As lockdown eases across the country, the Government needs to find a way to make sure economic recovery goes hand in hand with the suppression of the virus. Both Boris Johnson and Joe Biden are promising to ‘build back better’, but arguably only one of them has a vision for what that means.
It’s a difficult balancing act – the need to lift restrictions to get the economy moving, but in doing so not creating the perfect conditions for Covid-19 to thrive once again.
The key to driving the recovery is to give people confidence. Confidence will help people get back to life in the new normal, to return to city centres and prop up businesses desperate for the return of office workers and, most importantly, confidence to start spending the vast sums that have been saved during the pandemic.
Covid-19 has obviously been economically devastating for many people, with the impact particularly acute at the lower ends of the income scale, but a large number of people have also amassed significant savings over the past year.
At the peak of the pandemic the House of Commons Library estimated that households were saving 29% of their disposable income, almost three times the rate it was pre-pandemic. Over the past year this frugality has grown people’s savings by more than £180bn – equivalent to about 10% of the UK’s annual GDP.
And it’s not limited to consumers.
Again, whilst many businesses have struggled and been forced to rely on government support to keep operating, for others the pandemic has seen a huge growth in cash reserves as investments were put on hold. This was backed up by the Chancellor, Rishi Sunak, who told ITV that “businesses have about £100 billion of excess cash that they’re sitting on”.
The UK economy is already showing positive signs of growth according to the latest data from the ONS, but to truly unlock the potential for a new “Roaring Twenties” the Government needs to find ways to encourage people to start spending again.
The key is confidence.
People and businesses alike will only loosen their self-imposed spending restrictions when they have confidence in the future economic prosperity of the country, confidence that it is the Government’s job to instill.
Whilst there have been some moves to incentivise spending, such as the ‘super-deduction’ for businesses that invest, that has been off-set by the promise of future tax rises announced years before they come into effect.
You only have to look across ‘the pond’ to see a different approach.
The Biden Administration has wasted no time in seizing control of the agenda. The President’s ‘Build Back Better’ plan is a $7 trillion plan to not only rebuild, but remake the American economy. Covering everything from paid leave, to healthcare and green jobs it is a bold and ambitious plan to leverage the impact of Covid-19 into transformative change for the country.
And guess what, Americans like it. A recent poll showed support at over 60%, and that from a nation of people who are historically suspicious of large government interventions. And it’s already beginning to have a positive impact on consumer spending.
Critics will say that the plan calls for too much borrowing and too many tax rises, but at a time of record-low costs of borrowing and with the US 32nd out of 37 in the OECD tax burden league table, now is surely the time they can afford it.
A new vision is needed.
The UK would benefit from a plan, or a leader, with similar ambition and vision.
For years now, UK politics has been suffocated by Brexit, held back by weak governments and led by Prime Ministers without overarching visions of how to govern. Arguably, the last Prime Minister with a clear vision for Britain was Tony Blair in 1997, however people may feel about his premiership today.
Our current PM’s obsession with public perception means policy is more often focused on the next news cycle than the next decade, and we are much the poorer for it.
Off the back of crises come opportunities for transformation. Roosevelt’s ‘New Deal’ in America (itself financed by over $200 billion of borrowing), or the creation of the NHS in this country demonstrate that times of the greatest difficulties can also be the exact moments that systemic and long-lasting change is possible.
With enormous challenges from climate change, social justice, social care and a much needed green industrial revolution facing the UK, what better time for a bold, ambitious and inspiring vision for the future of the country?
Such a project might just get consumers and businesses spending once again, help rebuild the damage from Covid-19 and transform the future of the UK economy.
It would also be good politics – parking yet more Tory tanks on traditional Labour lawns, giving our media-conscious PM a bucket load of announcements and photo ops, and giving a Government who will have been in power for almost 15 years a new and refreshing story to take to the public in the 2024 General Election.
After all, no one remembers FDR for how much he borrowed.
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Harry Shackleton
Harry is an experienced communications and operations professional with 15 years’ experience working across public affairs and communications, in the UK, Brussels and with clients across Europe. He has worked with some of the UK’s best known communications agencies to help them develop their business and become more effective.
