Do you know about the Covid Corporate Financing Facility? Well, don’t beat yourself up if the answer’s ‘no’, very few do. You’ll find it scarcely reported in today’s papers. In fact, the Bank of England at first wanted no one to know about it – they sought to give out public money to corporations in complete secrecy, requiring participants to sign a confidentiality agreement. Thankfully, a campaign by Positive Money pressured them to reveal which UK companies are getting a bailout. The list makes for very interesting reading.
£300 million each goes to Brian Souters’ Stagecoach, outsourcing giant G4S, and Rolls-Royce, which just announced it was laying off 9000 workers, including 700 at its Renfrewshire plant. Easyjet, which announced it was cutting 30 per cent of its staff last week, gets £600 million. The Intercontinental Hotels Group, which only yesterday announced it was starting a redundancy package at its hotels in Glasgow and Edinburgh, also gets £600 million. You get the picture. The only strings which are tied to this cheap money is a request by the BoE to be restrained in paying dividends. It doesn’t matter if they are climate polluters or tax-haven users or have exposed their workers to harm during the pandemic, the BoE will bail them out if they are making a “material contribution” to the UK economy, just so long as they are also corporate giants.
So far, 152 companies have taken just over £16 billion from the scheme, with the BoE green-lighting £67.7 billion in total. The way it works is the BoE provides short-term liquidity based on the credit ratings of firms prior to 1 March, i.e. before the economy crashed. The money has to be paid back but attracts a minimal rate of interest, much smaller than these firms would get from commercial banks. CCFF is based not on a firm’s future prospects, but on how big it was before the crisis (you have to be ‘investment-grade’ to apply). That’s why the airliners, for example, have been first in line (£1.8 billion in bailout money combined): their prospects now look disastrous, but the CCFF stumps up cheap cash regardless. Indeed, the list of companies reads like a who’s who of carbon polluters: one in five of the firms to receive the bailout money so far are airlines, oil & gas or car manufacturers. So much for claims from Ministers’ that this would be a green economic recovery.
Not only is this money being dished out without social or ecological purpose, it provides a market advantage to company’s purely based on their size pre-crash. For football fans out there, Man Utd and Tottenham are the only clubs eligible for CCFF (Tottenham has taken this up, with a £175 million loan), so if you are a supporter of another team, tough luck – they’ll have to go to pay commercial rates if they need a loan. Meanwhile, five to ten clubs in the lower English leagues are on the verge of going under. This is not “free-market” capitalism – it is a corporate cartel.
Positive Money warns that many of these companies may be back for more before long as they burn through cash, with the BoE now having a direct stake in their survival. It is becoming absurd that this institution is ‘independent’ of government, i.e. of democratic accountability, when its influence on the UK economy is so massive and so skewed towards protecting the super-rich. Research on the impact of Quantitative Easing in the UK – another BoE corporate welfare scheme, which now totals £645 billion – shows it has had the effect of increasing wealth inequality.
The economy is rigged; Britain PLC wins even when they lose. And the role of the Bank of England in rigging the system is crucial.
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