Rishi Sunak’s spending review made for grim reading. The UK economy will contract 11.3pc during 2020, we learnt last week, the sharpest nosedive in peacetime history. State-backed furloughing and other support measures have seen government spending soar, as the locked-down economy has struggled to generate tax.
As such, the Government will borrow £394bn this fiscal year – equivalent to 19pc of GDP, an annual budget deficit twice that which followed the 2008 financial crisis. And it doesn’t stop there.
In March, just before lockdown, the Government’s spring Budget forecast the state would borrow £301bn in total during the five years to 2025. Last week’s five-year estimate was an additional £863bn of state liabilities by mid-decade – approaching three times more.
Much of this vast new debt is being bought by the Bank of England, using newly-created money. For our central bank to be hoovering up so much debt, so quickly, is simply unprecedented. And there’s little sign of serious thinking about how this monetary experiment will end.
Until recently, the national debate has been focused on the health implications of this virus. Increasingly, though, since lockdown was renewed, attention has switched to the impact of anti-Covid restrictions on growth and unemployment.
The “lives verses livelihoods” debate was always nonsense – as some of us have stressed for months. While lockdown may have saved lives, the knock-on effects – non-Covid NHS treatment delayed, to say nothing of the mental health impact of wholesale economic destruction – have also most definitely cost lives.
The Government last week estimated unemployment will reach 7.5pc by the middle of next year. I’d say, using claimant count data and HMRC payroll evidence, we’re already there. And with millions more still on furlough, unemployment will spiral much higher when the scheme ends in March, upending our politics.
During much of this pandemic, finger-jabbing pundits have insisted that even considering the economic drawbacks of lockdown was callous. Now, though, particularly after this spending review, economic concerns are finally moving centre-stage.
A growing band of Tory MPs is threatening to rebel against the Government’s regional “tiers” before they come into force this Wednesday. If Labour votes the same way – arguing that regions in the strictest Tier 3, mainly in the North, aren’t receiving enough financial assistance – the measures could be blocked.
Tory rebels are demanding “cost-benefit analysis” of ongoing restrictions before backing them. That means examination of the economic damage caused by lockdown, and the impact on health and fatalities of such damage, to set against evidence of lives saved by lockdown itself.
While the rapid introduction of a two-week curfew was justifiable in March, lockdown extension during subsequent weeks and months should have been accompanied by exactly this sort of cost-benefit analysis.
Instead, Boris Johnson surrounded himself with a very narrow group of advisers – almost all medics, all with the same pro-lockdown views. No room was made for highly respected anti-lockdown epidemiologists (there are many), economists or others with a broader perspective.
The lack of such official cost-benefit analysis ahead of a policy that has already caused the deepest depression in three centuries, sent our national debt into orbit and destroyed thousands of businesses and millions of livelihoods, which much more to come, is simply astonishing.
Some highly respected independent economists have produced such studies – including former Monetary Policy Committee member David Miles and Professor Robert Rowthorn at Cambridge.
Their analysis suggests lockdowns can’t be justified. One reason, while it sounds harsh, is that we know the vast majority of those likely to die from Covid-19 are elderly – over 75 years old, often with pre-existing life-threatening conditions.
That means across-the-board lockdowns which are extremely damaging to broader society – in terms of both the economy and mental health, plus the impact on non-Covid healthcare – save relatively few “quality-adjusted life years”, to use the jargon. So does it make sense, under those circumstances, to impose national lockdowns denying current and future citizens so much, in terms of their own health, well-being and future national prosperity?
Even on health grounds, of course, countless scientists question if such lockdowns work. The Great Barrington Declaration, written by scientists from Oxford, Harvard and Stanford, calls for age-stratified shielding – and has been signed by tens of thousands of medical practitioners.
It is based on the established fact that young people, particularly those below 40, are extremely unlikely to be harmed by Covid, so should be free to live their lives, and run the economy. Older at-risk adults could then shield if they wish, and be assisted by others to do so, until societies are vaccinated or otherwise reach herd immunity.
Levels of savings during lockdowns indicate how much money could have been spent on the economy this year.
Such an approach has been vehemently rejected by Britain’s medical establishment – with Sir Simon Stephens, NHS chief executive, describing it as “age-based apartheid”, ignoring that shielding would be voluntary. Others have cited that the existence of multi-generational households – younger workers living with the elderly and vulnerable – makes age segmentation infeasible.
Yet the Warwick economist Professor Andrew Oswald, has just produced a paper demonstrating that 96pc of UK workers under age 40 don’t live with anyone over 65 and, in fact, 92pc of workers don’t live with any over-65s – and that holds true across both white and ethnic minority households.
“Releasing young workers would thus expose only a small fraction of older citizens to intra-household transmission,” he concludes, suggesting the Government could, for a while, subsidise unused hotel rooms for younger workers who do live in multi-generational homes.
“Our findings illustrate the potential value of fine-tuning the lifting of restrictions, buttressing the cost-benefit case for age-based policies,” argues Oswald and his co-author Thijs Van Rens.
We’re told a vaccine is coming. It could yet take months and, between now and then, additional lockdown damage could be huge. Could it make sense to use voluntary age-based, rather than regional restrictions in these final few months of Covid?
We must certainly accept, finally, that just like this ghastly virus, economic carnage also costs lives.