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Price of ‘bailing out’ any companies should be equity which will generate long-term returns, say economists in IPPR discussion paper

The Chancellor should take equity stakes of 30 per cent in each of the major airlines as the price of supporting them through the coronavirus crisis, according to a discussion paper commissioned by the IPPR think tank.

Economists Eric Lonergan and Mark Blyth argue that the government is likely to recoup up to three times its investment in struggling UK companies as they bounce back over the next decade, underscoring the long-term benefit of intervention now. They propose a model that could immediately be applied to airlines, but also other sectors in the economy such as retail and manufacturing.

Shares should eventually be used to begin building a new National Wealth Fund, they say, for the benefit of citizens with few assets of their own. The fund would also be used to drive higher social, environmental and governance standards within the companies in which it holds a stake.

But for now the government should insist only that any businesses it helps with major cash injections retain all their current staff, to preserve jobs and support the wider UK economy.

The paper comes as the Chancellor, Rishi Sunak, and other government ministers wrestle over how best to intervene in the aviation industry, which has seen passenger numbers plunge and both revenues and share prices plummet as a result of the crisis.

Eric Lonergan, a leading economist and writer, and Mark Blyth, professor of political economy at Brown University, call for the government to step in by:

  • Refinancing existing credit facilities at zero interest for six months
  • Offering new credit facilities up to a maximum equivalent to three months’ revenue, if necessary. These would also be priced at zero interest rates, also for six months.
  • Taking equity stakes of 30 per cent in each major airline, priced using the average share price over the prior 30 days.
  • Requiring that companies supported maintain all current employees, regardless of their contract type.

They argue that it is a misnomer to call such intervention ‘bailouts’, as it is in everyone’s interest to sustain the operations of good business and support jobs. Meanwhile shareholders have already suffered large losses, while low interest rates make this is an ideal moment for such intervention.

Lonergan and Blyth write:

“The state will emerge from this crisis with a stronger, not a weaker, balance sheet. This is a very different calculus to the government issuing debt to finance current expenditure.

“By issuing debt when interest rates are so low and... buying assets at very cheap prices, in the medium term, the state will simultaneously ensure businesses survive, workers keep their jobs and the state emerges an owner of significant assets.”

CarysRoberts, Executive Director of IPPR, who commissioned the discussion document, said:

“We are delighted to publish this important paper by Eric Lonergan and Mark Blyth, part of an exploration by IPPR of how interventions to shield the economy during this crisis can be designed to generate a more prosperous and just society when the crisis has passed.

“It’s particularly significant that they are calling for this to be the starting point for a new UK National Wealth Fund, like that established in other countries. Establishing such a fund, to be managed in the public interest and for social and environmental benefit, was a key recommendation of IPPR’s Commission on Economic Justice.”



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  1. The IPPR-hosted discussion paper, Beyond bailouts, by Eric Lonergan and Mark Blyth, will be published at 0001 on Thursday March 26. It will be available at:
  2. Advance copies of the paper are available under embargo on request
  3. The IPPR’s Commission on Economic Justice reported in 2018. Commissioners included Archbishop of Canterbury Justin Welby and Frances O’Grady, general secretary of the Trades Union Congress. It recommended far-reaching reforms to the UK economy, including establishing a Citizens’ Wealth Fund. The report, Prosperity and Justice, can be read at:
  4. IPPR is the UK’s pre-eminent progressive think tank. With more than 40 staff in offices in London, Manchester, Newcastle and Edinburgh, IPPR is Britain’s only national think tank with a truly national presence.