Covid-19: Economy

Lord Low of Dalston Excerpts

Thursday 4th June 2020 Lords Chamber

[Lord Low of Dalston (CB)]

My Lords, will rushing to lift the lockdown hasten or postpone recovery? The Prime Minister seems to have started to lift the lockdown more quickly than most scientists would have advised. No doubt the reasons are mixed, but strong pressure seems to have come from the Treasury, concerned about the costs of furloughing and other income support measures, and anxious to see an increase in tax receipts from increased economic activity. However, the belief that the sooner we lift lockdown, the sooner we will all get back to work, may well be misplaced. Infection and death rates are still high: the R value is not much below 1, and we do not have a fully functioning test, trace and isolate regime in place. The danger is that infection rates will start to rise again, and we will not have the testing capacity to track and suppress new outbreaks.

In the event of a second wave, lockdown may have to be reimposed—or in any case people will choose not to go back to work and be unwilling to go out and spend, and the recovery will stall. Premature unlocking could well thus cost the Treasury and business more, not less. Much better, then, to delay a precipitate lifting of the lockdown for a few weeks, which would be sufficient to get infection rates down and put in place a test, trace and isolate regime capable of tracking and suppressing new outbreaks. Of course, no one can be sure how the virus will respond to raising the lockdown, or how people will behave in the event of a second wave, but arguably the risks of a second wave and a long, delayed recovery greatly outweigh those of a more cautious lockdown that will buy time for infection and death rates to come down and for test, trace and isolate to kick in.

The other thing to highlight is, of course, the interplay between Covid and Brexit. The big risk is that, under cover of our preoccupation with the pandemic and its economic impact, the Government will squander the opportunity of a trade deal with the 27 and default to what the ERG have always wanted: no trade deal and WTO rules by the beginning of next year. This would of course be an act of wilful self-harm when we need to do everything possible to stimulate post-Covid recovery, a point well illustrated by this week’s reminder from Nissan that its Sunderland plant will be unsustainable in the absence of a trade deal.