When a crisis hits, effective governments do two things. The first is obvious: they deal with the immediate challenge. The second is harder: they anticipate the fallout and then set about working out how to tackle the consequences, looking months or even years ahead.
Thus far, Britain has spent £200bn on the coronavirus economic rescue operation but there is, as yet, no plan for economic recovery.
There are some hopeful signs, such as the good news that vital pharmaceutical goods may once again be manufactured in Britain. But one re-shoring success will replace only a few of the millions of jobs now at risk and, with or without a VAT cut, a summer surge in consumer spending will not of itself return our economy to pre-crisis levels of activity.
The reannouncement of major infrastructure projects – large promises from Conservative pre-election glory days – remains just that and most are nowhere near shovel-ready.
The £26bn in loans to 640,000 businesses has already been spent in offsetting shortfalls in cashflow, leaving even fundamentally sound companies unable to reinvest for the future and Britain vulnerable to more and more bankruptcies.
And as the oil and gas sector fades, immigration falls, post-Brexit European trade slows and productivity continues to falter, I fear that unless we act wisely and soon, the UK’s long-term rate of growth – 2.75% per year in the 2000s – will slip towards 1%, perhaps the lowest since the Industrial Revolution.
All this – and the imperative to strengthen Britain’s resilience ahead of a possible second wave of Covid-19 – highlights the urgent need for a July budget: its main purpose the support and, if necessary, the recapitalisation of viable British businesses and the prevention of mass unemployment.
The resolve that delivered the furlough scheme, which maintained 9 million people out of work, is needed again to help these millions back into work – flexibly and imaginatively.
A July Budget for jobs should include incentives for companies for both retaining and retraining their workforce; tax credits for those for whom only short-time working is available, retraining grants for those forced to move jobs and the rapid implementation of a comprehensive employment, work experience and training guarantee for a new generation of school-leavers and graduates facing a historically unprecedented autumn spike in youth unemployment.
But instead, the Treasury – panicked by the likely scale of the debt and deficit and now politically micromanaged from No 10 – seems to be in its own virtual lockdown. Having acted as the generous economic dove of spring, it is now, sadly, on course to be the tax-raising fiscal hawk of autumn and is in danger of losing sight of its overarching responsibility as a powerful force in economic government and not just a bookkeeping finance department.
The chancellor may try to justify sidestepping a July budget on grounds of fiscal uncertainty but at the time when economic leadership is required and nations such as France, Germany, China and Singapore are seizing the opportunity to, in the words of António Guterres, the UN secretary general, “build back better”, the UK is once more left behind.
There is, as Martin Luther King said, “such a thing as being too late” and a belated autumn 2020 budget will not be remembered for recovery plans, only for pre-announcing tax rises.
For Britain, there is nothing ahead like the expansionist plans now under discussion in the United States, which would turbocharge growth and create millions of jobs without significant increases in long-term debt.
But even on business logic alone, the government should act now. David Sainsbury’s timely book, Windows of Opportunity: How Nations Create Wealth, explains why our economy has neglected the importance of innovation and now has too few internationally competitive, leading-edge companies, large or small.
Sainsbury fleshes out an industrial policy for the 2020s based on investment in innovation, skills and regional hubs of excellence. No potential source of productivity growth should be ignored, including the contribution that can still come from continued affiliation to the EU’s Horizon science programme and the Erasmus training programme and from joint infrastructure ventures with the European Investment Bank, all of which are still open to UK participation, even outside the EU.
But without a plan to recapitalise industry, otherwise sound companies may be unable to fund much-needed investments in technology, training and the low-carbon economy. The Industrial and Commercial Finance Corporation (ICFC), which from 1945 to 1990 bought shares in innovative companies, has recently been replicated in many countries. From now on, the Business Growth Fund and Future Fund should be scaled up in each region to be an ICFC for our times: working with private investors to convert current and future loans into equity stakes and, where necessary, take shareholdings on behalf of the public in promising companies.
Business must respond by addressing some issues ignored for too long: the environment, diversity and workplace fairness. By linking government funding to measurable environmental and social outcomes, and legislating for companies to introduce impact-weighted accounting – a new format for reporting on performance in these areas – the taxpayer could ensure that British business becomes better equipped for a low-carbon and far more inclusive economic future.
That Covid-19 has been the “great leveller” is the biggest lie of the current crisis. Far from there being an equality of sacrifice, the permanently low paid, the already workless families and the zero-hours contract workers have suffered most.
Since the prime minister defended the indefensible wanderings of Dominic Cummings, the charge of “one rule for the No 10 elite, another rule for us” has stuck to him.
And nothing confirms this more than the dither and delay now resulting in the betrayal of families throughout the United Kingdom, as children, young people, working-age adults and older people face, after 10 years of austerity, the impact of an avoidable failure to plan for economic recovery.
• Gordon Brown was UK prime minister from 2007 to 2010
