Neil O’Brien is MP for Harborough.
In the middle of an unprecedented crisis, British people naturally reach for metaphors from the Second World War. It’s right in some senses. We have to all pull together. There’s a certain “Blitz spirit” at work: across my constituency many people are stepping up to organise local support groups for those self-isolating.
Hoarders are the villains of the hour, just as they were then. And just as during the war, life is easier in villages than cities. I don’t just mean that London and the black country are the hardest hit so far. People self-distancing can more easily go for a solitary walk. Where people have gardens children can play outside.
More importantly, villages seem more quickly to be organising self-help groups to help those force to self-isolate to shield themselves. I’m not sure why: it may be there are more institutions to organise around (church, parish council etc). Like MPs and councils across the land, trying to organise voluntary action, I’m currently worrying about how we best serve other places where there is less happening spontaneously.
As in the war, extraordinary measures are being taken extraordinarily quickly. The lowest interest rates for 325 years. Emergency legislation. Emergency economic measures. For a Conservative Government to announce we will underwrite all employees’ wages at 80 per cent is something that people thought would never happen in a month of Sundays.
And yet a month of Sundays is more or less exactly what we are facing – an economy where large sectors are shut, while we try and keep sound businesses in a sort of cryogenic suspended animation until the crisis can be resolved.
That’s where the war metaphor starts to break down. In the second world war production increased: GDP rose 16 per cent from 1938 to 1945. We tried to get as many people into work as possible. Rosie the riveter. Land girls. The future Queen driving a truck for the ATS.
Today the focus is almost the opposite: reducing contact as much as possible, increasing working from home as much as possible, shutting every pub, bar and club. Rishi Sunak has rightly drawn plaudits from across the political spectrum for his quick action to keep businesses afloat and unprecedentedly radical measures to stop unemployment soaring.
Speaking to my local hospitals, it is particularly helpful that they have been guaranteed they will have whatever they need financially to fight this. The Government has taken the “big bazooka” approach that this site encouraged.
Given that the economy will contract unprecedentedly quickly, while borrowing rises dramatically, it must be likely that the deficit will soar to levels not seen since, well, the Second World War. Chris Giles on the Financial Times suggested it will go from the 2.4 per cent suggested for this year to 10 per cent.
That number could easily go higher – but it’s the right thing to do. Letting vast numbers of sound businesses go under because of an event they could never ever have insured against would destroy huge amounts of value: the processes and knowledge and contacts built up inside those firms can’t just be magicked back into existence: eggs can’t be unscrambled.
With the bazooka being well-wielded by Sunak, it seems almost churlish to suggest some further things the Treasury could do. But here are three.
First, the self-employed. There are different kinds of help available. They can now get an interest free loan for 12 months, their tax bills are deferred, they can get Universal Credit with the minimum income floor removed. But still, they are not able to get the kind of paid suspension of employment that employees can.
Helping the self-employed is just fundamentally a hard nut for the Treasury to crack. Government doesn’t hold everyone’s bank details (even for large firms) and self-employed people have wildly fluctuating earnings. Because of self-assessment, there are long lags on even knowing how much tax they are paying. Many people are both employed and self-employed so could be getting helped twice over if they take the 80 per cent support for employment. And many are still working and making money.
Could the answer to these thorny problems be to aim for a kind of very, very rough justice? To pay out to self-employed people who apply some kind of temporary hardship support, roughly linked to the tax they have paid in previous years? There could be a cap and floor on payments, or even a flat rate for those with previous income above a certain threshold. And people who apply who have not seen a genuine income drop off having the money clawed back later.
I can’t see any way that could be anything other than an expensive, messy, manual process to administer, with many unfair outcomes along the way. But unbelievably rough justice might be better than none at all for self-employed people, many of who are pretty screwed otherwise. Our entrepreneurs are like the seeds of future growth: it’s worth helping them survive this economic winter.
Second, welfare. Sunak rightly made Universal Credit and the housing benefit part of it more generous, and he is right to focus first on stopping people losing their jobs in the first place.
Perhaps the next step should be to go further and end the wait at the start of Universal Credit? Move to payments twice a month, and make the current advances that are offered at the start of a new claim into a grant. It might cost a billion or two a year while running but could hugely reduce disruption – including for many people working part time.
Third, more positively, perhaps we should learn from one of the better measures taken in (sorry) the Second World War. Then government funded a huge programme of retooling for industry. Today we should do the same: not just capital allowances (tax breaks on investment) but capital grants. There are all kinds of reasons to do this. Car and other production lines that are unbelievably expensive to stop will be stopped anyway. Britain has a long-term underinvestment problem, and we have invest to raise our productivity (not least to pay off the large debts we are about to incur). Such support would have a highly multiplier effect once we can start to see the light at the end of this tunnel.
After Coronavirus and the race underway right now to produce more ventillators, I suspect we will want to see more manufacturing here, more focus on preserving critical capacities and our own industrial commons.
Much of the debt we are about to incur we will (seemingly) have nothing to show for it: it’s just the price to avoid a catastrophic alternative. It would be nice for part of our economic agenda for this crisis to have a more optimistic, forwarding looking note. And my God, we are going to need some optimism.
Every night I look at the graph which John Burn-Murdoch updates daily, showing how the virus is spreading on a log scale across the world and the death rate by country. It seems to me we are on a terrible, terrible course, and yet some people are still messing about like this is a game. All I can say to anyone who will listen is: Stay Home, Protect the NHS, Save Lives. We are on track to see the same distressing scenes we are seeing today in Italy (or worse) unless people change their behaviour dramatically.
It feels weird to write about the economy because so many people are about to be in such desperate need, and when I finish this piece I will go back to working on how we can help them locally. But we need to take action on the economy because – sadly – this is likely to be a marathon, not a sprint.
Once we lockdown fully as Italy just did and people heed the advice, the disease will slow, as it has elsewhere. But we could be in and out of such lockdown measures for a long time until a vaccine is developed and scaled up.
This is not even the end of the beginning, and we are in for a long period of blood, sweat and tears.