said in comments that pushed sterling higher.

London has this week refused to continue full negotiations, saying the EU must “fundamentally change” its stance.

The EU sees this as bluff by Prime Minister Boris Johnson but has also extended an olive branch by talking up UK sovereignty, as well as the EU’s readiness to discuss intensively, across the board and on specific legal texts.

A UK spokesman said London noted “with interest” Barnier’s comments that touch “in a significant way on the issues behind the current difficulties in our talks”.

Barnier and his UK counterpart David Frost had been due to speak on the phone at 14h GMT on Wednesday (21 October).

Michel stressed the 27 EU members were ready for an abrupt split without a new agreement to avoid tariffs or quotas with three main sticking points in the negotiations: fishing rights, economic fair play and settling disputes.

“We don’t need words, we need guarantees,” he said of fair competition safeguards.

Michel called for a “binding, independent arbitration” to redress market distortions swiftly, adding that London’s draft Internal Market Bill - which would undermine Britain’s earlier divorce deal with the EU - only strengthened the bloc’s resolve to ensure tight policing of any new deal.

The EU’s executive Commission said London must respect its Brexit settlement regardless of the trade talks.

Michel said losing access to British waters would damage the EU’s fishing industry, and the EU therefore wanted to prolong the status-quo just as London sought to keep the EU market open for UK companies.

“But the UK wants access to the single market while at the same time being able to diverge from our standards and regulations when it suits them,” Michel said.

Following Brexit last January, Britain’s current EU trading terms expire in 10 weeks and unfettered commerce will end without a new treaty.

Keen to avoid any blame, the bloc is ready to negotiate until mid-November but must then ratify any deal in the European Parliament before time is up.

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Brexit

EU says Britain must respect withdrawal pact, deal or no deal

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Inter-institutional Relations and Foresight Commissioner Maros Sefcovic addresses lawmakers during a plenary session of Work Programme 2021 at the European Parliament in Brussels. Francisco Seco/Pool via REUTERS/File Photo

Britain must implement the Withdrawal Agreement on its exit from the European Union, regardless of the outcome of ongoing trade talks between the two sides, a senior European commissioner said on Wednesday (21 October), writes Kate Abnett.

“Deal or no deal, the Withdrawal Agreement must be respected,” European Commission Vice President Maros Sefcovic (pictured) told the European Parliament.

Sefcovic said the EU is committed to reaching a deal on the trade agreement and other aspects of their future relationship, but that the two sides remain “far apart” on the issues of fisheries and the so-called level playing field of fair competition.

“Our objective is still to reach an agreement that will pave the way for a new fruitful relationship between the EU and UK. We will continue to work for such an agreement, but not at any price,” he said.

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Brexit

EU's Barnier says trade deal with UK 'within reach'

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The European Union’s Brexit negotiator said on Wednesday (21 October) that a new trade deal with Britain was “within reach” if both sides work hard to overcome the sticking points in the coming days, write Gabriela Baczynska and Marine Strauss.

“An agreement is within reach if both sides are willing to work constructively, compromise and working to make progress on the basis of legal texts and if we are able in the coming days to resolve the sticking points,” Michel Barnier said.

“Time is of essence... Along with our British counterparts, we must find solutions to the most difficult areas.”

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