Following the budget last week, I wrote that the British government would have to introduce a significant further financial package to see the UK economy through the unprecedented challenges it was about to face following the coronavirus outbreak.
The sheer unremitting terror of the crisis is only just becoming clear to the public, with the business community about to teeter on the brink of a partial collapse – that may then turn to a complete collapse.
Please do not underestimate how quickly things will become desperate, so the time for small measures and half measures is long gone, the government must introduce bold and radical financial initiatives put in place within days.
There is no point pretending these won’t be very expensive in the short term and not particularly palatable to some people, but they could save the British economy from mass unemployment and a long-term economic contraction unlike anything we have seen, including the banking crisis. Here are two ideas that will help support the economy:
First, the government should introduce £1000 per month payments for a six-month period to all people of working age who want it. Millions of people are going to have unpredictable incomes, if any at all, over the coming months.
Consultants, freelancers, those in the “gig” economy, those on zero hours contracts or those made redundant (and so it goes on), will be in significant financial trouble if not supported.
Absorbing many more people into a long-winded and complicated benefits system would be extraordinarily stupid, particularly as immediate and effective action is required. Tinkering with mortgage holiday payments and other such small initiatives will help, but they ultimately still leave the economy weaker at the time it needs to bounce back. To put it in terms of an economist’s graph, we want a V-shaped rather than a U or L-shaped economic bounce back.
To achieve this, everyone should be treated the same and government should work with employers to pay the £1000 via the existing payroll system.
The money could then be recouped later by, for example, a temporary one percent increase in income tax as the economy strengthens. But it would mean bills get paid, food gets bought, life going on, albeit with discomfort, and the economy will be in a strong position to return to near normal more quickly once the current strict coronavirus measures are lifted.
Second, the Government needs to put radical plans in place to protect business continuity. A huge business relief package is required probably costing hundreds of billions to unburden businesses of costs and taxes.
Even this will not be enough for some and the government may need to pass emergency legislation so that it can nationalise any business (big or small) in trouble for a temporary period of three months. The priority for all government measures must be to protect business continuity and to ensure that when the lockdown period ends there are still functioning businesses to create employment and wealth and deliver the immediate bounce back of the economy we all require for life to return to normal. Temporary nationalisation may be one of the few ways to deliver this.
I appreciate these may seem radical ideas and I fully accept that there may be better policies that I haven’t thought about or seen. However, overly complicated solutions won’t help in this emergency whereas those that are radical, simple, short and sharp might.
Rob Wilson is a businessman, writer, former government minister and MP.