Beyond COvid: The Digest

Corporate bailouts and UK recovery packages

June 8, 2020
SUMMARY
  • We look at the issue of corporate bailouts off the back of our most recent webinar - covering the latest news around the Government's Covid Corporate Financing Facility and "Project Birch" schemes, and analysis of the social and environmental conditions we should impose on corporations receiving public funding.
  • Chancellor Rishi Sunak MP is rumoured to present a green stimulus package in July, with a focus on investment in infrastructure and retraining. We take a look at competing visions for a green recovery from think tanks and industry.
  • Public Health England released its report on the disproportionate impact Covid-19 is having on Black and Minority Ethnic (BME) English residents, while the latest report from the Runnymede Trust takes a broader look at racial inequalities and discrimination in the UK.

Focus: corporate bailouts

  • With many major companies in serious financial trouble as a result of the economic lockdown, governments around the world are offering or considering rescue or 'bailout' packages.
  • ~~53 companies have received funding through the Covid Corporate Financing Facility (CCFF), according to Bank of England figures.
  • ~~Analysis by Positive Money reveals that a number of companies they describe as "socially and environmentally irresponsible" are receiving bailout funds through the Covid Corporate Financing Facility.
  • The British government is now reported to be considering taking equity stakes in firms receiving bailouts, under a plan codenamed “Project Birch”. However, there have been no indications as yet that it will be imposing additional conditionalities – like environmental measures or jobs guarantees – on companies receiving bailout funds.
  • ~~IPPR have recently proposed a rapid bailout scheme for companies, with additional funding conditional on protections for the workforce and the government taking an equity stake, which they propose using for a sovereign wealth fund.
  • ~~A recent leader in the Financial Times also proposed far stricter rules on bailed out companies, echoed by suggestions from the High Pay Centre on social and environmental conditions being placed on companies receiving public funds.
  • Aviation is towards the front of the queue for bailout schemes. It is claimed that bailouts have become subject to strategic behaviour by firms, with British Airways lobbying against bailouts,in order to undermine its rivals, whilst Easyjet and Virgin Atlantic have made redundancies ahead of any bailout cash.
  • Following the lead of Denmark and Poland, the demand that no companies using tax havens should receive bailout funds has gained attention.
  • ~~The devolved administrations of Scotland and Wales have both now banned companies based in tax havens from receiving bailout funding they administer, although questions remain about how this will be enforced and how much will be affected, in the absence of action from Westminster.
  • ~~The Fair Tax Mark has published policy proposals for bailouts that include a ban on the use of tax havens, and major improvements in company tax transparency amongst the conditions to be met.
Deborah Hargreaves of the High Pay Centre and economist and author Eric Lonergan discussed bailouts and conditionalities in the second webinar of our Beyond Covid Discussion Series.

UK green recovery packages

  • Briefings by the UK government over the last week have raised the prospect of a green stimulus package, to be presented by Chancellor Rishi Sunak in July following a major speech by Prime Minister Boris Johnson in June.
  • ~~The July package is expected to include funding to retrain workers after the current furlough scheme ends, so they can “get jobs in in areas such as insulation upgrades, offshore wind and carbon capture” as well as “massive” infrastructure investment, bolstering the government’s plans on clean energy. These new measures are expected to go “significantly beyond” the government’s manifesto commitments to create two million green jobs over the next decade.
  • With a growing recognition of the need for a major economic stimulus as the country attempts to move out from the lockdown, politicians and thinkers on the centre-right have begun to raise green investment and green growth as a viable post-pandemic economic strategy.
  • ~~Sam Hall of the Conservative Environmental Network and Ted Christie-Miller of centrist Conservative-aligned thinktank Onward have a six-point “pro-market” programme for a green recovery, including an innovative “net zero fiscal policy”, in opposition to more state-led Green New Deal schemes.
  • ~~James Kirkup, director of the Social Markets Foundation has called for for infrastructure investment outside of London to create a “new, greener Britain”.
  • Boris Johnson himself is said to have been persuaded of the case for a “pro-market” green recovery by evidence showing that, with modest economic growth in the last decade, Britain had the steepest fall in carbon emissions of any country – down, on the Carbon Brief estimate, 29% from 2010.
  • ~~Two hundred chief executives of British firms have written to him, meanwhile, insisting on the need for a “clean, just recovery”.
  • Alternative recovery programmes are beginning to appear:
  • ~~Common Wealth and the New Economics Foundation have a joint report out on redesigning the tax system to support a just, green recovery.
  • ~~Greenpeace have published their manifesto for a green recovery, which has received wide media coverage. They outline 12 policy priorities, covering reducing emissions from from buildings, investing in clean transport, and building the circular economy.
  • ~~WWF published their net investment strategy, with research suggesting investment to reach net zero could deliver over £133bn of additional benefits a year.
  • ~~Executive Director of the IPPR, Carys Roberts, writes in the Guardian on the need to think beyond the blind pursuit of GDP in a green recovery.
  • ~~Centre-right think tank Policy Exchange have called for a new "nominal GDP growth" target for the Bank of England in their "Pro-Growth Economic Strategy", which also warns the government to avoid austerity at the present time whilst recognising the importance of sustainable investment.
  • The Labour Party have launched their own "green economic recovery" consultation, open to all, with a deadline of 30 June for submissions.

Reflections

  • Mishal Khan writes for Chatham House on how systemic weaknesses have undermined countries' covid-19 response, irrespective of wealth. Universal health care, strong basic welfare provision, and fair and effective enforcement of rules all made more difference.
  • As we look to rebuild the economy after covid-19, this new report from Runnymede Trust shows how persistent, systematic racial inequalities are barrier to a genuinely fair and resilient economy.

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