We were hoping for a V: a rapid economic bounceback. We would have probably settled for a W; a wobbly recovery, with dips along the way. Right now, even an L – a steep plunge that at least bottoms out – would be acceptable. Instead, it is starting to look more like an I: a collapse that just goes down and down.
And it may even turn out not to be a letter that best describes the economy at all, but something more like a deranged scribble from a psychopath.
With deeply disappointing GDP figures published yesterday, and with local restrictions already covering a third of the country, output is weakening and the Chancellor has been forced to start putting in place plans to support businesses through Lockdown 2.0.
There is a problem, however. We have already been through a series of rescues, at vast expense, none of which has done any more than postpone the pain. Even worse, instead of a proper plan to get us through to the end of the epidemic, the Treasury is still muddling through with half-baked, badly designed rescue schemes. That has to change, and change fast, if the British economy is to have any hope of coming through the crisis intact.
Friday was a grim day for the British economy. GDP expanded by a modest 2.1pc in August, which might sound OK in normal times, but was far less than expected given that we were meant to be reopening after lockdown.
We would have hoped to see at least double that if the economy was genuinely recovering. Even worse, we are heading into another lockdown.
Economists at Bank of America calculate that regions with Covid cases above 100 per 100,000 people, and therefore at high risk, account for a third of GDP. Add in London, where cases are rising again, and another 23pc of GDP is under threat.
Unless something changes very quickly, it looks inevitable that the next quarterly statistics will show GDP falling again.
The winding down of the furlough scheme in just 20 days’ time could hardly have come at a worse moment.
The Chancellor has already been through a couple of replacements. There was the Job Retention Bonus, which offered employers an extra £1,000 for keeping furloughed staff on until January (a complete waste of time, as either they were worth keeping or not but a grand isn’t going to change that calculation either way).
It was followed by the Job Retention Scheme, which paid a far smaller percentage of wages, and offered little prospect of saving any employees (if someone can’t work because there are no customers it doesn’t make any difference if the Treasury pays a slice of the salary).
Now we have a third attempt: a revamped furlough, but with support only for companies that are forced to close because of government restrictions, along with a cash grant to help them through. That is at least something. But it is hard to imagine many pubs, restaurants, shops or nightclubs are going to keep going through a dismal winter, and a terrible Christmas, just because they can furlough a few staff or because the Treasury is handing over a few thousand. Many are going to throw in the towel, and it is hard to blame them.
In truth, instead of yet another hastily cobbled together rescue package, what the Government needs is a clear strategy for steering us through this mess. That should have three key elements.
First, the economy will have to learn to live with the virus until we get a vaccine or else we achieve some form of population immunity. This isn’t a temporary emergency anymore.
Sure, it was easy to understand why the Chancellor came up with lots of schemes scribbled on the back of an envelope in April. He had five minutes to come up with something. That is not true this time around. The Treasury has had six months to think about the possibility of a second wave, and a return to lockdown. It has to decide which parts of the economy need saving, and how much it is worth spending on the rescues, and what it is prepared to abandon. And it needs to start making that clear now.
Next, let creative destruction rip. Covid-19 has accelerated trends that were already under way. Sales were moving online, but we have fast-forwarded that by a decade.
Working from home was on the rise already, but has suddenly become normal. Traditional retailing was already in steep decline, and we had too many pubs and restaurants.
There is no point in keeping businesses alive through the epidemic if they were simply going to collapse in 2023 or 2024 anyway. It might sound harsh, but they may as well close now. All that office, retail and hospitality space can be turned into something more useful, and the staff can find jobs in industries that are growing.
Finally, offer plenty of support to workers. Whether unemployment climbs to two or three million over the winter remains to be seen. But it is going to be a horrifically big number.
There isn’t any point in keeping low-skilled, relatively poorly paid hospitality and retail staff on furlough until the spring. It is far better for them to be made redundant. But, in return, we should be far more generous to anyone who loses their job.
The best thing we could do right now is revamp Mrs Thatcher’s Enterprise Allowance Scheme from the last big surge in unemployment in the early Eighties. It is far better to pay people to start their own business than to sit around doing nothing, or remain “furloughed” by a company that doesn’t plan to rehire them anyway.
We are seven months into the Covid-19 crisis. Our economy looks set to end up 10pc smaller, at least, and we will have added hundreds of billions to the national debt. We know that Lockdown 1.0 didn’t achieve much. We can’t afford to make the same mistakes with Lockdown 2.0.