The Coronovirus Bailout alternative: how it might work

My previous post was a letter published in the Financial Times, which suggested that instead of disbursing covid-19 bailout funds to businesses, the UK Government could instead issue coupons to people entitling them to spend the equivalent per capita sum in particular expenditure categories. Here I will sketch out some broad outlines as to how this scheme might work.

Guiding principles

• Aim for what’s best for the country.
• Aim to compensate sectors for losses incurred.
• Aim to give consumers choice about which businesses to support within each expenditure category.

The starting point is the sums that Government would otherwise spend on bailing out businesses hit my covid-19. 

Categories are broad, partly for simplicity, partly because coupon-holders should be able to choose between providers of services. Coupon-holders can choose within categories. All coupons are tradeable and exchangable. I would assume that all businesses have barcode or QR scanners but that many consumers don't.

• I suggest as examples of categories: 
• Air travel
• Surface travel
• Personal services (hair, nails, massage, body-piercing, tattoos, any similar one-to-one service) 
• Hospitality 
• Private healthcare, including dentistry

Expenditure statistics per UK household for 2019 are given here. To some extent categories will be decided by the statistics available. 

Example: The ONS says each UK household spends £51.30* per week on restaurants and hotels. Rather than try to assess and then compensate each business for any lost income, I suggest giving each household coupons worth 104 times £51.30* = £5335 to be spent on restaurants and hotels, within the UK, within the next two years. 

*Bear in mind that the UK Government's aim is to compensate UK business, so a sum representing expenditure on overseas hospitality would have to be subtracted from the £51.30 

There are other aspects that would need discussion. In particular, the entitlements of each household should be broken down to adults and children. 

The scheme would be more complex and more contentious than the likely government plan of direct compensation to big business. But, in my view, if properly done, its advantages could outweigh the disadvantages. The advantages, as outline in my previous post, are mainly that it would stimlate competition, and help small businesses. It would also benefit consumers who aren't interested in, for example, air travel who could swap their coupons for a smaller amount of cash or for other services that they want or need. Under this scheme, an adult could exchange their air travel coupon for a coupon for childcare or private dentistry.