The magic money tree… shaken by a Tory! Astonished former Chancellor NORMAN LAMONT gives his verdict on Rishi Sunak’s mini-Budget
As a former Chancellor of the Exchequer in the 1990s, I can honestly say that I never expected to see the day when one of my Conservative successors would stand up in the House of Commons and announce ‘helicopter money’ as government policy.
Helicopter money, otherwise known as free money shaken down from the Magic Money Tree which we Conservatives are supposed not to believe in, is a cash incentive for incentive’s sake.
True, the free meal voucher of £10 a head is a very modest gimmick compared to the much more ambitious and imaginative measures Rishi Sunak unveiled yesterday.
But I think it is an appropriately symbolic way of sending a clear message to a population still in the grip of fear of the Covid-19 virus. After all, the normal rules of engagement have had to be suspended in order to avoid a catastrophic economic slump.
Chancellor Rishi Sunak told the Commons he is determined to weigh in behind business and ‘do what is right’ as the country ‘opens up’ from lockdown.
Including loans and other guarantees, the government had committed £280billion before the latest £30billion package
The jobs bonus was the biggest ticket item in the £30billion package announced – which comes on top of the £160billion already pumped into the economy by the government
In my days as Chancellor my Treasury team and I would spend weeks fretting over ways to balance the books. Perhaps an extra 5p on a bottle of whisky, or a percentage point or two on VAT. All in the interests of prudent management of the economy.
But my present-day equivalent has no choice but to turn on the spending taps. Fortunately the money markets are aligned with the demands of this crisis. Interest rates are sometimes actually negative, with the result that it is possible to be paid to borrow money.
My only word of caution is that interest rates cannot be guaranteed to stay low for ever and the principal will have to be paid off at some point in any case.
But, in the meantime, Mr Sunak is right to stand everyone a drink. Only a week ago the Government was ordering the public not to go to pubs and restaurants; now it is practically begging us to do so for the sake of economic recovery, and sending us on our way with a tenner to ensure there are no slackers.
Some Tories will be critical of this approach, but I cannot see any alternative to the broad policies outlined by Mr Sunak. Taken as a whole, his measures are creative and properly conservative in that they adapt to changed circumstances, which is why the Tory Party has always been the natural party of government.
He was right to resist the siren calls from opposition parties, and even from the former Bank of England governor Lord King, to keep open the spigot of the furlough scheme indefinitely.
The ‘job retention bonus’ of £1,000 per furloughed employee who is brought back to work is designed to help the workforce off the hook of the government life-support system.
It could theoretically cost up to £9.4billion, but in practice it will not be fully taken up because, sadly, some of the jobs will already have been lost.
Either way, the scheme will cost much less than the blanket furlough we are moving away from.
Though I have never been persuaded it is possible to kickstart an economy, I do like the £2.1billion ‘kickstart scheme’ to subsidise six-month work placements for young people. This recognises the terrible reality that they will be the principal economic victims of the pandemic.
I had not expected the Chancellor to touch tax rates until the autumn budget, but on balance I think he was right to introduce a stamp-duty holiday on properties up to £500,000.
He was right, too, not to bang on – as the Prime Minister tends to do – about vast infrastructure projects to create jobs. He knows that it takes years to turn a shovel when building a new road or bridge, so better to concentrate on measures such as the £5,000 vouchers for energy-saving home improvements, which can bring immediate work.
Mr Sunak knows full well he is not master of his fate. But I think he did as well as he could in the circumstances, standing there socially distanced from his colleagues, a man cool and resolute under enormous pressure.
He had the air of one who knows that the future of the British economy depends as much on this dreadful virus, and whether it peaks again, as on any of the bold measures that he announced yesterday.