It says something about the current state of Britain that the economy has become a sideshow. At any other time, the prospect of a double-dip recession would be front-page news, but it is now merely a footnote to daily bulletins charting infection rates, hospitalisations and deaths.
For the past year there has been a debate about whether lockdowns are worth the pain, once all the collateral damage – the cancelled cancer operations, the lost months of schooling for children who can ill afford it, the increased incidence of domestic abuse and mental health problems, the lengthening dole queues – is taken into account.
That debate is now over. The risk of the NHS being overwhelmed has forced a return to restrictions almost as severe as those enacted last spring. Having blundered its way through 2020, the government felt it had no choice but to shut the schools and instruct people to stay at home.
Make no mistake, there is an economic cost. The loss of output in late 2020 and early 2021 will be nothing like as severe as the 25% contraction suffered between February and April last year, but it will be bad enough. Businesses have been running down their cash reserves. For some, a third lockdown will be one too many. Others will survive only if the restrictions imposed this week are relatively short-lived.
Boris Johnson’s view is that a successful vaccine programme will solve both the health crisis and the economic crisis – and the prime minister is right about that. Once enough jabs have been administered, the pressure on the NHS will begin to lift, restrictions will be eased, businesses will be allowed to reopen and the economy will recover.
But the experience of the past year suggests it might not be as easy as that. The government has repeatedly made big promises that it failed to deliver. Its test, trace and isolate programme failed to meet expectations; Rishi Sunak’s furlough scheme was supposed to end last October but has been extended for a further six months; the tier system was supposed to keep the virus in check but England is now in a third lockdown. It would be entirely understandable if the public wasn’t confident that the government will fulfil its vaccine promises. Outside of wartime, it’s difficult to recall an administration that has played for such high stakes – let alone one that has appeared so clueless.
Providing daily updates on the number of vaccinations is a good idea, but there are plenty of other things Johnson could do to get a grip on the situation. In 1915, the prime minister Herbert Asquith moved Lloyd George from the Treasury to become minister for munitions, because he understood that managing the nation’s money mattered less than the struggle on the western front. The government has appointed Nadhim Zahawi as parliamentary under-secretary of state for the vaccine programme, but there’s a strong argument for having a senior cabinet minister responsible for the vaccine delivery.
Preferably, that minister would have experience of running a business or, if not, be someone willing to experiment with new ideas. Despite the panic-buying last spring, supermarkets’ sophisticated logistics networks kept the shelves stocked and stopped Britain running out of food. The government could draw on their capacity to distribute the vaccines – as it is doing with high street pharmacies, which are due to start offering the Oxford/AstraZeneca vaccine next week. If the lack of staff to administer vaccines is a problem, as it may well be, government could cut the red tape to make it easier for GPs and nurses to volunteer to come out of retirement – indeed, it has already proposed expanding the workforce of people who are able to deliver jabs. In the days when they were open, theatres used to limit the number of empty seats by allowing people to queue up for last-minute tickets from returns and no-shows. Israel has adopted the same principle for its vaccination programme, offering on-the-spot jabs at the end of the day in order to cut waste.
Thus far the government has not appeared keen on innovation, despite the way test and trace exposed the shortcomings of a command and control approach. There is already a sense of excuses being prepared for when the target of vaccinating 13 million people in four priority groups by mid-February is not met.
One lesson of the past year has been that there has been too much spin and too little creative thinking. The furlough was an example of an innovation that worked: sure, paying the wages of workers has been expensive but the alternative – an unemployment rate comfortably into double figures – would have been far worse.
Sunak’s job now is to keep splashing the cash. Having protected jobs and businesses for the best part of a year, the Treasury would undo all its good work if a misplaced frugality allowed unemployment to rise sharply over the coming months. Even if the vaccination programme goes as planned, social distancing restrictions will be relaxed only slowly, leaving some sectors of the economy struggling well into the summer and perhaps beyond. The chancellor needs to approach the phasing out of financial support in the same cautious manner, offering plentiful assistance to those that need it most.
There has been a string of mini-budgets since last summer and there was a strong case for another one this week to coincide with the new lockdown rather than one-off grants of up to £9,000. It would have been a good time to announce the extension of the furlough, a further one-year business rates holiday and a continuation of more generous universal credit. Why? Because it would have suggested there was a plan for getting us out of this mess – not just a hope that somehow everything will be alright.
Larry Elliott is the Guardian’s economics editor
This article was updated on 7 January 2021 to clarify that there is currently a junior minister responsible for the vaccination programme.
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