Rishi Sunak won many plaudits for moving so swiftly to pump billions of pounds into the economy to save Britain from going bust after the lockdown.
The rookie Chancellor also showed sensitivity by listening to his critics, adapting his rescue package to provide fully government-guaranteed Bounce Back loans for SMEs, whose futures are the lifeblood of the economy, as well as a new scheme for the self-employed.
Broadly speaking, his emergency plan was compassionate, drawing support across the political divide, from the TUC to the freest of free marketeers.
Decision time: Rishi Sunak won many plaudits for moving so swiftly to pump billions of pounds into the economy to save Britain from going bust after the lockdown
Now comes another difficult choice for the Chancellor and the Treasury. Should the Government bail out some of Britain’s biggest employers which are struggling, and don’t have access to any of the Government’s rescue schemes?
Known as Project Birch, the Treasury is in talks with Jaguar Land Rover, Tata Steel and others, including airlines, about putting together some sort of rescue package to save them from going belly up.
The Tata-owned Jaguar car maker has been forced to turn to No 11 because it does not have the required investment grade credit rating to be eligible for the Bank of England’s loan schemes for larger companies.
That tells you something about the unhappy state of JLR. Yet it is of great importance to the UK, employing 38,000 directly and thousands more through the supply chain. So too does Tata Steel, Britain’s biggest steel maker, which employs thousands in Wales.
To date, the Treasury has indicated it may be willing to provide support as a ‘last resort’ if a firm’s failure would ‘disproportionately harm the UK’.
Clearly heavy cut-backs or closure of both these companies would cause disproportionate harm, so some sort of rescue looks on the cards.
But the question is how should the Treasury best devise these rescue packages? Should it be through loans or equity stakes?
Only last week Andrew Bailey, Governor of the Bank of England, said he has had talks with Sunak about the concept of the Government taking shareholdings.
At first glance, taking equity stakes in these companies, as the French and German governments already do in their car makers, is the preferable option. It allows the taxpayer to gain any upside from the Government investment.
However, before taking on equity, the Treasury has to judge whether the companies have viable futures in normal times.
Car sales are on a downward trend around the world while the types of vehicles sought by the public are often smaller and more fuel efficient than the gas-guzzlers of old.
Steel-making will be hit by the world slump in demand, and air travel is going to be restricted for years.
There’s another question the Treasury must ask of Tata Group, owner of JLR and Tata Steel. Should the Indian company not be investing more of its own money into the UK businesses until the economy recovers?
Deciding on equity or debt is going to be tricky. It’s clear the Treasury is worried about how much further it should go with its spending bazooka.
Forecasts suggest borrowing this year will be £300billion, pushing overall debt-to-GDP from around 80 per cent to nearer 120 per cent.
For the overall health of the economy, and particularly the regions where these industries are based, the Chancellor probably has no choice but to help them out.
But Sunak will need commercial astuteness as well as compassion to make this call.