Why I still think #EatOutToHelpOut is wrong … but what it might achieve

I have been arguing since it was announced that Rishi Sunak’s “Eat out to help out” scheme was a bad idea economically.  You see, the assumption seems to be that the measure will encourage people to start eating out in restaurants again. The problem is that the thing that has stopped people eating out over the past few months has not been the shorter of a tenner or two but rather, that we have been in lockdown for the past few months and there is still a vicious virus doing the rounds. I could be wrong but I don’t think that most of the people still reluctant to go out and about are going to be attracted out by money. They will be attracted out by knowing that things are safe, that the virus has abated and that they will be able to live a normal life without fear.

However, there are two possible things that this particular remedy might do.  The discount is only in place on Monday to Wednesday. That probably gives us a clue about what is hoped for.  You see, most hospitality business tends to be at the weekend. That’s the time of the week when it will be hard to maintain social distancing if you go out.  So, if the measure leads to a more even spread of customers at pubs and restaurants through the week, then that might be a good thing. That would also explain why the measures are not aimed at takeaways.

The second possibility is something that I’ve seen suggested online in conversation. From a Keynesian economics point of view, Sunak could just have easily given everyone ten pound to spend as they felt fit. That would put money into circulation in the economy.  The risk with that is that they don’t spend it where the Government wants it spent.

It has been suggested that people might just hold onto the money and save it but given that interest rates are at rock bottom, that is unlikely to happen. There is no motivation to save.  However, they may choose to spend it in other sectors. Therefore, even if the money is going to people who would have spent it anyway, they are nudged to spend it where it is needed.

The problem with that is two-fold. First of all, there is a moral dimension to this. We learn to see money given to us by the government as a gift from them. However, it is our money that we have paid in taxes that is being given to us. The Government are making decisions for us about where we should spend our money. We are losing moral agency.

Secondly, it assumes that central government is best placed to decide where the money is spent. You see, given that all the logic suggests that the beneficiaries will be people who would have been out and about and spending anyway, all that this means is that any extra money going to Starbucks and Beefeater would have been spent somewhere else in the economy.

As we see shops that sell manufactured products closing down branches and other businesses going into administration, then this might give us pause to consider why the hospitality industry is more deserving of our help than them.

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