The cost of supporting salaries of staff
furloughed is apparently higher than the government had expected; they may be
surprised by that, although I and many others are not. Despite the obvious inadequacies
of the scheme and the problems which the government has made for itself in
introducing it, it has been a ‘success’ in the sense that most of the staff
affected (almost a quarter of total UK employees) would probably have been made
redundant otherwise, and any potential return to whatever will pass for
normality in future would have been made very much harder. But the Chancellor
is now making noises about winding the scheme down because of its steep cost.
I suppose it’s about par for the course
with this government that they’d try and stop doing one of the few things which
had been at least a partial success but in the course of an interview
with ITV, Sunak managed to justify it with the brilliantly silly non-sequitur
that “…as some scenarios have suggested we are potentially spending as much
on the furlough scheme as we do on the NHS for example. Now clearly that is not
a sustainable situation.” What exactly is it about expenditure on a scheme reaching
the same level as the NHS which suddenly makes it ‘unsustainable’? What on earth
makes him think that’s even a sensible comparison? The question to be asked is
not ‘how does this expenditure compare with what we spend on other things?’ –
that’s utterly irrelevant. The right questions to ask are whether it is
achieving its objective and what the alternatives might be. The answer to the
first is undoubtedly ‘yes’ (albeit a conditional ‘yes’ given some of the scheme’s
failings). And the answer to the second is that around 23% of all employees
would probably be made redundant and around 800,000 businesses would probably
fold. Economic recovery would be postponed as a result.
From a purely economic point of view (ignoring
the human hardships which would be caused) there is a certain type of rationality
in comparing the cost of paying to keep staff and businesses afloat with the
cost of allowing them to fail. Perhaps that’s the comparison that he’s actually
making (it’s certainly the sort of attitude one might expect from a former
banker used to monetising everything) but that has nothing to do with the cost
of anything else. I can see why he might have balked at presenting it that way
to the public but hiding behind vacuous statements isn’t exactly the best way
to divert attention.
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2 comments:
Rishi is rapidly becoming yet another Tory who baulks at any fairly effective measure just because someone has whispered that it smacks of being "too socialist". This type of knee jerk has been visible among other Tories for a while. What they don't seem to realise, despite their financial backgrounds, is that by taking steps to help pay employees they are in reality helping business through what is otherwise a crippling period. Now it is fair to expect some business failures, maybe some would have failed anyway in the fullness of time, but steps to flatten the curve of business failure are just as "worthy"as steps taken to flatten the curve of demanDs on the NHS. Indeed they are complimentary moves in a balanced response. I hope that by end of June much of the demand for support for business and their employees will have eased and that the demand curve for NHS responses to Covid 19 will also be heading down rapidly.
In the olden days, Tory MPs often had a business background, generally in 'proper' businesses serving 'proper' customers. These days, they seem mostly to be from what is euphemistically called 'financial services', which at best is code for 'merchant bankers' (hence, allegedly, the cockney rhyming slang 'merchant') but more generally is code for the sort of spivs who gamble and speculate with other people's money to enrich themselves. And those that don't come from that background are generally funded from outside parliament by, and socialise with, those who do. The result is that a party which used to be regarded as the party of business is now largely composed of people who don't have the foggiest idea how real businesses actually work, a fact which also helps to explain the inadequacy and imperfections of Sunak's financial schemes. They confuse 'wealth creation' with 'making themselves and their friends wealthy' - I think that they genuinely don't understand the difference.
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