Thomas Cook, the iconic British travel company, has recently collapsed after 176 years of operations, having failed to secure a £150m bailout from the government. The incident has forced the government to initiate the largest peacetime evacuation in British history, aimed at bringing more than 150,000 British tourists home. The severe disruption aside, the collapse has left the company’s 21,000 staff, including 9,000 in the UK, without jobs.
Practically speaking, any government would think twice before letting such an enormous company fail. The amount of bailout requested from the government is meager given the fact that Thomas Cook has an annual sales of $11b. One might also find it ridiculous that the government has spent about £100 million bringing back stranded Thomas Cook passengers, which is only £50 million less than bailing out the company.
The refusal to grant the bailout also defies political logic in a sense that the government is led by the Conservative Party, which is generally seen as a pro-business party. Like the Republican Party in the US, the Conservative Party generally favors tax cuts, blames migrants for economic woes, is obsessed about reducing deficits, thus, spending less. It also promotes less rigorous state regulation.
And, the affection seems to be mutual. While the idea that the Conservative Party is inherently pro-business is being debated in the wake of the Brexit, the business community still favors the Conservative over Jeremy Corbyn’s Labour, as a recent paper by Politics Studies Association notes.
Moreover, while the progressives across both sides of the Atlantic loathe the idea of bailing out corporations, it shouldn’t be problematic for a right-wing party like the Conservative Party.
Therefore, one could assume that with such a credential Tories would be more than willing to grant the bailout to Thomas Cook. But it certainly did not happen.
As to why, Boris Johnson, the prime minister, cited “a moral hazard” that the deal could have created for other businesses to fail. This argument was even more baffling because morality is not something that a right-wing party is supposed to invoke when it comes to bailing out a company.
In their opposition to providing bailouts to corporations with the taxpayers’ money, progressives generally deride hefty payouts to executives. In this case, however, it was the British government—not the left-wing Labour Party, which remained largely silent on the issue—which adopted this particular line of attacks to justify its decision.
Boris Johnson slammed Thomas Cook’s top executives who had reportedly been paid £20m in bonuses in the last five years. The day it became clear that the company would undergo “compulsory liquidation,” it was the Times and the Daily Mail, two generally Conservative-leaning newspapers, which prominently covered the bonuses given to top Thomas Cook executives.
When the Independent newspaper shared the article on Facebook that the government had refused to accept the bailout request, the majority of its readers—who tend to be liberal and progressive—expressed anger, as suggested by the angry reactions and comments the story attracted. This begs a question: Why on earth would progressives be supportive of a bailout?
I asked Pat Osborne, a friend and the Labour candidate in the last parliamentary election from North Dorset constituency, to explain this conundrum. He revealed to me that Thomas Cook was more deserving of the bailout than it appeared.
He cited reports to say the company had already managed nearly £1b funds for its planned recovery. Its largest funder, however, attached a last-minute condition that it should get an additional £150m, which forced it to ask the government.
Pat explained that the risk for so many people of losing their jobs forced the trade unions, a natural ally of the Labour Party, to support the company in its negotiation. Perhaps, this explains the main opposition party’s silence.