Exit Wounds
The thing about sticking plasters is that they give a wound the chance to heal whilst keeping out contagion. But if the wound is too deep, too big or already infected then... all a sticking plaster does is cover up the severity of the problem. Over the next few months, we will discover whether the Government’s various sticking plasters were sufficient to help Britain to heal the COVID wound. As they are peeled off, we will get a clearer view - is it a healthy scab under there or is it a gangrenous mess?
The furlough scheme is the most acute example. The word ‘unprecedented’ has been overused in 2020 (global pandemics, for example, are absolutely not unprecedented - they are a regular feature of human existence). But Rishi Sunak’s furlough scheme really was a first. Essentially, the taxpayer offered every private sector employee in the country an 80% funded job guarantee - no real questions asked, no quibbling about the long-term viability of that job, no obligation to do anything whatsoever. That has never happened before.
The purpose of the scheme was two-fold. One, lockdown meant a collapse in revenue for all sorts of businesses and the natural consequence of that would have been massive redundancies. Given that lockdown was an event - and a man-made one at that - and that this event was never intended to last forever, it seemed churlish to let jobs be lost forever as a result of a short-term, one-off moment. Two, millions of people losing their jobs overnight would equal a devastating depression that would end up costing the Government more than even the billions it has spent propping up these jobs.
But whether this particular sticking plaster has succeeded in its task is about to be revealed. Because Sunak is peeling it off over the next few months. First, employers will be asked to contribute a proportion of their workers’ furlough salaries. Then, the furlough scheme will be withdrawn entirely. And as this process unfolds, what employers decide to do will tell us the nature of the wound. If many employers make significant proportions of their furloughed staff redundant once the financial burden is passed back to them then we will know that we merely postponed the pain. There will be huge variation, of course. If Eat Out To Help Out succeeds in boosting hospitality then - perhaps - pubs and restaurants will take their workers back en masse. But one only needs to look at the redundancy programmes already announced - at massive companies from BA to BP - to see that it is not going to be plain sailing. The Chancellor will say - with some justification - that he cannot pay millions of people to sit at home forever. But he chose to pay them to do that for a bit. And the backlash if it becomes clear that these people’s jobs have disappeared and that their taxpayer stipends are gone too could be vicious. Add into the mix the tax rises that are likely to be needed to pay back that money... well, these will alienate a lot of traditional Tory voters. And if there is a second spike in infections and a need to re-enter lockdown? Millions of unemployed people could find themselves subsisting on Universal Credit, trapped at home with no realistic prospect of finding another job any time soon. A heady political mix.
Rishi Sunak has earned himself great plaudits for his response to COVID-19 - not least in these notes. But it is not particularly difficult to achieve popularity whilst handing out money and buying everyone their lunch. The next six months - as we move from stopping the bleeding to assessing the long-term impact of the wound - they will be much harder for the relatively untested Chancellor of the Exchequer. Maybe Boris won’t look so foolish for letting Sunak be the frontman on all things economic after all.