The losses incurred by companies from the corona embargo should be compensated for without a hurry to the state peak. Leaving companies thrown would be a cowardly and costly mistake from the government, writes Special Editor Jan Hurri.
If the mobility funding and containment measures proposed by the government accelerate the containment of corona infections, as the government justifies in its bill, the economy also benefits of them.
This is for the simple reason that alleviating a serious health threat is a prerequisite for easing restrictions, opening up society – and even economic recovery.
But while tackling the epidemic as efficiently and quickly as possible will ultimately be an economic benefit, corona-related closure and precautionary measures will still result in losses and loss of income for a large number of companies and their staff.
In addition to previously closed catering and accommodation establishments, losses will also be accumulated for service companies, such as hairdressers and specialty stores, whose business is based on the personal service of the customers present in the store.
The losses of restaurants and hotels are due to the direct orders of the authorities to close the doors to customers. Barbers and hairdressers, like virtually all non-food shops, will soon suffer heavy losses in areas affected by restrictions on movement due to the indirect effects of the restrictions.
With its bill, the government would not order the closure of shops, but the effect would be the same, as a restriction on movement would prohibit citizens from going to the shops.
An indirect ban is costly
In its Bill on Restrictions on Movement, the government states that “restrictions on movement cause indirect losses to businesses and traders when restricting the movement of customers”.
As if to further mitigate the effects of losses – or perhaps avoid the State’s liability – the bill goes on to say, “However, these are not direct restrictions on business …”, and refers to the Expenditure Subsidies Act.
Cost subsidies during the interest rate crisis are a way for the state to help companies in difficulty due to the crisis, but the two cost subsidy programs implemented so far have ended and a third is still being prepared.
According to the bill, indirect losses and other losses resulting from restrictions on movement are to be compensated by a “reasonable amount” through cost support.
On the other hand, the Government does not consider it necessary to include in the package restrictions on movement restrictions a separate regulation on compensation for losses caused by restrictions.
This delimitation is a questionable and possibly also a cowardly error.
A direct injunction would be clearer
If the government wants to prevent citizens from going to a barber shop, a shoe store, an art gallery, or even a rental cottage, it would be as if they had ordered them to close their doors and close down for a limited time. Like restaurants.
A clear closure order would have created an equally clear obligation for the state to compensate – and removed from companies both the uncertainty of compensating for losses and the strange contradiction in which closing doors is supposed to be the company’s own choice.
The government itself understands that restrictions on movement cause losses, so leaving compensation to know when and under what conditions the “cost subsidy to the third” to be completed appears to be an evasion of the obligation to pay compensation.
The Ministry of Employment and the Economy has already announced that it is preparing a separate part for the third tranche of cost support, which is already being prepared, for losses caused by mobility restrictions.
Companies losing their customers soon due to mobility restrictions will be doubly uncertain about such a procedure.
Firstly, how comprehensive compensation can be expected and under what conditions, and immediately afterwards, how soon support can be applied for – and how long it will take before any support appears in the account.
This can be a harbinger of course
The wording of the losses on the restrictions on movement restrictions and their possible compensation raises doubts about the possible intention of the government to set a course.
The review of compensation is referred to, for example, by the reduction of restriction losses written in quite clear letters between the lines of the bill, for example under the pretext of “territorial and temporal limitation and necessity” of restrictions on movement.
Another formulation referring to intentions is to characterize possible compensation as “reasonable compensation” which would “reasonably” take into account “the effects of restrictions on movement”.
Describing loss-making intentions in such vague and obvious cues is probably one of the main reasons for the sharp objections of business organizations to restrictions on movement.
Such vagueness – and the obvious threat of numerous companies being left empty for weeks – is a cowardly blow from the government to companies that are in trouble.
And this is not only cowardly, but this is also bad economic management and a silly way to exacerbate the economic interest rate crisis.
The interest rate crisis is not the fault of companies
The interest rate crisis is not the cause of any company that has to close down or otherwise lose its customers and income due to interest rates or interest rate restrictions.
And interest rate losses are not normal business risks, but rather equate to losses due to a natural disaster.
The cause of the losses is the coronavirus and the highly contagious and even life-threatening epidemic that spreads its destruction throughout the world, threatening public health.
The national economy is plagued by the same scourge as public health.
This health crisis will inevitably result in losses, regardless of whether the government imposes closures or whether citizens lock themselves indoors because of their own precautions.
The actions of the government and the behavior of the citizens can affect the duration and severity of the health crisis – and indirectly also the amount of losses and income losses accumulated during the crisis.
In addition, the government – and only the government – can influence the distribution of the losses that inevitably accrue as a nuisance to the national economy between the various parties.
Corona losses are a common peak
The path of the least hassle and, ultimately, of the smallest losses would be to pass on the losses and other interest costs to the state, without delay and without the slightest change, without delay and even in full.
Of course, the generous opening of the state support peak would incur costs for the state and again the need for new indebtedness, but clinging to this will blur the overall picture.
The transfer of losses to the peak of the state does not in itself generate losses comparable to the euro – nor does the exchange rate of subsidies compare to saving the national economy from losses.
Instead, opening up the peak of state support would only shift losses from companies and citizens who have lost their income through no fault of their own to the broadest common shoulders of the whole nation.
If, on the other hand, the rate of subsidies pushes a large number of companies to the brink and a large number of citizens into the unemployment register, this will certainly cause more and longer-term harm to public finances than would result from compensation for family losses.
Source site www.is.fi