The current health crisis is occupying so much of the current bandwidth of government worldwide that insufficient attention is being paid to the economic tsunami that is following in its wake.
Radical measures are required, and it has been heartening to see that some of the necessary policy has been enacted by finance ministers across the globe.
As well as lobbying government, I launched a petition on Change.org arguing that where businesses are being forced to close their doors their fixed costs should be met. This includes paying the salaries of all staff whose jobs are temporarily non-viable.
The petition is at https://www.change.org/fund_staff_salaries
Three days later, Rishi Sunak announced his Job Retention Scheme saying that 80% of salaries would be met up to £2,500 per month. Later, he followed it up with the Statutory Self-Employed Pay scheme, offering something of the same for the self-employed.
It is hugely to the Chancellor’s credit that he has done this and yet I can’t help thinking that a light-bulb moment has been missed.
I say this, because if you truly understand why this remedy needs taking you would understand that the 20% haircuts and the caps are self-defeating.
The challenge for our governments is to enable many nonessential businesses to go into hibernation. These sleeping businesses have no access to revenue, so this must be met by government in the form of paying all their fixed costs (mainly rent, rates and salaries). If this is done, a domino effect of failure and insolvency can be avoided.
Tourism aside, many of these nonessential services were being paid for out of our disposable income. We cannot buy these services now and most of us would happily donate in tax what we were spending in order to keep the economy on an even keel.
That’s what should happen in a well-ordered system: at times of crisis we experience a loss of amenity. We should not be tumbling towards economic meltdown because we can no longer buy lattes. We need, for now, to keep the same money circulating in the same way, just minus the service.
The two principal taxes that should be raised to pay for this are income tax and corporation tax. Businesses benefiting from government assistance in this way should not be making profits, so corporation tax should start at 100% and maybe tapered down in proportion to the help sought.
This should be done temporarily and immediately. Taxing when the economy is trying to recover is not the right time.
It may seem anomalous for a Campaign that does not have a place for either income taxes or corporation tax in its ultimate vision should be proposing this. But this is where I take a different view from some Green colleagues who are seeing this as a good opportunity to introduce Universal Basic Income. Now is not the time. Now is the time to keep things in aspic. When it is realised that it is possible to sustain our economy without so much of the activity we thought was necessary, other models of operating will start to look much more credible.