Paying for all the Covid-19 demands on the public purse

Everyone wants a bailout. Not everyone will get one, but many will. So how do we go about paying for it all? A minimum tax rate on earned and unearned income would be a good start.

George Osborne © PAUL ELLIS/AFP via Getty Images
George Osborne: used to be a flat-tax fan © Getty
(Image credit: George Osborne © PAUL ELLIS/AFP via Getty Images)

An awful lot of people want an awful lot of things from the public purse this summer. The UK’s job-furlough scheme to run beyond October (that’s mostly Nicola Sturgeon). Some kind of “one-off final payment” to help workers in vulnerable sectors to find work. A new industrial strategy that offers tax incentives to growth businesses. Immediate tax breaks for start-ups. A new scheme to support directors of limited companies who (because they pay themselves via dividends) aren’t included in any other schemes. A bailout for actors. A rise in out-of-work benefits for the newly unemployed. Yet more money for the still-failing NHS. VAT cuts. National insurance holidays. Extra tutoring for vulnerable children in the holidays. And of course an “infrastructure revolution”. No crisis is complete without demands for an infrastructure revolution.

Sounds expensive doesn’t it? It won’t all happen, but some of it will – and the UK has already spent fortunes on existing Covid measures. So how do we pay? Partly by recovering successfully. But outside that, there is no shortage of ideas. The infrastructure revolution could be paid for by forcing pension funds to buy special bonds. We could just keep borrowing (low interest rates make it easy) and put in place various forms of financial repression to make sure our bonds keep being bought. We could print money (and damn the inflation risk). We could introduce real austerity and cut the state back properly. Or we could try to pay at least part of the bill by raising taxes.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.