The government is in talks with six companies under its "Project Birch" plan for bailouts, including Jaguar Land Rover and two steelmakers. We take a look at government equity stakes, wealth funds and other proposals for how government can support businesses while ensuring these meet environmental and social commitments.
Major reports from the UK's Committee on Climate Change and IPPR underline the country's lack of preparedness for environmental breakdown and the need for major, rapid action to meet our legally-enshrined emissions targets. We look at prospective solutions, including a plan for £85bn of "shovel-ready investment" from the TUC, the protection of national habitats, cuts to fossil fuel subsidies and 'greening' trade deals in our In Brief section.
Our Reflections section this week features articles on the link between climate and racial justice, the employment boon of green recovery programmes and the Conservative case for a four-day week.
Focus: bailout plans and equity stakes
The government is in talks with six companies under its "Project Birch" plan for bailouts, including Welsh steelmaker Celsa and Jaguar Land Rover.
~~Celsa is expected to become the first company receiving assistance, with a £50m loan announcement expected this week in return for "assurances" on its workforce, emissions reductions, and curbs on executive pay.
~~Tata Steel also looks set to receive assistance from the UK government in the next week, in a loan reportedly worth £500m under Project Birch.The stated intention is to preserve Britain’s steelmaking capacity, increasingly seen as strategically essential, and protect up to 8,000 jobs, plus more in Tata’s supply chain.
Project Birch loans will reportedly be available only after all other avenues have been exhausted, including the government’s other coronavirus funding. But despite calls from unions and opposition parties to apply strict conditions to any special assistance, particularly to preserve employment, the government has not yet clarified any potential conditions.
~~The Treasury is reported to be like to offer convertible loans in some cases, in which, under certain conditions (such as the company being unable to meet repayments), the existing loan would convert to equity. But government sources have been keen to avoid taking direct ownership of any business, preferring to ensure the government became the preferred creditor for the company (meaning its loans would be repaid ahead of other claims).
~~IPPR has urged a general policy of 30% equity being taken as a condition of bailouts, to ensure the government’s own balance sheet was protected and to provide additional leverage over sectors in the event of a broader restructuring being necessary.
One option for government equity stakes, favoured by IPPR and Common Wealth, is to use them as the basis for a new national (or sovereign) wealth fund. This would be a fund, under public control, containing the investments that the government owned and so paying a regular return to the taxpayer.
~~IPPR proposed a “citizens’ wealth fund”, on the basis of some initial government asset sales and small regular payments, to cover the costs of a “citizens’ income”.
~~Duncan McCann and Stewart Lansley, in a paper for the Friends Provident Foundation, proposed a suite of “social wealth funds”, operating at different levels of scale (from local to national), to provide for longer-term public expenditures like healthcare, social care, and pensions.
Boris Johnson is expected to speak on Tuesday this week, setting out the government's infrastructure plans for the recovery, including £1bn promised for new schools.
From recovery to reform: rebuilding local economies after Covid-19
The International Labour Organisation (ILO) has warned of a “crisis within a crisis” for 164 million migrant workers, who faced being forced to return home from recession-hit economies to countries without the resources to manage a large numbers of returnees.
Wildlife Trust’s new report argues that the protection of natural habitats is critical for Britain to meet its legally-binding climate change targets, with threatened peatlands, seagrass meadows and saltmarsh all important for natural carbon storage.
The IMF has slashed its forecasts for global economic growth from 3% contraction this year to 4.9%, marking an “unprecedented global crisis”. The “advanced economies” will be hardest hit, with a forecast contraction of 8% over this year, and far weaker recoveries subsequently.