Mr Javid said the government “rightly put public health first”, but he added that Boris Johnson should now focus on restoring the economy. The former chancellor expressed doubts over Bank of England’s claims that the economy will overcome what it anticipates will be the deepest recession in 300 years.
“I think a V-shaped recovery will be challenging. And I know the Bank of England has said it’s possible,” Mr Javid said.
“It has made a whole set of assumptions around relaxing the lockdown and ending it completely in three months. And it says itself that it’s at best uncertain.
“I do think it’s just like the virus itself, let’s hope for the best but let’s plan for the worst, and that means you’re taking whatever action you think is necessary and possible right now to make sure we do get the fastest recovery possible.”
Mr Javid expressed his support for his protege and current Chancellor, Rishi Sunak, who he said was “absolutely right” to “use fiscal firepower to intervene and mitigate” in the short term.
But the former chancellor and investment banker said the efforts should now be directed towards ensuring the health of the banking system to restore the economy.
He also urged ministers to “run the economy hot” in order to balance controlling the pandemic with the broader damage of an extended lockdown.
Speaking of the banking system, the Mr Javid said he is “worried about the health of our banks” and said they might have to raise more capital to ensure they do not just face losses but also continue lending.
“Because of the action that has taken place over the last 10 years since the last financial crisis, the banks are capitalised, they’ve got more sort of buffers, as it were, than ever before, so they can absorb the expected losses based on the Bank of England scenario.
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“But we don’t need banks that are just able to absorb losses. We need banks that are able to lend to British businesses particularly our SMEs, over half of SMEs rely only on bank loans they’re their main source of debt.
“So, we need to have banks that aren’t taking let’s say sort of a ‘safety-first crash position’.
“We have to stand up tall, be confident and lend to British business. That’s what I’m concerned about.”
Ministers might also need to ensure banks have support for their worst-performing loans.
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“The second thing is that maybe the government should dust off some of the plans that existed after the last financial crisis on what was called a sort of ‘bad bank’ policy, which was never properly implemented in the end because it wasn’t needed,” he said.
“You might need something. You have some kind of support for banks with some of the worst-performing loans and try to help the banks in that way, so that they can in turn help the economy and lend.”
Mr Javid is the most prominent Conservative to also publicly call for lockdown to be lifted as soon as possible while but also ensuring the NHS the capacity to cope with ongoing infections.
“We’re going to have to co-exist with this virus for I think many months, if not potentially years.
“But we’ve got to find a way forward and that does mean you’re relaxing, as much as you can,” he said.
“Running the economy hot you could say, in a way that you are trying to take into account, not just the sort of necessity to control the virus, but also the wider impact on society – those job losses, those opportunities foregone, particularly for younger people.
“The rise of domestic violence, child abuse, of mental health cases. All of that needs to be taken into account.”
He is publicly making the argument that the current chancellor and Michael Gove, the Cabinet Office minister, have been reportedly been making privately in recently – voicing the concerns of Conservative MPs and donors.
Mr Javid believes that the government should begin easing lockdown measures if the R number is below 1 – the rate that show the number of new cases is no longer increasing – rather than waiting until the virus has been completely eradicated.
“As well as listening to the scientists we also need to think carefully about the impact on the rest of society and the economy and jobs and wider social impacts and that does mean, I think, that when it comes to opening up you want to go as far and as quick as you can,” the former chancellor said.
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