We have bounced back but it will be a much harder trick to pull off twice

Linda J. Dodson

This is, of course, a sensitive issue. But health economists often have to put a monetary value on people’s lives based on the number of years of life that they have left, and the quality of that life, for example when deciding how much the NHS should be willing to spend on new treatments.

It is therefore surely relevant that those most vulnerable to Covid-19 are the relatively old and those with pre-existing health problems. These people must not be abandoned. Indeed, additional support should be targeted at those at greatest risk, including in care homes. However, we do need to ensure that others do not pay a disproportionate price. 

Finally, we have to acknowledge too that it is extremely difficult to undertake a comprehensive cost-benefit analysis of the lockdown. (Having tried myself, I have huge sympathy for anyone attempting this.) One of the biggest challenges is to identify the “counterfactual”, or what would have happened anyway even if the authorities had not responded in the way that they have.

For example, in assessing the value of the lockdown we need to have an idea of the number of premature deaths that the lockdown has prevented. The fact that the actual number of Covid deaths during the lockdown has been much lower than some had feared proves nothing either way.

Even if we know the answers here, we are still left with the problems of comparing “apples” (potential deaths from Covid), “oranges” (other less visible impacts on health) and “gooseberries” (economic costs).

None the less, we can draw a few lessons from the first national lockdown. On the plus side, the fiscal costs were manageable. Government borrowing and debt have soared, but this has proved to be readily financeable at very low interest rates. Many of the costs were also “transfer payments”, such as subsidies to furloughed workers, rather than a total loss to the economy.

Economic activity has also rebounded more quickly than most had expected, as the restrictions have been lifted. In the meantime, the UK Government has been able to protect the majority of businesses and jobs.

However, it would be much harder to pull off this trick twice. Indeed, the worst possible scenario could be a stop, start and then stop again approach that would create even more economic uncertainty and test the patience of financial markets to the limit.

We are also now much more aware of the harms done by the lockdown itself, particularly to the welfare of young people – but also not forgetting the impact on many of the elderly who are suffering in isolation.

Taking all this in the round, the more that the restrictions are tightened, the greater the margin by which the costs are likely to outweigh the benefits. It may still be right to focus on the impact on health and well-being rather than any short-term economic hit, but the balance has now shifted.

In addition, the longer the economy is held back, the greater the risk that some of the damage will be permanent, making it that much harder to pay for better public services in the future.

It is therefore reasonable to conclude that the first national lockdown may have been “worth it” originally, given the amount of uncertainty at the time, but it was no longer so by the end. A second national lockdown would be a blow from which it would take much, much longer to recover.

Julian Jessop is an independent economist. You can follow him on Twitter @julianhjessop

Jeremy Warner is away

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