I noted a few days ago that I was uneasy about the number of businesses that appear to have decided it is in their business interests to go into hibernation, temporarily cease trading and take advantage of Rishi Sunak's bold schemes which he described as the most generous in the world. (What Is Essential? 20 April). It's not clear the chancellor expected this degree of gaming of the system, potentially hitting the economy even harder than he allowed for. Evidence is building that some of the help to individuals and businesses may be too generous to enable the economy to function as effectively as it could, even in these difficult circumstances. But I accept that each business has to take its own decisions about how to best get through to the other side.
Meanwhile the furlough scheme, underpinning 80% of normal wages has not been without criticism because of details such as how agency workers are paid. Apparently a large chunk of their regular earnings are paid as if they were discretionary bonuses which don't count as 'normal' pay. There are myriad other issues as well but I don't criticise Sunak on that account - it had to be a simple, one size fits all scheme that could be implemented quickly. The problem is simply that resources which could have helped the economy and the national effort to tackle the virus have been kept locked up because many furloughed people don't need to work. They can volunteer or indeed do work for another employer - provided their contract with their current employer allows it*. None of my contracts of employment - at least none that I can remember - would have allowed this. The point about an emergency is that the government can change almost anything though I understand they would be reluctant on things like this.
The most vivid example of the impact is the requirement for seasonal workers to pick fruit and vegetable crops which requires 70,000 pairs of hands each year. 99% come from the EU, nearly 60% from Romania and Bulgaria. The government apparently hoped that some of the people laid off would work in a "land army" of seasonal workers. Well 35,000 did apply - a worthwhile half the requirement. But then the chancellor announced his furlough scheme. Only 20% of them completed the application process and only 3,000, less than 10% of the original applicants, are committing. "We think it's partly because the chancellor's subsidy schemes mean many people no longer need farm work" said an agricultural recruitment agency**. So planeloads of Romanians are being brought in.
Wherever the chancellor looks there must be problems. So while the food sector is generally flat out, dairy farmers are having to pour away milk and are getting a fraction of their cost price from the supermarkets. One such farmer normally supplies milk to Costa Coffee and BA. At the moment they don't qualify for government support but within weeks but will soon run out of cash to buy feed. Given there is a groundswell of opinion about becoming less reliant on imports it would be unfortunate if we have eaten much of the dairy herd.
Meanwhile he has businesses who don't qualify for the support so far offered lobbying hard, Virgin Atlantic being one. I'm not sure I would bail out Virgin but not because it's majority owner is rich or it's other main shareholder is the large American company, Delta. My reservation is that I can't see air travel returning to anything like normal for a very long time. It may be that a structural reduction in the capacity is inevitable. If so, how long should we bail out the weaker companies for?
Some have argued that allowing firms like Virgin to go under would mean we pay higher prices in the future on the Atlantic routes dominated by a BA-American duopoly***. But the planes and slots would still be there for another business to enter and undercut them if the market is lucrative enough. Oh I feel sympathy for the staff alright, but if the jobs aren't there long term they aren't there.
So I can understand why Sunak is sitting on his hands on this one at the moment. It's his job to see that the economy is in a position to restart. That doesn't mean bailing out every firm. The measures taken to deal with the economic impacts of the financial crisis protected a lot of weak companies which is not in the best interest of the economy long term. It would be unfortunate if the economic and financial measures taken to deal with the medical crisis leave us with a legacy of too many weak companies, shuffling into the future like zombies but without the strength to flourish. It might be better in some cases to let the weakest companies go to the wall and prepare a bold and visionary scheme to encourage entrepreneurs to start new companies in the recovery.
While uneasy I'm not yet critical of Sunak and the government's approach. They had to act quickly and it would have been worse to announce something inadequate and to have had to bolster it. Sunak is trying to support the economy and the population in general and he can't worry too much about some things falling through the cracks. But as we move forward into easing restrictions he may have to get smarter. It won't be easy but we all have a vested interest in him getting it right.
And if Sunak had been significantly less generous he could have been on the end of rants like American comedian Vic Dibetto's, whose in-car video has been viewed over 10 million times on social media. It's a fabulous, passionate, red-faced expletive ridden tirade about what he thinks the US government should be doing. You can find it in lots of places: as well as showing the video the Guardian **** gives some background. As a buddy said on facebook "can we hire this guy to ask the questions at the UK daily government briefing?"
It would be more fun to watch than the questions our journos ask.
* https://www.citizensadvice.org.uk/work/coronavirus-if-your-employer-has-told-you-not-to-work/
** Lettuce help - Romanians come to the rescue of farmers, Sunday Times 19 April
*** Alex Brummer, Virgin deserves a lifeline, Daily Mail 23 April
**** https://www.theguardian.com/culture/2020/apr/24/vic-dibitetto-coronavirus-rant-video-interview
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