The narrative surrounding COVID-19 continues to be dominated by a supposed trade-off between managing the public health crisis and protecting the economy. But the experience of this summer and early Autumn shows this to be a false dichotomy, reflecting a wider misunderstanding of the nature of the crisis we are facing. If we are to open the economy in a sustainable way that allows business and consumer confidence to grow, we need to see a fundamental shift in how we think about the crisis and the actions that then follow.
First, we must recognise the reality that up until the point at which we either have an effective and widely available vaccine, or a rapid, effective and widely available treatment for COVID-19, there will be negative impacts on significant parts of our economy. In the interim period, there will be no meaningful economic recovery without an effective and consistent public health strategy to successfully manage the rate of infections.
A cycle of ‘lockdowns’, partial re-openings and ever shifting batches of temporary financial support for businesses and workers is not a sustainable strategy for the future. Such uncertainty makes it impossible for businesses to plan even for the medium term, and heightens the insecurity and anxiety faced by millions of workers across the economy.
That’s why establishing a widely understood and enforceable set of public health measures for the long term is crucial, as is additional support to help businesses adapt their premises and operating models to comply to ensure as many can stay open as possible. The newly introduced three tier system of restrictions could bring welcome clarity, but only if more is done to establish its status as part of a longer-term plan, rather than simply a response to current rising infections. And of course, the development of a reliable and rapid test, track and trace system will be key to allowing for any outbreaks to be swiftly contained without significantly disrupting economic activity.
Nevertheless, such measures won’t be sufficient to avoid sub-optimal output and demand in significant parts of the economy for some time to come. Even with a more generous and stable set of support measures and adaptations, controlling the spread of the virus will mean aspects of social and economic activity remain supressed – and that will go beyond those organisations ordered to close their doors, with weaker demand impacting a whole host of other businesses.
Unemployment and job insecurity are therefore likely to rise, and pay is likely to fall, in several sectors as a result. And with vacancies likely to remain significantly below 2019 levels, re-entering the labour market will prove very challenging for many people. This will be particularly true in those parts of the country dependent on sectors like hospitality and tourism, as well as elements of city centre economies.
That’s why it is so important that the Government’s approach moves beyond erring on the side of “wait and see” – with iterative sets of announcements that seek to respond to the situation on the ground as it changes – to something more comprehensive for the longer term which is aimed at mitigating the worst impacts on the labour market.
The Chancellor’s ‘Winter Economy Plan’ is a key example here – not only were the measures announced in close proximity to the ending of the original Coronavirus Job Retention Scheme, creating the prospect of a ‘cliff-edge’ in terms of support ending, but despite significant signals that COVID-19 infections were rising, the economic measures announced fell well short of those previously available to businesses and workers, both in terms of the amount of support on offer, and the number of businesses and workers eligible to access it.
Less than a fortnight later and the Government shifted its stance, increasing the amount of support available, albeit still below the levels offered during the first phase of the pandemic. While a degree of flexibility is in some senses welcome, the significant downside of this approach is that organisations can only take resourcing and budget decisions based on what they know at the time – the less certainty of the kinds of support on offer over the long term, the less likely they are to be able to adapt their operations and retain staff in the future.
And crucially, the same applies when we think about our social safety net. While the Government’s focus on improving skills and training provision is welcome, given the lengths of time involved in acquiring new qualifications those interventions are only likely to pay dividends beyond 2021. In the meantime, millions more people are likely to find themselves reliant on the welfare system in the year ahead than has previously been the case.
So far, the focus has been on flexing a system of welfare payments developed during a time of austerity and rising employment, but this will only go so far towards meeting the needs of people as we navigate the pandemic. While it is vital that those temporary increases to Universal Credit that were introduced early in the pandemic are maintained, wider reform is also likely to be necessary. This should include allowing for advance Universal Credit payments to be made as grants rather than loans and reviewing the requirements to engage in ‘work-related activity’ at a time when the economy is going through significant disruption.
The truth is too many of us are still guilty of committing a ‘category error’ when it comes to thinking about COVID-19 – imagining that the pandemic represents a severe short term but temporary crisis, rather than a long term and enduring situation that requires substantial and lasting adaptation. Given how optimistic the prospects of a widely available and effective Spring vaccine are, it is overwhelmingly likely that the fundamentals of the pandemic will be with us deep into 2021. It’s time for the policy response in terms of public health, the economy and the welfare system to reflect that.
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