The importance of the Treasury to achieving the policy outcome or government investment decision you’re looking for should never be underestimated; but the COVID-19 pandemic has shown just how crucial the Chancellor and his team can be in times of crisis. In this blog, our CBI Economics Director, Annie Gascoyne, shares her lessons learned from working closely with the Treasury on the vital measures needed to keep businesses afloat and protect livelihoods during the pandemic.
As we start to emerge from the economic turbulence caused by the COVID-19 pandemic, many of you will be looking to government to make investment and policy decisions that support your business or sector. How do you ensure that your arguments are landing with the treasury?
Rewind to February and my team were looking optimistically to the first Budget of the decade. The start of 2020 had seen a welcome lift in business confidence and we believed the Chancellor had the opportunity to turn rising optimism into a surge in investment across the UK. Six weeks later, the picture looked dramatically different.
As the virus took hold and even before the Prime Minister announced an undefined period of lockdown, shutting down many sectors of the UK economy; we were quickly inundated by businesses reporting that their cash reserves would not last long and without government intervention huge job losses would be inevitable.
The CBI quickly urged the government to consider using the existing PAYE system to help employers to keep employees on their payroll and avoid redundancies. Thanks to our existing relationships with the Treasury – from policy teams right up to the Chancellor, we were immediately able to secure agreement on a Job Retention Scheme with government funding 80% of wages of employees that were not needed at work as well as a business rates holiday and a number of business loans schemes to help every size of business.
Here are a few things we have learnt from the daily contact we have had with the Treasury over the last few months:
- Be clear on both the costs of what you’re asking for – but also the cost of inaction
At the CBI, we always ensure that our policy recommendations are costed and reasonable within the fiscal envelope – on this occasion we were clear that the ground had shifted and the old fiscal rulebook no longer applied - instead we had to estimate the potentially devastating cost of failure to act to protect both jobs and the economy for the long-term
- Explain the market failure, be solutions focused and offer practical help to make their schemes successful
Remember the UK Treasury is somewhat unique in an international context, taking on the role of both finance and economics ministry. A large proportion of their civil servants studied economics and it is therefore the lens through which all policy is considered. In the case of the Bounce Back Loans, it was important for us to set out why the current scheme did not work for small businesses and the banks that lend to them. We identified where the blocker was in the market, in this case risk appetite and uncertainty, and pinpointed what was needed to solve that problem – 100% guarantees to speed up delivery of finance to small businesses. Getting into the detail is essential with the Treasury so we provided practical examples of where the schemes were and were not working on the ground, stats from our surveys and comparisons of what other countries were doing to help SMEs. We kept feeding back to government as the schemes were implemented so they had evidence on how schemes needed to evolve to be most effective
- Detail impact wherever you can: If the evidence is powerful enough it’s impossible to ignore
Sometimes it simply comes down to numbers. The volume of evidence we had from businesses of all sizes, from all sectors on the impact that lockdown would have on their finances, jobs and potential ability to survive was overwhelming and impossible for any government to ignore. Analysis, numbers and case studies are all useful tools and drawing these together to evidence the argument you want to make, as well as international comparisons to show where we can learn from others, can provide a pretty water-tight economic case
- Investing in relationships in times of strength will serve you well in times of crisis
Our ability to influence in this situation was strengthened by the longstanding relationships we have. These relationships are based on sharing insight, data and ideas throughout the year rather than just in the run up to fiscal events or when we need help. The Treasury spend time on relationships not because they must but because you are telling them something they did not know before and could not find out on their own. Ask them what they want and try to deliver it, don’t just focus what you want out of them
- Influence from your seat at the table: be supportive and keep criticism behind closed doors
In times of crisis when all in government were working around the clock to do what they could – it was important to recognise that government was trying to make the best decisions they could – and that if these were imperfect, we could help improve them be offering support and ideas – not public criticism. Criticism is often easier to provide than praise but as a department that gets a lot of the former don’t underestimate the power of providing the latter in building long-lasting relationships.
As we emerge from lockdown and greet another Economic Statement from the Chancellor, filled with more bold and expensive economic policy moves, there is perhaps some time to think forward to the next steps of the economic recovery. We are certainly not out of the woods yet, the risk of localised outbreaks remains and as many of the support schemes come to end in Autumn additional economic stimulus is still desperately needed to help good businesses to survive, protect jobs and our economy in the longer term.
Do you need help developing your economic evidence base?
We know that many organisations are looking to set out their case for the measures the Chancellor should take in the next Budget and beyond. At CBI Economics we can help you figure out the fiscal costs of your policy ideas, understand the economic impact they’ll have, research what world leading economic policy looks like or simply help you to best articulate your issues through robust economic theory and evidence. For more details on how CBI Economics can help you, get in touch with the team.