Personally, I would vote for an immediate end of the lockdown. I understand the concerns, but I think we have reached a stage where the economic cost of the lockdown vastly outweighs any potential health benefits.
Our economy is in freefall. Businesses are failing en masse. Unemployment is skyrocketing. The public finances are in dire straits. This would have been terrible at any time – but what makes the timing especially bad for Britain is that this was supposed to be the year leading up to our post-Brexit future, just when industries needed to be at their best. Instead, they have been hobbled by the pandemic.
None of this is to say that the lockdown was the wrong policy choice. But the lockdown’s initial aim was to ensure that the NHS does not get overwhelmed, and that, fortunately, has now been achieved. It is now time to re-prioritise the economy.
If the lockdown continues, we will see even more business failures, and an even further deterioration in public finances. We will see unemployment spiral and investment stall. We will see a prolonged, ruinous recession.
A booming economy would give us a stronger hand to negotiate Brexit, safeguard our financial wellbeing, and save lives by keeping our society physically and mentally healthy as well as providing funds for the NHS.
Would an end to the lockdown, on its own, ensure a swift recovery? Of course not. Economic activity already began to slow down before the lockdown, and Sweden, which never had a lockdown in the first place, has not escaped unscathed either. Moreover, we are now dealing with a global recession, from which we cannot just insulate ourselves.
Nonetheless, with ambitious and forward-thinking plans to boost the economy – making good on the “Northern Powerhouse” rhetoric, liberating small and medium-sized businesses across the country, slashing regulation that prevents businesses from getting on, giving infrastructure projects with a favourable cost-benefit-ratio the go-ahead – we can get out of this mess. These are not initiatives to be placed on the backburner – rather, they are of the utmost urgency. Delaying them will be ruinous. The Government owes it to British workers to get the economy moving again.
Crises beget hardship, but they can also be a wake-up call. We have an opportunity now to carry out a revolutionary shift to a true pro-growth policy, transforming the UK into a competitive, export-led high-productivity economy.
We know how this can be achieved, or at least in broad outlines, if not in every detail. The research has been done. The thinking has been done. The proposals are all on the table. They just need to be refined, and above all, implemented.
A pro-growth agenda could start with planning reform. We should make it a lot easier to build. Build housing, build offices, build retail outlets, build factories – build, build, build. Research from the US has shown that sensible planning reforms could easily increase US GDP by about 10%, and possibly more. If that is true of the US, it must be a fortiori true of the UK, where planning laws are much more restrictive, and almost uniformly so.
A pro-growth agenda, and especially one that aims to boost the regions, could involve fiscal decentralisation. Countries with more decentralised tax systems and governance structures, such as the US, Germany, Canada and Switzerland, are characterised by various regional economic centres, as opposed to one single “economic capital”. Talking about the “Northern Powerhouse”, about “levelling up” etc is all well and good, but without a serious decentralisation agenda, this is all just rhetoric.
We can make our tax system smarter, simpler, less distortionary and more growth-focused. This means measures like “full expensing”, which would allow companies to deduct any investment spending from their tax bill straight away, rather than having to spread those deductions out over several years. It sounds like a minor technical change, but there is good evidence for the investment-boosting effect. More generally, we ought to shift the tax burden away from work, saving and investment, and towards immobile factors, especially land values.
There are options for a smarter immigration system that rolls out the red carpet for highly skilled individuals and (would-be) entrepreneurs, rather than scaring them away with Home Office bureaucracy. We should stop blocking growth-enhancing infrastructure projects, such as airport expansion. We need cheap, abundant energy, rather than eco-Malthusianism. We need a competitive education system that builds up useful skills.
These are just some of the most important policy areas. There’s plenty to do, and there is no shortage of ideas based on sound, solid evidence.
Achieve this, and the UK could emerge from the coronavirus crisis a fundamentally changed nation – for the better. A dynamic but advanced economy; an agile and streamlined regulatory framework; an attractive and safe market for investors; a robust manufacturing sector combined with a world-beating financial services sector. This would revolutionise British industry as we know it, not just in London, but from Newcastle to Southampton.
We’ve got everything it takes. We just need to muster the political courage.
Alexander Temerko is director of Aquind Ltd, and a member of the IEA’s Advisory Council.