Week 1: on Part 1 and Covid-19 in the UK
By: Mihir Baxi
Tags: UK, Economics, Covid 19

Closing down the year

2020 started with bush fires in Australia and is ending with Brexit. In the spirit of saying the year ended on a slightly positive note, an incredibly impressive and long awaited vaccine against the coronavirus might soon be available to us all.

I remember when I first realised that Covid-19 may be a serious problem. I was in Paris in early March and listening to first-hand accounts from people who had been through the lockdown in Milan. This was evidence enough. The realisation gave me some anxiety about my own security. And I’ve been pleasantly surprised by how well supply chains have held up and at how well a large number of people have adapted to a changed lifestyle.

But within the positives, there are stories a lot more gloomy about who the response to this virus has impacted more or less. As Raj Chetty shows, low wage workers in the US have taken a larger economic hit as a result of the response to Covid-19 than higher wage workers. Similarly, as schools moved their coursework online, the impact on learning has been felt differently depending on income. Children from high income households quickly returned to the learning trajectory they would have expected had schools continued in person. While children of lower income households are completing coursework at a slower pace. This is likely due to differences in access to online learning platforms, changes in contact with teachers, and differences in internet connectivity.

Even in the UK, the IFS found higher-income parents to be more likely to report that their child’s school provides online classes and access to videoconferencing with teachers. The evidence shows that children from better off families have more and better access to online educational resources, a better setup to make use of those resources, and parents with a larger capacity to offer support. A study by researchers at Cambridge used ONS data to show that the likelihood of having internet access at home varies significantly with income. Only 51% of households earning an annual income between £6000–10,000 have internet access (compared to 99% for households earning more than £40,000). It is essential that more is done to level the educational playing field.

There’s a larger story here about deprivation and destitution in the world and in the UK. And about how the response to Covid-19 can help bring some of these essential issues back into focus. These are issues not just about how people need more support during tough times, but about how we as a society treat the weakest amongst us. I hope to explore this further in the weeks to come.

Being in the UK this year was challenging. I heard someone say that while the coronavirus didn’t impact every country in the same way, a country’s response to it reveals a lot about how that country is being run. Almost every major decision made by the Prime Minister and his cabinet has missed the mark. Yes it’s easy to criticise, especially in these tough times, and of course hindsight is 20–20. But it’s not difficult to see how things could have been different (as I document below). And some of these points held true even while the decisions in question were being made.

The UK had 67,500 excess deaths as a result of the coronavirus. The first nationwide lockdown was announced much later than it should have and we now know that starting it just a week earlier could have prevented up to half of the deaths in the first wave. Other countries acted quicker and did better. Similarly in October, when cases were rising and the government was advised to implement a second lockdown, the decision was delayed until there was no choice but to act. The Chancellor apparently led this revolt against a second lockdown on economic grounds — ignoring that (as Chetty’s research ahs shown) a complete economic recovery cannot start without the virus being tamed.

A hesitation to make tough decisions has been a constant feature of the UK government’s response to Covid-19. Even the decision to extend lockdown restrictions over Christmas was taken with significant delay. Who exactly is helped by this constant tergiversation? Decisive action has been avoided, when it is what was needed most.

The Eat out to help out scheme was problematic from the start. The policy gave customers a significant discount to have meals in restaurants or pubs during the month of August, with treasury financing the cost of the discount to businesses. But doing so incentivised spreading the virus. A recent study shows that this scheme may have driven infections higher by between 8 and 17 percent. Why not subsidise food delivery and take out instead? The £500 million that the scheme cost could undoubtedly have been put to better use in this way — still giving restaurants a chance to open up for business and not spreading the disease further.

To give another example of problematic policymaking, the Bounce Back Loan Scheme (which is designed to provide loans quickly to struggling businesses) may result in up to £26 billion in losses as a result of fraud. The Financial Times reports one banker calling the policy ‘a giant bonfire of taxpayer money’.

The Office of the Comptroller and Auditor General investigated government procurement during the pandemic. Their report found that out of the £18 billion worth of contracts awarded for emergency pandemic-related procurements, £10.5 billion of contracts were awarded without competitive bidding. The report acknowledges that these are extraordinary times, but that the government has not managed the risks associated with these contracts well, and avoided appropriate commercial practices and standards. Excellent reporting by the Guardian also revealed significant cronyism in the process.

If the pandemic indeed reveals how well countries are being run — the response to Covid-19 in the UK speaks volumes. It may have not only exacerbated inequalities , but has also been characterised by the irresponsibility and incompetence of some of those at the very top of government.