This week we have entered a second national lockdown, which has forced the chancellor, Rishi Sunak, to U-turn on extending the furlough scheme. Both these outcomes the chancellor did not want and doggedly resisted for weeks. He led the group of ministers in cabinet who opposed the circuit-break when Labour backed it last month. And he fought Andy Burnham, the mayor of Greater Manchester, over the compensation package for those affected by tighter coronavirus restrictions.
The chancellor’s U-turns are not a problem in themselves – ministers should change their mind when their decisions are shown to be wrong. The problem is the time it took for him to reach the right decision. The lockdown delay has invariably cost lives that could have been saved; and it will now require harsher restrictions, and for longer, which will deepen the economic damage Sunak was trying to avoid.
During the first wave of the pandemic, the chancellor was widely praised for acting decisively to protect livelihoods – intervening to ensure that Britain’s economic response was in step with the outbreak. But in this second wave, his response appears to be two steps behind the pace. Behind this miscalculation is a false choice that Sunak has set up, between the health of the nation and the economy.
No one disputes that lockdowns are damaging for the economy. The numbers speak for themselves: a 20% slump in output in the first month of the last lockdown; a projected 12% contraction of the economy this year; and an estimated 3 million unemployed by Christmas. But the alternative, of soldiering on through the pandemic – with no restrictive measures and the inevitable increase in infections, hospitalisations and deaths – is equally damaging economically, if not more so.
The loss of lives, the panic as people watch our health system collapse, the drop in confidence and the changes in behaviour as a wary population restricts its social interactions, will have their own costs. And this is the point – the dichotomy between our wellbeing and the economy is a wholly false one. A good economy is one that works to protect people’s wellbeing. While our lives and our health are under threat, the economy will never fully function.
The chancellor’s failure to recognise this sooner is a major error of judgment. We have no choice but to suppress and manage the virus until the fundamentals of the pandemic change, through better therapeutics and a vaccine that can help us achieve immunity in the long run. The way that we square the circle between the necessary restrictions and the economic damage is through sustained government intervention, to protect jobs and incomes and prop up the economy. This is the conclusion that other major economies, such as Germany, France and Denmark, have come to. They extended their versions of furlough and put in place continuing economic support months ago.
The furlough scheme has shown that we can protect people’s livelihoods while we fight the pandemic. But it requires a government willing to continue taking unprecedented action to match the scale of the challenge. This means that in addition to rolling forward the furlough scheme, the government must plug gaps in its support. There are still too many people falling through the cracks.
For those who have been excluded from government support schemes, and the growing numbers who have lost their jobs and rely on universal credit – which at about £90 a week is below the level required to keep people out of poverty – there is the prospect of real hardship this winter. To avoid this, the chancellor may ultimately be forced to act again. And he should start by providing a minimum income guarantee of £220 a week to help families weather the storm.
The protection of jobs and incomes is just one part of the puzzle, however. The other crucial part – key to reconciling the tension between public health and the economy – is an effective test-and-trace system. This must now be a priority for the government over the next four weeks because we know it can potentially allow us to coexist with the virus and open up the economy.
This winter is set to be the most challenging chapter of the crisis. Instead of thoughts turned towards celebrations with loved ones and lights – whether Diwali, Hanukah or Christmas – thoughts instead turn to rent, bills, food, and whether there will be any light at all. This time we have to get it right: to look out for each other, and to strengthen the systems that support us all when times are tough.
• Miatta Fahnbulleh is chief executive of the New Economics Foundation