Article author Eddie Saint-Jean
There have been comparisons with the Second World War in impact and scale. That is disputable, but it’s fair to call it the steepest economic trajectory in history, certainly for three centuries. Also, this is the largest number of weekly deaths the UK has faced in many decades. Boris Johnson’s hero Winston Churchill led the nation through the war and it’s the UK Prime Minister’s moment to show an equal amount of clear and defining leadership with the health of millions and a fragile economy at stake.
He and other national leaders must decide whether their focus is to protect lives or kickstart the economy. Their decisions will impact the severity of incoming recessions but many have not yet even mitigated the public health risk and possibility of new outbreaks.
So what do the experts have to say about the Health vs Economy (some say People vs Profit) dilemma? We hear from economists, health experts and politicians.
Michael Gove, Conservative politician – “The whole point about life is that you need to manage risk. We cannot have a situation where we keep our economy and our schools and our public services continually closed down, because the health consequences of doing so would be malign as well.”
Certainly, it’s not as simple as one or the other. If public health is ignored then there may be many more fatalities and this will also affect the economy. However, if the economy is severely neglected it will lead to considerable deaths from the resulting socio-economic hardship and emerging developed nations with weaker healthcare systems and crowded cities such as in Latin America, Asia and Africa will be the hardest hit.
There are already riots in Chile over food shortages and unemployment caused by lockdown. The World Health Organisation predicts a quarter of a billion infections and 300,000 – 3.5 million deaths across Africa, which will put immense pressure on their healthcare systems and economies.
Boris Johnson’s former economic advisor Dr Gerrard Lyons claims if we don’t remove the lockdown soon, the UK will be Europe’s most affected economy and believes outbreak concerns can be resolved with social distancing along with testing and tracking and tracing. However, the PM moved to get the nation back to work when no such safeguards were in place; he acted after a drop in the infection rate.
His actions were also hastened by reports from the Office of Budgetary Responsibility (OBR) who say if the second quarter trajectory continues there will be an unprecedented 35% quarterly fall. Many fear the impact of this second quarter peak, hence the PM encouraging the public to get back to work from May 11 while telling them to ‘Stay Alert’. “Good luck with that” might have been a more fitting send-off from the PM.
With the nation facing high levels of unemployment and even the safe jobs teetering on the brink of redundancy, the danger of a cramped, virus-ridden Tube seems to be a risk worth taking. But Johnson announcing this only 12 hours before the expected May 11 rush hour shows a PM who is either desperate to restart the economy, lacking in meticulous method or both.
Professor Kevin Fenton, London regional director for Public Health England – “We can’t be complacent otherwise we risk this virus repeating again.”
Leaving it up to businesses and local authorities to sort out transport systems, offices and public spaces and mumbling on about a 50-page online guidance document (Our Plan to Rebuild) shows a distinct lack of Clement Attlee-style attention to detail.
The PM is a big fan of war minister Winston Churchill whose inspiring rhetoric lifted the nation during the Second World War but it is worth noting that Labour leader Clement Attlee was the national government’s deputy PM at the time and it was he who managed the fine details of the national effort during the war with his fastidious handling of everything from factory munitions to societal logistics.
The Covid-19 pandemic isn’t a war, but comparisons can be made with the management of an economy in collapse and people losing hope and panicking about their losing their livelihoods, let alone their lives. However, war rhetoric alone will not save the NHS from possible collapse if there are 2nd or even 3rd outbreaks as a result of relaxing lockdown.
Phillip Coggan, The Economist – “It shows our humanity that we want to reduce the deaths so much that we’re willing to put up with all these restrictions and willing to accept a big hit to economic activity.”
Economic impact
Let’s look in greater detail at the economic factors that have forced the PM’s hand.
The coronavirus has uncompromisingly shut down global supply and demand. China, the world’s supply chain, producing over a third of all the world’s products, is where the coronavirus first struck and the first nation shut down because of it. Europe, it’s biggest market, is feeling the after-effects.
The significant delays in supplies going out means products can’t be made or sold, resulting in redundancies and bankruptcies and a fall in consumer purchases and sales. This supply and demand cycle repeats itself with innumerable supply chain tributaries affected. If that’s not enough, China is also a major global buyer so when China hurts, the world hurts big time.
This domino effect, along with nationwide lockdown, has impacted the UK. The Organisation for Economic Cooperation and Development (OECD) has stats which show Britain’s economy will slump deeper than any other major European economy this year and UK Chancellor Rishi Sunak says that it is very likely that the UK will face a significant recession. Only a month into the job he was steering the UK through the sharpest economic decline since the Global Financial Crisis of 2008, with the UK economy shrinking 2% in the first quarter and 2.1million unemployed.
The Bank of England cut interest rates to 0% to stimulate the economy (the lowest since the bank was formed in 1694) and the US did the same. The head of the Federal Reserve Jerome Powell is currently fending off desperate calls for negative interest rates favoured by Trump – that’s how bad it’s got. This after the US’s longest ever period of economic expansion.
Sir Iain Duncan-Smith, Former Conservative Party Leader – “Our economy is facing a complete crash: the debts we’re racking up on how we’re supporting people, the fact no work or very little work is taking place.”
Government and Consumer debt
Consumer debt is higher than at the time of the 2008 crisis and feeds the cycle of people unable to repay leading to financial institutions and lenders incurring massive losses. Big banks and lenders unable to recoup debts can lead to a collapse of the banking system, as occurred in 2008.
Local authorities face a £5bn funding shortfall because costs continue with no revenue, moreover there are additional costs from dealing with the Covid-19 emergency. They may even need to implement their own local government austerity measures because the government’s £3.2bn council bailouts are nearly spent.
These budget cuts won’t only be in the arts and leisure services most hit during 2010 austerity but also in key services such as waste management. Over £400m in business rates and £288m in unpaid council tax has been lost because of unexpected job losses and many local authorities are close to serving Section 114a Notices for insolvency.
Ann Widdecombe, Former Conservative MP – “If we don’t get the economy going there are going to be huge long-term health problems as well as economic problems.”
London Mayor Sadiq Khan raised concerns about these ailing local authorities and also threatened to cut London tube and bus services which also desperately need emergency bailouts. The TFL came close to using up all its £1.2bn cash reserve before the government eventually bailed them out. The government is now under pressure to cancel out the local authorities’ total £82bn debt. However, the Office for Budgetary Responsibility has warned total public sector debt could eventually be as high as £273billion, which is comparable to the Second World War.
Johnson and Khan at loggerheads show how complex and multiflorous the health versus economy argument is. On the one hand, you have the PM keen to get people back to work and packing out tubes and buses to pump money into a near-bankrupt transport system and into the economy – even if it risks their health, and on the other hand, Sadiq Khan doesn’t want public health risked on the TFL system he has authority over, even as it goes bankrupt and he presses the PM for a bailout.
Tim Jackson, Economist, University of Surrey – “What matters more than avoiding an all-out depression is protecting people’s health, particularly protecting the most vulnerable.”
Khan wants more stringent testing and track and trace to prevent further outbreaks. As mayor of the capital, he is aware of the ethnic and socio-economic factors which make this highly populous city vulnerable. For him, same day coronavirus testing is essential. Ideally, all of this should have been implemented well before the PM encouraged the British public to stand cheek by jowl on the capital’s Tube.
However, the PM’s concerns about the economy are borne out in research which shows links between the economy and public health. The 2008 recession led to an increase in suicide and depression in the UK as people struggled with economic hardship. Also, research on the effect of recessions on health and social protection systems published in The Lancet shows that the Brazilian recession led to increased mortality rates particularly among ethnic minorities and the poor. It also found that increased expenditure in healthcare and social protection mitigated the detrimental effects.
A poverty-linked health crisis is a real threat with the leap in unemployment claims higher than since Clement Attlee’s overhaul of the Welfare State in 1946. Britain, at least, has a substantial safety net thanks to the welfare reforms of Liberal PM Lloyd George (1911) and Attlee (1946). More recently, the furlough scheme provides a well-needed safety net for vulnerable workers.
Implemented after discussion with the CBI and TUC, 30% of all workers are expected to be on the scheme at a cost of £42bn to the government, this includes many blue-chip companies with 37% of them cutting highest executive pay to reduce costs. The government has also provided £200m worth of loans for companies who require stop-gap funding.
Poorer nations with no comparative NHS or generous stimulus scheme – and even the US – may face higher unemployment and healthcare pressures. Amount and length of benefit in the US changes state to state, while the UK has a universal, statutory payment. Trump may have to review the nation’s fragile unemployment insurance despite the generous $2.2trillion federal stimulus package.
It faces a possible 1930s-style Great Depression with 36 million unemployed. The Great Depression led to the Social Security Act of 1935 and the introduction of unemployment insurance (U.I) and harsh economics may force Trump’s hand and history repeat itself.
Johnson and Trump may also find that political philosophies crumble in the face of collapsing economies. In the 1940s, Clement Attlee worked with economist John Maynard Keynes on protecting Britain’s fragile economy after the war and he advised huge government spending when the economy was in trouble. Keynes was so well thought of he even advised President Roosevelt on higher government spending during the USA’s Great Depression.
Neo-liberalists frown on state spending and consider it socialist intervention but the coronavirus outbreak has proved that “everyone is a Keynesian in a foxhole.” – a quote attributed to Robert Lucas, professor of economics at the University of Chicago. President Trump, who is fervently anti-state intervention, has outspent the UK dollar for pound.
The arguments in favour of the economy are inevitably entrenched in health issues. If we examine the ailing travel and hospitality sectors, Johnson, arguably, delayed foreign visitor quarantines because of the feared disruption to the economy and society. This fear has been backed up by warnings from tourism chiefs that quarantine may cost their already stagnant industry a further £25bn.
These fears were spelt out by Tom Jenkins, chief executive of the European Tourism Association ( ETOA) as the government announced plans to introduce foreign traveller checks mid-May. Similarly, restaurants fear social distancing is unworkable and will kill their revenue at a crucial time in their post-COVID-19 recovery. But government plans to reduce it to one metre are at odds with World Health Organisation research which show this would double the infection rate.
The Restaurant Group has announced 3,000 job cuts and more may follow across the sector if social distancing causes a drop in footfall and revenue. Some analysts predict 3.5m jobs lost in hospitality if it does not resume business in the booming summer season.
Health Impact
So what are the health factors Boris Johnson is overlooking as he opts to restart the economy?
The government’s own chief medical officer Chris Whitty has warned that a second wave may be even worse – especially in the winter months. He advised keeping the R number below 1 to mitigate both the possibility and severity of a return.
A coronavirus resurgence happened in a number of countries that loosened lockdown, including China, Hong Kong, Singapore and South Korea who have a more thorough approach and experience of dealing with similar pandemics. The second wave of the Spanish Flu pandemic of 1918 was worse than the first.
Mitigation mismanagement is an issue. The UK has the highest death toll in the world and was late in introducing mass testing and track and trace. Johnson abandoned it in mid-March and reintroduced it mid-May but has now ditched it again in an embarrassing U-turn. The phone app won’t be available till winter – if at all.
Did SAGE wrongly advise the government to abandon testing or did the PM overrule? None of this is clear. Public Health England is yet to reveal the evidence behind the decision to abandon mass testing and the minutes of the Sage meetings won’t be available until the pandemic dies down.
Also, border quarantines and airport checks were only put in place AFTER telling the UK workforce to return to their jobs. It doesn’t bode well for the containment of the virus. Moreover, there are concerns over virus mutation, immunity and antibodies. Scientists are yet to tell us whether it is possible to become immune once infected and for how long.
And a vaccine won’t be available for at least 18 months, if ever. Deputy chief medical officer Jonathan Van-Tam said as much at a Downing Street press conference a day after Business Secretary Alok Sharma was hopeful of a September vaccine. Confused yet? Well former WHO director Professor Karol Sikora says we might not need a vaccine anyway because the virus may run its course naturally.
The PM thanked the NHS for saving his life and must now take steps to prevent it from collapse if more outbreaks occur. Less of the desk-thumping oratory and more of the meticulous method of the creator of the NHS himself, Clement Attlee. Attlee was a pretty uninspiring orator and even his own wife walked out on one of his speeches but was detail and logistics-orientated in a crisis and was a facts and figures PM with a phenomenal memory. No detail was ever too tiny and little escaped him.
Also, his ability to restructure a health service during a shaky economy shows both statesmanship and crisis management skills. We need equal attention to both health and economy today and a similarly meticulous approach to examining the gaps in the official vulnerable risk group complied by NHS England. It covers 2.5 people with weak immune systems who need special shielding but fails to identify people with common chronic ailments that put them at risk of a return to work.
Schools – health or economy?
Conservative MPs are concerned that the sluggish reopening of schools will lead to sluggish economic recovery but the unions are unmoved. The NUT, National Education Union, Unison and the Local Government Association advise caution and don’t want teachers facing a health risk by returning to work on June 1st without proper testing, tracking and tracing and firm guidelines in place. The British Medical Association and the Doctor’s Union also advise not to open schools yet.
There’s been a messy region to region, school to school approach to re-openings. At least 18 local authorities will keep schools shut until they can agree with headteachers, unions and the government on a safe way forward. Notably, PPE for teachers is not in place, let alone testing and isolating. Parents are certainly hesitant. Research by Childcare.co.uk reveals 81% of parents won’t send their kids to school in June
In this ongoing health vs economy duel, Trump has also displayed impatience at the delay in reopening schools. The US ‘s top infectious disease expert Dr Anthony Fauci warned against the widespread belief that Covid-19 doesn’t harm children and does not support the relaxing of lockdown, much to the ire of Trump who wants the US to get back to normal.
Well does it affect children? If the conflicting expert advice hasn’t confused you yet, latest research by the Office for National Statistics shows children are as likely to be infected as adults. Yet an Australian study, the only one of its kind into pupil and teacher transmission, shows the transmission rate is tiny.
However, France has reported 70 new coronavirus cases days after reopening its 40,000 preschools and primary schools and 150,0000 secondary schools. Seven schools in northern France have now been closed. Notably, these class sizes were capped at the 15 pupils per classroom that the UK is following.
Ultimately, with health experts and the government agreeing to disagree and unions and workers not yet working together, there seems to be no firm central guidance. Leaving it up to British common sense invites chaotic repercussions such as workers (quite rightly) threatening to walk out if they feel their workplaces are unsafe.
This actually prompted Business Secretary Alok Sharma to advise workers to consult their bosses and seek further guidance from the Health and Safety Executive (HSE) if they felt compromised. Boris Johnson’s promised spot inspections of workplaces by the HSE have not materialised. By some curious irony, the have stopped all such checks because of concern about their own members’ health during the outbreak.
Philip Coggan, Economist – “the difficult calculation for governments is trading off the lives of people who die of the coronavirus versus the damage to the economy.”
So health or the economy?
A recent YouGov poll shows the public favours wellbeing and health over economic growth during the Covid-19 emergency so perhaps the government needs to listen to its electorate. The results of the poll, commissioned by campaign group Positive Money raises questions about prioritising GDP as accepted targets and markers. With this in mind, policies might reflect wellbeing post-Covid-19 – and even now.
The pursuit of GDP as a marker of a nation’s performance has also been questioned in a report called The Tragedy of Growth. Campaigners argue that growth markers wilfully ignore not only health and wellbeing but the environment and climate emergency in the pursuit of GDP, leading to policies around economic growth at the expense of everything else. Other nations such as Iceland and New Zealand have caught the zeitgeist early and are already moving in the right direction.
It’s important the UK is amongst the leaders in this switch and not as sluggish out of the blocks as it was in implementing border checks, PPEs, mass testing and test and trace. The UK gave the world the target-driven Industrial Revolution in the 1700s which developed into the capitalist system’s relentless demand for higher GDP and must now be at the vanguard of the Green Industrial Revolution which puts people before profit and has health at the forefront of all economic considerations.
Westminster World 