The “Coronavirus Job Retention Scheme” is the really big measure here.
The businesses I’ve been speaking to widely see it as an aggressive, well-designed package that will potentially make a big difference.
The government is acting as the insurer of last resort.
Faced with an extraordinary and severe economic shock that is, for want of a better expression, “an act of God”, the state is basically providing compensation payments to workers who would otherwise lose their jobs.
And in doing so it is reducing the financial pressure that on those companies who are up against it.
We are witnessing large chunks of our economy heading into a kind of deep freeze.
Pubs, restaurants, gym, shops, car factories, airlines are shutting down, hopefully, temporarily.
- Joel Hills explains to News at Ten presenter Tom Bradby what the chancellor hopes to achieve with his latest move
Well, there is now a massive incentive for them to hold onto their staff even as activity grinds to a halt.
There are limits to the schemes effectiveness. It won’t do anything for the 5 million people self-employed, many of whom are seeing contracts cancelled and work dry up.
Unlike employees, they don’t get sick pay, holiday pay or redundancy pay.
To compensate, the chancellor is making the benefits system more generous - beefing up universal credit, working tax credits and housing benefit.
As the chancellor acknowledges, the scheme also won’t prevent unemployment rising.
Companies will still fail, people will lose their jobs in the months ahead. This is all about damage limitation.
And the government is throwing an awful lot at limiting the damage:
The Business Rates relief on offer to companies is a big tax cut. The VAT holiday is a tax deferral not a cut but it will help firms hang on to cash.
There are hundreds of billions of pounds of cheap loans being made available, the bulk of them interest free and underwritten by the taxpayer.
The Bank of England has cut interest rates and is incentivising bank lending. And now the state is underwriting company payrolls.
This will be hugely expensive. The IFS calculates if 10% of private sector employees - approximately 2.1 million people - end up on paid leave under the Coronavirus Job Retention Scheme for three months then it will cost the taxpayer £10 billion.
Who knows what the final cost will be. We don’t know how the economic hit will be, how long it will last and how many businesses and households will be affected.
Pick a number, you will be wrong.
Collectively, the measures announced in the chancellor’s rescue package alone could very easily cost the government an extra £100 billion this year. Borrowing will soar, the national debt will rise. But what is the alternative?
This is an national emergency and history tell us that in times of crisis - whether its war, recession or pandemics - national debt rises exponentially.
When the good times return, then difficult decisions have to be made about how that debt is repaid.
Coronavirus: Everything you need to know