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20 October 2020

The UK government has two Covid-19 policies. One of them will have to go

Ministers are pursuing an ambitious lockdown strategy while also trying to reduce public spending. These two objectives can’t co-exist.  

By Stephen Bush

​​Is the British pub industry viable or not? I ask because the question illustrates the real problem with the government’s current lockdown strategy. Rishi Sunak’s explicit argument is that some jobs rendered impossible or unprofitable by the pandemic will never return – and that the government should not subsidise “unviable” jobs.

That disagreement is why the Westminster government and Greater Manchester’s local authorities and metro-mayor, Andy Burnham, were unable to reach an accord, and why the region will enter tier three – in which pubs not serving substantial meals have to close, household mixing is banned and a variety of other organisations are compelled to shut. Although the figure at the heart of the dispute – just £5m – is small in terms of government spending, the disagreement is not how much the Conservative government and Burnham want to spend: it is about what Burnham wants to do with the money. He wants a more generous furlough scheme, analogous to the original scheme, with a wider scope: the government, and the Chancellor in particular, want to avoid anything that could lead to the return of the nationwide furlough. 

The problem, in practice, is that a job’s “viability” has a simple metric: whether the government has compelled it to shut or not. That means that a dry pub – that is, a pub that serves only alcohol and snacks or small bites – in a tier 3 area, which is compelled to shut, will receive financial support and its employees will have their salaries paid by the state. But a brewery in the same area receives nothing other than the new job support scheme, which, as designed, makes it more costly to retain staff than to cut hours.

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

It is not clear why the business of selling craft beers in Greater Manchester is viable, and therefore worthy of government support, yet the business of producing craft bars in the same is unviable – or indeed, why the business of selling craft beers becomes less viable if you sell both craft beers and food.

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These restrictions also have implications well beyond Greater Manchester (or any region in tier three for that matter). If you are a farmer in Devon, then you might have a very low rate of fresh Covid-19 cases and be in tier one, in which individuals are able to meet indoors subject to the rule of six. But demand for your products in restaurants and bars is also adversely affected – even though you are not under lockdown and there is no immediate prospect that you will be.

Again, it’s not clear why selling beers and snacks in Greater Manchester makes you a viable business, but selling beers and snacks in London means that you are unviable, but even less clear why producing beers and snacks anywhere means you aren’t viable.

The answer, of course, is that, ultimately, the government’s current policy position is the result of various conflicting forces: an anti-coronavirus strategy devised in the Department of Health that prioritises curbing the growth of the virus, and an anti-debt strategy devised in the Treasury that prioritises any means of reducing the amount it spends on salary support. The policy mix makes no sense because it is nonsensical: it is two conflicting policy approaches in the same administration. While regional lockdowns can be used to avoid the social and psychological pain of lockdowns, regional lockdowns do not free ministers from the need to provide nationwide economic support in order to maintain consent for lockdowns, both in terms of general support for the government and observance of lockdown procedures. The UK’s two approaches cannot co-exist with one another: something will have to give. 

Which will it be? I think it’s likely that the present lockdown will simply collapse. Restaurants and pubs are not enforcing the ban on inter-household mixing, partly because it is essentially impossible to do so in all but the most obvious cases, and partly because they are so financially strained that they are not going to refuse what little business they can get through the door. Elsewhere, the lack of financial support for households will compel people to go out to look for work or trigger the merging of households (most visibly through children in cities moving to family homes outside of them, but also through people who are evicted sleeping on the couches of their friends and relations within cities).

Both of these things are happening at the margin already and I see no compelling reason to believe that this trend will not become more acute. The choices before the government are often presented as a choice between Sweden, which did not formally lockdown, and New Zealand, which locked down very early. But the UK’s present policy mix looks more like that of India, which compelled a lockdown without significant financial support, and has ended up with one of the largest coronavirus epidemics in the world.