COVID-19: LIVES, LIVELIHOODS AND THE TREASURY

On Wednesday the Chancellor Rishi Sunak set out the Spending Review for the UK.  Key points included:

• The UK economy is expected to shrink by 11.3% this year, the most for some 300 years
• Unemployment is expected to reach 7.5% next spring, with 2.6 million people out of work
• The deficit forecast to hit £394bn this year, equivalent to 19% of GDP, the highest since 1944
  
• The Office of Budget Responsibility says Government borrowing will be over 100% of GDP this year, the first time since 1960, partly due to borrowing more, and partly due to the reduction in GDP
  

It's clearly vital to re-open the economy as quickly as possible, for the country's finances and of course individual livelihoods.  We heard earlier in the week about great news for three vaccines, which will hopefully reduce infection levels to very low levels, #NearZero, that will allow the economy to re-open.  That would achieve a host of other benefits, including a reduction in deaths and incidence of LongCOVID.   Benefiting lives, livelihoods and the Treasury:

TIMESCALES

But it will take months to manufacture and roll-out the vaccines, even assuming that testing has been sufficient for the regulators to authorise each vaccine's use.  

The Government is talking after next Easter before any significant benefit will be seen.  The Prime Minister said at Monday's press briefing that "It will be months before we can be sure that we have inoculated everyone that needs a vaccine, and those months will be hard..."  These sentiments have been echoed by his key scientific advisors.

So do we just have to wait?  Or is there anything we could do to re-open the economy sooner, yet safely?   Here follows a summary of a more detailed evaluation.

 

THE CONCEPT OF A FIREBREAK

The concept of a FireBreak is a short, very sharp set of measures that breaks the chain of transmission of the virus, to substantially reduce infection rates, whilst minimising the very real side-effects of a lockdown.

In this analysis, we can see:

• The original UK lockdown reduced national infection rates by five sixths in three weeks, with a little more in the fourth week, before the impact tailed off

• The recent 17-day FireBreak in Wales reduced infection rates by half, more effective in areas with higher infection rates.  The measures were not as strict as the original lockdown, and 17 days was not long enough given the virus's lifecycle
  

• Indications from early stages of the latest English lockdown, for which restrictions have been less than the original lockdown, are:
• The tier 3 and lockdown restrictions, which are not as sharp as the original lockdown, can reduce infection rates in high infection areas by about half in three weeks
• There has been little impact in areas with medium infection levels
• Infection levels have even risen in some areas with lower infection levels
  

 This all means that:

• The impact of a lockdown or FireBreak is dependent on the severity of the restrictions
• Most of the impact of a lockdown or FireBreak is in the first three weeks, as would be expected from the virus lifecycle, given how long people take to become and remain infectious:
• If everybody in a geographical area was to simultaneously self-isolate for a month, nobody would be infectious and the virus would be eliminated in that area.  
• Indeed three weeks would be enough to virtually eliminate the virus in that area

So a short, very sharp FireBreak of three weeks would cut infection rates dramatically, by reducing contact between people to a vital minimum:

• Everything except the absolutely vital being closed
• As many people as possible self-isolating for the period
  

That would need to be followed by reasonable constraints to keep infection rates very low:

• Improvements in testing, contact tracing and isolation, which should be far easier at very low infection rates
• Controls over arrival of people and high-risk goods from abroad 
• Continuation of social distancing, masks and washing hands

By keeping the FireBreak short and effective, real concerns about 'the medicine being worse than the disease' can be dismissed.

A FireBreak is an investment, given the high levels of infection that has existed in the last few months. 

 

SCHOOLS AND UNIVERSITIES

A key difference between recent restrictions and the original lockdown is that schools and universities have remained open.  There has been significant disruption to classes as a result of high levels of infection in the community.  

These entities being open is also likely to be a factor in recent initiatives not being as successful in driving down infection rates as the original lockdown.  Partly phychological, but also that schools involve adults mingling - parents of younger children, teachers and other staff - as well as the children themselves.  Of course university students are adults.

Schools and universities would need to remain closed for the duration of the FireBreak.  But given that would result in a significant reduction in disruption, this 'investment' would be worthwhile for education.  Provided the FireBreak is kept short, three weeks because of the virus's lifecycle.

FINANCIAL SUPPORT

It is imperative that businesses and individuals are given adequate financial support from the Government during the FireBreak, so businesses can get up and running as soon as it finishes. 

From the Treasury's persective, that investment would be paid back handsomely by the improved economy once the FireBreak finishes.

Financial support is especially important for sectors such as hospitality and live entertainment, that will already have been closed through much of 2020 and are now in tiers 2 and 3.

WHEN SHOULD A FIREBREAK TAKE PLACE?

A short, very sharp FireBreak should ideally take place as soon as possible.  But given December is a major month for retail, and some time for preparation is preferable, early January seems more realistic.  Schools and university students could return as soon as the FireBreak is over.

We would then expect infection rates to tend to rise, but slowly enough to get through to Easter before another FireBreak might be needed. That would provide nine to ten weeks of open economy for an investment of a three-week FireBreak.  

Overall by comparison to the Government's 3-tier plans for England:

An idea certainly worthy of serious consideration, given the potential benefits.

Here is a more detailed discussion of the value of a short, very sharp FireBreak and the science that justifies it.