Rebooting Britain: Economists urge the Government to build its way out of recession

The Chancellor’s pre-pandemic promises to invest in an “infrastructure revolution” and “level up left-behind regions” have taken on added urgency in wake of the coronavirus crisis, according to the UK's leading independent fiscal referee.

In a virtual conference call, three representatives of the Institute for Fiscal Studies (IFS) argued that the Government should use the path out of the recession to make the economy more productive – an opportunity they said was missed in the aftermath of the financial crisis.

Central to this effort, said Rachel Griffith, the think tank’s research director, would be spending on infrastructure such as broadband, schools and public transport – pretty much as Rishi Sunak had been planning anyway.

Despite the cost, she said: “If investments can be targeted at areas where the private sector is not employing people with the relevant skills, or if the disruption such investments cause is lower than normal, then infrastructure investments might turn out to be relatively cheap.

“Even where such such investments are costly, they might still make sense to ensure the country's resources are used productively rather than sitting idle.”

An infrastructure spree would also help to get Britain back to work, especially by creating jobs for young people who, IFS research shows, will be the hardest hit by the current crisis.

About a third of under-25s work in sectors that have been shut down and are unlikely to return to normality immediately after the lockdown is lifted, such as accommodation and food services, and arts, entertainment and recreation, in which the highest proportions of workers have been furloughed.

The young have the least reason not to return to work for fear of catching or spreading the virus, given they are the age category least likely to live with someone over 60, a key worker or a child, the IFS finds. This makes them “good candidates to get things up and running”, Robert Joyce, the institute's deputy director, said.

Focusing on long-term productivity will mean not funneling resources towards struggling sectors, such as retail, that were already experiencing structural declines, he added. “There will be a lot of lobbying and special pleading… The goal isn’t necessarily to return every sector to where it was before the crisis.”

Draft guidelines seen by The Telegraph on reopening workplaces, to be published by the Department for Business, Energy and Industrial Strategy (BEIS), also seem well-targeted in light of the IFS’s advice.

Joyce said working from home was the most obvious way to dampen the economic damage of the crisis and to contain the virus’s spread, but would need to be explicitly promoted by the Government to encourage companies to spend on facilitating the transition. 

The key message reiterated in each of the seven BEIS documents, which cover reopening offices, factories, shops and hotels, is that “everyone should work from home unless they cannot work from home”.

London will play a crucial role in the recovery, the IFS said, because its workforce is younger and more able to work from home, although when Londoners do commute, it tends to be by public transport at peak times, which heightens their risk of infection. 

Again, this reflects well on the BEIS advice that employers should consider staggering workers’ arrival and departure times, ending the nine-to-five working day for the foreseeable future.

So far, it appears, the Government is heeding the counsel of Rahm Emanuel, Bill Clinton's one-time chief of staff, who famously said that one should never waste a good crisis.