Back in April when the first indications of the economic impact of coronavirus became clear we touted an alternative rescue plan to the one the chancellor was pushing.
In our eyes Rishi Sunak’s bailout schemes were predicated on replacing revenues with loans – turning assets into liabilities – which could cause a bottom-up collapse of the economy.
A more sensible approach would be to offer equity investment to companies that require cash, thereby ensuring they are not laden with debt as the economy restarts.
The Football League
Since the start of lockdown and as economic thinkers shift their focus from short to long-term solutions the notion of ‘debt alternative’ rescue packages has started to win some appeal.
In the Football League, with clubs faced with the prospect of several fan-free months, a six-point plan backed by the FSA along with MP Damian Collins advocates public funding in exchange for a minority shareholding in the club.
Crucially, it includes measures to force clubs to behave like the social institutions they are by moving gradually towards a German model where communities own 50 per cent of their local club.
FSA chair Malcolm Clarke says the plan would allow clubs to not only secure their short-term future, “but help them thrive in the seasons ahead”.
In the theatre a similar scheme has been suggested by Sam Mendes in the Financial Times.
The ‘Cultural Investment Participation Scheme’ combines the joint potential of commercial and subsidised ecologies to offer the government the genuine prospect of substantial financial return.
The idea would be to treat the government as an “Angel”, using the same formula to return investment and share in the profit of successful shows, once those shows have earned back their initial costs.
“This is not a request for a handout, or for long-term life support,” he writes. “It is an offer for the government to become partners in a successful business.”
It is, of course, worth remembering that the notion of the government becoming business ‘partners’ rather than business ‘lenders’ isn’t without precedence.
When the financial crisis struck Gordon Brown took a 43 per cent stake in Lloyds to be watered down as the money was paid back.
In 2017 the then chancellor Philip Hammond announced the bailout had been repaid in full.
Today the bank is playing a central role in the rescue of thousands of businesses across the country.