The government is planning to bail out the most polluting businesses: now is the time for conditions to be attached

Posted on May 25 2020

The FT has reported that:

Rishi Sunak has authorised a bailout plan named “Project Birch” to save strategically important companies, as pressure mounts on the chancellor to inject state equity into companies drowning in debt.

They add:

The Treasury has revealed to the Financial Times the principles under which the government would rescue individual companies, saying it would act to save those whose failure would “disproportionately harm the economy”.

Aviation, aerospace and steel firms are among those facing acute problems, while carmaker Jaguar Land Rover is also talking to the government, although the company declined to provide details.

Under Project Birch, Mr Sunak has increased the capacity of the Treasury to handle bespoke bailouts of “viable companies which have exhausted all options”, including government loan schemes.

What is being talked about then are large companies, with poor credit records, and business models that look deeply unattractive post-Covid-19 and in the era of heightened climate awareness that the government wants to bail out. The FT says:

The chancellor's allies said the Treasury would not initially look to take equity stakes in struggling companies, some of which do not have investment-grade credit ratings and cannot access a Bank of England commercial loan scheme.

The preferred option would be to extend loans that ensured that the taxpayer was at the top of the hierarchy of creditors. Other “bespoke” rescue schemes being examined could see state loans advanced which convert to equity.

Early companies for consideration include Virgin Atlantic, Loganair and Tata Steel. Jaguar is also being mentioned.

I have already said that I think the taking os takes in essential businesses is a way forward on Covid-19: increasing debt is not viable for many businesses. But the option being considered here is not the creation of a strategic National Wealth Service of the sort I have recommended, but a Thatcherite 'buy it and flog it' approach. As the FT says:

Jim O'Neill, former Treasury minister and ex-chief economist at Goldman Sachs, has discussed with government officials the creation of a public-sector-owned funding body – perhaps with an initial investment capacity of £25bn – to take stakes in “inherently stable” businesses.

This is the worst possible outcome: this is simply a sticking plaster for the status quo. And what every business needing this help will require is a radical transformation, including the transition to a green basis for working. Conditions have to be attached including:

  • Going for zero carbon
  • Accounting for doing so via  sustainable cost accounting
  • Paying living wages
  • Recognising unions
  • An end to tax abuse and all involvement with tax havens
  • Real measures to address gender pay gaps
  • Investment in and responsibility to all stakeholders
  • Employees on the board

Then we begin to get value for this.

But a wheeler-dealer approach is 2009 all over again, and we cannot afford that this time.

 

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10 Responses

  1. Gordon McKendrick says:
    May 25 2020 at 4:12 pm

    The government are just people. They have children and grandchildren. Why are they doing so little to save the planet?

    Maybe they feel they are doing the best they can. Maybe juggling jobs/economy now with the public still consuming and climate change only beginning to be noticeable, isn’t easy.

    No, this doesn’t seem right. I’m sure they could be doing more. I’m sure they should be doing more. Waiting for the public to change its habits first isn’t what I believe government is for. It should be leading on this.

    So, why aren’t they doing more? They surely care about their descendants.

    Don’t they?

    • Steve H says:
      May 26 2020 at 1:05 pm

      I think that they 1- don’t know exactly how bad the climate catastrophe could be and that it’s actually a threat to our civilisation. And 2- they don’t really care that much as it won’t affect them personally (all conservatives are selfish) as they’ll be dead, and they figure their children will be best placed to survive it due to the wealth they inherit. Hunger Games here we come!

      They don’t have any morals or empathy, and they are quite literally stealing the future from billions of people, which is to say plotting the deaths of billions of people, so that the already fabulously rich can be slightly richer.

      They disgust me. At what point do we put their heads on pikes?

  2. Vincent Richardson says:
    May 25 2020 at 5:17 pm

    Can I add a condition please?

    Anyone who has anything whatsoever to do with being involved with, or has associated with anyone involved with Gldman Sachs, is banned from involvment in any government affairs.

    You could call it the vampire squid ban : )

  3. Surav Sunder says:
    May 25 2020 at 8:20 pm

    When we had a general election, how important did the majority of the people think the climate ‘crisis’ was?

    (Crisis deliberately put in quotes)

    The fact is, the government govern for the majority, with their priorities set by the manifesto.

    If the majority of the electorate thought there was genuinely a climate crisis then the Greens would have won a majority and could enact their policies.

    I think the Greens failed to get a majority, so the electorate clearly had other policies as a priority.

    You can try again in 2024!