Without competence and smart governance, both of which have been absent from Whitehall, the economy will be plagued for years to come.
By Ross Alexander Hutton
In a letter sent to every household across the UK, Boris Johnson wrote in plain-English: “We are giving one simple instruction — you must stay at home”. Those few short words initiated monumental changes to every aspect of social life with historic ramifications for the British economy. Woven into the Prime Minister’s address to the nation was the spirit of the lockdown – to protect the NHS and save lives – which imprinted itself upon the nations’ psyche by establishing a renewed national mission.
Just as the British people took on the struggle with a war-like effort to curb the threat of the virus, so too did the Treasury meet the moment with the introduction of the Coronavirus Job Retention Scheme and Self-employment Income Support, which now account for nearly a quarter of workers’ wages. For a ‘great office of state’, defined by its cautious and scrupulous approach, to intervene so decisively in the economy and at such pace was unprecedented by all accounts. With both the Public and the State ‘fighting tooth and nail’ to combat the novel coronavirus it seemed as though the UK would flatten the peak of the disease and the economy would eventually be freed from its life-line. Even though Boris Johnson has declared his government’s “apparent success” in tackling the virus, both outcomes remain far more uncertain.
Indeed, had the Prime Minister acted sooner without (to coin the phrase) ‘dither and delay’, the longevity and severity of this national crisis would have been diminished. If the government had introduced ‘lockdown’ just 10 days earlier, it is estimated that the death toll would have been reduced by three-quarters. The paralysis in Downing Street during those crucial days was undoubtedly the first instance illuminating the absence of smart governance in this crisis – a systemic failure in the heart of Whitehall which continues to impede the government’s operation.
To which we turn to the ‘elephant in the room’ – or rather in Barnard Castle. The historic market town in County Durham became embroiled in the controversy surrounding Boris Johnson’s Chief Advisor Dominic Cummings’ infringement of his own ‘Stay at Home’ message. In doing so, the mastermind of Johnson’s Government became the face of Westminster elitism (the very image he revolted against prior to entering Downing Street) which was not helped by his refusal to apologise.
In normal times, political discord seldom penetrates past the ‘Westminster Bubble’ to trickle down to public opinion, but these are not ordinary times – nor can the Durham scandal be so easily dismissed as a typical political squabble. The cut-through of the Cummings saga to public opinion is unsurprising given the sacrifices made by the British public throughout the lockdown. With growing anger across the nation, and pressure from the government’s own backbenchers for Cummings to resign, Johnson chose to throw the full weight of the government machine behind an unelected aide rather than the crisis devastating the country.
Consequently, the defence of Cumming’s trip to Barnard Castle to ‘test his eyesight’ was widely ridiculed. The government was reduced to an out-of-touch laughing stock – a particularly precarious position to be in during a crisis. The widening disparity of sentiment between the government and public comes at a price: lost confidence. As Abraham Lincoln said “Public Sentiment is Everything” for the art of political persuasion to prevail. For Johnson’s cabinet to burn up political capital at a time when trust in the government’s approach to fighting coronavirus is of paramount importance, and conscious conformity is essential for the measures to work. It is perhaps no coincidence that Barnard Castle is slang for ‘pathetic excuse’.
In a bid to wean the press off the Durham Scandal, the government decided to ease restrictions on social life in a defiant step away from “following the science”. Despite several members of SAGE (Scientific Advisory Group for Emergencies) raising concerns that the relaxation of measures was “dangerous”, since the incidence level was still very high, the government proceeded to ‘let the genie out of the bottle’. Pursuing such an exit strategy from lockdown which is wholly reliant on compliance rooted in the public’s willingness to co-operate en masse – a previously abundant but now scarce government asset – is the most blatant form of incompetence conceivable.
Notwithstanding the objective of protecting Dominic Cummings, the Government was under intense pressure from British industry to unleash business from lockdown and to prioritise the economy over the health of the nation. Yet they are inseparable. The truth is, the government is not dealing with two separate crises but one, intertwined crisis with effects on both health and the economy. It is all well and good to lift restrictions on businesses to get the economic machine out of neutral, but without consumer confidence, the economy cannot get into first gear never mind firing on all cylinders. For the exit strategy to work, the public must trust the government’s calculation – especially those most at risk from the virus – and believe the government is still prioritising health in order for the economic recovery to succeed.
Without a meticulous defence system in place to fight Coronavirus in the form of Test & Trace, further easing of restrictions by a government blinded by myopic newspaper headlines as opposed to the long-termism of preventing a ‘second wave’ makes such a scenario inevitable. Considering that the now infamous ‘R-number’ was already teetering on the edge of 1 before the restrictions were lifted, it is not difficult to envisage exponential growth resuming and the completion of the ‘one-two punch’ to the British economy.
As Britain sleepwalks into a second wave, the Chancellor’s prediction of a ‘swift and strong recovery’ is as delusional as it is naïve. It is easy to be in denial about the seriousness of an invisible enemy and the consequences for the way we live our lives. With the focus on the immediate struggle against Coronavirus, one can lose sight of the historical significance of the times we are living through. In economic terms, 2020 is likely to see the largest economic contraction since 1900 dwarfing both the 2008 Financial Crisis and World War II. If history tells us anything, it is that wars and epidemics cause enormous upheaval and profound changes to social life for years after: the ramifications persist.
Be in no doubt, the calls to return back to the pre-Covid halcyon days may not only be infeasible but undesirable. Under the radar, businesses are quietly assessing the future of office-working amidst the growth of video-conferencing, raising a myriad of questions about the post-Covid working environment. The weekly ‘clap for carers’ has sparked a national conversation about the valuation of key workers and their importance to the UK economy – raising hopes that a re-balancing of the economy is on the horizon. In light of reports around the world of the environmental benefits of national lockdowns ranging from cleaner canals in Venice to greatly reduced air pollution in India, societies have shown they can change their behaviour to combat climate change. Of course, there are serious fiscal challenges ahead which will no doubt take centre stage in the political discourse for years to come as the national debt will likely reach eye-watering levels of £200bn this year, according to the Institute for Fiscal Studies.
It is worth noting that the widespread mismanagement of the financial system was largely to blame for the 2008 crisis, requiring unprecedented measures to save the financial sector from the brink of collapse. Similarly, the fundamental mismanagement of the Coronavirus pandemic by the government will likely contribute to sustained damage across the entire economy and every industry, as shown by the record-breaking economic contraction of 20% in April. Regardless of the shape of GDP growth, from the most optimistic forecasts of a V-shaped comeback to the more likely scenario of L-shaped growth, ordinary stimulus measures will not return the economy to its former self.
A recovery from this economic nightmare – entrenched by the threat of a second wave of the virus – will depend upon unprecedented measures, in the realm of those introduced during the ‘Great Recession’, to prevent a whole generation of young workers from the shadow of unemployment hovering over their entire working lives. Now is the time for smart governance and innovative policies such as the creation of ‘green jobs’, proactive investment and structural retraining – aided by an international response which has so-far been absent despite the crisis transcending national jurisdictions.
Given the perilous position the UK finds itself resulting from governmental incompetence during this crisis, there is plenty of reason to be concerned about the times ahead. Equally, there is reason for optimism. It is not too late for smart governance and competency to prevail instead of simply throwing everything at the crisis, and not necessarily in the right places. Going forward, if the government is to lead an economic recovery, it must do so smarter not harder.
The views expressed in this article are the author’s own, and may not reflect the opinions of the St Andrews Economist.
Image Source: Sky News