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For all that the government is finally ramping up its encouragement for us all sit inside refreshing our groupchats to beat coronavirus, as the crisis looms, people also need help economically. Yesterday Chancellor Rishi Sunak gave a statement to lay that out. In short, he gave businesses and homeowners a massive leg up while leaving workers and renters hanging.
Sunak stated that he’d be offering £330 billion worth of emergency loans to businesses – equivalent to 15 percent of the UK’s GDP – along with three month’s relief on mortgage payments and grants to smaller businesses. If businesses need more loans, the government will step forward and provide them.
This is a good first step given the significant economic risks of allowing businesses to default. Business have used the last decade of low interest rates to gorge themselves on cheap debt – total debt to British corporations is worth 82 percent of GDP, higher than in the US, where onlookers have been warning of a corporate debt bubble for years. Many economists have warned of the rise of “zombie firms” – poorly performing businesses that should have gone under, but which have been able to borrow to stay afloat.
The shock of coronavirus, which means an immediate loss of income, could tip many of these firms into bankruptcy. Thanks to the Chancellor’s intervention those with solid business models should be able to weather the storm. The issue is that these are still loans – not grants. Businesses are going to have to pay them back, so they’re simply going to add to the UK’s already high corporate debt burden over the long-term. If, as seems likely, the economic impact of the virus lasts more than two quarters, Sunak might need to take more drastic measures.
If you’re self-employed, work in the gig economy or live in the private rented sector, you’re probably waiting for the part where I tell you that Sunak has also announced a package of measures to top up incomes, freeze rents and freeze household debt repayments. Unfortunately, you’ll be disappointed.
The Chancellor has decided to provide relief for mortgage-holders – including landlords – but not private renters. And funnily enough, Twitter is already full of stories of landlords refusing to allow their tenants any leeway on paying their rent. The government announced today that it will be halting evictions until the crisis is over. Though many private renters will not react well to being considered an afterthought.
Should we be surprised? Probably not. Given the age-profile of homeowners compared to private renters, this is an explicit giveaway to Gen X and, to a lesser extent, boomers at the expense of millennials and Gen Z. In other words, the Conservative Party is ensuring their electoral coalition is safe. There has been enough outrage in response to the strategy that we may see a change of tack from the government over the coming weeks, but it shows where their priorities lie.
Meanwhile, the thousands of people who have been forced into self-isolation may not be able to pay their rent or bills with the UK’s statutory sick pay of just £94.25 per week. The self-employed, those on zero hours contracts and those who work in the gig economy may face a complete loss of work altogether. Many who work in entertainment have pointed to the callousness of the government’s decision to “advise” people to stay at home rather than “require” it, because it means entertainers and venues can’t claim for the loss of income on their insurance.
Even more scandalous, frontline health workers still aren’t being offered free testing for coronavirus, even as private companies sell tests for nearly £400 a pop. This means that many health and care workers who have symptoms, or who have come in to contact with someone who does, are being forced to self-isolate, reducing the NHS’ capacity even further. During pandemics like this, it’s not just the virus that kills people – the lack of capacity within the health system means that many more people will go without treatment for other conditions is dangerous as well.
In other words, a lot of people have been left out of the Chancellor’s safety net. It is highly likely that the government will announce further measures to protect these people in the coming days at weeks. Failing to do so would spell economic disaster – any number of people could face unemployment, homelessness and bankruptcy if the government fails to act. But the timing of these announcements has clearly demonstrated where the government’s priorities lie – first, businesses, second, homeowners, last, everyone else.