Recovering from Covid pandemic
Won’t be easy creating the require policy programs. Outstanding question remains is the govt up to the task?
Lost decade almost ended with another recession. Underlying economic numbers before the covid were weak. UK has entered recession, 11 years after the last one. Financial markets caused the great recession, pandemic caused this rapid recession. Loss of confidence changed behaviour, economic activity to decline, any official lock down policy started. Lock down policy is largely driven by public opinion, chaotic approach has not helped. Threat of pandemic was highly probable, experts warned about this threat for some time. Department of health even planned for this event. One simple virus was able to caused biggest economic slowdown in modern history. As turns out economic system today is far less resilience, food supply chain showed weakness. Banking sector this time is far more resilience, other parts of the economy are less resilience. Signs of weakness were present before the outbreak. Unlike the last recession, this mainly a health driven crisis. Dozens of potential outcomes, further shocks are still likely.
Recovery won’t start until confidence returns. Breakdown in confidence caused the economy to slow down, driven by covid 19. Investors have caused negative interest rates, signal they want stronger fiscal policy. This not normal downturn, any response needs to be not normal. Labour market started to suffer big job losses, furlough scheme was quickly created. Scheme covered huge parts of the economy, credit is due for creating massive scheme. Overall it could be argued this design is flawed, broad support doing bare minimum. Barely enough to avoid short term problems, turning health crisis into economic nightmare. Furlough scheme is due to come to an end, real challenge starts now. No clear guidance what policy is going to replace it. No details on what sectors are going to get extra support. Big risk is another outbreak happens with no policy plan. Hoping things go back to normal is unlikely to happen, economic restructuring happens during any recession.
Big unknown element during of this, Boris Johnson lack of clear idealogical direction. Danger here is re-fighting old battles, failing to hold Boris to account. Social safety net is less resilience, unemployment use universal credit. Other benefits during that time, became less generous. Huge problems with employment and support allowance, no benefit was spared.
Taken one decade to combine various benefits into one, designed to lower the welfare cost. System is far less generous, weeks until the first payment. Built in sanctions designed to be harsh, punishing people over supporting. Whole thing is designed to cut costs over support people. Roll out is not even completed at this stage, millions of families still to switch. Covid has exposed fiscal stabilisers was short term political choice. Frankly never designed with fairness, or support in mind. Likely we are facing mass unemployment, system never designed to cope with this outcome. Programs designed to help claimants are gone. Point of the system avoiding people from claiming with weeks until first payment.
Labour market quickly turned negative, major job losses. Forced the conservative party create, furlough scheme. Designed to keep people in jobs. Blanket approach to preserve, protect and stem any job losses. Necessary massive blunt but costly program to run for extended time frame. Details can be debated, loads of flaws including inflexible with fixed end date. Rest of Europe already have furlough schemes built into welfare policies. Smarter flexible approaches which allow for part time work, providing retraining and job creation. UK policy makers had none of that existing structure. Any recession is painful, shape or size is determined by policy response. Choices made during any crisis will define governments. Government policy platform was level up, get brexit done and more public service funding. Pandemic has ruined that policy platform.
About to find causes out how serious each promise was. Doing nothing is not an option at all. Big risk is doing nothing could cause major long term damage. Long term investment promises do little for job losses now. Building roads to nowhere, no real response to now. When reality bites government folds, how much do promises matter to Boris?
Creating giant policy problem, quick answers with no draw backs no thing exists. So far reality has destroy various bits of policy due being to difficult. Large majority is not enough when crisis happen, with no clear ideology thinking.
What levers could be used?
No perfect solution here to serious health crisis.
Increasing benefits to be more generous, existing fiscal stabilisers is another option. Changes to universal credit sanctions, don’t forget about ESA. Sick pay payments increasing the length. Decreasing payment waiting times.
Furlough scheme could be extended, modified providing part time work. Extending support for sectors which can’t operate, retail, tourism and service sectors.
Zombie businesses are real concern but government already given them money. Further grants to help, changing business loans to grants.
Above all else this health crisis not an economic one, any packages must be carefully directed. Opportunity to make long term changes, avoiding short term thinking to create a better system. Based on past behaviour, don’t expect any big major policy shifts. Who knows natural party of government earned that title. UK government can be described authoritarian nationalism populist movement. Party of law and order, wants to break the law. Destroy institutions who hold the executive to account. Brexit project goes against every single traditional principle, thatcherism ideas on state aid is ignored. Yet nobody is willing to challenge or even fight for what they believe in. At the moment they have fallen for their very worse instincts. Incompetence decision making has got us so far, followed by dozens of U turns towards right policy. Covid 19 pandemic has only just started, big choices far policy makers ahead. Just hope they are willing to listen and learn.
Deep concern UK won’t recover from covid, releasing the very worse instincts. Should not rebuild but create a future everybody can support. Much bigger challenges remain unaddressed I don’t have much faith.