The world is at war. So Emmanuel Macron tells France. Donald Trump warns Americans they are under attack from the “invisible enemy” of a murderous virus. And yesterday Boris Johnson declared himself head of a “wartime government”.
Even from politicians, such language this time bears no trace of hyperbole. If we are lucky, government scientists warn, tens of thousands of Britons could be killed in this pandemic. The NHS and other public services are just weeks from breaking point, while the economy teeters on the brink of severe recession. To illuminate the grim path ahead some economists hold aloft the examples of Lehman Brothers in 2008 or 9/11, yet the next few months stand to be more devastating. A contagion on hospital wards and high streets, rather than on bank balance sheets, it is devastating everywhere from Beijing to Belfast at almost the same time. Our economies are all sinking together – fast.
Which begs the question: why go into deadly conflict armed only with a peashooter? For all their martial language, that is what Johnson and chancellor Rishi Sunak are offering the British people. The economy-boosting package they have trumpeted this week is in reality too puny a tool, aimed at the wrong target. While other governments of every political hue attack their many-headed enemy with a range of formidable weapons, ours charges ahead with just one, merely promising that reinforcements will arrive at some unspecified date. Just as in dealing with the pandemic itself, we are lagging far behind our European neighbours.
That is not how it has been treated by many newspapers. The front pages this morning hail Dishy Rishi and his “kiss of life”, yet only last Wednesday those same publications swooned over his definitive corona-budget. A few days later, neither the measures nor their rapturous reception look quite so well-judged. At the time, I wrote on these pages that the emergency package “simply does not look large enough”. So it has proved.
Johnson’s team are masters of the three-word slogan. Take Back Control; Get Brexit Done, and today: Whatever It Takes. All are grand-sounding promises that never quite come good because they simplify too far.
The essence of our economic problem is easily summed up: to contain this disease, the economy must grind to a halt. Whether for entertainment or for business, over the next few months people can no longer gather together. The restaurant that did a roaring trade in February must now by Whitehall edict be silenced. However sound the business, no firm can keep going in such circumstances, which is why shops and museums across the country are already pulling down their shutters. Airlines and hotels everywhere face bankruptcy, while millions of employees around the world could lose their jobs.
In speed and scale, this has all the makings of a depression – unless governments go big and fast. That is not what Sunak is doing. Last week, he extended sick pay for those struck down by the virus, when already the economic problem has metastasised to healthy workers getting laid off from becalmed businesses. He talked yesterday of a mortgage holiday – which big lenders are already offering – while saying nothing about renters. For firms he is putting up £330bn of loans and grants. Loans help to spread the burden of outgoings, which is why we take them to buy houses and cars, but for your local cafe owner who has just seen her revenues vanish, for God knows how long, they are utterly inadequate.
The government’s supporters promise all will come in good time, but global pandemics do not work to the timetables of newbie chancellors. Meanwhile, Italy has suspended mortgages and rents, France has suspended utility bills and rent for small businesses and Denmark has agreed to pay as much as 75% of the wages of some private-sector employees rather than see them laid off. In each case, the rationale is the same: to lose a home, a company, a job does lasting damage to individuals, households, an entire economy. Better in this squall to tide people over than to let them drown.
These governments are following the same dictum as our Treasury officials, introducing “timely, targeted and temporary” measures. But as Johnson’s former economic adviser Gerard Lyons observes, they have added another T: titanic. As in exceptional scale, not sinking ships. While no socialist, he calls on the British government to follow suit.
A real bailout for the economy must have two main principles. First, it should put money in people’s pockets right now, targeting the poorest. Successive prime ministers from Margaret Thatcher to Tony Blair to David Cameron have made our welfare system as punitive and mean as possible, supposedly to drive people into work. In this crisis we need it to serve an entirely opposite purpose: to encourage workers to stay at home. The last thing you want is a care worker shrugging off her cough and temperature because she needs to put food on the family’s table.
That means raising sick pay alongside universal credit and other benefits, and lifting conditions and sanctions. If schools are to close, child benefit should rise and the nasty two-child limit must be scrapped. All essential costs to keep a roof over one’s head or one’s business going should be suspended, which includes tax collection. The UK should follow the Nordic countries in being prepared to subsidise wages. Whatever money the government has promised the NHS, our hospitals clearly don’t have enough resources right now, which is why A&E doctors are wearing paper masks. Local authorities are having to respond to this crisis after years of being stripped of money by the Conservatives: that must be reversed. Given the likely hit to our GDP, the government cannot spend enough right now, especially with interest rates at zero. If Johnson is serious about leading a “wartime government” he should remember that during the second world war the UK ran a budget deficit of 20% of national income every year for five years.
Just over 10 years ago, the banking crisis was resolved with vast amounts of public cash. The public was repaid for its support by seeing its social contract with the state and with employers ripped up. We got lower pay, fewer rights and the slashing of our public realm. That cannot happen again. This crisis has revealed the flaws in our political-economic system: insecure work, a cruel welfare system, businesses that expect the public to keep them afloat while doing little for the public good (look in the mirror, Richard Branson), and a government that will only drop its laissez-faire laconicism when confronted with the prospect of hundreds of thousands of deaths.
And this is where we get to the second principle for saving the economy. Any bailout for airlines, say, can’t involve taxpayers handing billions to Branson and others; there must be public stakes for public financial support. More widely, there needs to be a new contract with businesses that recognises they are social institutions reliant on society, and compelling them to play their proper role in it, from pay to how they run their supply chains.
Wars often serve as the catalyst for such change. Income tax was a short-term measure to beat Napoleon. When coalition minister Ernest Bevin launched his crusade for full employment in the Commons, he recalled visiting a port with Winston Churchill before soldiers set sail for the D-Day landings in Normandy. One soldier asked: “Ernie, when we have done this job for you, are we going back to the dole?” Bevin told MPs that he and Churchill answered almost as one: “No, you are not.”
This time we are asking frontline staff in hospitals and schools and town halls to risk illness and worse on our behalf. This follows years of their pay being held down and their institutions being cut to the bone, and after decades of seeing top earners march off with outsize returns. The least we can do is promise there will be no return to those days.
• Aditya Chakrabortty is a Guardian columnist