“Turnover is vanity, profit is sanity, but cash is reality”.

There are plenty of unprofitable businesses in the world some with very high turnovers, but there are none without cash. Some businesses have mountains of cash like Apple and Amazon, tucked away in low tax regimes. Obviously they are “smart” businesses avoiding paying taxes to states that waste the money on things like universal healthcare. I wonder if all those tax dodgers are immune to COVID-19?

However I digress. In the last budget, that was six days ago when the world was a different place, the Chancellor announced a £12bn package of measures to support business. This morning on the Today Programme that amount was dismissed as a rounding error for the scale of support needed.

The need is not for tax relief next month  it is for cash, today or tomorrow. The reason for this is that so many businesses in the hospitality industry operate on very tight cash margins. Once day to day operating costs are covered the money coming into the business during a month provides the cash to pay for the salaries and the tax bills at the end of the month, and if you are lucky an element of profit. If halfway through the month, say on the 16th, the Prime Minister tells all your customers they should not go into your pub, restaurant, hotel, theatre etc then it is very likely by the end of the month you will not be able to pay your salary or tax bill.

HMRC can be as understanding about late payment of tax as they want, staff will either sue for their wages, or walk out, or both. In any of those scenario’s its game over for the business.

This is what will happen to hundred of businesses around the country and thousands of staff, possibly millions as it is clear other industry sectors are beset by the same basic cash problem. The scale of the problem is enormous.

Providing cash to keep businesses afloat when there are no customers, for one, two or six months is a mind boggling number. So big it may be dismissed out of hand. But then on the other hand the alternatives are not great.

Firstly, there is a logistical problem. In the space of a couple of weeks hundreds of thousands could be being made unemployed. The DWP are wrestling with Universal Credit, and losing. They will be overwhelmed with demand for from new claimants. The transfer payment bill will go through the roof.

Although the social security bill will balloon, as people move from low wages of circa £300 per week (most hospitality workers are on minimum wage) to unemployment benefit of around £70 per week the impact on demand in the economy will be immense. Causing other businesses to contract or collapse creating a vicious circle of decline, further reducing tax revenues and further increasing transfer costs.

The level of discontent this will generate in a population restricted to their homes does not bare thinking about.

COVID-19 is not just infecting people it is infecting the economy. More specifically it is attacking cash, the life blood of all current economic life. The only way to insulate against this is an enormous transfusion of  new cash into the economy. As Jim O’Neil suggested on the Today Programme we need Quantitative Easing for people. Others have called it helicopter money, after the notion that you empty sacks of money out of helicopters. The idea being to put effective demand into the hands of consumers, the vast majority of whom will spend all of it and thus stimulate the economy.

There are some very radical proposals kicking around at the moment. If people thought the last budget was a radical spend budget for a Tory government, they ain’t seen nothing yet.

(Declaration of interest – The writer part owns a small restaurant)