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20 March 2020

Chancellor has 'much more' to do to protect vulnerable in wake of pandemic

The government has “much more” work to do if it is to avoid long-lasting economic damage in the wake of the coronavirus pandemic.

That’s the view of economics professor, Jonathan Portes, who says the chancellor has made a “good start” in supporting businesses but needs to pay greater attention to those at risk of losing their jobs and income in the weeks and months ahead.

Rishi Sunak announced a £300billion package of loans and grants to businesses on 17 March.

Writing in Prospect magazine, Professor Portes, from the Department of Political Economy at King’s College London, said: “We need to stop firms laying people off and stop them going bust. That means subsidising firms to keep employing and paying workers, even if they don’t actually need it; helping to pay or delay their bills; and implementing programmes to allow banks to delay loan repayments.

“In short, the government should bail out the private sector.”

Prof Portes said such a move would be anathema to economists in normal times but added that the circumstances of the pandemic were unique and required action to match.

Among measures Prof Portes would like to see Mr Sunak introduce, more generous statutory sick pay, and immediate increases to universal credit, housing and tax credits were the top priority.

He added: “The fiscal consequences of all this are essentially irrelevant, certainly in the short term. Market reaction to the crisis has been to force interest rates on long-term government debt in the US, UK and eurozone to the lowest levels in recorded economic history; investors are willing to pay governments for the privilege of lending them money.

“If we’ve learned anything from the aftermath of the financial crisis it should be that the role of government is to sustain demand, and that worrying about the impact on debt and deficits of the necessary spending is the economic equivalent of anti-vaccination scaremongering.”

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Jonathan  Portes

Professor of Economics and Public Policy