Saturday, 21 March 2020

Still not quite there

Yesterday, in his third attempt at presenting a crisis budget, the Chancellor at last showed some sign of understanding the scale of the problem and the nature of the response required.  As long as people get a mortgage / rent ‘holiday’, and given the reduced opportunities to spend, a level of 80% of normal salary doesn’t look unreasonable in most cases, although there are some details not yet provided, and there will be some people to whom it can’t easily be applied.  But it’s still unlikely to be enough – I suspect he’ll be back for attempt number 4 very soon.  The problem is that, despite abandoning many policy positions, there’s still one shibboleth of the Tory Party to which he is adhering.
The government has abandoned all that nonsense about balanced budgets and admitted that there really is a giant money tree which can provide all the cash required to keep things running.  We’ve even had the PM telling people to forget the individualism which his party has promoted for decades and embrace a collectivist approach, although there’s some doubt about how sincere he really is on that one.  It doesn’t help that, with his small beady eyes in a well-fed face he bears at least a passing resemblance to Napoleon (the pig, not the emperor), and coming from him collectivism sounds more like ‘I’ve spent three weeks digging this hole, it’s up to the rest of you to get me out’ than a slogan from the early days of the Labour Party before that party abandoned any pretence of socialism.
There’s one big ideological problem remaining, though – their aversion to universality, and to anyone getting ‘something for nothing’.  Instead of simply implementing their wage support plan, immediately, for all companies, the result is that there is an application process; and processing applications – by a civil service which is likely to be hit by sickness absence, self-isolation and a host of other priorities – inevitably means a delay.  For companies facing a sudden and complete loss of income, with no certainty about when or even whether that income will be restored, delay means laying staff off today, not next week.  They can’t even legally borrow money to tide them over – borrowing money with no guarantee of any income stream would be unlawfully trading whilst technically insolvent, and because there is an application process even the government payments are not guaranteed.
I’ve seen a meme on social media suggesting that large companies don’t need bailouts because they can simply borrow against their assets.  This ignores the effects of decades of financial engineering – many companies have no assets to speak of.  We have airlines which lease rather than own their planes; hotel companies which lease rather than own their buildings, transport and haulage companies (including the railway operators) which lease rather than own their vehicles, and services companies which lease rather than own their offices and most of the equipment in them – even down to the water coolers.  The capital is owned by banks and other financial services companies, not by the businesses themselves; the only ‘asset’ against which they can borrow is anticipated future income.  And for many companies, that ‘asset’ has just been instantly wiped out, whilst for many others in a whole range of sectors it is diminishing rapidly.
If they are serious about ‘doing whatever it takes’, the Chancellor will bring forward a fourth attempt, which embraces universality and makes the payments automatically to all private companies, in a range of sectors at least, immediately, based on their HMRC reporting in previous months.  He can always come back later, if he really wants to, when there is more time to consider the matter thoroughly, and claw back any payments subsequently deemed to have been unnecessary by taxing any excess profits.

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