The latest package of emergency measures announced by the Chancellor is welcome and well-judged. It is worth reiterating that the aim is no longer to prevent a recession: a collapse in normal economic activity is inevitable and even, in these circumstances, desirable. Instead, it is to protect the most vulnerable households and businesses and to prevent a temporary shock from becoming a prolonged depression. In my view, Rishi Sunak is continuing to do a good job.
The highlight in purely monetary terms was the £330 billion of new loan guarantees, equivalent to 15% of a normal year’s GDP. Admittedly, it is misleading to describe this a ‘stimulus’: this is money that companies themselves are going to have to borrow and repay, rather than a no-strings injection of cash into the economy. But if cheap finance helps some firms to survive, as it surely will, this will still be very useful.
Some of the smaller measures are actually likely to have a bigger immediate impact. There is an additional £20 billion in direct support for businesses, notably: an extension of the business rates holiday announced in the Budget to all retail, hospitality and leisure businesses; new grants of £25,000 for small businesses in these sectors; and an increase in grants for all small businesses eligible for Small Business Rate Relief from £3,000 to £10,000. This is real money, available quickly.
The other headline-grabber was the announcement that mortgage lenders have agreed they will support customers in difficulty as a result of Covid-19, including through payment holidays of up to three months. This isn’t necessarily a game-changer, because most lenders would probably do this anyway. But the announcement should still provide some additional reassurance.
As a free-marketeer, I also liked the relaxation of the rules to allow pubs and restaurants to start providing takeaways without a planning application. The Government has already announced similar measures to cut red tape in other areas, such as making it easier for retired doctors and nurses to re-register and work again to ease pressure on the NHS.
Inevitably there are still gaps. There will have to more support for specific sectors, notably airlines, but this will follow in the coming days. It is too late to prevent these companies from suspending operations, and not desirable to do so anyway. Planes, for example, are already grounded. In the meantime, it is worth waiting just a little longer to nail down the details of what could be a very costly rescue package.
The Chancellor has been criticised for announcing measures to support people with mortgages, but not those who rent. This criticism is a bit unfair. It is obviously simpler and quicker to help the former; there are many fewer mortgage lenders than private landlords, and these lenders (mainly big banks) can ride out the lost income more easily. Nonetheless, more will need to be done here. It’s a safe bet that the Treasury is working on this too.
The Chancellor also indicated that he intends to do more to prevent job losses by introducing various types of employment support. This is likely to include cuts in payroll taxes and the launch of some form of wage subsidy scheme.
New Zealand has just introduced such a scheme: businesses there will be able to apply for wage subsidies if they can show a 30% year-on-year decline in revenue for any month between January and June (including projected revenue). Eligible businesses would then receive a grant of NZ$585.80 per week (about £285) for each full-time employee, and NZ$350 (£172) for part time staff, to cover a 12-week period.
Finally, don’t forget that the self-employed and renters will already be helped by measures announced in the Budget earlier this month, which made it easier to access existing means-tested benefits, notably Universal Credit. Again, I think the Government will have to go further here. We are probably not far away from some form of universal income support, such as cash grants to all people of working age.
Whatever the next step, though, there can be no doubt that more measures are in the pipeline.
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