More than a decade after the 2008 financial crash and the state rescue of banks that followed, corporate bailouts are back. Across the globe, governments are throwing huge sums of money at companies and industries to keep them afloat throughout the coronavirus pandemic. The question for policymakers this time, however, is whether taxpayers’ money should be allocated solely on the basis of economic need, or on another criteria. In other words, who deserves a bailout?
Widespread support for Government financial assistance
Populus’s parliamentary research suggests that MPs across the House support the Government bailing out many sectors with taxpayer funds, including pubs, restaurants, retailers, hotels, rail companies and airlines; but not banks.
Hospitality and retail companies the most favoured recipients of Government support
With hospitality one of the last sectors to reopen post-lockdown and therefore containing some of the businesses hit hardest by the outbreak, restaurants, pubs and hotels receive the greatest support for financial assistance from MPs with 94% saying they would support bailing out pubs and assisting hotels.
Moreover, despite the crisis highlighting the strengths of online business and arguably accelerating the decline of bricks-and-mortar retailing, a significant majority of MPs (88%) support financial assistance for retailers from the Government. Traditionally in favour of ‘big government’, Labour MPs are particular advocates of supporting the UK’s high street. 36% of Labour MPs ‘strongly’ back intervention in the sector, compared to 26% in the Conservative camp. With high street footfall likely to remain subdued for the foreseeable future however, is Government support sustainable or would taxpayers simply be deferring the high street’s inevitable fall to online commerce?
Rail companies and airlines also entitled to COVID relief
After lockdown halted travel, it is no secret that airlines were some of the first companies to seek state aid to offset the negative repercussions of lockdown on the aviation sector. Widespread press coverage of continued dividend and executive bonus pay-outs has, however, undermined the legitimacy of such requests, whilst simultaneously putting many businesses’ reputations on the line. Notwithstanding this, 71% of MPs support assisting airlines with taxpayer money with greatest support from Labour MPs (79% vs 66% from Conservative MPs).
Four in five MPs (79%) also back bailing out railway companies with taxpayer funds. With passenger numbers at only 20% capacity and little chance of an early return to pre-pandemic levels, no train operating companies are viable as going concerns. The railway is effectively in the process of being renationalised to keep the trains running.
Bash-a-banker trope persists
Of the sectors tested, support for providing financial assistance to banks is weakest – only 14% of MPs strongly support bailing out the banks, whilst more than double the number (29%) are in strong opposition.
The speed at which governments are having to decide which companies deserve financial support has echoes of the 2008 financial crisis, during which banks’ apparent indifference to public opinion even as they were being saved by taxpayers has led to their demonisation. It is clear that the bash-a-banker trope lives on today.
Do policymakers have a clear mandate from taxpayers themselves?
Whilst there is widespread parliamentary support for Government assistance for many sectors, data from Populus Group’s Coronavirus Public tracker suggests the public is less enthused by the prospect of largescale bailouts. Support across most of the sectors tested is significantly lower, whereas opposition is much stronger.
The fallout from the 2008 financial crisis should serve as a warning to both policymakers and the business community alike, of the potential reputational repercussions of giving out or accepting state handouts without public support and sensible tests attached.
Populus interviewed 92 MPs between May and June 2020 online or by self-completion postal questionnaire. Results were weighted in order to ensure the sample was representative of the party composition of the House of Commons.
Populus is a member of the British Polling Council and abides by its rules. For more information see www.populus.co.uk