by Jonathan Todd

It is not a sprint to the next general election. Nor a marathon. It is more like 800 metres.

You cannot win it in the opening straight, but you can lose it. Every step counts. And – as Covid-19 has painfully illustrated – new obstacles can appear from nowhere.

Here are five questions to help comprehend this 800-metre random assault course:

1) What will the UK economy be like in 2023/2024?

Sir Charles Bean, a member of the Office of Budget Responsibility (OBR), has referred to it being “not implausible” that for as long as the lockdown is in force, economic activity will be reduced “by somewhere between a quarter and a third”, and that a three-month lockdown “would knock something like 6-8 percentage points off annual GDP”.

Two months into the lockdown, however, it does not seem likely that all economic activity will return to pre-lockdown levels a month from now. Therefore, the annual contraction in GDP seems likely to exceed 8%.

Perhaps significantly so if a second wave necessitates a return to lockdown and/or the government fail to deliver a track, trace, and isolate system effective enough to enable more economic activity alongside suppression of a second wave.

Even after two months of lockdown, there are still thought to be around 3500 new cases each day. But where are these? Who have they interacted with? Are the sufferers and all of those that they have interacted with in isolation?

It is a massive task to constantly stay on top of these questions. More so than challenges that the government have struggled to overcome, e.g. delivering adequate PPE and tests.

2020 brings depression-era economics, an ongoing and uncontrolled public health crisis, and the rupturing of around 40 trade agreements with over 70 countries. All of which will create a big hole in public finances.

If the Tories respond to this with the “medicine” of the past decade (austerity), our economic and social problems will deepen. There have been worrying signs that this may be where we are headed.

A dozen years after the global financial crisis, we still live in a world of very low interest rates. Instead of austerity, government must listen to this market signal and seize this opportunity.

2) How will the government be perceived to have performed on the economy?

While the economy recovered after our exit from the ERM, the then Tory government’s reputation for economic competence did not.

Even if today’s government were to leverage very low interest rates to drive an investment boom, their standing on economic competence may be poor if they are blamed – as was the case with the ERM – for having caused the calamity from which we are recovering.

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