Never before has the government of this country stepped in to pay a major chunk of workers' wages in companies across the nation.

Ed Conway - Economics editor

Saturday 21 March 2020 11:08, UK

Capitalism has been suspended in the UK.

That is the ultimate consequence of the extraordinary moves announced by Chancellor Rishi Sunak on Friday evening.

Never before has the government of this country stepped in to pay a major chunk of workers' wages in companies across the nation.

It is a move of such consequence that the numbers involved - 80% of the salaries of affected workers, caps of £2,500 per worker, potentially £4bn of money flowing out of the Exchequer every quarter - are dwarfed by the symbolism.

A Conservative government is effectively nationalising parts of the private sector, paying most of the wages of workers instead of their employers.

It is a move which even the hardest-left of administrations would have steered clear of for terrifying investors and the markets.

Yet here is the strange thing: this move might be the only way to convince investors that the UK authorities are serious about preventing the economy from imploding altogether.

For the reality is that Britain is in the middle of an economic heart attack. Right now.

Never before has it faced a crisis of these dimensions - a health crisis that has given rise to a lifestyle crisis that has given rise to the most monumental economic crisis of our lifetimes.

Right now, employers are deciding whether to fire staff or pay taxes or simply shut down their businesses.

What else would you do if you were a restaurant owner who was now forced to close and might not be able to claim insurance?

What would you do if you ran a travel business when borders are suddenly closed around the world for the foreseeable future?

Some people can carry on working but the reality is that vast swathes of this economy have gone into hibernation. Or simply shut down. This is something which is deeper and scarier than the financial crisis.

It is a crisis whose timescale has been measured in hours. We have heard, anecdotally, about thousands of workers losing their jobs abruptly in recent days - all because their bosses have just, through no fault of their own, lost their entire income stream.

Up until now there had been growing concern that the Treasury wasn't moving fast enough - that instead of using an economic bazooka it was firing a pea shooter.

There were targeted measures to alleviate the costs of business rates and to loan money to firms. But none of this was enough to convince Britain's many small businesses - the lifeblood of the economy - to stop firing their staff.

But the chancellor's Coronavirus Job Retention Scheme, as it is called, might just be that scheme.

For the first time ever, the government will step in and subsidise salaries across all companies affected by the direct economic impact of the virus. There will be small print. There will be questions asked about whether the eligible criteria are too stringent.

But the scheme looks to be as generous, if not more so, than even the more radical economists expected.

There were other measures designed to prevent the rise in unemployment. VAT payments have been suspended for the next quarter - a big deal given those bills are due in a matter of days. There will be more generous Universal Credit payments and support for renters.

And, frankly, this is still unlikely to be enough. There will probably have to be more measures in the coming weeks as the picture of the economy becomes clearer.

But still... contemplate this for a moment. The relationship between the state and its citizens has changed dramatically.

Britons will have to endure genuinely draconian bans on socialising in the coming weeks. And many of them will find that their pay cheque is being financed not by their employers but by the government. Who will literally be paying them for staying at home.

It's an extraordinary move - especially from a Conservative government. And in case that wasn't enough, consider this: the mountains of debt paying for this policy will be financed not by private investors but by the Bank of England.

An extraordinary moment.

Earlier this week I asked the Bank of England Governor Andrew Bailey if he would contemplate such a radical move - the Bank creating money to be distributed to British people.

In effect, we are now seeing the closest thing Britain has ever had to that.

Normal life has been suspended by COVID-19.

And now, so has capitalism as we know it.