Big business and government

THE government should not want to bail out big business or take share stakes in large companies. It should be helping and encouraging them to get more money from customers so they do not need bail outs.

The policy is meant to be getting many more people back to work, preferably working from home. Taxpayers do not want shares in companies that are losing so much money they cannot finance themselves commercially from banks and the markets.

It is rumoured that Jaguar Land Rover might need government money.

Yet this is a company with good products, that needs to sell more cars to generate the cash it needs. The government should be asking any car business that thinks it might want taxpayer aid the following questions:

Will its dealerships soon be open to sell cars observing social distancing assuming that gets the go ahead?

Meanwhile is the sales force available during normal business hours to sell on line and through email and Zoom/Teams meetings with customers?

Have they tried contacting their customer and customer enquiry lists to see if people will buy a new vehicle? Are they offering any special promotions to get the market moving again?

Given the reported growing interest in people buying cheaper second hand cars as an alternative to public transport to get to work, isn’t this a good time to encourage switching to a newer vehicle for people who are already owners?

The Bank of England and the commercial banks are making plenty of money available to those who need a car loan to buy or upgrade a vehicle.

The Treasury were right to offer short term generous assistance for the lock down period.

Now we need to move on and find ways to get people back to work safely and wean companies off government life support.

The price of solidarity

For years Germany and the Netherlands have resisted any idea that the EU should borrow money together and spend it in the poorer areas of its territory.

They wanted a currency union but not a benefits union, a monetary union but not a transfer union.

The dollar area or the sterling area are currency unions backed by self governing states. In each there are large transfers of money from the richer parts of the area to the poorer parts. These take the form of grants to local government from central taxation, grants to individuals through the benefits system based on need, and common taxation raising m ore from the places where incomes are higher. As a city or county that suffers relatively low incomes cannot devalue against the richer places, it needs to the grants to get its living standards closer to the national average.

Last week Germany and France came to an Agreement. They propose a Euro 500bn fund for the EU, to spend on recovery from the pandemic.

The money will be borrowed by the EU as a whole, where each state stands behind the loans in proportion to the size of its economy.

If the EU decides to spend proportionately more in the distressed areas of its territory, then it would have some mild element of redistribution about it.

Time will tell whether this is the first step on the full road to a transfer union, or whether this is a one off gesture soon to be watered down by delays in getting the money and by an approach that all states should have prizes in the lottery draw for the funds.

I have always thought those in the EU who argue they need a transfer union to complete their monetary union are right. The problem is the true price of solidarity and more equal standards will be very high for German and Dutch taxpayers.

Is this a saleable proposition to them?