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16 March 2020updated 17 Mar 2020 11:23am

Boris Johnson’s new anti-coronavirus measures need a new economic policy to match

If people cannot self-isolate and maintain financial peace of mind, they won’t follow the government’s orders.

By Stephen Bush

British people should avoid all non-essential social contact, while the pregnant and the over-70s should self-isolate for 12 weeks, the Prime Minister Boris Johnson has announced. The government’s chief scientific adviser, Patrick Vallance, warned that the period of social distancing would last for weeks and might extend for months.

It represents a change in approach to a more stringent set of recommendations than the one previously favoured by the government. But the policy has a missing component: an updated set of economic and welfare policies from Rishi Sunak, the Chancellor, to support people, particularly parents and carers, and businesses through the period of self-isolation and reduced activity. 

Sunak got one thing right and two things wrong in his budget. What he got right was opting to boost the strength of existing policies rather than creating new ones. Rolling out any new policy takes time, both in terms of implementation and conception. It’s considerably easier to just increase the scope and generosity of existing systems, such as Universal Credit, than it is to create a “coronavirus personal income supplement grant” or something similar.

But the Chancellor also made two big mistakes. The first was in the scale of the provisions for people self-isolating. Statutory sick pay remains very low, and the five week-wait for the first Universal Credit payment remains in place. He made it considerably easier to claim and reduced the minimum income threshold, both important changes: but if you are, today, wondering if you will go into work tomorrow, then knowing you can get your Universal Credit payment in the bank in five weeks, no questions asked, is of limited use to you.

The second is that Sunak made little in the way of provision for medium-sized or bigger businesses. Politicians tend to prefer talking about “small businesses” because they poll better than “big businesses”. But 40 per cent of people are employed by big businesses and many small businesses depend, directly or indirectly, on the health of small businesses.

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Taken together, those two mistakes have the same consequence: it’s hard to see how many workers and businesses will feel comfortable and safe in scaling back their economic activities. Johnson’s decision to refrain from closing theatres and pubs, which will instead mean that theatres and concert halls will fear that they will not be able to collect insurance payments, will have two consequences. The first is that when the crisis is over, the economic and social cost of the anti-viral measures will be larger. The second is that it makes it less likely that people will actually follow the government’s advice – and that may mean that the social consequences of the virus itself will be larger, too.  

Johnson is right to say that the economic consequences of Covid-19 are unlike the 2008 financial crisis – there is no underlying systemic issue, which means that the problem is easy to surmount: any additional borrowing or spending that occurs can be very easily absorbed after the crisis passes. But that doesn’t mean that the government won’t need to do far more for both people and businesses than it is at present.