You’re in your late thirties and you’ve been given your first big management job. It’s all going swimmingly – big things are predicted for you. Then, one day, you get a call to let you know that your boss has resigned and, completely unexpectedly, you’re in the hottest of hot seats.
This is the position that chancellor of the exchequer Rishi Sunak found himself in mid-February 2020 – not only having to pick up the pieces after Boris Johnson backed his advisor Dominic Cummings over the then chancellor, Sajid Javid – but facing what Bloomberg Economics estimates to be a £200 billion hole in the UK economy because of the UK’s departure from the European Union.
Sunak’s first budget, delivered only a week ago, promised to “level up” the UK, pouring billions in infrastructure, broadband and research. The message was that austerity was over and we were to enjoy “a decade of growth” driven by innovation, fixed potholes, investment in the NHS and the establishment of a British version of the Advanced Research Project Agency (ARPA), a government facility dedicated to investing in high-risk, high-reward projects that will give rise to breakthrough technologies.
A week, as they say, is a long time in politics. A few days later, with the UK gearing up for a spike in Covid–19 cases, Sunak announced an unprecedented package of measures, including state loan guarantees totalling £330 billion – 15 per cent of UK GDP, as Tory MPs kept repeating on Twitter throughout the evening – plus another £20 billion in support for businesses. The Bank of England will provide commercial paper – short term debt used by most large corporations to finance day-to-day operations – to support lending by banks to avoid liquidity issues faced in 2008. There will be government grants for struggling retailers and breaks from business rates.
The chancellor began his speech by acknowledging that this isn’t just a public health challenge; for most people in the UK, this is a serious economic test. “I know that people’s anxiety about the disease itself is matched only by their anxiety about their livelihoods,” he said.
But more focus must be applied on the reasons for that anxiety – zero hour contracts, statutory sickness benefit of just £93.50 per week, the crisis in social care, and the income inequality experienced by many of those who will be on the front-line in the coming battle against Covid-19: low-paid workers in the NHS, carers looking after the elderly on minimum wage – that will need to be addressed if, as the Prime Minister said, the British economy is to “bounce back”. Public services as well as business will need intervention. Family incomes must be protected. Struggling firms need mechanisms in order to retain workers. Last night ministers were briefing that more is to come.
Sunak offered a three-month mortgage holiday for homeowners. But there was no action for those who rent – those in financial difficulty should be offered similar support and there should be guidance for the courts to ensure that no one is evicted from their home because of the current crisis. As the package was undoubtedly put together on the fly, we must assume that there will be additional measures put in place for others who will feel the full force of this crisis in the coming weeks – the nearly five million people according to Office for National Statistics who are self-employed, freelance workers, those in the gig economy and zero hours contracts, parents who will have to take leave in order to care for children sent home from school. Some form of employment support protection should be introduced in the coming days.
Speed is also of the essence. The chancellor’s most popular measures were those that would have an immediate impact, such as relief on business rates. Application systems need to be put in place, which the government says that it will have established by next week. But loans will not be palatable to many businesses who don’t know when they will be able to pay them back. One suggestion put forward by the CBI was to reverse National Insurance payments made by business to the Treasury, which could have an immediate impact and avoid mass redundancies for companies that are in most trouble. Instead, only the businesses that qualify for loans and grants will stay afloat. Where loans are taken it would make sense to ensure that these funds are used to fulfil wages and buy supplies rather than pay dividends or creditors. Around £35 billion in VAT payments will be due in the coming weeks, it would make sense to defer those payments.
“Wider whole-economy measures like regulatory and tax relief in areas including VAT and National Insurance will support a broader range of firms in real need,” said Dame Carolyn Fairbairn, responding to the chancellor’s emergency measures, adding that “urgent decisions are also needed on wages. An immediate mechanism is needed to top up wages for firms with no choice but to reduce hours for lower paid staff, so they can keep them employed and get through the other side.”
While the support for the economy is welcome, money should not only flow from the coffers of the Exchequer along well-worn channels. The government needs to think creatively, along the lines of its reported decision to immediately change planning rules to enable pubs and restaurants to offer deliveries and takeaway services without the usual permissions. The offer from the Communication Workers Union that Post Office staff should become an additional emergency service during the crisis – delivering medicine, food and checking on the vulnerable – is one that could offer an exceptionally powerful network across the country that reaches even the remotest places.
Elsewhere in Europe, countries such as Germany, France, Spain and Italy have already made announcements that, as well as loans and credit guarantees for companies, there will be subsidies, tax deferrals and social security assistance for workers. The Italian government has underwritten debt repayment holidays. President Macron promised “exceptional and massive” support for workers temporarily out of work by businesses no longer able to pay their wages. The Danish government will cover 75 per cent of the salaries of private sector workers in distressed companies. Sweden is allowing businesses to defer tax payments for up to a year, which will cost its public finances 6 per cent of GDP. Ireland has introduced an unemployment insurance payment for up to six weeks.
Sunak’s measures will do much to reassure business, but the crisis will mean that he will need to take further action. According to research by Nationwide in 2019, a quarter of adults in the UK, just over 12 million people, have no savings.
The chancellor put on an impressive display, communicating his measures clearly, and offering a far more poised and lucid figure than his boss. His measures were bold and wide-ranging, acting to the nation a Minister who is clearly on top of his brief, despite only having been in the role a few weeks.
The challenge for this government now is to show substance over words, no longer upending elites and undoing the ossified ranks of mandarins, but giving the people of the UK confidence that it’s able to fire-fight a fast-moving and unpredictable adversary. Whole sectors of the UK economy are being hollowed out by Covid-19, while others (like Amazon and supermarkets) look to hire staff. Discretionary spending will take an enormous hit while people self-isolate and purchase only essentials, service businesses based on personal contact will face a prolonged period of uncertainty, but others such as FMCG groups and many technology companies could benefit.
The chancellor repeated the phrase “whatever it takes” five times during his speech: delivering on this will mean consulting with multiple stakeholder groups, meetings that the chancellor intimated would take place shortly. This will give him the basis to take even bolder and more decisive action in the coming weeks that will extend relief not only to business, but the millions of others who will require state intervention not just as an obligation, but as a necessity.
At a time of deep uncertainty, Sunak offered a reassuring series of measures that suggested that he is up to the job, one that will require a steady hand for many months to come. The question now is how deep future interventions will need to go and how long the emergency will continue for.
Greg Williams is WIRED's editor-in-chief. He tweets from @GregWilliams718
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This article was originally published by WIRED UK
