Thread by @Gilesyb

So my @instituteforgov report into Bailing out Coronavirus Britain is out. Here it is, and I can confidently say it is the hardest thing I have ever written - this is a fast moving area, full of grisly dilemmas. Some quick highlights...
instituteforgovernment.org.uk/sites/default/…

First, the massive challenge is not just that ‘we are in a new world’. It is that we are *temporarily* in a new world. The emphasis on different policy virtues is going to shift with time (see table, forgive typo)

Second: massive uncertainty. The policies you want for a brief, sharp shutdown (like, say, after a volcano) are very different to a 6 month hibernation, one year recession. And look how fast forecasts have shifted

So normal rules of thumb are suspended, but only for a while. In particular, in the heat of the crisis the idea that there is "creative" destruction is nonsense: all the destruction is purely destructive. This is different to the attitude we took towards the disruption of No Deal

And remember how Woolworths fell over in 2008, and no one really thought we should save it? That attitude was in temporary abeyance

The best way to summarise that early phase: the state was providing ex-post pandemic insurance, no questions asked.

But there is a good economic rationale: all that destruction can sap the 'bounciness' of the economy to a dangerous degree, in a number of ways. Employment, loss of intangible or organisational capital, burdened balance sheets, wrecked supply chains ...

The good news: by my ready reckoning, the state can easily afford to do a big, *one-off* support package, so long as it generates good growth in response. If it doesn't, the fiscal pain will be waaaaay worse afterwards

What's the advice, then? An impossible tightrope! Policy "flexible enough to adjust to a rebound and recovery and functioning financial markets, on the one hand, or an enduring depression on the other". Please send thoughts to the @hmtreasury ... But some rules of thumb

Including - the punchline of the report, insofar as it has one - start preparing for more equity

There are plenty of other conclusions or bits of passing advice:
- be wary around the 100% guarantee idea
- remember it is jobs and companies you are meant to help, investors less so
- don't kitchen-sink every other damned agenda you have in mind, rebuilding growth is enough

And above all: start work now on the stuff you wish you had in place for this crisis. It may last a while. Envy the German state bank KFW? Well start the work now. We may need it. Wish our tax system favoured equity more? Ditto. And so on.

Anyway, I hope you find something useful in there. It was not easy to write, and the Treasury kept innovating faster than I could write. But there are also impossible value judgements in there. Not everyone can be pleased.