Avoid austerity and invest in saving jobs

FINANCE Minister Rebecca Evans’ assertion that we have in store a “very, very, very rough recession” is hardly a great revelation.

We have known since the start of the lockdown that the consequences could be dire from an economic point of view.

But to have it spelt out in the way Ms Evans did yesterday is hardly comforting.

On top of coping with a pandemic that has brought premature death to so many families, we are told we will have to deal with the consequences of business closures that can be expected to take place on a scale not seen since the 1930s.

Huge numbers of people employed in the private sector will feel fearful for the future, not knowing whether they will keep their job or whether the business they work for will be able to function at all.

The furlough scheme has undoubtedly cushioned some companies whose operations have effectively gone into hibernation, with lost revenue made up at least partially by a UK Government subsidy.

Firms have also received grants from the Welsh Government.

Without such assistance, we would already have suffered an economic collapse.

Just as after the 2008 banking crash, let it never again be argued that the public sector is a drain on wealth creation. Without the ability of governments to draw on tax revenue and low-interest borrowing facilities, much of the private sector would already have disappeared.

The danger is that as the public subsidy dries up, business owners’ thoughts will turn in the direction of redundancies. Unless revenues return, they will reasonably argue, it will be impossible to maintain their workforce, certainly at prelockdown levels.

But a spike in unemployment is in nobody’s interest. It takes taxpayers out of the economy and turns them into welfare recipients. And if tax revenues decline, there will be the need for governments to spend more on welfare payments. To fund such payments in circumstances where revenues have declined inevitably leads to borrowing.

If borrowing is inevitable, it is surely far better to use the money borrowed to invest in saving jobs and creating new ones. Doing so will lead to a virtuous circle, with workers able to contribute to government revenues and keep the economy moving.

Wales is certainly faced with huge challenges, but so long as we avoid the austerity policies of the past there is no reason to be terrified of the future.