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Chancellor Rishi Sunak leaves Number 11 Downing Street ahead of his statement to Parliament.
Taxes on hospitality and tourism will be slashed, stamp duty deferred and employers enticed by cash bonuses under a new coronavirus stimulus package in Britain.

The deal is designed to compensate for the axing of a furlough scheme credited with preventing a quarter of the British workforce from losing their jobs.

In a plan which attempts to wind back huge taxpayer-funded employment subsidies without inflicting more damage on the already fragile economy, Chancellor Rishi Sunak on Wednesday announced £30 billion ($54 billion) in new measures to revive the labour market and lure reluctant consumers into shops and restaurants.

He resisted demands by some backbench MPs for an immediate wave of income and company tax cuts and was unapologetic for pursuing state intervention at a level once considered unthinkable for a Tory government.

Comment: It's the best the corrupt establishment can think of to keep the zombie economy staggering forward: Is there actually anything conservative about Bojo's Tories?

The new jobs package brings the total cost of Britain's response to the COVID-19 outbreak to £190 billion.

The bill includes £15 billion on protective equipment for frontline workers, and £69 billion on wage support - including a widely praised scheme where the government has paid 80 per cent of furloughed workers' salary.

Extending furlough scheme offers 'false hope'

Some 9.4 million Britons - more than a quarter of the entire workforce - have received payments under the scheme. However Sunak said the program would wind down in October because it "cannot and should not go on forever" and would not help the economy recover in the long term.

"I know that when furlough ends it will be a difficult moment. I'm also sure that if I say the scheme must end in October, critics will say it should end in November. If I say it should end in November, critics will just say December," he said.

"But the truth is this: calling for endless extensions to the furlough is just as irresponsible as it would have been, back in June, to end the scheme overnight."

Sunak argued that leaving the scheme open beyond October gave workers "false hope that it will always be possible to return to the jobs they had before".

"It is in no one's long-term interest for the scheme to continue forever, least of all those trapped in a job that can only exist because of a government subsidy."

The scheme will be replaced by a suite of new measures, including a £1000 bonus paid to employers for each employee brought back from furlough and still in work as of January next year.

The bonus would cost taxpayers £9 billion if every furloughed worker returned to work, however that is highly unlikely given Europe's deep recession. Even Sunak warned the government "cannot protect every job".

Bid to revive smashed industries

The British equivalent of the GST, the VAT, will also be cut from 20 per cent to 5 per cent on all food, accommodation and tourist attractions for the next six months, while pub-goers and diners will be able to enjoy 50 per cent off a meal in restaurants and cafes every Monday, Tuesday and Wednesday in August - up to a limit of £10 per person, per session.

"Each week in August, businesses can claim the money back, with the funds in their bank account within five working days," Sunak told MPs. The scheme - dubbed "Help Out To Eat Out" - had never been tried before, he conceded, but said 2020 was the time for creative thinking.

Four out of every five hospitality businesses ceased trading in April, pushing 1.4 million workers onto the furlough scheme - the highest proportion of any sector.

Sunak also temporarily lifted the threshold for paying stamp duty from £125,000 to £500,000 to help stimulate the property industry, as well as £2 billion in new subsidies to cover the cost of new jobs for any 16- to 24-year-old at risk of falling into long-term unemployment.

"Coronavirus has hit them hard," Sunak said. "Under 25s are 2½ times as likely to work in a sector that has been closed."

A response 'most would have thought unthinkable'

Prime Minister Scott Morrison has similarly pledged "a further phase of support" for Australian workers once the government's $70 billion JobKeeper program expires. Sunak's approach offers some hints on the multilayered approach Canberra may take to support the Australian economy into 2021.

The 40-year-old British Chancellor will later this year outline how the government plans to pay for the new spending.

Wes Streeting, a member of the Labour opposition's economics team, told MPs that Sunak had pulled policy levers "that most people would have thought unthinkable" for a conservative chancellor. He praised Sunak's pledge to go forward "unencumbered by dogma".

"We welcome that approach and we hope that others in his party were listening," Streeting said.

"In recent weeks and months we have seen the penny drop for the champions of small state, free-market, low-tax economics of the limitations of their blinkered ideological dogma."