The Government has to let the country get moving again. The damage piles up every day that the lockdown continues – damage in personal as well as economic and financial terms.
No one wants a return of the virus, which is now receding fast, so a step-by-step response makes sense. But the dithering, uncertain way in which the restrictions are being lifted does not.
The numbers for the economy are dreadful. Output in April was down more than 20 per cent on March, and that is bad enough. More worrying still is what is happening now, which is a slower recovery than that of any major economy.
Radical thinker?: It is time for the Government to get behind new Chancellor Rishi Sunak
Cast forward and if the OECD forecasts are right, the UK will end up having a deeper decline in output this year than anyone else. It is small comfort that it also forecasted a sharper bounce back next year than the others.
So what’s to be done?
Well, the Bank of England will try to get some sort of further boost after its Monetary Policy Committee meeting this week. Expect at a minimum another bout of quantitative easing (QE). But to be realistic, there is not much more that monetary policy can do, and there is a danger that anything it does try will be counter-productive. Interest rates are already just above the floor. Cutting them to zero would reduce the paltry amount savers receive even further.
So it has to be the Government. The first thing here is for it to stop making mistakes, such as the 14-day quarantine it has imposed on airport arrivals. It is being sued for that by airlines so we will see what the courts make of this. But, as argued here last week, it does not pass the common sense test.
Other mistakes include the two-metre distancing rule. We are not fools, and we don’t want to catch bugs. So why not simply advise people to keep a reasonable distance from each other?
We have to get our pubs, restaurants and hotels moving. Much of Europe is opening up and we can learn from them how to do so safely. So far the signs there are encouraging, but if there were to be a rise in infections, then we could act accordingly.
We also have to get the housing market moving. Here there are some signs of life, with mortgage applications, which had collapsed, jumping back. But mortgage rates have not fallen, despite the efforts of the Bank of England, and cheaper money would certainly give a boost. The biggest thing that the Government could do, however, is to have a temporary cut in stamp duty on home sales. Say, halve it for a year?
The point here is that when people move home they spend money on other things.
We buy furnishings, put in new bathrooms, get the place redecorated. So there is a huge knock-on impact on the economy, which we need right now. That leads to the issue of whether there should be a mini-Budget of tax cuts next month. Germany has just agreed to cut VAT in an attempt to jack up its economy, and there is an argument for that.
There is certainly a case for temporary tax cuts, just as there is a case for a radical revamp of our entire tax system. A mini-Budget would be helpful, but the cleaning up of our hideously complex tax system is ultimately much more important, and that will have to wait.
Our new Chancellor, Rishi Sunak, knows all this. Time for the Government to get behind him.