New Times,
New Thinking.

The Conservative government is still trying to have it both ways over lockdown

An ambitious lockdown programme can’t be reconciled with an ambitious attempt to reduce the cost of economic support.

By Stephen Bush

No business is an island, independent of itself. Not only does it require the custom of others to trade and to make a profit, but every business is, in of itself, a customer. Pubs and restaurants are not just businesses – they are customers for breweries, farms, and other suppliers. While the pressures on retail, hospitality and leisure are at their most visible in the pub industry, because a closed pub is a visible fact of life on your high street or in the middle of your village, they are felt throughout the wider industry (and from there the rest of the economy).

Although the easing of restrictions from 23 to 27 December will allow a measure of socialising as normal for households, this will not make up for the loss of Christmas trade for many hospitality businesses, and with that for the loss of custom across their supply chains.

The government’s economic support to businesses is designed to do two things: to protect the incomes of a business’ employees via the furlough scheme and the incomes of a business’ landlords via direct grants and loans. What it is not designed to do is protect the income of a businesses’ suppliers, or any of the wear and tear that businesses need to service over the course of a year. This has two consequences: the first is that businesses are shutting down due to debts owed to their suppliers, and the second is that suppliers are themselves in jeopardy.

So the government’s measures to “protect” pubs and restaurants have to be assessed on two metrics: the first is the survival of pubs themselves, the second of their supply chains. The proposed cash injection fails on both metrics. The government proposes to give pubs that are forced to close £1,000 – the average pub would expect to make close to 50 times that in December. It’s unclear, other than providing a rare opportunity for me to use the term “pissing money up the wall” on the New Statesman website, what earthly use this £1,000 payment serves: taken together we are giving pubs quite a lot of money, but not enough to meet their fixed costs let alone inch anyone towards viability.

[see also: Should you go home for Christmas?]

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To add to the problem, this is solely for “wet” pubs – that is to say, pubs that only serve alcohol and have been forced to close. If you are “wet-led” – that is a pub that makes the majority of its money through selling booze, say, you are a sports bar that serves some food and the odd meal during Champions League nights but makes the majority of its profit via selling alcohol, you receive nothing.

Of course, if you are only receiving two per cent of your regular profit, you are not going to be able to meet many of your fixed costs, let alone pass any of that cash further down the supply chain.

Confining the subsidy to only businesses forced to close also means that businesses are heavily incentivised to observe the letter rather than the spirit of the law. If you are a “dry” pub (that is to say, you serve food and alcohol) then you know that you need to trade as much as possible. That encourages you to turn a blind eye to blatant breaches of inter-household mixing, to actively encourage people to drink with the thinnest of pretexts – as James Hansen explains over at Eater, the term “substantial meal” is innately fungible – and therefore to spread cases of the novel coronavirus.

The central problem of the government’s Covid-19 strategy remains the same: we have an ambitious lockdown policy coupled with a parsimonious programme of economic support outside of income and rent protection. The result is that the government risks having accrued large debts but failed to avoid mass bankruptcies, and has subjected the country to a painful lockdown while still having a large death toll.

[see also: Christmas is a logistical challenge as well as a public health one ]

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