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On this site earlier this week, James Frayne wrote that “public opinion on the economy is a rapidly ticking timebomb” and that “if their employers consider themselves to be heading for catastrophe, it suggests that the public will catch up before too long”.

There must indeed come a point at which, in an imaginary world in which the present lockdown continues indefinitely, voter support for the shutdown ends, and public defiance of it begins – as people come to believe that the cost is no longer worth the gain.  (It’s worth adding that there is no conclusive evidence, in the real world we live in, that this point has yet been reached.)

The flight from investment, drawing in of financial horns and laying-off of workers will have set in during early March.  The second of the May bank holidays falls on May 25th.  The period coming after it will mark roughly three months since the contraction began in earnest, the same timespan as an economic quarter.

There are two main views within government about how to approach early June.  In order to keep the temperature cool, let’s depersonalise them, and call them the Health view and the Treasury view.  Now imagine them being put to Boris Johnson.  (ConservativeHome can report that while the Prime Minister may not be working he is certainly texting.)

Health first.  “Look, Prime Minister, we mustn’t let defeat be snatched from the jaws of victory.  Our solid win from this calamity is that the NHS hasn’t collapsed.  We need more time to build it up so that it can cope with the second wave that will follow the gradual end of lockdown.”

“Furthermore, look at the polls.  We’re riding high.  You are seen to have led from the front simply by having survived the virus yourself.  Other countries who got it earlier are now easing off their own shutdowns.  Let’s wait and learn from them what works and what doesn’t.  And we couldn’t announce any end to the lockdown until the daily death number falls, anyway.”

Now the Treasury.  “Prime Minister, maybe the economy will rebound from three months of being effectively closed down – an experience it didn’t have even in wartime.  But, frankly, even the OBR’s estimate of what happens if there is “no lasting economic hit” is alarming.

A 35 per cent GDP fall in the second quarter, unemployment at ten per cent, the largest single-year deficit since the Second World War, debt at over 100 per cent of GDP.  Now translate that into human terms: lost jobs, ruined businesses and rising demands on the state.  And into political ones.  There won’t be an NHS at all without a wider economy to fund it.  And those poll ratings will go south overnight.  We must move by early May at the latest.”

What should the recovering Boris Johnson make of these competing claims?  It’s worth remembering at the start that he is still recuperating, and surely won’t be back in action next week, when the Commons returns in virtual form.  We’ve no objection to Dominic Raab taking key decisions in his absence.  But this is very unlikely to happen.

So Parliament is set to see Keir Starmer demand that the Government publish a lockdown exit plan, and Ministers to bite back by suggesting that Labour is putting the NHS at risk by not sticking to the core message of “stay at home, protect the NHS, save lives”.  Is that good enough?  Which route should the Government take – Health’s or the Treasury’s?  And how fast?

We’ve urged it to get its lockdown exit plan ready behind the scenes, and there are some signs that this is now happening.  Beyond that, we run up against the limits of our knowledge.  You don’t have to believe that Ministers have handled this crisis perfectly, or even well, to concede that the decisions they must make are fiendishly hard.

Knowing what’s really happening abroad, getting comparable figures, understanding the virus itself and immunity from it, predicting how the public will behave: all this is an art, not a science.  The Prime Minister is like a man who must pick out a tune on a broken piano while wearing earplugs.  One of the reasons why politicians seem to be rising in popularity and journalists falling is that much of the media doesn’t seem to get this at all.

So this site won’t rush in where editors should fear to tread.  But we will ask a question – and then try following a line of thought.  The question is: once the lockdown is turned off, even in part, could it really be turned on again, if necessary?

The line of thought strikes out in a different direction.  The Treasury’s furlough scheme is designed to last for three months.  So is the mortgage holiday.  So is the Self-Employed Support Scheme.  Rishi Sunak has made it very clear that all will be extended if necessary.  But you will see from that persistent timeframe that the Treasury has been hoping or expecting or both that the lockdown will wind down from mid-June at the latest.

If it isn’t, the Chancellor won’t suddenly withdraw life support from the economy.  He will extend the schemes.  And he will risk loans turning into grants, and extending their availability – which is what looks set to happen to the Large Business Interruption Loan Scheme.

In short, the longer the lockdown goes on, the more Sunak will re-deploy his bazooka.  And as one experienced hand pointed out to ConHome yesterday, “you need a bigger bang each time to get the same effect”.  We don’t expect the shutdown to last in full until summer.  But if it did, Britain might well be moving towards Universal Credit as a basic income, and grants to keep businesses alive – for all the Chancellor’s insistence that not all will survive.

Gazing at this prospect of even more statism, printing, borrowing and taxes, it’s not hard to understand why the Treasury is so agitated.  The newspaper industry is being hit hard – the Jewish Chronicle has closed; a straw in an ill wind for the industry – and it will agitate, with Tory MPs at its side, for subsidies for all if the lockdown doesn’t end.

Furthermore, the banks and the Treasury aren’t skilled at getting the money out of the door.  The banks have criteria that they like to apply, in ways that their counterparts abroad don’t always do, and have a tendency to assume that, at present, its business as usual.  Hence the grinding pace of the rollout of the sister of the loan scheme we’ve already referred to – the Business Interruption Loan Scheme.

The Treasury is set up to ensure sound money: its basic institutional bias.  Again, that’s fine, indeed essential, in ordinary times, but these are extraordinary ones.  Paying out money isn’t what it’s trained to do.  Anyone who doubts it should glance back to the nightmarish tale of Gordon Brown’s tax credits.

To date, Sunak has been a lucky politician: top of this site’s most recent Cabinet table, no less.  He is clever, deft and has command, all of which have been on display in what have effectively been three budgets in less than six months.  A dog that the media has given a bad name – Chris Grayling, say – would have been lynched for doing the same.

ConHome is rooting for the Chancellor, but the challenges ahead are unprecedented, even if the economy bounces back. Our instinct is that he will need a Reaganesque programme of tax cuts, deregulation and borrowing, if the markets will wear the last – but we shall see.

192 comments for: The longer the lockdown lasts, the bigger Sunak’s bazooka will be

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