Big businesses will need to be bailed out too, warns Darling
RISHI SUNAK will have to think about bailing out Britain’s bigger businesses, including airline companies, if he is to reduce the economic impact of the impending health crisis, one of the chancellor’s predecessors has said.
Lord Darling, the Labour peer who was chancellor during the last financial crash, said Boris Johnson’s government would have to do “whatever it takes to keep the economy going”.
He spoke as the markets struggled to bounce back following the FTSE 100’s worst day of trading on Thursday since the 1987 “Black Monday” crash.
Lord Darling, who as Alistair Darling became chancellor when Gordon Brown moved into 10 Downing Street, said: “They shouldn’t close the door to anything at the moment.”
Baroness Morgan, the Tory peer and former culture secretary, said Mr Darling had “a good point” about bailouts.
It came as the Institute for Fiscal Studies, the economic think tank, said the £12billion emergency relief package announced by Mr Sunak in his Budget this week did not contain enough to help bigger businesses.
But it was understood that No11 was speaking to relevant heads of companies that may need extra support, and that included large businesses.
RISHI SUNAK should consider bailing out big businesses including airlines to stem the economic impact of the health crisis, Lord Darling has said.
The Labour peer, who was Chancellor during the financial crash, says the Government must do “whatever it takes to keep the economy going”.
Yesterday, markets struggled to bounce back after the FTSE 100 suffered its worst day since the 1987 Black Monday crash.
Asked if bailouts of large businesses should be an option, Lord Darling said: “They shouldn’t close the door to anything at the moment. The Bank of England has made considerable funds available to be dispersed through the banking system to provide loans to companies, particularly small [and] medium-sized enterprises.”
He added the Government must make “sure we still have the basic economic infrastructure that will work”.
On Thursday, the Institute for Fiscal Studies, the think tank, said the Budget did not contain enough to help big business through the crisis, with the £12 billion emergency coronavirus measures focused on small business.
Paul Johnson, director of the IFS, said the Budget “does much less for those that might end up having to reduce production or close temporarily because staff can’t come into work either because they are ill, self isolating or looking after children who have been sent home from school.
“This may be a particular problem for [the] manufacturing industry where home working will be much harder than in some office based jobs.”
Meanwhile, Baroness Morgan, the Tory peer and former culture secretary, said Mr Darling “has a good point” about bailouts.
“The key thing is to keep cash flow going which means supporting businesses with their costs if their income falls dramatically,” she said.
Yesterday, the Chancellor met the Bank of England governor and representatives from the UK’S biggest banks to discuss responding to the crisis.
His Budget was focused on providing support for small businesses which may suffer from staffing issues and cashflow as a result of the health crisis, including underwriting bank loans.
Measures for larger businesses were
‘One of the reasons why the global economy recovered 10 years ago was because of international co-operation’
‘The key thing is to keep cash flow going, which means supporting businesses with their costs if their income falls dramatically’
not specified in the Budget although Mr Sunak told MPS: “If more action is needed, I will take it.”
A Treasury source said: “Our focus in the Budget was supporting those who are most vulnerable – small businesses. But we are in an evolving process and we are ready to provide support as and when it’s needed.”
It is understood No 11 is speaking to relevant heads of companies that may need extra support, including large businesses. It is understood airlines are likely to be the first to be considered for additional support from the Treasury.
Yesterday, the chief executive of British Airways warned staff that jobs would be lost as a result of the crisis which is “more serious” for the airline industry than 9/11 and Sars.
Lord Darling said the Government
“should not balk at doing what’s necessary to make sure that we get through this” and pointed out a lot of people will “feel the pinch as this goes on, as people stop buying things, stop going out.”
He said he “wouldn’t criticise” Mr Sunak for reviewing his approach: “He will need to go back to the House of Commons – I had to do it several times during the financial crisis – they must do whatever it takes to keep the economy going.”
The former chancellor said international co-operation is in “something of a short supply” from the response to the crisis.
He told BBC Radio 4 Today: “One of the reasons why the global economy recovered 10 years ago was because of international co-operation. We all did the same thing, from communist China to corporate-led United States.”
On Monday, G7 leaders will hold a Leaders’ Summit by videoconference on coronavirus. French President Emmanuel Macron said: “We will co-ordinate research efforts on a vaccine and treatments, and work on an economic and financial response.”
The Prime Minister’s spokesman said: “The Prime Minister has spoken to President Macron and Prime Minister Trudeau and I would expect him to be speaking to other world leaders in the coming days to talk about an international response to what is a global crisis.”
A six-day bloodbath on London’s stock market ended yesterday as Brussels deployed €37billion (£33billion) of help for the ailing European economy and central banks in China and Japan stepped up their action.
Berlin ditched its prudent approach, unleashing economic aid and unlimited credit for businesses in Germany’s biggest stimulus package since the Second World War.
German finance minister Olaf Scholz said businesses could access around €550billion of loans from the country’s development bank and companies facing a cash crunch will be able to push back tax payments.
The package marked a sharp U-turn on fiscal policy by the German government. Last year, Angela Merkel’s government had refused to ditch its stringent budget rules to support its economy, despite Germany coming within a whisker of recession.
But resurgent confidence faded late in trading and most of the gains made on European markets were lost. The FTSE 100 ended trading yesterday just 2 per cent higher, putting a small dent in its 18 per cent loss for the week.
Investors were left tallying up huge losses at the end of the worst week since the financial crisis after the coronavirus panic wiped trillions of pounds off global stocks.
City economists have warned the virus could tip the global economy into recession as businesses struggle to cope with a cash crunch.
Covid-19 has caused a shock to both supply and demand in the economy. Supply chains have been disrupted, lockdowns have restricted business and travel, and consumer spending in developed economies is expected to be hit hard by the global spread of the virus.