THE challenge for government ministers to properly balance public health policy and economic priorities is unimaginably difficult. As we take the first tentative steps towards the end of the lockdown, the risk always remains of a second spike in Covid-19 cases.
Just as the coronavirus statistics have improved this last week, the calamitous realities of the economic damage have become clearer. There is an understandable drive to try to help an economic bounce-back happen as quickly as possible.
The Scottish Government announcement about a potential tourism sector green-light in July is a major signal towards economic re-opening, subject to continuing downward coronavirus trends.
It feels like we are at a pivotal point for both pandemic and economic recovery. In many ways, this is the most difficult balancing act, which is why it was right for the First Minister to stress: “Cases, hospitalisations, deaths and the R number are falling in Scotland because we’re pursuing a careful and orderly plan. That must continue. The more we suppress – and hopefully eradicate – Covid, the more normality we can restore to the economy. Sustainability of recovery matters.”
Nicola Sturgeon went on to underline that: “If we can effectively eradicate Covid – and then control through Test and Protect and policies to mitigate against cases coming into the country – we can restore a much greater degree of normality. Decisions then about, such as whether the social distancing limit should be two metres or one metre are more possible. But first we must suppress/eradicate.”
Yesterday’s announcement that the UK economy shrank by a record 20.4% in April has highlighted the scale of the damage to jobs and businesses. It is the largest drop since records began and 10 times worse than the steepest ever pre-Covid fall. Counting both March and April, the economy shrunk by 25%, losing more than two decades of growth and hard work.
The biggest drop was in UK accommodation and food services, with a fall of 40.9% between February and April. The fact that the hospitality and tourism sector is larger in Scotland underlines the domestic challenges.
This week, the Organisation for Economic Co-operation and Development (OECD) warned that the UK will be the worst performing among the industrialised economies. It predicts there will be an 11.5% slump in national income during 2020, compared with a fall of 6.6% in Germany, 11.1% in Spain, 11.3% in Italy and France’s 11.4%.
Should there be a second global coronavirus outbreak before the end of 2020, the UK’s GDP is projected to fall by 14%. In noting UK measures to limit damage caused by the pandemic, the OECD called for the schemes to be kept in place “as long as they are needed and fiscal policy should remain supportive”. Specifically, it said that “higher unemployment benefits should be extended beyond the fiscal year 2020/21 to help support demand during the recovery”.
Other European countries are already making longer-term commitments to maintain wage subsidy schemes for up to two years. Airbus has just warned that its UK employees face “more permanent” job cuts than their colleagues in France or Germany, where longer-running government schemes have been announced”.
Another growing call is for the two-metre social distancing rule to be reduced, especially given that the World Health Organisation (WHO) says that a distance of one metre is safe. Countries such as China, Denmark, France and Singapore have maintained a one-metre rule, while South Korea is using 1.4m; Australia, Belgium, Germany, Greece, Italy, Netherlands and Portugal have 1.5m; the United States is 1.8m, and in Canada, Spain and the UK it is 2m.
For many sectors, such as hospitality and tourism, the reduction to 1m is critical to run viably. However, according to a recent study published in the medical journal The Lancet, the risk of being infected is estimated to be 13% within 1m, but only 3% beyond that distance. The fear for policy-makers is that by reducing the limit to 1m it will effectively be closer than that for many and raise the risk of infection exponentially.
One area of widespread agreement, however, is the advantages of delaying departure from the European single market (permanently in my view). This week the OECD said that “given the economic disruption caused by Covid-19, a temporary extension of existing trading relationships with the EU beyond the end of 2020 would help reduce uncertainty”.
Next week the Scottish Government will hopefully move to phase two of the pandemic recovery plan with further decisions on the lockdown will follow when the scientific and behavioural advice allows. An economic bounce-back is going to be hugely important to safeguard jobs, incomes and businesses, as well as people’s physical and mental wellbeing. That can only come when the time is right to avoid going backwards with coronavirus infections.
Luckily we have a First Minister and Scottish Government that the public trust to make these difficult decisions.