A vaccine will be the most effective economic stimulus

Chancellor Rishi Sunak’s extension of the furlough scheme through October is confirmation, if any were needed, that the pandemic will not produce a mere three-month economic hiatus.

Lost GDP from our societal decision to suppress the virus runs at around £60bn per month right now, with government borrowing potentially up to £300bn for 2020. Neither accounts for the broader social costs of this crisis, from lost interaction with loved ones or potential partners, through to impaired learning for children.

I say a “societal decision,” rather than the Government’s lockdown, because good evidence worldwide shows that voluntary social distancing shuttered activity long before government mandates. Sweden, which hasn’t locked down, is likewise not being spared devastation as its people adapt.

Their central bank forecasts a 7-10pc GDP decline this year – a worse hit than other Scandinavian countries and up to three-quarters of the forecasted UK impact. The virus is our primary economic problem.

Economic disruption will, therefore, remain even as the Conservatives relax some lockdown restrictions. Continued uncertainty about the risks of a second wave will plague business investment. Boris wants us in for the “long haul.”

He’s announced a policy of suppressing the spread of the virus with a threat-level type system triggering new restrictions on activity whenever transmissions jumps, right until a vaccine or effective treatment is found.

Matt Hancock, the Health Secretary, highlighted an important implication for single people – nobody should “hug” a stranger until that point.

Given these intolerable costs and this strategy’s dependence on a vaccine or effective treatment saving lives before herd immunity is reached, it is baffling how little taxpayers are spending to find one. Cobbling together public announcements implies UK public spending of just £300m for Covid-19 vaccine development, a mere 0.1pc of this year’s likely borrowing.​

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