A £330 billion package of loans to business. A huge tax break to any company in the hospitality or leisure industry. Mortgage holidays to anyone who has been impacted by the coronavirus. People can accuse the Government of being behind the curve on delaying the spread of Covid-19 through the population. But it is hard to accuse it of not moving quickly enough to mitigate its financial impact.
Only last week, alongside a rate cut from the Bank of England, the Chancellor Rishi Sunak announced huge rises in Government spending. Today he followed that with a massive round of state intervention, more money for industry, and the hint of a rolling programme of bail-outs as companies run into trouble.
Once sacred Conservative taboos – a smaller state, balancing the books, trusting the market to fix problems – are falling by the day. The trouble is, a few more taboos will have to be broken before this pandemic is fixed.
In the wake of his announcement there will be lots of speculation about whether Sunak has done enough. In truth, no one really knows what ‘enough’ looks like anymore. No advanced developed economy has ever been in a situation like this, and the textbooks are about as useful as a facemask. What we do know is that the economic impact of trying to control the virus is terrifying.
For a taster, just take a look at some of the figures coming out of China. Retail sales down by 20 per cent. Industrial output down by 13 per cent. Investment down by 24 per cent, and auto production by 80 per cent. The UK, which has a far more services, and therefore people, based economy, than China, is likely to be hit at least as badly, and probably worse. We will see falls in GDP on a scale that have not been witnessed since records began.
We will have to see a lot more taboos broken over the next two month. Such as? We can expect to see whole industries such as airlines, railways, and possibly even retail and restaurant chains, bailed out. We can expect to see temporary nationalisation of industries that are deemed vital to fighting the virus. And we are certainly going to see some form of ‘helicopter money’, the mechanism by which the state, via the central bank, simply prints money and hands it out to people. Who will benefit? My bet is that we will see a move to paying the rent as well as the mortgage of anyone with the virus: a temporary suspension of all student debt repayments: a suspension of VAT collection from businesses; and six months of income support on full-pay for anyone laid-off work. The bill will come to billions but no one minds anymore.
To their credit, both Johnson and Sunak have recognised that ideological baggage is of no use to them here. They are in uncharted territory, both medically and economically. But at least they are willing to break taboos, even if they will have to keep on breaking them until the crisis finally subsides.
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