Six weeks ago life in the UK was pretty normal; now it isn’t. The rapidity with which Covid-19 has impacted on our society and economy is remarkable.
The fashion is to blame our politicians for not being ready but the reality is you can never be fully ready for every eventuality. In every war we find that the weapons which were effective before are no longer fit for purpose. Politicians at both the UK and Scottish levels have been working sensibly and together to deal with what is a genuine public health emergency.
When people debate continued lockdown compared to a return to normality they tend to frame the debate as return to normality to help the economy versus stay indoors to help people. In reality there will come a point, in weeks rather than months, where the damage to people’s general health, the reducing ability of a weaker economy to fund good public services and the effect on future generations of crushing levels of debt means we will have to rise from our economic knees and get back to work.
In the meantime the slide into the economic abyss is being prevented by Government action, some of which is working well and some of which is not.
What the Government cannot do is provide a great outcome for everybody. Companies and individuals who have borrowed money are more vulnerable - aside from compelling lenders not to foreclose and to provide repayment holidays there is not a great deal which can be done.
Those who own companies and who chose to arrange their remuneration such that most of it was dividends rather than income - perfectly sensible tax planning - are now paying the price; we should not be too sympathetic, they sought financial advantage and now know what the “Insurance” in National Insurance is about.
The UK Government’s great success is the Furlough Scheme. Faced with the collapse of their revenues, companies would have had no choice but to make many of their employees redundant - the Furlough Scheme has largely avoided that risk for now.
The cost of this is enormous - but less than the cost of catastrophic economic collapse.
The key to why this scheme has worked is that it is simple and rapid. By the end of this month payments to cover 80% of the wage bill for furloughed employees will flow into companies bank accounts. This is a remarkable achievement.
What isn’t working well is the UK Government backed Coronavirus Business Interruption Loan Scheme. Hundreds of millions of pounds is available but less than 1% has so far been deployed.
Why? The need is certainly there. The reasons aren’t hard to find - unreasonable financial and practical demands on companies, catch 22 requirements, bureaucratic screw ups.
The CBILS is not working - it needs to - and fast if businesses are to have the cash not just to get through the lockdown but to fund their working capital as we move out the other side. The authorities must move quickly to simplify the scheme, it is not a time for niceties, up to say £50,000 the banks could just be told to lend to existing customers and if they ultimately lose 20% of this - tough luck.
We must resist the temptation to add nice to have requirements to schemes whose purpose is to protect the economy in this crisis. Gender equality, living wage requirements and environmental impacts are important issues - but for tomorrow not today.
In Scotland we have managed in certain hospitality sectors to over complicate the Coronavirus Grant Scheme such that businesses are not getting the money they desperately need now. We need to be less smart on this occasion - simple and quick are the key requirements not slow perfection.
Guy Stenhouse is a Scottish financial sector veteran who wrote formerly as Pinstripe.
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