jomur wrote:Its not a vast amount, taxes relevant to the aviation industry would still be paid if Virgin didn't exist as their passengers would most likely fly with another airline. PAYE is a small amount considering the rather small amount of staff they have. .
I don’t think you can credibly assert that it is not a vast amount, or that passengers would fly elsewhere. This is a further example of the bad information flying around in the subject.
Taking the first point, VS say they turnover around £250m in air passenger duties and £135m in payroll taxes. This will obviously reduce if it survives, but this is a fairly large slice of the circa £500m liquidity they are seeking in a 12 months period. This doesn’t include VAT, the cost of universal credit or the knock on effect of suppliers and the loc economy as the money cycles round the system. It is not unreasonable to say that the government would get its money back in taxes in a 12 month period. That is not the same as repaying a loan, but it illustrates the difference in approach between commercial lenders and government.
Taking the second point, it is extraordinarily unlikely that VS passengers would fly elsewhere - certainly not in the short term. Carriers the world over are (or shortly will) be cutting capacity. If a competitor exits the market that capacity will not be replaced in the short term, and economic theory suggests that this will likely not be replaced in the mid to long term unless a new competitor emerges (and how likely is that).
jomur wrote:I doubt that many of the companies supply Virgin depend totally in them would survive longterm regardless of Virgin existing or not. I am not saying they might suffer some short term difficulties but they would survive
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It is possible they would survive, but there is obviously no guarantee of that. What we do know is that as VS, BA and others contract, their suppliers will contract also. This means fewer jobs, less tax being paid, more universal credit being paid and less cash cycling through the system (which also lowers tax take). It is a viscous circle, but protecting the entity at the top of the supply chain mitigates this damage throughout the chain. All of this plays into the calculations.
jomur wrote:Personally I'm not a fan of SRB but that doesn't mean I think Virgin should get no money regardless, I just think that the same rules that apply to every other company asking for a Government loan should apply to Virgin. Currently, regardless of what any one else thimks, the UK Government don't think it qualifies for one otherwise it would have received one by now. In the future?..maybe
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This largely repeats what you said last week, so I’ll repeat what I said to you then which answers the point:
DobboDobbo wrote:First, the government are in the process of gathering evidence on the aviation industry and developing policy to understand its importance and what can be done to preserve it as far as possible. We do not yet know the outcome of this process. We also know that any bespoke support from the U.K. government is to be a last resort. In the last few weeks we have seen BA and VS commence restructures which will be ongoing for about 8 weeks. Therefore, on the issue of whether the U.K. government is prepared to support VS, your point is at best premature.
Second, the comparison between what I (Or any other private individual or company) would/should do with their money and what the government would/should do with it is a bad one. The governments job is very different to that of a private person. The comparison is simply not relevant.
Third, it’s not just the 6,000+ jobs at VS at stake (this assumes a cut of 25% of their workforce). It’s their suppliers, from the staff at the airport, to the travel agents, to the engine and aircraft manufacturers. You could give handouts to all of them, but it would be more economical to support the anchor of that supply chain to continue trading. Many of the thousands of smaller businesses you feel could be saved for less money may themselves be reliant upon a VS or a BA - meaning that “saving” them would be largely pointless if their chief customer fails.
Fourth, whether you like him or not Branson has already put hundreds of millions of dollars of his own money into supporting the Virgin group (of which something like $100m has gone to VS). I’d imagine (but obviously don’t know) he would be willing to do more if he could. Whether he has the cash or the ability to access cash (e.g. borrowing, sale of assets) I don’t know either. Either way, he clearly has given (not lent) money to VS so therefore your inference that he is unwilling to put his money where his mouth is plainly wrong, and following through the logic of your argument wouldn’t you agree the government should be sympathetic in principle to supporting VS given he has already done so?
Finally, the nature of the various stimuli announced have or are costing the treasury an absolute fortune. The sums VS are seeking are a drop in the ocean. There is little point stimulating the economy if there is nothing left to stimulate as we come out of the other side of this.
My view is that the economic consequences of this pandemic are unprecedented and disproportionately affect the aviation / tourism sectors. They will have to adjust to the new normal, but governments should be willing to assist where appropriate to facilitate this transition. That will likely not be known until June or July IMO.
