16 ★ F I N A N C I A L T I M E S Monday 23 March 2020
Universal basic income
can protect those in need
We are clearly living in unprecedented
economic times. While the chancellor’s
£300bn-plus support package to
businesses is to be welcomed, this does
not directly help those laid off, the
self-employed and members of the gig
economy.
Universal basic income has gained in
popular interest in recent years — the
unconditional transfer of money from
the state to individuals. While there
have been several UBI experiments
globally, none of these have been on a
large scale. If we assume that basic
needs could be met with payments of
£7,000 per annum for a non-pensioner
adult (£583 per month) and £3,
per annum for a child (£291), this
would cost the government around
£25bn per month.
Given the potential vast scale of
hardship that could arise in the next
few weeks, we need to move quickly.
This means minimal bureaucracy and
no means testing — a UBI that could be
paid to everyone. The registers of
national insurance numbers and child
benefit claimants already exist. Of
course, there would be some leakage
and no doubt some degree of fraud, but
the need is simply too great.
With those in work receiving a
significant windfall, this could be
largely dealt with by increasing income
tax rates temporarily. If all income tax
rates were increased by 50 per cent (eg,
the 20 per cent rate becoming 30 per
cent), this would raise roughly £8bn
per month to offset the cost.
The PAYE system ensures that this
adjustment takes place in real time so
that broadly those in work would
receive the benefit of UBI immediately,
but also see their pay reduce. There
would of course be winners and losers,
but these temporary measures are all
about protecting those with the most
urgent need.Mortgage holidays and eviction-free
periods need augmenting with the cash
for day to day living. With the new tax
year about to start, I would urge the
chancellor to be bold, and add this
relatively easy-to-implement package
to his audacious corporate ones.
Steve Jeffels
Alliance Manchester Business School,
University of Manchester, UKDamage to airlines will
resonate across the globe
“If they be like to die, then they’d best
to do it, and decrease the surplus
population.” Ebenezer Scrooge’s harsh
judgment on England’s poor and
destitute has found a home among
those who see the Covid-19-driven
cataclysm overtaking the world’s
airlines as a necessary Malthusian
correction, or as just deserts for
questionable investment decisions.
Neither view is fair. The claim that
US airlines in particular are unworthy
of government aid because they spent
$48bn on stock buybacks from 2010-
instead of saving for a rainy day ignores
the fact that over the same period, they
had capex of $139bn for things like
hundreds of new, greener aircraft and
passenger-pleasing terminals. They
also retired $91bn in debt, hired 70,
new workers and raised employee
compensation levels 41 per cent.
And what about Europe’s airlines?
Should aid be withheld to enable a
much-needed Darwinian shakeout of
the weakest (FT View, March 18)? It’s
no secret that Europe’s airline industry
is more fragmented than other regions.
But that can hardly be blamed on the
industry, which has consolidated as
much as has been permitted. And these
are not ordinary times. A hands-off
approach in this catastrophe is not
going to weed out just the weak. It will
devastate the strong, too.
Since the end of January, airlines
have cancelled more than 185,
flights. They didn’t do this because
they had too many share buybacks.
They did it because of a black swan
event. Absent relief measures, the
damage being done to this industry will
resonate across the globe.
Our world is built on aviation
connectivity. It supports $2.7tn in
economic activity, equivalent to 3.6 per
cent of global GDP. Furthermore, the
world’s airlines employ some 2.7m
people. Each one of these 2.7m
individuals help to support another 24
jobs in the broader economy. That
works out to 65.5m jobs around the
globe that are connected to airlines.
If governments believe that
something needs to be done to cure the
airline industry, Covid-19 is not a
scalpel, it’s a broadsword. And it will
cut far deeper than just airlines.
Alexandre de Juniac
Director-General and CEO,
International Air Transport AssociationM O N DAY 2 3 M A R C H 2 0 2 0Corrections
c The Datawatch chart on the front page
on March 18 showed mortgages in a
number of countries as a percentage of
household income, not household debt
as wrongly stated.
c The founder of Hong Kong-based
education company Snapask is
Timothy Yu, not Timothy Le, and the
company’s total number of users is 3m,
not 1.3m, as incorrectly stated in an
article on March 19.When the time came, Britain’s chancel-
lor did not so much loosen the purse
strings as rip the purse apart. Rishi
Sunak’s commitment to pay a large
portion of the wages of anyone facing
redundancy was unprecedented, and
necessary. Thousands of people in the
UK have already lost their jobs as the
economic reality of the coronavirus
pandemic has hit home. The health cri-
sis has rapidly turned into an economic
and labour market emergency with lit-
tle parallel. When the government
closes down large parts of the economy
to slow the spread of the virus, it has a
duty to protect its citizens from the
consequences. Now is the time to put
workers first.
The chancellor’s comprehensive
package, which also included cash
grants to small businesses and help for
renters and the jobless, will go some
way to assuaging the concerns of mil-
lions of employees in the UK. Britain’s
response had lagged behind that of sev-
eral other European countries, includ-
ing Denmark, Sweden and Germany.
The promise to cover the cost of 80
per cent of workers’ salaries, or up to
£2,500 a month, for any employee who
is furloughed rather than made redun-
dant goes further than the pledges
made by many other governments.
The open-ended nature of the support
— it will initially be open for three
months but can be extended at any
time and will be backdated to March 1
— is welcome. So, too, is the promise to
provide a further £7bn of extra support
through the existing welfare system.
As well as the money, people will
have taken some comfort from Mr
Sunak’s measured speech and his
apparent understanding of the human
cost of the crisis and the need for social
compassion. The youthful chancellor
appeared more assured than prime
minister Boris Johnson.
A lot will still depend on how the
m e a s u re s a re i m p l e m e n t e d ; M r
Sunak’s promise that the first grants
under the new so-called Coronavirus
Jobs Retention Scheme would be paid
within weeks may still come too late for
many employees. Making it as easy as
possible to apply for the grants will also
be important.
The promise to defer £30bn of value
added tax payments until the end of
June will provide some breathing
space. The move will help with compa-
nies’ cash flow but, given that they will
still need to pay the tax later, it will not
help their bottom line. The Treasury
should consider offering holidays on
other taxes, including corporate tax
and business rates for all sectors.
What the package lacked was more
generous support for Britain’s millions
of self-employed and those working in
the gig economy, many of them on
zero-hours contracts. The offer to allow
the self-employed access to universal
credit at a rate equivalent to statutory
sick pay — which is just £94.25 a week
— does not go far enough. Norway last
week guaranteed the self-employed 80
per cent of their average pay over the
past three years, initially for 20 days.
Mr Sunak’s drastic intervention has,
as he noted on Friday, no precedent in
the history of the British state. For the
country to recover from this crisis,
companies will need to be able to rely
on their workers to help the economy
restart. With borrowing costs low, now
is not the time to worry about the con-
sequences of the intervention for pub-
lic finances, though these are big. Esti-
mates show that for each three months
of operation, the job retention scheme
alone would cost some £3.5bn for every
1m workers affected. For much of the
pandemic to date, the UK govern-
ment’s response has lagged behind that
of its counterparts. With its worker
support package it has heeded calls for
action and set an example for others.UK government must now take similar steps to protect self-employed
A bold plan to support
workers amid pandemic
The world’s largest and richest econo-
mies are already reeling from coronavi-
rus. For emerging markets, the threat is
even more devastating — both in health
and economic terms. The scale of dol-
lar outflows from the emerging world is
greater than during the 2008 financial
crisis. The plunge in oil and commodity
prices is squeezing incomes. The com-
bination of such pressures with health
systems that are unprepared to deal
with a pandemic at the best of times
creates a real risk of social implosion.
When the global economy went into
recession in 2008 it was accompanied
by rocketing commodity prices. That
provided a double blow, to the global
economy generally and to those who
lost jobs — leaving them facing both
lower incomes and higher prices. It
was, though, a boon for emerging mar-
kets that relied on selling raw materials
to finance their overseas borrowing,
helping them to weather the recession.
This time emerging markets are suf-
fering from the twin shocks of a dollar
funding squeeze and a collapse in com-
modity prices. A scramble for the
greenback, as corporate and financial
borrowers try to obtain the currency
they need to meet their liabilities, has
driven down emerging market curren-
cies. The Indian rupee and Mexican
peso fell to their lowest levels against
the dollar last week. South Korea’s won
fell to an 11-year low.
The collapse in commodity prices —
copper hit a four-year low on Thursday
— means emerging markets have fewer
ways to get the foreign currency they
need. The fall in mass tourism is also
felt more keenly by poorer countries,
particularly in parts of south-east Asia,
Latin America and the Caribbean.
After a decade of borrowing growth,
both public and private, the developing
world is exposed to a sudden “stop” in
capital flows that is driving up borrow-
ing costs for businesses and govern-
ments. Investors have already begun to
dump emerging market bonds: the
Institute of International Finance says
about $80bn of funds have left EM
stocks and bonds since January 21.
Last week saw some positive steps.
The Federal Reserve moved swiftly to
broaden swap lines to boost US dollar
funding markets that it had already set
up with some rich-country central
banks, to include large emerging mar-
kets such as Brazil, Mexico and Korea.
The IMF has also promised to pro-
vide $1tn of loans to help its members
deal with the pandemic, including
$50bn for emerging markets and
$10bn for low-income countries, at zero
interest rates. The World Bank pledged
a further $14bn in fast-track finance for
companies and governments.
The fund will, however, need to be
ready to move fast to provide balance-
of-payments support to the many
countries likely to request it, poten-
tially without sending missions. Sup-
port programmes must be designed so
that they do not have the effect, even
unintended, of limiting spending on
health. Much of the money should be in
grants; many emerging markets will
not be able to handle additional loans
in this situation without sizeable write-
downs. Large IMF shareholders may
need to be willing to take some risk on
some of its capital.
Supporting emerging markets is not
just about the moral imperative of car-
ing for the world’s poorer populations.
For richer countries, it is also a matter
of self-interest. Economic disaster that
stokes pandemic in, say, India, Indone-
sia or sub-Saharan Africa could
rebound on the developed world if
travellers from those regions cause
additional waves of infection. The
chain of defence against coronavirus is
only as strong as the weakest link.
Investing to bolster weak links will be
money very well spent.Helping poorer countries is both a moral and a practical imperative
Virus risks a calamity
for the emerging world
Better to admit this
football season is over
You report that the Premier League, FA
and other UK football bodies have
committed to extending the current
2019-20 season so that all matches can
be completed (March 19).
I can understand why the various
bodies might wish to make such a
commitment, as by doing so they avoid
massive potential headaches, not least
legal action, either for making the
season null and void, or for deeming
the season finished before all matches
have been completed.
One option put forward is
completing this season, perhaps behind
closed doors, over the summer period.
Frankly that timeframe seems
ludicrous today. After all, a high tide
turns only when the waters are at their
highest.
So any completion is likely to
impinge on next season, and thus
either they will have to play more
matches in the normal 2020-21 season
period, or the season will have to be
reduced in size (no home and away?),
or the season will have to be extended
into the summer of 2021.
Then we have the issue of our teams
qualifying for next season’s European
competitions. Maybe the UK bodies are
trying to set a precedent, but they
cannot act unilaterally, they would
need agreement with all the European
bodies.
The UK bodies are saying the right
thing, but I suspect in the knowledge
that ultimately they will have no choice
but to declare the 2019-20 season null
and void. Tragic for Liverpool fans. As
an Evertonian I have no sympathy.
Dick Sands
Brentford, London, UKEquilibrium is unfeasible
with debt out of control
In your editorial “The Fed must act to
keep markets functioning” (March 18),
you write “the Fed must assume the
role of market-maker of last resort. It
could adopt the ‘yield curve control’
policy the Bank of Japan pioneered”.
The Bank of Japan targeted a 10-year
yield of 0 per cent. The Fed might
target 1 per cent. It certainly won’t
target 5 per cent.
Over the last 15 years the Fed has
attempted to get rates back to 5 per
cent no less than three times. The first
attempt caused the great recession of- The last two failed.
There is no way back to equilibrium
because debt is out of control. Yield
curve control means no control, in
practice.
Targeting 0 per cent or 1 per cent in a
liquidity trap is lamentable. The
situation is hopeless, but not serious, as
they say in Russia.
Cathal Rabbitte
Villars-sur-Ollon, Switzerland
Experts across disciplines
must put heads together
Chris Giles believes that scientists
should take lessons from economists
on virus response (March 19).
Initially, this amused me, as Mr Giles
implies that economists aren’t
scientists, when in fact economists are
also scientists, they are social scientists.
Mr Giles then goes on to write:
“When UK prime minister Boris
Johnson and Patrick Vallance, the chief
scientific officer, proclaim ‘we will do
the right thing at the right time’, decent
macroeconomists hold their heads in
their hands. There is no polite way of
putting it. The statement is nonsense.”
As a philosopher, I’m concerned that
a journalist critiques his fellow human
beings for trying to “do the right thing
at the right time”.
Perhaps what we should all be doing
right now is to bring together experts
from all of the academic disciplines
and professions to stop and think about
what exactly we are trying to do and
why?
For example, why have we concluded
that Covid-19 is a threat worse than the
economic and social depressions that
are likely consequences of government
policies around the world?
Or why have we not yet reacted in
the same way to the pandemic of
hunger that kills 25,000 people every
day and for which we already have a
vaccine called food?
Until we can all find the humility and
humanity to ask the right questions
together, we have little hope of finding
the right answers.
Prof Roger Steare
Corporate Philosopher in Residence,
Cass Business School, London, UKMoney and currency
are not the same things
FT articles and letters constantly use
the term “money” when they should be
using the term “currency.” The terms
are incorrectly used interchangeably.
They have different economic
implications that can be very
important.
A few principal differences: money is
a store of value. Currency cannot be a
store of value. Money has intrinsic
value. Currency does not have intrinsic
value. Money refers to the actual value
of goods and services that it is traded
for. Currency is a medium of exchange.
The US constitution was originally,
and is today, based on “money”,
generally physical silver coin and
physical gold coin. As our governments
create trillions and trillions of
“currency” out of thin air, the
recognised differences between
“money” and “currency” are likely to
be profound. It’s quite possible we are
coming to the end of fiat currency,
which importantly and essentially, is
based on trust and nothing real.
Chris Kniel
Orinda, CA USLetters
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If you are not satisfied with the FT’s response to your complaint, you can appeal
to the FT Editorial Complaints Commissioner: [email protected]Kate Fall is either too decent or too
discreet to make a really good political
diarist. Close friend of David Cameron,
his deputy chief of staff and founding
member of his so-called Notting Hill
set, Fall has a decent claim to being
the second-most important woman in
the former prime minister’s public
life. She was there from the first day of
his leadership to the last. Yet the very
qualities that placed her outside his
door and inside nearly every big
strategy meeting are those that
diminish this as an insider’s account.
Fall emerges from her airy,
enjoyable and fast-paced memoir as a
thoroughly likeable and loyal person,
which is a pity because if she were less
devoted and discreet this would be a
much more interesting book. Fall
knows where all the bodies are buried,
but she really isn’t telling.
Remarkably, for a period that ended
less than four years ago, the book itself
already feels like a historical
document, a revelation of an era now
entirely lost. It was, for the
Conservatives, a period of optimism,
of openness and social liberalism.
Fall acknowledges that the Cameron
government sowed most of the seeds
of both the 2016 vote for Brexit and its
own destruction. A long period of
austerity hurt too many people; the
leadership seemed too privileged and
too disdainful of ordinary people.
Even so, the Cameron years already
feel like another lifetime. Whatever
Cameronism was, there is almost
nothing left of it now. The Tories have
become almost exactly the party MrCameron was determined to prevent
them becoming.
Her dedication to the prime
minister she served is unstinting, her
praise unwavering. It is hard to recall a
single moment of criticism. Decisions
are brave. He does not duck problems.
He has a “ferocious work ethic”, he is
“brilliant, intellectually rigorous,
pragmatic, decisive and extremely
funny”. He does not tolerate
sloppiness or laziness. But then all the
main players of the era are her friends.
George Osborne, the former
chancellor, perhaps emerges as the
shrewdest strategist. It is he who fights
a rearguard action to stop the EU
referendum, arguing presciently that
it is “all downside”.
Only two figures come off badly and
they are the two friends Fall judges to
have betrayed the leader’s trust.
Michael Gove, who deserts to lead the
Brexit campaign, is the main villain,
dispatched with contemptuous flicks.
He has abandoned “loyalty and
decency and become an arch-
assassin”. She talks of the “personal
disloyalty of a broken friendship”.
Early on he has shown signs. The
secrets of the Notting Hill set start to
leak only when Gove joins it, she
notes. He is a “bit of a Maoist” and also
the butt of many of the book’s comic
episodes, most notably when he
manages to get his car stuck and then
crushed by a car lift. Steve Hilton,
another early friend and adviser, gets
similar treatment. In both cases she
notes their feelings of being let down
by the leader: Mr Gove at beingdemoted, and Mr Hilton in finding
himself marginalised.
The first half of the book is more a
description of life in Downing Street,
how it works, personal relationships.
The most vivid pen portraits are of
Messers Osborne, Gove, Hilton and
Fall’s boss, Cameron’s Etonian
contemporary Ed Llewellyn. There are
nice vignettes of the coalition
government era, notably of Nick
Clegg, the Liberal Democrat leader
and deputy prime minister, depicted
as a decent man but a political naïf.
Fall frustrates in what she does not
tell us. She was present and involved
in most big calls but rarely goes into
detail. There are moments when her
influence is apparent, but she rarely
plays up her role, preferring to
chronicle the posturing of the “alpha
males”. The most interesting passages
are when things go wrong, most
obviously in the run-up to the Brexit
referendum. The team know they are
speeding towards a cliff but cannot
figure out a way to stop.
What comes across most clearly is
the extraordinarily chummy nature of
the inner core. This was a government
of pals, who had known or worked
with each other for years, which is
why disloyalty is the greatest crime.
This, then, is an insider’s record
which preserves the omerta of a group
of friends who end up running the
country. It is all great fun, right up
until the moment when it isn’t.The reviewer is the FT’s chief political
commentatorAn insider’s
account so
decent it’s dull
Book review
Robert Shrimsley
The Gatekeeper: Life At
The Heart of No 10
by Kate Fall
HQ, £16.The Covid-19 crisis will make or break
the eurozone. The European Central
Bank has said it will do whatever it
takes (March 20). It has signalled it
will use whatever monetary policies it
can to finance and support the fiscal
effort.
No member state should have to seek
a bailout or sign a memorandum of
understanding to access emergency EU
funding. This is a European crisis. Itrequires a European solution.
Rather than have each member-state
issuing their own debt to fund their
fiscal efforts, we call on the European
Council to agree a common eurobond.
We need a common debt instrument
in order to mutualise the fiscal costs of
fighting this crisis. Now is time for
action. Now is the time for solidarity. It
is time for eurobonds.
Aidan ReganUniversity College Dublin
Mark Blyth
Brown University
Matthias Matthijs
Johns Hopkins University
Catherine de Vries
Bocconi University Milan
Thomas Piketty
Paris School of Economics
For a full list of signatories, go
to http://www.newpoliticaleconomyeurope.euIt is time for Brussels to launch a eurobond
Atalanta beat Valencia behind closed
doors in the Champions LeagueMARCH 23 2020 Section:Features Time: 22/3/2020 - 18:35 User: neil.way Page Name: LEADER USA, Part,Page,Edition: USA, 16, 1