Covid-19: Economic Impact of Lockdowns

James Gray Excerpts

Tuesday 29th November 2022 Westminster Hall

[Esther McVey]

My hon. Friend and near neighbour raises an important point. This House is about debate and questioning things, and I am afraid that that did not happen. As he rightly says, we should ensure that Parliament never closes down again, as it did under the pandemic. Even back then, the figures from the Office for National Statistics pointed out that lockdowns and anti-covid measures would lead to the deaths of 200,000 in the medium to long term, due to missed treatments, under-diagnosis, loss of jobs and tax revenue, with disadvantaged people suffering the most. Bristol University in 2020 put that figure much higher, at 560,000 deaths.

Debates are now occurring on the unintended consequences of lockdown, from the mental health issues suffered by our children, to increased deaths of dementia patients, and the lack of visiting rights in care centres and hospitals still happening, even now. A big thank you has to go to the academics and scientists who initially raised concerns in those areas, including Professor Townsend, Professor Carl Heneghan and Professor Robert Dingwall, who asked those all-important questions.

Today, however, our focus is on the economic consequences of lockdown: rising financial hardship; increased poverty levels in the UK; the hundreds of thousands of people since lockdown now classed as economically inactive; the impact on them, their families and local communities; and the economic impact on the next generation’s wealth and earning capacity. It is estimated that school closures and lockdowns will lead to £40,000 being lost from lifetime earnings for each individual. A report by UNESCO, UNICEF and the World Bank finds that students now risk

“losing $17 trillion in lifetime earnings, or the equivalent of 14 percent of today’s global GDP, as a result of COVID-19 pandemic-related school closures”

and economic shocks.

Let us look back at some of the economic shocks of lockdown. The House of Commons Library notes explain that

“The magnitude of the recession caused by the pandemic is unprecedented in modern times.”

GDP declined by 11% in 2020, the steepest drop since consistent records began in 1948 and, based on less precise estimates of GDP going back further, the contraction in 2020 was the largest since 1709. During the first lockdown, UK GDP was 26% lower in April than only two months earlier in February. More than 8 million workers were furloughed during April and May 2020, peaking at 8.9 million—roughly a third of all employees—in May 2020. Overall, 11.7 million jobs were furloughed.

In response, the Bank of England cut interest rates to 0.1% and more than doubled its quantitative easing programme by £450 billion, taking the total value of assets it owned to a peak of £895 billion by December 2021. The total amount of public money calculated to have been spent on tackling the pandemic ranges from £376 billion by the National Audit Office in June 2022 to £407 billion by the International Monetary Fund in September 2021. In 2020-21, Government had income of £794 billion in tax receipts and other revenues, which is £79 billion less than forecast, and spent more than £1,107 billion. The budget deficit was £312 billion, or 15% of GDP, which is a peacetime record. The financial cost for every man, woman and child in this country has been estimated at £5,500.

Former Supreme Court judge Lord Sumption, writing in The Daily Telegraph on 18 November, said:

“Compare the modest financial hit experienced by Sweden, the only European country to see through the hype by which other governments sought to justify their measures. Sweden operated a largely voluntary system and refused to lock down. Pandemic-related measures cost 60 billion kronor in 2020 and 2021, according to government figures. This works about at about £460 a head, less than a tenth of the UK figure. Yet their results in terms of both cases and deaths were a lot better than ours.

We are paying the price of panic, populism and poorly thought-out knee-jerk decision-making. At least the current Prime Minister can point to his warnings as chancellor that lockdowns were unaffordable if extended over any significant period of time. Boris Johnson’s indifference to mere money ensured that the cost was not even considered. All that can be said in his favour is that, if the Labour Party had had its way, the lockdowns would have been even longer and more costly.”

Let us look at the inflationary pressures we are now suffering from. As the country and world opened up after lockdown, there were sharp increases in the cost of essential goods and energy as the world emerged unprepared for such rapid demand, putting prices up, from the fuel pumps to the goods on supermarket shelves.

[James Gray (North Wiltshire) (Con)]

I congratulate my right hon. Friend on her speech. Although I do not necessarily subscribe to all her views about lockdown, she is right to say that the hospitality sector in particular is suffering dreadfully from energy price increases. I bring to her attention a particular case in my constituency, where we have many pubs and restaurants that are suffering. The energy bills of a large country house, which is open to the public, have gone from £16,000 a week to £60,000 a week. That is entirely and totally unsustainable. Does the right hon. Lady agree with me that the Government have to do something now to ease the pressure on the hospitality sector?

[Esther McVey]

I welcome my hon. Friend to this debate today. He might be one of those who voted for continuous lockdowns, but it is important that we are all together in a sense of open debate and conversation. The point he raised is correct. If subsequently, after the Government had intervened to close things down, there were effects on otherwise viable businesses, the Government had to step in and support them. Indeed, the Government have given unprecedented support, but I wish we could have had discussions beforehand so that when people voted for lockdown, they knew what would befall them. At the time, too many colleagues did not want to do that.