Yesterday it was made clear that Boris Johnson’s Government is going for broke.
It is sparing no effort as it battles to stop the coronavirus sending Britain’s hardwon prosperity over a cliff and turning what is now an inevitable recession into a depression of a kind not seen since the 1930s, with large and enduring unemployment.
Chancellor Rishi Sunak has put to one side Tory squeamishness about propping up struggling enterprises along with their healthy counterparts and opted to save everything – good and bad – in the greater public interest.
Chancellor Rishi Sunak has put to one side Tory squeamishness about propping up struggling enterprises along with their healthy counterparts and opted to save everything
Even though many of the actions taken will be time limited, I would venture to say the vision of what is being done is every bit as far reaching as that of the post-Second World War Clement Attlee government, with its bold promise of protecting people from cradle to grave.
We must not underestimate the scale of Sunak’s intervention. It is the most far-reaching package of measures to protect workers, businesses and to try to ensure the preservation of social cohesion in this nation’s history, and goes far beyond the 2008 rescue operation for banks.
He is placing Britain in the vanguard of actions taken by the Group of Seven.
Over the past ten days the Chancellor has unleashed three separate packages of support for the economy, hoping he can keep it in hibernation through the worst of this deadly epidemic and then rapidly bring it back to life later in the year.
In his pledge to pay 80 per cent of the wages of all those employees whose lives are being put on hold by the crisis, he is taking unprecedented actions.
For less complex democracies such as Denmark, with a population of less than six million, such a step would be ambitious enough.
But, even in wartime, it is something that has never been tried by nation with a population of 66million and a complex services, financial and industrial economy and near full employment.
The Government is seeking to provide succour to every household.
There is real money for businesses and the self-employed through enormous tax breaks.
Instead of HMRC being everyone’s enemy – hassling us for every last penny of taxes – it’s being turned into Father Christmas through the coronavirus job retention scheme.
Sunak has also banished the portrayal by the Left of the Tories as the nasty party, concerned only with business not people, by boosting the despised Universal Credit and those on the Working Tax Credit by £1,000 – in effect ‘helicopter money’ that provides direct help for the four million vulnerable people in society.
Just over a week ago, Sunak unveiled £30billion of extra spending in his Budget to keep the public finances in order.
Since then, as the crisis has deepened, he’s continued to splurge on a scale never seen before with a second package of £350billion for enterprises and mortgage holidays.
Now we have his plan for people in work that could run into the hundreds of billions.
The stress will have to be taken by public borrowing, which could surge beyond wartime levels of 25 per cent of national output – a figure so out of scale with modern experience of 2 to 3 per cent it is hard to imagine.
Raising the money to pay for all of this is going to require Herculean efforts for the new Governor of the Bank of England, Andrew Bailey, who already is in uncharted territory.
Since the Budget, the Bank has slashed interest rates twice, to the lowest ever level of 0.1 per cent.
It has established the commercial credit window of £330billion through which larger businesses can borrow and is tipping an additional £200billion of cash into the banking system, bringing the total of money printing up to £645billion.
The Treasury and the Bank of England are taking a huge gamble. They are hoping there will be enough buyers in the UK and overseas of British Government debt, known as gilt-edged stock, to absorb the extraordinary levels of government borrowing.
If that doesn’t happen, the Bank of England will step in and ‘buy’ the debt itself.
The assumption behind this is that with output flat and inflation negligible, the financial markets will give the UK the benefit of the doubt and not push the pound below parity level with the dollar.
Indeed, there is a possibility that the Government will be rewarded in the markets for taking the kind of storming measures that no other Western nation has yet attempted.
As was the case after the 2008 financial crisis, Britain’s financial establishment is attacking the economic and social devastation of Covid-19 head on.
All we can do now is pray it works.