The coronavirus pandemic has shown us all in just a few days how fragile our way of life really is. Basic certainties about our health, that of our loved ones and our normal way of life can no longer be taken for granted. Our sense of anxiety is real and understandable.
In these new circumstances, the most important and hardest thing for government is to not cling to old certainties about the way things should be done, but to tear up the rulebook. That is what we have started to see in the last few days when it comes to public health measures. There is now a desperate urgency that this scale of action is matched by the government’s economic response. We are not there yet – not by a long way.
No individual, business, worker or charity must be left to bear the risk and consequences of the economic impact on their own. A pandemic is the ultimate collective action problem: we are in this together and it must be managed collectively by government.
We cannot say to our pubs, small businesses, cinemas, theatres that we want them empty and then leave them and their employees to face the consequences. If we do, we will face bankrupt businesses and laid-off workers at a scale that will cause misery and hardship throughout our country.
Nor can we leave all the other businesses affected to fend for themselves. We cannot say to the 5 million self-employed people that if they have no work or get sick, they must face the consequences alone. Nor can we say to the millions of workers who live pay cheque to pay cheque that £93.50 a week statutory sick pay is enough to get them through.
This crisis reveals some of the gaping holes in our social safety net. It is both right in principle and necessary for the public health measures to mend those holes at speed. If we want people to self-isolate if they have symptoms, or if someone in their family does, we need to make it economically possible for them to do so.
First, we need action at a scale that is commensurate with the economic costs of the crisis. While estimates are hard to make, the loss in demand that is likely to occur will, without action, cause a very deep recession. France’s president, Emmanuel Macron, has made available support that amounted to hundreds of billions of euros of help. Given how quickly the crisis is moving, last Wednesday’s budget provided only a fraction of what is required.
Second, we need action at speed. A crucial test of any new measure proposed is how quickly it can have an effect. It takes much longer than you might think to design new systems of payments or support. Workers and businesses need help in days not months.
Third, we need scope of action that covers all at-risk workers and businesses. Ireland has shown what is possible with a new special unemployment insurance payment. Denmark has gone further with its government guaranteeing 75% of wages for private sector workers who would otherwise be made redundant. Given that we expect this crisis to be temporary, we need to keep workers attached to their firms if at all possible.
In the interests of scale, speed and scope, we should turn statutory sick pay into employment retention pay, available to all those workers whose businesses have had to cease their activities or substantially reduce them as a result of the crisis – not just to those workers who are sick. It should be paid at a substantially higher level than now to enable families to make ends meet, either as a flat rate payment or a proportion of previous earnings, say 75%, up to a cap, as in Denmark.
There are different ideas for supporting the economy, including a temporary universal basic income, and nothing should be ruled out. But as the Resolution Foundation has suggested, employment retention pay has the virtue that the mechanism to make this payment already exists, it will cover all employed workers affected by the crisis, and it will cover a substantial proportion of employer costs. It will keep families afloat and prop up demand, helping businesses.
The government would essentially be acting as a guarantor for a portion of the wages for all those businesses affected by the crisis and unable to operate. Such action would be radical, but it is necessary.
Clearly, however, it does not cover the self-employed. Just because people work for themselves, they should not be left on their own. Here we need to fix the fact that universal credit at £73 a week is simply not enough for many people to live on and risks deepening the drop in demand. The crisis has shone a light on this fact. Universal credit needs to be substantially increased and available immediately, to help the individuals concerned and prop up the economy.
Finally we need to support businesses and charities in the costs they face over and above the costs of their workers. At the very least, we need a generous interest-free loan system to keep them afloat, but this could leave them debt-burdened when we emerge from the crisis. In France, businesses are being allowed to suspend rent payments and payments for gas and electricity.
Of course, there are substantial costs involved with all these measures. But it is absolutely necessary to act. If we do not, there will not just be millions of people who will face poverty and hardship, to add to the health consequences of the pandemic, but it will lead to long-term economic effects, from which it will take years to recover. Further action may also be necessary as well as these immediate measures.
This is a moment that tests our political leadership. We need imagination, compassion and action. There is not a moment to lose.