As I pointed out last week, literally minutes after he sat down from delivering it, Rishi Sunak's first budget was a disaster because of the massive underestimation of the implications of coronavirus implicit in it. I suggested that he would need to be back at the Dispatch Box very soon. I thought it would be weeks. It's turned out to be days. As the FT reports this morning:
Rishi Sunak, UK chancellor, will on Tuesday announce a major package of measures to help Britain's businesses through the coronavirus crisis, amid warnings the economy could be living with the fallout for “a year or more”.
Mr Sunak will announce measures to help companies deal with the consequences of the dramatic moves announced by prime minister Boris Johnson on Monday to tackle the outbreak.
Some thoughts might be appropriate.
First, as ever the government will have a choice as to whom it wishes to favour when pursuing a course of action. It could, if it wished, favour capital. In effect, shareholders could be bailed out. In that case it is highly likely that employees would be treated less favourably. Alternatively, the bias can be towards households: the aim would, then, be to keep them solvent throughout this crisis.
I have a horrible fear, given the track record of this government, that the bias to be shown will be towards big business. The likelihood is that banks will emerge from this crisis unscathed, yet again, as will most other companies in the financial services sector.
In contrast, there will be casualties, but mainly in the hospitality and tourism sector. These will be considered expendable.
In between, who knows? But, the likelihood that there will be a vain attempt to preserve financial markets is high.
This objective will be seriously misplaced. It will be based upon the claim that unless it is done the value of pensions will be seriously undermined. This is to miss the point, entirely: the value of pensions has already been seriously undermined by their unfortunate investment in Ponzi style stock markets that have created enormous asset bubbles of little worth, as it is now becoming apparent. Retroactive support for that bubble will not preserve its value: it will simply send good money after bad.
The need now is for recognition that what matters for the future is the ability to add value. As a matter of fact this gives a reason for preserving the UK insurance industry, but much less excuse the preserving banks in their existing form when they would appear to have destroyed so much value for so long. Bank nationalisation, with the shareholders being wiped out, has now to be on the cards. We will have to underpin the banks, but the idea that we keep their structure in place for very much longer is now wholly beyond the pale.
There is good reason for preserving significant parts of the UK retail infrastructure: we are dependent upon their supply chains.
But, there is little reason the supporting many energy companies: when we know that they have been drastically overvalued because of the presumption that oil is the basis for our future, when that is clearly not true we should not be seeking to preserve their value now. The time for their nationalisation has arrived so that the transition to the green economy can be taken forward with speed after this crisis is over.
In contrast, there is very good reason preserving much of the UK hospitality sector. As a matter of fact when this crisis is over people will want to go out. They will want pubs, clubs, restaurants and bars. We will truly appreciate the pleasure of drinking in coffee shops once more. Our appetite for long haul travel may well disappear; our desire to holiday at home may increase. This sector, including peripheral aspects like cinema, needs all the help it can get: our collective well-being is heavily dependent upon it in a way that few have appreciated, but which they will now access to it is to be denied, at least in the short term.
What this also means is that support has not only to be selective, but must be right across the business size spectrum. Nothing less will do. Indeed, the preservation of the intellectual and human, as well as financial, capital of many smaller businesses might be just as important for our long term survival of this crisis as is support for larger enterprises.
And we will have to support households. On the right I have seen it suggested that a bail out of maybe £1,000 our household should be delivered: I wonder what planet those people live on if they think that this will be enough to keep the UK economy going in the face of downturn that is about to hit it? I stress, as I have before, and I will again, that whatever the size of the deficit does not matter now: keeping people afloat does, and only the government can do that. That requires, as I have said before, bank loan holidays, rent payment holidays and tax payment holidays for business. But it will also require cash support.
Will Sunak rise to this challenge? I seriously doubt it. In which case he will be back at the Dispatch Box again, very soon.
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I don’t have much faith though. Tories doing something for the greater good? Nope.
I hope you will agree this bears repetition, at least once: “Universal basic income will not suffice to drive the measures needed for our survival and prosperity. Understanding has to be shared that inequality and insecurity of income-shares act to drive corruption and collective ruin. Need across the world is for real equal-partnership democracy, conscience liberated across the old political spectrum to drive our shared agenda. Our species is in danger of wilfully ‘losing our place’ in a cosmos that is not just ‘potentially benign’ but that has meaning ONLY AS ‘actually benign’, to be understood as ‘pure gift’ for ‘such as us’. In receipt of more than ‘viable consciousness’, we share awareness and appreciation of the highest imaginable faculties, sense and purpose guided by Reason and Care. Our will to survive is matched at heart by our will to love, against unreason and uncaring to honour the context of Immanent Goodwill, transcendent of all traditions of race and religion and politics. It is time for us to CHOOSE, ‘friend or foe’: partnership for life, or collective self-extinction. For Earth a planetary tipping-point is close: neglecting Reason and Care we will leave our children to the evolutionary default of ‘Natural Selection’.” Your serious doubts are shared on Rishi Sunak being allowed – before too late – to rise to the challenge (not just for the Tory funding-base but for humanity ‘all-in’).
I just hope that ‘Rishi Sunak’ does not mean ‘ Top Down’ when translated into English !!!
Sorry……………….
Very good questions Richard (and a loud hello, again!!).
The questions the Tories in their new incarnation always faced was:
How to spend whilst retaining the rentier element of the economy. A circle impossible to square.
In the budget nothing was offered to deal with the underlying problems of private debt and housing which are the key factors to shared prosperity and ending wealth siphoning.
The populace as a whole has still not questioned the ‘piss-take’ that has been played out on them that a Government in 2013 (when National Debt was 1.2 trillion) can suddenly decide to spend in 2020 after wrecking the real economy, the health of many (including tens of thousands of deaths) when the national Debt is 1.8 trillion (roughly) and is still using neoliberal frames of reference including bullshit terminology like ‘fiscal headroom.’
Like you , Richard, I am not holding my breath, that there will be any enlightenment about our monetary system and the real scope for fiscal policy.
So far there has:
1. Been little reassurance to collapsing businesses and no insurance that is claimable due to Covid-19.
2. The DWP still insists it will carry on assessments (based on discredited criteria) rather than divert energy elsewhere in this crisis as if the marginalisation of the vulnerable MUST continue as a national sport.
3. Sick pay has still not been cleared up, especially for zero hours worker.
4. Advice has been poor around closures of places of social gathering and it has largely been up to individual organisations to make decisions for themselves.
This has to be a war -time spend and blow the gaff on the ‘sound finance’ lie.
I agree, we need vehicles for re-socilaisation after the crisis and this must include a rapid rebuilding of the near dead adult education culture that was such a flowering area after the War and shamefully razed in the wake of thatcherian Philistinism.
We nee the resurrection of talking, of discussing and disputing constructively so we can bring to an end the agent of the maximalisation of self interest as the model for the homo economicus.
We are ill prepared for this after 40 years of ‘greed is good’ and the mocking of the non monetised as failed beings.
Will we wake up? I’m not holding my breath!
In the meantime let’s take care and look out for each other while the man with the tousled hair pretends he cares about anyone by squeezing his facial muscles into a shape that pretends gravity.
Sunak won’t rise to the challenge and neither has Johnson whose policy of allowing the virus to propagate in the early stages presages a disaster of war-time proportions. I advise everyone to read the article in today’s Guardian by Professor Anthony Costello which lays bare the total failure of Johnson, Whitty and “herd immunity” Vallance and their non-compliance with WHO protocols for tackling pandemics. Most doctors cannot believe that we are not mass testing. If Whitty’s estimation of a 1% death rate of those who catch the virus is allowed to occur (and I don’t see how it can be stopped now) we are looking at 400,000 deaths in the UK. That’s some legacy for Johnson, though I doubt I’ll live to see the fallout.
Correct David.
Its was obvious to me from the phrasing of Vallances’ and Whittys’ replies their early policy was deeply political and directed by the Conservative Govt. THIS IS NOT INDEPENDENT SCIENTIFIC ADVICE. Johnson’s team will stymie anything off message. An independent panel of advisors, with cross party support, has not been established as far as I am aware; perhaps the scientific community should do this immediately under the leadership of independent medical / scientific experts together with much broader community/international representation, and Govt to deliver it. I have reservations of any politically constrained advisory panel i.e. SAGE [2], where is the community and international representation on this panel? There is a case for strong cross party representation to get the politics out there, not hidden.
The strategy of Johnson – ‘lets take it on the chin’ seems to me to be a crime against the people. As a professional scientist of 45 years, and frequent referee of Govt funded scientific proposals, it seemed obvious that ‘letting rip’ was crazy and would overload our system. It was also obvious to the UK scientific community, and they made that be known [1].
Does Johnson strategy align to an approach of Cummings (“we’re going to see lots of beneficial crises that will enable us to …..” ). Cummings should stand down immediately.
How do politicians perceive scientists? Thatcher said of scientific advisors words to the effect ‘I want scientists on tap not on top’. Remember David Nutt (Professor of Neuropsychopharmacology) giving ‘good advice’ to Govt, he was eviscerated for speaking out on the UK drug policy.
I am still unconvinced of the approach led by Johnson, what aren’t they telling us?
1). “By putting in place social distancing measures now, the growth can be slowed down dramatically, and thousands of lives can be spared.” http://maths.qmul.ac.uk/~vnicosia/UK_scientists_statement_on_coronavirus_measures.pdf
2) https://www.gov.uk/government/groups/scientific-advisory-group-for-emergencies-sage
Too big a problem for the Tories to handle alone. 70 years ago when we had a national crisis, a government of National Unity was formed in which all Political Parties played a major part.
If we are now talking about nationalising industries as a necessity, should we not be talking about nationalising the government as well, as was done then.
While we are at it, let’s suggest that we go back to the EU and ask them if we can stay after all, at least until the crisis is over. By which time everyone will have realised that cooperation is better than competition, especially when it comes to solving the looming Climate Emergency.
Wishful thinking?
80 years ago, I think….
and a National Govt. in 1931 -though much of the Labour party did not join.
If the Tories are essentially the political arm of their vested interests, TODAY they won’t bail out the public. I can see that changing as the threat of social disorder and rampant stagnation looms. Revenue streams to protect!
However I have this palpable sense; capitalism as we know and our economic systems, are teetering toward the tipping point into chaos..
Anyone for global MMT ?
More utter self-contradictory drivel from the OBR (which should be shut down):
‘The head of the Treasury watchdog has said Britain faces a “wartime situation” and must urgently raise public spending to support households and businesses through the coronavirus outbreak, even if public borrowing dramatically balloons.
Robert Chote, the head of the Office for Budget Responsibility, said the economy was “probably shrinking as we speak” — with damaging consequences for the public purse — but that now was the time to spend without regard for the national debt.
Speaking to MPs on the Treasury committee, he said: “This is not a time to be squeamish about one-off additions to the public debt. It’s more like a wartime situation that this is money well spent.”
1. SO money is only ‘well spent’ when a war-like crisis is upon us?
2. Supporting the ill and the vulnerable wasn’t money well spent?
3. Debt/GDP ratios suddenly don’t matter (they don’t normally taken in isolation)
4. Spending for massive Green Industrial Revolution would not have been money well spent!
Sack these people someone and quickly!
Here’s a translation of an interesting piece from la Repubblica in Italy:
https://translate.google.com/translate?sl=auto&tl=en&u=https%3A%2F%2Fwww.repubblica.it%2Fsalute%2Fmedicina-e-ricerca%2F2020%2F03%2F16%2Fnews%2Fcoronavirus_studio_il_50-75_dei_casi_a_vo_sono_asintomatici_e_molto_contagiosi-251474302%2F%3Fref%3DRHPPTP-BH-I251454518-C12-P3-S2.4-T1
A study where all inhabitants of a small town in Italy were tested shows that:
“The vast majority of people infected with Covid-19, between 50 and 75%, are completely asymptomatic but represent a formidable source of contagion”.
If over half of the people who get the virus are completely unaware of it, estimates of its spread are probably way too low. The report doesn’t mention the demographics of those who are asymptomatic, but I’m guessing that most of them will be in the younger, less at risk brackets.
If these figures are accurate elsewhere, it will prove all but impossible to eradicate unless we know who has got it and who hasn’t. We’ll need to test everybody and have those in infected households isolate themselves until tested as clear. This can take up to 27 days (longest case), I believe.
Whether the logistical ability to achieve this sort of testing exists or not, I simply don’t know. Barring a vaccine or other form of treatment, it is going to be a real struggle to keep the most vulnerable safe (though I’d imagine that some of them will be asymptomatic as well).
The fact that we’re still learning about this virus just shows what a gamble the ‘herd immunity’ plan really was. Unless, of course, they already know that so many of those infected are asymptomatic and they are just bluffing us while the disease runs its course.
Mass genoside by dopey boris & his party
No it isn’t
It’s not competent though
80 years ago, not 70. Of course, I was referring to the all party coalition headed by Churchill in 1940, not the National Government formed in 1931. Sorry for the confusion.