Coronavirus crisis: Helicopter money dropped by Boris Johnson could save the economy

Expect to hear the helicopters flying overhead any moment now. Providing each and every one of the British public with emergency cash payments looks to be the only way to save people from losing their jobs or going without food over the next few weeks as the virus crisis tightens.

Giving out helicopter money – the concept of cash payments direct to individuals as an alternative to quantitative easing – is gaining ground from every group in civil society, from charities to think-tanks to trade organisations and business leaders.

Paying everyone a basic income is also increasingly being supported by a growing number of politicians across the party divide as the most effective route to protect households and cushioning the blow of what otherwise will become economic Armageddon with millions of people without jobs.

They now realise that the government’s huge £330 billion emergency package, announced earlier this week, to help rescue the economy is not enough.

More pertinently, the money being offered to companies in the form of loans and grants, will not get to all the people affected by this catastrophe and will not be processed fast enough to do any good. Or indeed, may backfire.

There are many alternatives to such loans, some of them counter-intuitive. The government could offer massive tax breaks to those who do still have money who want to invest in small businesses, to help in potential rescue plans.

One serial City investor, who is already in talks with small companies putting together rescue plans, says most SME bosses would prefer equity to debt anyway. So why doesn’t the government introduce attractive tax incentives? And maybe decide not to reduce Entrepreneurs Relief as mooted in the Budget?

As this City investor said: “While offering loans and grants was a good idea, it is no longer the right medicine. Its going to take too long and not everybody will get to benefit. We have gone beyond that stage. That was yesterday’s cure. Now we need a shot of adrenalin.”

We certainly do, and fast.The hospitality trade body has already warned that at least one million jobs will be lost as a consequence of cancelling events and the closure of most restaurants and bars.

At the Association of Independent Professionals and the Self-Employed, the future is already utterly bleak for its freelance members and certainly no time to wait.

A snap poll over the last 12 hours suggested that nearly half of all freelancers have had all their work cancelled this week. Imagine if this continues.

The livelihoods of more than six million people who are self-employed in the UK will be massacred. The association wants a cash grant to the self-employed businesses and freelancers that need it most. As I have mentioned before, the Norwegians have been swift to say they will pay self-employed people 80 per cent of their average income over the last three years.

What’s interesting is that a growing number of the more traditional diehard Tory MPs are also coming around to the idea that a quicker fix – in some form of helicopter money or basic income support for all – should be adopted as a package of new emergency measures.

Unusually, the mild-mannered former business secretary, Greg Clark, cut a more strident tone, demanding the government act immediately to prevent mass job losses by allowing the taxpayer to subsidise companies’ wage bills.

Clark also questioned the efficacy of the £330bn loan scheme, claiming it would not prevent firms from sacking their staff.

And he’s right, because taking out loans gives companies no reasons to keep staff employed, and those who are sacked will be left without any cover.

Clark put it well: “In fact the reverse, because the smaller the wage bill, the less would have to be borrowed.”

Up to forty-six opposition MPs and peers have written to Boris Johnson and Chancellor Rishi Sunak urging them to consider a basic income payment for all people to tide them through this crisis.

Those calling for the introduction of a minimum basic income are a catholic bunch, including Jon Cruddas, Lord Dubs and Chris Bryant for Labour, Green Party MP Caroline Lucas, the Liberal Democrat Layla Moran, 33 of the SNP’s Westminster MPs and those from Plaid Cymru.

There is a medley of measures being proposed and which should all be considered. Whatever the new ‘war cabinet’ chooses, it must be quickly done before hardship really bites deep. And whatever the plan is,it does not need to be fixed permanently as it can be reviewed every few weeks or months.

Here are a few of the options being touted and they all have merit:

*Citizens Advice has suggested a “crisis minimum income” of at least £180 a week so everyone has enough money “to protect their own health and the health of others”. It suggested that a  single-person households needed £960 a month to avoid getting into difficulty, and a couple with children £1,700.

*Economists at the Resolution Foundation think tank want the government to pay two-thirds of wages if employees are left without work to do. That would cost £8bn for a million workers over six months.

Resolution also proposes that the 2 million lowest-earning employees currently ineligible for statutory sick pay are granted the benefit which should be increased for everyone from £95.85 to £160 a week to cover half the earnings of employees that rely on it, up from the current third. The government should meet £800m cost of the increase over six months for small and medium-sized businesses.

*Business trade groups such as the CBI are also calling on government to suspend VAT and other tax payments as well as temporary relief of National Insurance payments.

Ministers should also look closely at what other innovative ideas that countries are taking to protect their people. The Danish government is paying 75% of the salary of workers who have been laid off temporarily, up to around £2,800 a month.

The Germans have said that employees, after going into quarantine, must continue to be paid for six weeks and that the government would refund employers.

Employers in Ireland ,who have to temporarily shut businesses, have been asked to continue paying staff €203 a week. This is  to be paid back by the government. Sick pay will also rise to €305 a week and will be available for those asked to self-isolate.

In Sweden, employers can halve their wage costs and temporarily stand down their employees. But employees will still receive more than 90% of their wage from the government, which is also offering to cover the cost to firms of all sick pay at least until May.

Although the Chancellor said earlier in the week that the government preferred the loan and grant package rather than basic income support for all, he also said this was no time for ideology or orthodoxy.

That’s just as well, as there is no time either to waste in playing political games while protecting the nation’s health and wealth.

Whatever the ‘war cabinet’ chooses to do next – and my view is that Boris is a natural helicopter pilot – the action plan must be trumpeted loudly over the next day or so. The public must feel comfortable that every possible measure is being taken to avoid permanent hardship.

If Boris Johnson blows this chance to show he does have true leadership qualities, the Conservatives could be out of government for decades and decades to come.