It’s a good start but much more needed

THE £330bn business rescue package announced by Chancellor Rishi Sunak is a welcome initial response to the huge economic crisis precipitated by the impact of the coronavirus.

But we need to be clear that it doesn’t go far enough, and that large numbers of ordinary people will not be helped by the measures.

It is right that businesses in the hospitality sector should pay no business rates for a year, that companies should receive help to take out loans to ensure their survival and that mortgage holidays should be guaranteed to home buyers.

Yet there are no earnings guarantees for workers who are laid off or compensatory payments for the self-employed, whose proportion in the workforce has been rising.

The extent of the economic impact will only become clear in time, but there is no doubt that we have entered an extremely perilous period.

Even at the height of the financial crash in 2008, there was no suggestion that airports like Heathrow and Gatwick could go out of business, or that the entire leisure industry could be wiped out.

It’s when these factors are taken into account that the bailout total of £330bn doesn’t seem quite so much.

In 2008 the then Labour government, under Gordon Brown and Alistair Darling, injected £500bn to rescue the banks.

There were people at the time who argued that the banks – some of whom had operated wholly irresponsible lending policies – did not deserve to be bailed out.

But despite their reckless behaviour that brought about the crisis, Messrs Brown and Darling recognised that large numbers of ordinary people could be left destitute if the banks were allowed to go bust.

On this occasion, no blame can be attributed to the companies now at risk of going under.

Many of them face a revenue meltdown, which the underwriting of loans is not going to help. More needs to be done.

Once again, just as in 2008, the crucial role of the public sector in protecting the private sector has been demonstrated.

There is considerable irony in the fact that arguably the most right-wing UK Government since World War Two is having to act against its own ideological inclination, which would be to let the markets determine the response.

It is strong government intervention on an international basis that will get us through this.