A lockdown with insufficient financial support is the worst of both worlds

The UK’s Covid-19 strategy, like that of India, risks damaging both public health and the economy. 

 

 

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Greater Manchester will enter tier three, but without agreement on the extent of the region's financial support package, while Barnsley, Doncaster, Rotherham and Sheffield will enter tier three on Saturday (24 October). 

Although the gap between the British government and Greater Manchester is small in cash terms at £5m – an essentially meaningless sum in the context of government spending – the difference is large because of what the two sides want to spend it on. Andy Burnham wants to be able to top up the furlough scheme to its current level of 80 per cent. The Conservative government, particularly the Chancellor Rishi Sunak, meanwhile, want to avoid having to resume the furlough scheme at a nationwide level. 

[see also: Regional lockdowns will have sharp consequences for “medium tier” areas]

I find it hard to conceive a situation where, eventually, the financial protections available in areas under the heaviest lockdowns aren't extended everywhere. As Tortoise's Chris Cook explains​​​​​​, the coronavirus economic shock extends well beyond parts of the country that have escaped major outbreaks. Devon and Cornwall have low levels of coronavirus transmission, but that is because they also have lower levels of tourism, and because their farms have decreased demand. If I can't go to St John with my friend, then British farmers can't sell their goods to the restaurant. Increased home-cooking does not sufficiently replace the lost demand. 

Regional lockdowns avoid making everyone in the country pay the psychological and physical costs of lockdown. They do not avoid making everyone pay the economic costs, however. 

Added to that, because our great cities are net importers of young people and workers, if your financial support package makes it impossible or simply too painful for those workers to remain where they are, they will return to their family homes – and at least some of them will bring the novel coronavirus with them. 

[See also: Andy Burnham, Mark Drakeford and Keir Starmer share a diagnosis – but differ on strategy]

There are essentially two approaches to the novel coronavirus: do you believe, with inflation at 0.5 per cent and ten-year gilt yields under 0.2 per cent, you can keep borrowing until the crisis is over and treat the whole thing like war debt? If so, then you support the economy through the period of pain, because Whitehall's ability to guess which bits of the economy will be viable afterwards is limited. This is the approach taken by other Western European economies of a similar size and nature to the UK. 

Or do you think that you can't borrow indefinitely until the crisis is over? That's the conclusion of many countries in the global South, which do not have the ability to borrow as freely as others. That means ending the lockdown.

Or do you decide to lock down with inadequate economic support: the choice made by India, which has resulted in patchy observance of lockdown measures and a major internal migration of people from high-infection cities to their home. As a result, India has one of the largest outbreaks in the world and its GDP-per-head is set to finish the year at a lower level than that of Bangladesh. 

The troubling thing is, as it stands, the patchy network of support for businesses and households in the United Kingdom most resembles India's approach. 

[see also: The UK government has two Covid-19 policies. One of them will have to go]

Stephen Bush is political editor of the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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