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30 April 2020

What the fate of British air travel means for the government

Ministers must ask themselves how much they should consider the future needs of the country when trying to preserve the economy.

By Stephen Bush

British Airways have announced plans to make 12,000 people redundant, saying that it will take years for demand for air travel to return to pre-crisis levels.

The looming job losses highlight one of the challenges facing policymakers  – and not just here in the United Kingdom  – about the economic response to the coronavirus: to what extent should they try to anticipate potential changes in the economy?

One of the ways the political response to the pandemic recession differs from any other recession in history is that policymakers, across left and right, are broadly united in believing that the government should be trying to save specific jobs. Mostly in a crisis, governments aim to aid the transition of people from unemployment to new employment. They disagree sharply on how, but the one thing they agree on is that they aren’t in the business of saving existing jobs. Gordon Brown and David Cameron disagreed on how best to help the 25,000 people who lost their jobs when Woolworths went bust – but neither of them were in the business of saving Woolworths.

That’s why Rishi Sunak has opted to guarantee salaries via people’s employers rather than merely increasing the generosity of unemployment benefit – because his aim is to keep people as close to the labour market as possible, not to ease their transition from one job to another.

In 2020, however, Boris Johnson and Keir Starmer are both aiming to keep people employed and to maintain and protect specific industries. Is that the right call? Giles Wilkes, former special advisor to Vince Cable and Theresa May, has written a pamphlet for the Institute for Government about that specific question, which is worth reading in full. He splits the economic response into three phases: “rescue”, when governments pulled every lever available to prevent and lessen the economic damage of lockdown; “recovery”, the process that will begin as lockdown is either eased or we transition to a better functioning lockdown economy; and “restructuring”, in which the economy changes shape permanently as a result of the crisis.

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In many ways, using British Airways as a case study makes the need for certain chnages very easy to see. Even if you think, as I do, that the long-term changes in how we live will actually be pretty small, it is hard to see how, if global governments are going to meet their emissions targets, air travel will continue to employ as many people in 2021, 2022, or 2025 as it did in 2019.  

But I’m still reluctant to say that global governments shouldn’t be seeking to protect these jobs, at least in the short-term. The main reason to be pretty relaxed about individual job losses in normal times is that in a normal economy, new jobs are being created all the time and people can transition to them, provided that the safety net is sufficiently generous and well-funded. But often the problem in a British context is that the safety net is neither sufficiently generous nor well-funded, while the process of new job creation continues fine.

However, we have suspended the functioning of the normal economy, and I am increasingly of the view that the changes wrought by coronavirus will be smaller than we think. It will accelerate certain trends around the home delivery of groceries and other items, with more and more shops maintaining a limited physical presence merely as a showroom; films will be released for download and in cinemas simultaneously; homeworking will become more common as businesses, particularly those with expensive office space, try to cut costs.

But these trends were pretty much all underway anyway. There will, I think, be some small changes – mask-wearing will become permanent in most cities, people will be more open about their mental health, the general level of handwashing will likely permanently increase – but the lesson I take from previous pandemics is that we will forget Covid-19 more quickly than supposed.

I’m therefore fairly leery of arguments that the government should be more preoccupied about what its interventions mean for the restructuring of the economy after Covid-19. The bigger question should be about the changes that will happen during Covid-19, as governments across the world seek to make the era of social distancing more bearable and livable for citzens and businesses alike.

But that in of itself is a huge and potentially wrong call: there really are very few no-brainers here. The questions about the future of British Airways emphasise that while policy answers in terms of what you do for workers are easy, the issue of what to provide for businesses is altogether more complicated.