10 March 2020

The biggest economic test facing the government over coronavirus

In advance of mass self-isolation, ministers must prepare to deliver large-scale household relief.

LONDON, ENGLAND - MARCH 09: UK Prime Minister Boris Johnson speaks and takes questions during a press conference in Downing Street regarding the coronavirus outbreak, on March 9, 2020. in London, England. (Alberto Pezzali - WPA Pool/Getty Images)

The entire nation of Italy has been sent into quarantine, with 60 million people told to stay at home unless they have urgent health and work business.

It comes as a fierce political debate has broken out here in the United Kingdom over the extent and timing of any social distancing measures – should schools be closed, and when? To what extent should healthy people be encouraged or instructed to work at home?

Rory Stewart believes that the lesson from other pandemics is that there is always a bias towards optimism, so the government should go further than the official advice and act quickly and ruthlessly. But Justine Greening, who was international development secretary at the height of the 2014-16 ebola crisis, takes a different view.

The more important discussion to be had probably isn’t how the government should respond because, to be frank, our ability to have an informed debate one way or another is essentially non-existent. A more important question may be: what does encouraging someone to work at home actually involve?

For a chunk of people, it means little more than sitting at a computer in their home. That’s very easy. But for a lot of people, encouraging them to work at home will actually mean providing funds in lieu of employment. You can’t work from home as a delivery driver, a plumber, a waiter or carpenter, and your employer (if you have one) can’t easily hand over wages when no-one is coming through the door. The Italian government’s biggest crisis-fighting measure on that score so far is mortgage relief for homeowners: a big and very useful measure but one which won’t be felt by many. But it’s the type of economic relief needed and one that is far more effective than merely delaying the point when small businesses have to make payments to HMRC.

One important difference between the UK and Italy is that the Italian state is very poorly-equipped to funnel money directly and swiftly to individual households. The UK’s tax-collecting bureaucracy and infrastructure makes it well-placed to deliver the type of large-scale household relief that might be needed – and the level of willingness to do so and think imaginatively is now the biggest test of tomorrow’s Budget.