Lord King: "The cash has to go to self-employed businesses now"

The former Governor of the Bank of England has told 5 Live the self-employed “cannot wait” until June to get help from the government during the coronavirus crisis.

Lord King was speaking to Emma Barnett as new research suggests more than 800,000 businesses nationwide may soon have to shut down because they'll run out of money. He told 5 Live that unless people got access to funds soon the UK economy would suffer: “It’s no good waiting until June, cash has to go to self-employed businesses now. If we lose a large number of businesses between now and when the lockdown ends, we would have permanently impaired or at least impaired for a long time the productive capacity of our economy. That’s in no-ones interests because that will damage the livelihood and health of people looking forward. We’ve already taken steps which have damaged the younger generation in terms of the ending of their university courses in some cases, the ending of examinations for children in schools; these will have permanent affects and we desperately need to think through an exit strategy so we can row back from the extreme measures that we’ve taken sooner rather than later. ”

Lord King also said banks and bank employees need to be made key workers to ensure more people can access government help. 

“I was concerned to hear that many bank branches have been shut because just as we think of obviously health workers and people in supermarket as being essential people to carry on working so for the reasons you gave earlier its essential that people in banks - on the ground not in head office on the ground - can keep working in order to talk to their customers, their small businesses, self-employed people to arrange the loans which the government has said at a high level it will provide which obviously we’re having difficulty in delivering through the middle levels. The question the government should ask itself is ‘what is the mechanism by which these loans are going to be made? And if that is to be through the banks then banking workers therefore must be regarded as essential workers in order to deliver the loans. 

Lord King told Emma Barnett that the key was getting money to people quickly.

“When people say they can’t get through on the telephone or they can’t meet someone from the bank that’s not a failure with a design of the scheme as such it’s a failure of implementation and logistics and those things have to be tackled. After all our politicians have very little experience of running and we need people with practical experience of running things of being in charge of the logistics in terms of getting cash through I think the government should really stop collecting taxes at this stage of any kind. If we are going to have to lend a lot of money to the private sector then it doesn’t make much sense for the government to collect taxes and then lend it back. It may be that some of the self-employed may be able to benefit by claiming rebates for past value added tax so that would get cash to them pretty quickly these are mechanisms that need to be explored. The idea that we will simply wait until June I think is not a practical response to the challenge that many people face when through absolutely no fault of their own their livelihoods are now being put at risk and that will damage their health it will damage the health of their families. This will have a cost too in terms of not just a national income but in terms of the livelihoods and well-being of a large number of people.”

He said it was time for everyone to work together. “I understand the constraints he’s (the chancellor) is facing and I don’t want to appear to be sniping from the side lines this is a time when everyone has to work together to do it but I think people in banking, people elsewhere need to come together to help the chancellor find a way of getting cash to people sooner than June.”

As a former director of Aston Villa he also told Emma that it was right that wealthy football clubs like Tottenham Hotspur were able to access the government support.

“It’s easy to pick out examples of businesses that you don’t think need help, but in this situation, in a crisis that’s affecting everyone I think every business needs support to keep going. It is very important that the government replaces the spending we would have made if we had been able to go out. People would have gone to Tottenham Hotspur to watch games and paid the gate receipts; they’re not doing it now, the clubs are losing money. I think it’s reasonable for the government to step in to act as the purchaser, the spender of last resort, irrespective of the nature of that business. And by putting a cap on the total size of the support, so the chancellor has put a limit on the amount of wages that he’s going to replace by government support, that means there won’t be a lot of support for the wages of those highly paid football players. But it is not unreasonable for all businesses to take part in the government schemes that have been announced.