I have already mentioned the work Ben Wray is doing as editor of the Source Direct email newsletter from the Commonweal thinktank in Scotland, which I think is outstanding. This morning's is a classic and I am going to share it in full to promote his work and encourage people to subscribe. It's worth it, even if you have no interest in the Scottish dimension:
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Let's develop a little scorecard on where we are with the economic measures in the UK and Scotland to cope with our new pandemic-world.
For corporations, we have 80 per cent of the wages they owe workers affected by Covid-19 covered by government. That's a significant drop in their costs, overnight. For banks, we have unlimited access to emergency liquidity, as well as £330 billion in state-guarantees for loans. Almost unlimited protection from losses for finance. For buy-to-let landlords and home-owners, mortgage payment holidays are available to apply for. That's not all that generous, since the interest still accumulates on those loans, but those bankers must be paid! Finally, landlords in Scotland have also been given extra back-up by the Scottish Government, who agreed with the Scottish Tories to introduce a special interest-free loan for them, so should they struggle to collect rent in coming months, they can access that fund.
Now let's look at the other side of the equation. If you are an employee affected by Coronavirus, you get 80 per cent of your wages covered by government, but that could mean a 20 per cent wage-cut, with many companies saying they will pay workers the payment protection scheme cash and no more. Also, there is no agreement to stop redundancies in return for the huge corporate bailout. Nearly one million people have applied for Universal Credit in two weeks, suggesting workers are being laid off at an alarming rate. UC is being topped up by an extra £1,040 per year for new applicants, but unemployment will remain a sharp financial fall for most. And if you are still on one of the legacy benefits - Jobseekers' Allowance, Income Support and Employment Support Allowance - shockingly the new UC top-up does not apply to you. The self-employed are getting a sizeable bailout, but not until June, and if you happen to be a gig economy contractor for the likes of Uber or Deliveroo and have just seen demand for your pay-per-drop/ride services drop like a stone in the lockdown, then you have to just suck it up.
For all workers, there is no obvious fall in household costs. The rent payments continue - there's no tenant bailout here. No one can be evicted for six months in Scotland, but they can be evicted at the end of the notice-to-quit period, meaning if they don't pay rent now they will have the threat of eviction hanging over them when the six months is up. Debt repayments continue as normal, as do taxes like the Council Tax, in which debts (which incur 10 per cent interest) were already at peak levels in Scotland before this crisis began. It is possible that you can get support for your electricity bills if you are self-isolating, but the government advice is vague: payments can be "reassessed, reduced or paused".
So let's tally it up: there's an employer bailout, but no employee job guarantee. Creditors get unlimited protection, but debtors keep paying. There's a landlord fund, but no tenant bailout or fund. That looks an awfully lot like a one-sided version of 'all in it together' to me. As Laurie Macfarlane explains in a superb piece on the economics of the government's response: "What is being presented as a bailout for working people is, in practice, a bailout for the wealthy".
He explains: "The income streams for the ownership class — rents, interest and corporate income — are protected. But crucially, because the discretionary spending of the rich has collapsed (they are no longer going to nice restaurants or spending money on holidays), they will now have much more money left over each month. So while the bank balances of working people will shrink over the coming months, the bank balances of the asset owning rich will increase dramatically."
This will not do. We do not enter our new pandemic age out of a vacuum. A study of wealth inequality in the two years prior to Covid-19 found that the wealth of the UK's richest 10 per cent had risen four times faster than the poorest 10 per cent in just those 24 months. The ONS study found the poorest 10 per cent had debts three times greater than their assets, while the richest 10 per cent had accrued wealth 35 times larger than their total debts. What group really needs a bailout now, and which doesn't? We're still waiting on that rare thing - the people's bailout.
Ben Wray, Source Direct
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Don’t worry the asset price meltdown will have smashed inequality..the problem is though as inequality falling living standards are dropping for everyone at least in the short term
Good to see you promoting Ben Wray’s work. For my money he’s a very perceptive commentator who gets right to the heart of issues. As do Common Weal with their clear and thinking about the way forward for an Independent Scotland.
In short, he says it’s welfare for the wealthy, while the “people’s bailout” isn’t in the Tory lexicon.
I was going to email you about this morning’s Source, but I had to get on with the vacuuming.
Common Weal is the best progressive think tank I know
Excellent piece by Ben Wray . Just two penn’orth to add : let’s eliminate all hedge funds, derivative trading et al . Actually wait a minute , haven’t they just become irrelevant ?
I here that Sunak has upped the upper qualifying level for Government help for companies so Wray’s zrticel rings true with me.
What a mean little country we have become.
Richard, you will recall many years ago I emailed you, circa 2012/3 & said at that time that QE program was better off being distributed directly to the public…
Here we are again & I propose the same £330 billion / 68 million. Gives every single UK resident £4850 approx.
Paid directly to all, even children.
Thta £ will see that the vast majority in need have sufficient funds to see them through a few months of difficulty.
Parents with children will be able to use money on behalf of child’s welfare etc.
One off grant, NOT UBI.
If situation continues another round of grants could be considered as an interim measure, but probably at a reduced rate.
Money getting to the people who need it, economy will stabilise, because people will spend, save or invest it in equal measure at some point in time.
We have therefore created a short, medium & long term stimulus to stimulate economic growth out of regression, with positive effects to continue thereafter; as people will look to use this £ when we are in the all clear.
This action will alleviate the real economic stagnation UK has suffered in the past deacde & will encourage other countries to start doing the same, seeing UK take the lead.
Getting the money supply flowing again & trusting that the populace on the whole are not fickle & irrational, as studies have shown time & again.
Not repressing & maintenance of the status quo out of the fear or fear of loss from the few.
We need some serious Edward de Bono lateral thinking on this topic.
This grant money will still find its way into businesses, banks, investments & commodities & ultimately the Government’s coffers, but it will occur over a staggered period of time, due to the way people behave.
Instead of top down economics, we’ve got bottom up economics & monetary distribution.
Samson
I am not yet convinced – bar a smaller cash flow payment
The debate on UBI, universal basic services and the job guarantee needs to follow
Always respected your perspective Sir.
I concur about UBI, UBS & JG.
It is difficult to propose a ‘radical’ idea without objective data to support it. The peril of new thinking.
That being said, we could always amend such a scheme to pay out 50% grant immediately & then the next 50% in 3-4 months time.
See how the £ gets spent by the populace, which right now is extremely constrained & then with more freedoms in the following 3-4 months the data may well show that the vast majority will put it to good use & provide a direct economic stimulus through the citizen’s choices (funded by Government) to bolster the economy
‘Direct Citizenary Stimulus Package’
Trust the people to be rational agents who can think & make positive decisions, one way or another that money will be spent & circulate throughout the whole economy.
Exceptional times call for exceptional measures. I believe it has not been done before & therefore we enter unchartered territory, which could well prove positive.
However, if the Government propose more of the same/similar measures from over a decade ago what else shall we expect, more stagnation, recession, depression & regression.
The only difficulty is that we have no delivery mechanism – it simply does not exist
Agreed… this would be an ideal time for ID cards to be readily available so that funds could be distributed almost instantaneously, however that option is unavailable to us.
I propose some options for the dissemination of £330 billion directly to citizens, utilising available mechanisms, certainly not perfect, but a start at least.
1) Standard or digital form of Bankers draft issued directly by BoE (or HMRC) to the sum aforementioned; to all known 68 million approximate citizens in UK, with bank account access 0% redemption fee.
2) Standard or digital Postal Order posted to those 68 million without bank account access, redeemable for cash at 0% at Post Office branches or Banks.
3) Government issued Pre-paid cash Debit cards sent to 68 millions citizens preloaded with £4850 or whichever sum decided upon.
Useable like any other Debit Card for any form of transaction. Just has HM Government logo on the front, acceptable online or anywhere.
4) Letter sent to every household with registered UK resident occupants with unique QR code, upon scanning of digital app interlinked with mobile banking app, allow deposit of funds to actual recipient.
5) Payments could be verified by concomitant use of the Government’s verify service through HMRC to reduce fraud potential.
6) Entry of UK Drivers License/UK Passport & or NHS Identity number at particular stages to further ensure recipient identity; or Governmental documentation supportive of ID.
I am sorry – but I have spent some time discussing all this in some detail with people who know a great deal about the systems involved over the last few weeks – and this is vastly ores complex than you are suggesting
It does suggest we do need to know more – but there are also a lot of people who have chosen to be absent from government systems – and that really does not help
Sir, with the utmost respect you know far more about the complexities & nuances of financial systems than I ever shall.
This is why one reads your blog, because you can distill that down into something understandable for a lay-person like myself.
Absences you mention are not helpful & if you recall you described
https://www.taxresearch.org.uk/Blog/2020/03/24/unless-the-government-gets-cash-to-people-very-very-soon-there-is-going-to-be-rioting/
However, you will recall the Poll Tax riots…I am too young.
IF due if due to excess bureaucracy the money supply dwindles & is not distributed in an expeditious manner we will have civil strife on the streets, eventually, with the likes not ever seen before.
Almost 1 million claimants for unemployment benefits in rapido time is hugely detrimental to the wider society & economy.
It may well be complex & governmental finance akin to chicanery; with much that underpins it & keeps the system functioning baffling & a true art-form for practitioners of sophisticated wizardry who are in place to attempt to modify it from time to time.
I look out for the people, the ‘plebs’ some would say.
Sometimes complex problems require a simple solution, but the Occam’s razor principle pertatining to this situation would ensure a more suitable approach, by some, then making it neeedlessly more complicated than it need be.
We need decisive & definitive action forthwith, to get £ to people en masse.
My suggestions (without sounding arrogant or pretentious) seem to be the only ones which ensure a DIRECT approach from state to citizen.
I am interested to hear of something better.
If we look to Maslow & his basic Hierachy of needs, this is all underpinned by £.
£ isn’t everything, but its the only thing that enable you to purchase & create opportunities that are essential for the maintenace of needs Maslow described.
If basic needs are not met due to insufficient £ supply in the hands of citizens, then we might well see civil strife as a consequence & a breakdown in societal cohesion.
I was talking maybe £1,000 – enough to cover immediate bills
Note I also addressed universal basic services and loan and rent holidays too
That’s what could work
If the £1,000 missed targets there would still be support for people with the UBS and rent and loan holidays
I was managing for pragmatism – not to change the world in the next few weeks. That comes later
Sir,
Your suggestions are laudable & are an excellent start.
The only issue with loan & rent holidays is financial institutions will seek to recoup their pereceived losses & boost the balance sheet one way or another at the earliest opportunity possible, when this subsides.
Or hoard Government £ as we have seen over the past decade or so.
UBS can only go so far to even the odds & one concurs sensible pragmatism is the order of the day.
That being said coming from the perspective of a realist, albeit an imaginative one we; we face some stark decisions to be made soon.
Rents in the City, near Paddington for my Uncle in 2002 were £1500/pcm. He is a pilot.
God knows what that is now.
Going forward £1000 might not make a dent or ‘cut the mustard’, but your sentiments far surpass those you deal with in relation to caring for your fellow man.
One shall digress & conclude by quoting George Bernard Shaw,
“…The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself.
Therefore all progress depends on the unreasonable man…”
Great changes take time I understand that.
Stabilising the economy & averting future disaster is imperative.
The easiest way to do that is by reassuring people with ample £ in their pockets, which they can then choose to use as they see fit.
The world is an unfair place, however IF we have an opportunity here; to enable people in the midst of a crisis to have the confidence to become less reliant on Government (in the future) by enabling citizens to make decisions themselves from potential surplus £ left in their pocket; then we have created a society where people are given a golden opportunity to make themselves more equal in comparison to some of their fellow compatriots.
This may well be a golden opportunity to reduce glaring wealth disparity in the UK.
Think of the homeless person given £4850 who could with that £ be independent & autonomous enough to fund an existence outside of the goodwill & charity of others.
Or a single mother struggling to make ends meet, because of the sudden death of her partner no longer despairing about food & bills…You get my jist.
There are tough times ahead, but through volatility comes opportunity.
Look what we saw last time:
https://www.bbc.com/news/av/uk-england-20704588/britain-s-new-homeless-banker-sleeps-rough-in-park
If we are to forge a better,fairer society & future, now is the time to take action that will stimulate citizens to empower themselves in the name of the common good.
One shall digress Richard.
Much respect for the work you do to make better conditions for all, with the courage to challenge the staus quo.
We know the stories of Tantalus & Sisyphus. Our populace need to something to inspire them & belive in.
Enjoy your day of rest.