Matthew Lynn

At least no one can say it isn’t bold. The United States is fiddling around with some possible cuts to payroll taxes. Most of Europe is stuck with some printed money from the ECB. But the UK is embarking on one of the most radical experiments in modern economic theory, and one that will no doubt be studied for decades to come. With his latest announcement today, a whole 48 hours after his last intervention, the Chancellor Rishi Sunak has effectively turned the UK into a wartime economy.

A £330 billion package of loans to business. A huge tax break to any company in the hospitality or leisure industry. Mortgage holidays to anyone who has been impacted by the coronavirus. People can accuse the Government of being behind the curve on delaying the spread of Covid-19 through the population. But it is hard to accuse it of not moving quickly enough to mitigate its financial impact.  Only last week, alongside a rate cut from the Bank of England, the Chancellor Rishi Sunak announced huge rises in Government spending. Today he followed that with a massive round of state intervention, more money for industry, and the hint of a rolling programme of bail-outs as companies run into trouble.

A dramatic dawn cut in interest rates. A huge blast of public spending. And immediate cash help for companies that might find themselves temporarily in trouble as their customers stay at home and staff call in sick. We will find out over the next few weeks whether the British government has done enough to fight the coronavirus emergency it suddenly faces. But there can be no question it has at least done everything it can to fight the economic crisis that will surely follow. Likewise in the United States, the Federal Reserve has already sprung a cut in interest rates on the markets and may well make another move before the end of the month. President Trump has already announced a plan to cut payroll taxes, and is working on a stimulus package.

It is too expensive. It mostly goes to Southerners who already have plenty of money. And it doesn’t even work very well, while the money would be better spent elsewhere. As the Chancellor puts the finishing touches to his Budget, the leaks suggest that the most generous tax relief for entrepreneurs will either be curbed, reduced or potentially even scrapped completely. But hold on. That's crazy. It's just about possible that there might be a worse message to send out about post-Brexit Britain – nationalising the banks, perhaps, or a three-day working week – but it is hard to think of one. In fact, entrepreneur’s relief has been a huge success. Instead of scrapping it, we should think about extending it.

Supply chains are shutting down. Factories and offices are closing. Flights are being cancelled, conferences postponed and football and rugby games rescheduled. It remains to be seen how much of a blow the spread of the coronavirus turns into for the global economy. But one thing is now certain: it is going to lead to a sharp slowdown. And the real question now is this: how should governments and central banks respond? The medical response is already clear. Communities are put into lockdown. The infected are quarantined. Borders are closed where necessary. And treatment centres are braced for a vast increase in the number of patients. How well it works, and how quickly, remains to be seen. But at least a plan has been put in place. The economic response?

She’s back. With Brexit ‘done’ and with most of the country just grateful to have moved on from the whole saga, we might have thought we had heard the last of Gina Miller. Miller, who became something of a figurehead in the anti-Brexit movement, could quietly return to doing whatever it was she used to get up to. Not so. Now she is back on the attack, demanding a ‘review’ of the appointment of Andrew Bailey as Governor of the Bank of England. What’s her complaint this time? Apparently as head of the Financial Conduct Authority, Bailey presided over “a toxic cocktail of negligence, incompetence and indifference to the needs of ordinary depositors, investors and pensioners”.

We will export less. There will be less competition. Prices will be higher and productivity lower. Textbook economics tells us that trade friction – that is anything that makes it harder for goods or services to flow across borders – is a very bad thing. So why is the British Government suddenly accepting trade frictions with the EU? As chief Brexit negotiator David Frost made clear in his key speech yesterday, the UK is willing to accept some restrictions on trade with the rest of Europe if it has to. The answer? Because they are not necessarily as bad as the textbooks predict and the prize is a big one. True, in an ideal world we would have completely free trade with the EU. There would be no tariffs or quotas. We would remain members of the Single Market.

It will be big, shiny and it will make a difference. Even with its astronomical and rising cost and its wobbly economics, it is possible to see the gut appeal of HS2, especially to a big spending government such as this one which can borrow freely at virtually zero cost. After all, it needs to do something to close the gap between the regions. It also needs to improve the country’s transport infrastructure and this project is, at least, almost ready to start. The trouble is, there are far better ways of spending what is likely to be £200 billion by the time the final bill is due. After all, high-speed trains are a 40-year old technology. There is nothing especially modern about them anymore.

At least no one will be able to accuse it of not caring about the environment. The government has just bought forward its ban on all diesel, petrol and hybrid cars to 2035. From that date onwards, you will only be allowed to buy electric or hydrogen vehicles. The gas-guzzling, polluting SUVs we all like so much will be banished from the road, and all those petrol stations will be replaced with sleek charging stations. There is a problem, however, and it is far from a minor one. The government shouldn’t be telling us what to drive – because consumers left to themselves can decide for themselves. True, there is nothing wrong with electric cars. They are far, far better for the environment.

Less than the cost of a Spotify subscription. Less than Netflix charges you every month. True, you might not be able to get the latest Taylor Swift remix or episodes of Stranger Things, but the Labour Party is trying to reach out to the streaming generation with the claim that the state costs you less than either your music or TV fix. According to its Twitter feed, someone earning just £82,000 a year has to pay only £8.33 a month for ‘free healthcare, free education, properly funding the NHS, lifting children out of poverty, ending the climate crisis, and ending homelessness.’ https://twitter.

The morning of 13 December. A series of salacious revelations about his private life have sunk Boris Johnson’s campaign. A re-energised Nigel Farage has led a Brexit party surge in the north, splitting the Leave vote. The ousting of Jo Swinson in a coup organised by refugees from the People’s Vote campaign led to Remainers flocking back to Labour. The SNP has swept Scotland. Plaid Cymru and the Greens have picked up a dozen seats where they co-operated. And a couple of Tory rebels have managed to hang on as independents. After the dust settled on the most chaotic election campaign in memory, Jeremy Corbyn had just enough votes to lead a Labour/SNP/Green/Plaid/Independent coalition. The first 100 days of the Corbyn government were to prove a challenge, however.

If you wanted to completely destroy a modern twenty-first century economy there are various places you could start. You could print money to finance unlimited government spending. You could put up tariff barriers on all your main imports. You could even try raising the minimum wage to £30 an hour, while cutting the working week to three days. In truth, however, if you wanted to do some real long-term damage your best bet would probably be this. Nationalise the broadband network. Unfortunately, that is what the Labour party has just proposed. Labour has made a splash today with a headline grabbing proposal to provide free broadband for everyone by 2030.

We were about to crash out of the EU without a deal. The political system was in deadlock. Businesses were fleeing the country and investment was drying up, all against a backdrop of global trade wars and slumping demand across the eurozone. And what happened to the British economy against all those headwinds? As we learned this morning, it sailed right through the storm with steady, if hardly spectacular, growth. It now looks certain that far from reducing us all to poverty, leaving the EU won’t even create a brief technical recession. The predictions of catastrophe could hardly have been more wrong. If you had to choose a day to officially declare Project Fear dead, this would be it.