Has the government done enough to get the economy through the coronavirus emergency?

On 11 March – a political and economic lifetime ago – the chancellor, Rishi Sunak, unveiled in his Budget speech a package of new subsidised loans, grants and tax relief designed to help UK firms affected by the coronavirus crisis.

“I expect the combination of these measures to protect the vast majority of businesses through the worst of the crisis,” he told a packed House of Commons.

There was also an extension of the scope of statutory sick pay for those advised to self-isolate and £5bn more for the NHS to cope with the outbreak.

The chancellor ended with some words of self-praise for what he described as the UK government’s “world-leading response to the coronavirus”. Those words now look badly chosen, hubristic even.

In fairness, the crisis has deepened at incredible and quite terrifying speed since they were spoken, and not just in the UK. The budget came before the government-ordered lockdown, which seems to have delivered the most profound shock to the UK economy since the Second World War.

But what’s certainly clear is that the chancellor’s original package was not even close to sufficient to enable businesses, families and public services to withstand the economic tsunami of Covid-19.

So how much ground has been made up since?

Well, in the past fortnight we’ve had a promise of £330bn of state-guaranteed loans for firms whose revenues have fallen off a cliff and a state commitment to pay 80 per cent of their workers’ wages (and a similar offer to replace the incomes of the self-employed) for at least three months. There’s also been a boost in the generosity of benefits.

This will be expensive. Economists are estimating that the UK’s budget deficit could balloon out at £200bn this year, or around 10 per cent of GDP. That would be as high, relative to the size of the economy, as its peak during the financial crisis.

But, will it be enough? The nominal size and scope of the plan matters less than its implementation.

The promise of state-subsidised loans to firms facing collapse was widely welcomed. But then it turned out that many small firms were facing obstruction from the private banks asked by the government to administer the scheme.

The chancellor has sought to address those problems by easing the terms of access and exerting heavy pressure on banks to get loan money out of the door.

But the fact remains that delivery is not directly in the government’s hands. The chancellor is relying on the banks. And speed is critical here, with hundreds of thousands of small firms at risk of simply running out of cash in the coming days.

They need these cash injections if they are to make it to the safety raft of the governments’ worker wage replacement scheme that is due to be operational by the end of this month. And if that scheme is not ready on time the consequences could be catastrophic.

If firms are forced to go bust en masse there will be a flood of unemployment.

We’re already seeing that to some extent. Almost one million people have applied for universal credit in the past fortnight, ten times the usual rate, indicating a serious spike in private sector redundancies.

If that spike continues, overall UK unemployment is likely heading back up to its levels since at the height of the financial crisis.

So what more could be done by the government in future? More major industries may need to be directly bailed out by the state, including airlines.

But the depressing reality is that once good firms have gone bust and their workers have been laid off, the horse has largely bolted in terms of damage to the underlying productive capacity of the economy.

After that, what’s left is supporting people’s incomes through the benefits system, perhaps by making it more generous and accessible. The government could, for instance, suspend the savings limit on universal credit, which excludes those with more than £16,000 in savings from claiming.

It may have to increase spending on health and other vital public services like social care.

Yet trying to prop up the rest of the economy through the traditional levers of tax cuts or additional government spending, designed to stimulate household consumption, simply won’t work at a time of enforced social lockdown .

The government has had it’s main shot at mitigating the bulk of the economic damage of this crisis.

Now we just have to hope that it will prove to be enough.