The government’s record on protecting the economy during Covid has been impressive – but the toughest months lie ahead

As Britain’s official Covid death toll reaches six figures it is worth recalling how, when the pandemic was taking hold last spring, Sir Patrick Vallance declared that keeping fatalities below 20,000 would be a “good outcome”. On that measure, and by international standards, the government’s performance on meeting the medical challenge has been appalling.

By contrast, the government’s record on protecting the economy has been much more impressive. The fact that unemployment has risen to a four-year high of five per cent of the workforce – some 1.7 million people – is obviously disappointing. But without the Coronavirus Job Retention Scheme and the various other measures, this figure would not only be higher but pushing the economy into a slump from which it would be impossible to break free. It is a disaster that never happened because of international efforts to save the world from a deep recession.  

Even so, the economy faces difficulties in the months ahead. Some patients who survive Covid emerge from hospital with life-changing disabilities. These are still not properly understood, but they could well deprive people of their incomes and quality of life for years, if not decades, to come. Long Covid will be with them long after their initial illness.

The aftershocks of Covid will also persist for some time in the economy. Even if the furlough scheme was wound down more gradually than planned – and there should be no doubt that it should be withdrawn only slowly and in line with trends in infections – there will inevitably be more redundancies and more unemployment.

Much of that unemployment is now structural, rather than as a result of a temporary reduction in demand because of repeated lockdowns. The job losses in “bricks and mortar” retail are only the most obvious example of where Covid has given a powerful shove to secular declines in industries, which began long before the first Covid cases were detected. Globalisation, the internet and now Brexit were always going to force sometimes painful adjustments on communities and families who once imagined they had a job for life.

From the shellfish industry in Scotland to the folk behind the counters at Debenhams, there will be no going back to the old ways. Unemployment will probably reach two million by the end of the year, even if the Treasury and Bank of England continue to support economic activity – and there should be no talk of confidence-shredding tax hikes or increased interest rates until a recovery is under way. After that, the authorities will have to find the best way to retrain and reallocate those people with much of their working life still ahead of them, but whose life has changed beyond recognition. These are hardly ideal conditions to try and find another job; meantime there are bills to pay, no salary coming in and inadequate universal credit to rely on – plus the risk of Covid.  

Tuesday’s devastating death toll has taught us the grim results of failing to react quickly and boldly enough when faced with a crisis. The government must not repeat that approach when it comes to fighting for our economic recovery.

There is, though, one obvious cause for some medium-term optimism with the rapid rollout of the Covid vaccines. Despite some high-profile international wrangling about supply, it is also the single best reason to look forward to a faster reopening of the economy, though pressure on the NHS and the imperative to open schools first will make that a little more gradual.

With luck, the economic after-effects of Covid and Brexit should be less dire than they might otherwise be. The 2020s, however, seem set to be a decade of hard slog to pay down debts and build new industries. What might be termed “long economic Covid” will be as debilitating as the medical real thing.