UK's Sunak plans tax cuts to boost COVID recovery, The Times reports

LONDON (Reuters) - British finance minister Rishi Sunak will try to restart the country’s economy by giving homebuyers a tax break and cutting value-added tax for pubs, restaurants and other hospitality firms, The Times newspaper reported.

Chancellor of the Exchequer Rishi Sunak arrives in Downing Street as the spread of the coronavirus disease (COVID-19) continues, London, Britain, April 6, 2020. REUTERS/Peter Nicholls

Sunak is due to announce on Wednesday the next stage of his attempt to steer the world’s fifth-biggest economy away from its 25% collapse in March and April, when the government’s coronavirus lockdown shut entire sectors.

Sunak’s plan is expected to focus on measures to limit a rise in unemployment -- including help for job-seekers and trainees -- but the measures reported by The Times suggest he also sees a need to boost demand with tax cuts.

Sunak will say he will raise the property tax threshold to as high as 500,000 pounds ($623,700), four times its current level. That would exempt most homebuyers from paying any stamp duty for up to a year, the newspaper reported.

The tax break would be implemented in an official budget statement in the autumn, it said.

Sunak will also announce a temporary VAT cut for hospitality firms to protect 2.4 million jobs in the sector, which began to reopen on July 4, The Times said.

The Observer reported on Sunday that Sunak was considering a different option -- handing out vouchers of 500 pounds ($625) for adults, and 250 pounds for children, to spend in sectors hit hardest by the lockdown.

Sunak has already rushed out emergency measures that will cost an estimated 133 billion pounds this year to head off a surge in unemployment, chief among them a job-retention plan that pays furloughed workers 80% of their salary.

That plan is due to expire at the end of October, raising fears of a jump in unemployment.

Last week, several companies announced major job cuts, including travel food group SSP SSPG.L, which said it could cut about 5,000 staff.

A Bank of England survey published on July 2 showed companies expected an average 11% drop in employment for the third and fourth quarters of 2020.

Sunak’s spending push and a plunge in tax revenues are expected to create budget deficit that could hit 15% of economic output, levels not seen since World War Two.

The finance ministry declined to comment on the reports in The Times and the Guardian.

Over the weekend, the ministry said Sunak would announce the largest-ever increase in traineeships and double the number of its job coaches.

Prime Minister Boris Johnson last week said he would fast-track infrastructure investment and slash property planning rules.

Reporting by Aishwarya Nair in Bengaluru; writing by William Schomberg; editing by Larry King