Lord Flight is Chairman of Flight & Partners Recovery Fund, and is a former Shadow Chief Secretary to the Treasury.

We are in the middle of the sort of economic recession for which Keynes prescribed large Government deficit – spending support. It was a pity that Keynes was misinterpreted in the 1950’s and 1960’s. Right now, the UK economy needs all the business and financial support which Government can organise and provide. It is fortunate that interest rates are virtually zero and, in some cases, negative. The question is as to whether Government can channel enough economic stimulant, quickly enough, to turn around the economy.

In my judgement Andy Haldane, the eminent Bank of England economist, has it right. The economy is on track for a relatively short V-shaped recession. Spending has already picked up by more than even the Bank of England expected.

Haldane also expects that little long-term damage will be done to the economy. This is supported by the Government’s important decision to extend the Self-Employed Bail Out Scheme (SEISS) for the self-employed by a further three months, at a cost of £8 billion.

Keeping the self-employed portion of the UK economy afloat is fundamental to economic recovery. The major strength of the UK economy has been the size and spread of its self-employed and SME sectors – comprising some six million SMEs.

In an economic storm, practically, SMEs and the self-employed are more difficult to support than a few dozen large businesses. The Chancellor has thrown all he can at the small company and self-employed sectors. The main vehicle for the SME sector has been guaranteed loans via the Coronavirus Business Interruption Loan Scheme (CBILS). At the time of writing approximately £1.5bn has been lent to small businesses via CBILS. This, however, represents barely more than 6,000 loans, in contrast to Germany where the banks have already lent out seven times the amount.

The problem with CBILS was that, initially, banks participating thought they were obliged to assess whether the businesses requesting loans were eligible for a normal, non-virus, loan. This resulted in companies needing life or death support being tied down with lengthy requests for paperwork. They were then often offered regular loans including taking a director’s home as collateral, which was not the Government’s intention.

The larger banks’ justification for this has been EU State AID rules. Although Britain has left the EU, it transpires that we are bound by the State Aid rules until the end of the transition period. This needs changing speedily. The State Aid rules apply to all loans under CBILS. This appears to have been prescribed in small print by the Treasury, although it have denied knowledge of this. Subsequently, Rishi Sunak has changed the scheme so that banks can lend without first attempting a standard loan deal.

CBILS has also had an equally negative problem. While many Governments are guaranteeing 100 per cent of such loans the UK has been guaranteeing only 80 per cent. Increasing the Government guarantee to 100 per cent has been resisted by the Treasury, again on the grounds of not breaching EU State Aid rules, although Government guarantees are now going up to 100 per cent. In a situation in which the issue is rescuing our economy it is ridiculous to argue that appropriate economic measures can be stopped by EU State Aid rules.

The Future Fund has also had a damaging technical constraint on qualification. Where a company has Enterprise Investment Scheme or Venture Capital Trust investors, this is not tax compatible with required Futures Fund and Convertible Loan Note investment, which would disqualify EIS/VCT investors’ tax relief.

What is now needed is a faster sequential lifting of the lockdown package of constraints, both to accelerate the recovery of our economy and to give us a stronger hand to negotiate Brexit. The Business Secretary has the tools to preside over our economic revival, and his department must become a leading one.

It, too, needs to slash regulations that prevent businesses from getting loans. We also have the opportunity to carry out a revolutionary shift to a pro-business administration with an export led economy on the back of a weak Sterling. Here there is an argument for establishing a national export fund.

“Stay at home. Protect the NHS. Saves lives” now needs to change to “Get back to work. Protect the economy. Save livelihoods.” Our response to Covid-19 should now become more targeted, becayse the risks to millions of people who are younger is very small. Companies have complained about the lack of guidance where the outlook is becoming clearer.

I expect a major advance in the lifting of lockdown for the retail sector in June and, if all goes wel,l much of the lockdown will be lifted by the end of July. There is a range of business measures open to Government to boost the economy on a sustained basis.

The most effective are likely to be increasing the annual (company) investment allowance; reducing stamp duty on houses; rolling furlough arrangements into Universal Credit, providing incentives to work.

Equally important is to repeal regulations in the way of recovery – i.e: we have amongst the highest childcare costs because of our staff ratio laws. Infrastructure investment should be brought forward. Finally, EIS and VCT should be made tax compatible where companies have Future Fund or CBILS investment.