I have been working with a few local business people, helping them to put together an application for funds from the government from their stimulus package, announced last Tuesday. While I spent some time preparing figures to demonstrate the 30% downturn in income from last year, it seems it was a wasted effort, as all that is needed is a declaration from the business owner. The process is simple and the funds are often paid over more or less immediately. I give the government a big tick for not wrapping this process in red tape, and also for making money available immediately, but the lack of evidence of reduced income opens the system up to abuse.
Nevertheless, judging by the number of business people looking for assistance, it is my opinion that the $5.1 billion allocated to this will run out very fast. Remember that it is only $5.1 billion, out of a total $12 billion, as the rest of it goes to beneficiaries, tax changes (which will be a reduction in government revenue over the next 4 years rather than money to be borrowed right now) and a paltry $500 million to the health sector. My guess is that this money will run out within 3 months, but the pandemic will still be with us then. Some businesses may be operating at full strength by then, but many won’t, and with the threat of imminent lockdowns, things will get much worse before they get better.
Many other countries are doing much more for their people. The rescue package in Britain is a generous one, unprecedented in Britain’s history… but it may well be needed.
In an unprecedented step for the British government, the chancellor, Rishi Sunak, said the state would pay grants covering up to 80% of the salary of workers if companies kept them on their payroll, rather than lay them off as the economy crashes. The extraordinary payments will be worth up to a maximum of £2,500 per month, just above the median income.
Coming just days after the government announced a business bailout package worth £350bn to help firms cope with the lockdown of large parts of the British economy as the disease spreads, the chancellor described his revamped plan as one of the most comprehensive in the world and “unprecedented in British history”. City economists said the new plan would cost an additional £78bn.
He said there would be no limit on the funding available to pay people’s wages. The payments will be backdated to the start of March, will be up and running within weeks, open initially for at least three months, and could be extended if necessary.
The Guardian
Ours is paltry by comparison, and if we are not going to face total ruin, the government is going to have to come up with a lot more money before long. Jacinda may well regret increasing benefits at a time when beneficiaries are the only people whose incomes are secure, but it is too late now.
So where is all this money going to come from? They have borrowed for their infrastructure projects, and now are borrowing for this, meaning that they are now increasing borrowing at an exponential rate. That simply cannot go on. We will end up with massive deficits very soon, and although the pandemic is mostly to blame, the government really needed a lesson in how quickly things can change… and they just got it.
As an aside, a conversation with someone in the infrastructure sector this week indicated that the proposed roading projects that the government has taken out of mothballs are a long way from being ‘shovel ready’. Because they were shelved over 2 years ago, even though some of the projects were close to commencement, it will now take at least a couple of years to get the proverbial ball rolling again. What a shame that is. Grant Robertson was extremely wide of the mark when he described these projects as ‘shovel ready’ and the jobs they could have generated at a time like this would have made quite a difference to the economy. What an incredibly short-sighted government this is.
To save money, there are lots of projects that this government could reduce spending on, or stop it all together. At least the Greens’ travel budgets will be decimated this year, as they all learn how to teleconference, but think of all the other savings that could be made. Where should I start?
We could cut funding to the UN, as globalisation is now mostly dead in the water, and it has to be said, they have gone very quiet on this pandemic. Obviously, there are limited opportunities for UN officials and delegates to gain from the trough at the moment.
We could get rid of the policy that makes the first year of university fees free.
We could forget about climate change, cancel the Zero Carbon Bill, stop pouring funds into countries that couldn’t administer their way out of a paper bag and let us get on with dealing with a real crisis… for a change.
We could stop taking refugees.
We could stop paying international aid, and look after our own for a change.
We could stop pouring money into Pike River, and leave the poor guys in peace.
There must be billions of dollars of savings that could be made by cutting out some of this government’s crazy and wasteful schemes, and this is money that could be used to help business at a time when they really need it.
But they won’t. Of course, they won’t.
Instead, the most likely outcome is that there will be tax increases within a year. After all, this has got to be paid for somehow, and there never was a Labour-led government that didn’t increase taxes somewhere along the line. I’m sure Jacinda would not want to break the chain.
Nevertheless, if they applied a little bit of common sense, there is a lot they could do to shore up government money. But using the words ‘socialist government’ and ‘common sense’ in the same sentence is not something we can do. Socialists are prolific wastrels when it comes to government revenues; they spend it like water until, as Margaret Thatcher famously said, they run out of ‘other people’s money’.
It was a nice thought though, don’t you think?
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