Economic and social cost of delayed reopening can no longer be justified
The Government has given up two months of economic recovery and social reopening that is there for the taking. It has succumbed to a virulent variant of the European precautionary principle. Fear has become its council.
Each month of delay adds to the coming cascade of insolvencies and job losses, deceptively held back for now by emergency measures. Tens of thousands of small firms have been hanging on by their fingertips and will be pushed over the edge as a result of continued coercion by the British state.
Anti-lockdowers were wrong to argue last year that the economic and psychological damage from repression outweighed the dangers of the virus itself. But their sums undoubtedly add up today. Vaccination has reversed the trade-off.
It is the Government that is now misreading the calculator, heeding the maximalist arguments of the zero-Covid camp, or its near equivalent. This purist approach entails its own destructive consequences – frustratingly unquantified, but arguably greater than fall-out from fresh coronavirus cases, at least once we reach late March.
If the Government is going to deprive us of economic recovery – and our Magna Carta rights – long after those over 60 and the clinically vulnerable have received their first jab, it needs to make a very compelling argument. It has not done so. Much seems to hang on the threat of possible escape variants that might diminish vaccine protection. But even if the worst happens, reduced efficacy is not the same as no efficacy.
We are in an odd situation. The Government has got everything right on jabs, from the first decisions to fast-track research and development, to the marksmanship of the vaccine task force in picking candidates, to the one dose gamble and Blitzkrieg rollout, all culminating in the spectacular results for AstraZeneca from the Scottish study. Yet it refuses to grasp the prize.
As of today, unvaccinated Europe is more open. Its unprotected citizens have more freedoms. Its economy is slightly closer to normal conditions.
European states may of course be deluding themselves. France’s Emmanuel Macron almost certainly is. The B.220.127.116.11 variant Anglais was 36pc of all French cases at the end of last week and will soon be dominant. The South African variant is over 10pc in four departments.
French scientists say the apparent stability in cases nationwide is the temporary effect of two separate pandemics moving in opposite directions, the old one waning as the new one waxes. Once you pass the crossover point, it spirals out of control.
The UK at least has a chance to mitigate this same damage a few months earlier. Failure to do so courts financial fate. While I agree with optimists that British sovereign debt is manageable and that premature fiscal retrenchment would be self-defeating folly (the debt ratio would rise faster if there is an output gap), it would be unwise to ignore the bond vigilantes altogether.
The Office for Budget Responsibility estimates that the debt ratio will hit 105pc of GDP this year, up from 85pc pre-Covid. There is no particular line in the sand. Global debt markets are a beauty contest between bad, worse, and dreadful.
The UK is not dreadful. It has the longest debt maturity among G7 states as a safety buffer, and residual advantages as a reserve currency holder. Put another way: you don’t have to outrun the lion; you have to outrun the other wounded zebra. But you do have to run.
You also have to pay attention to the elephant in the global bathtub. The surge in US Treasury yields this year is sending tremors through world debt markets and has become disconcerting. British 10-year borrowing costs have jumped fourfold since early January to 0.76pc.
It is one thing when nominal yields rise; it is another when real yields become unhinged. It means the bond markets are pricing in more than inflation risk. They are starting to choke on the sheer volume of debt issuance. Such is the dark side of Joe Biden’s war economy plans: near instant and turbo-charged fiscal stimulus worth 13pc of GDP, if you include the $900bn Christmas package.
The surge in gilt yields partly reflects vaccine optimism and merely takes us back to pre-pandemic levels. It is not yet unhealthy. But it could become so over the next year if the US Federal Reserve has to jam on the brakes to prevent inflationary overheating. We might then find that global fund managers demand a higher premium to cover our incontinent deficits and to refinance our maturing debts.
The greatest problem with a lockdown that has lost its rationale – to the point of incoherence – is that people will progressively ignore it and ultimately defy it. We will then have a rule of law crisis. No government should ever get into that predicament.
We increasingly hear the argument that Britain must remain confined because resistors refuse to take the vaccine and must not be left protected. Such twisted reasoning cannot command the consent of this country. Those advancing this justification for the indefinite suspension of civil liberties and economic activity need to lie down in a dark room and get a grip.
The over-50s will be well on the way to vaccination by late March. Local pastors, imams and ethnic leaders are rapidly turning the tide against anti-vax disinformation in black and Muslim enclaves. Vaccination ratios have been good by global standards even for these groups, and rates are still rising.
Large numbers of young people have already been exposed to Covid and have some antibody and T-cell immunity. Better use of drugs and oxygen have halved the death rate for those in intensive care. It is no longer the same pandemic.
The Covid Recovery Group says the Government has set a ratchet effect that goes “only one way”. The lockdown dates may be extended, but not shortened. This regime is indefensible and amounts to a policy blunder. There is no revolt yet from the 1922 Committee but there might be before the Ides of March unless the ratchet is redesigned to go both ways.
The mistake at the onset of Covid last year was to rely on rigid models. The UK’s epidemic strategy was based on assumptions of a flu pandemic. Asia’s response (informed by Sars) was based on assumptions of a coronavirus pandemic. Chalk and cheese.
The Sage committee did not pay close enough attention to events in China or Korea, even after the publication of crucial studies in The Lancet and the US scientific press.
The missing ingredient was an open mind and the flexibility to switch tack in the face of fast-moving events. The UK first allowed the virus to gain a rapid foothold and then went into lockdown 12 days too late, doubling first wave deaths and deepening the economic damage.
We now have the mirror image. Policy has swung from bureaucratic insouciance to the other extreme of nanny state timidity. One can understand why Boris Johnson should have snake-bitten nerves after the nasty surprise of the Kent variant but we are not in the same unprotected circumstances any more.
Let us declare vaccine victory and pull forward the road map. The cost-benefit analysis says April. So does common sense.
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