‘Permanent economic changes’ driving tough choices as the Government coffers empty

The bridge back to a pre-Covid normality is being lifted, with increasingly scarce resources being redirected to supporting transition, says Paul Montague-Smith, senior counsel – public affairs at MRM

It is now over six months since we were first told to stay at home. A couple of months ago I wrote that politics had started leading the science and if there was a second wave it was unclear whether public health or the economy would be the priority.

With the marked increase in daily cases – apparently not accounted for by an increase in testing – a resurgent epidemic appears well underway. Boris Johnson has announced a tightening of restrictions, but many scientists argue they won’t be enough to bring below 1.

With less than 8% of the population estimated to have contracted and have some level of antibodies against the virus, the great fear is that we may soon be back where we started. But this time with the war coffers already blown.

Backbench Tory MPs are disgruntled, unhappy with the Government’s competence across a whole range of issues, including the removal of personal freedoms without, as they see it, adequate parliamentary approval. The public are split, some wanting an immediate repeat of a full lockdown and blaming the Government for encouraging a return to normality too soon.

Others argue we can’t go on like this, the virus will work its way through the population sooner or later and we should take an approach more akin to Sweden. The debates will rage and no wonder. We are in the most serious situation.

The Chancellor has been under huge pressure to extend financial support for businesses, particularly those in the worst affected sectors of the economy. The Treasury has been deeply reluctant to heed the calls of Labour and the trade unions to extend furlough, even on a targeted basis. Drawing the boundaries of targeted support is tricky.

With probably at least another six months of restrictions to try and dampen down the spread of the virus, it was clearly thought that we simply couldn’t afford to keep paying millions of people to not work. The Government now clearly believes we’re facing possible permanent changes to parts of our economy. The bridge back to a pre-Covid normality is being lifted, with increasingly scarce resources being redirected to supporting transition.

Politics, though, meant that more had to be done now in light of the tighter restrictions, so the Chancellor has moved to supporting the wages of people in work, along the lines of the German Kurzarbeit system, as well as announcing a range of other measures to support cashflow for businesses. He accepts though, that many more jobs are going to go.

Meanwhile the mid-October deadline set by Boris Johnson for a trade deal with the EU is looming fast with still no sign of a breakthrough at the time of writing. The Government’s move to introduce legislation that, if enacted, would infringe the EU Withdrawal Agreement outraged EU and UK politicians alike, uniting five former Prime Ministers against it.

It was clearly a play, timed to send a signal. Despite conceding a parliamentary lock before any action is taken, the Government’s timetable for the legislation means it won’t reach the statute until after we know whether a deal with the EU has been struck.

The implications of not reaching a deal are starting to hit the headlines on a daily basis. Two-day delays on exports, UK bank accounts of expats being closed, billions of banking assets being transferred to EU member states, the list is growing thick and fast. The October deadline, like others, might well pass with efforts to reach a political agreement continuing.

But the weeks and months ahead are set to be the most uncertain and testing of times – more so than the run up to Brexit. Flexibility, resilience, mutual support and good humour will be needed in spades.