empty central London street due to Covid-19

The lockdown exit strategy is crucial

Why charities and businesses need to know what comes next

By Dan Corry 20 April 2020 3 minute read

Breaking out of lockdown is a really complex task for policymakers. But it matters to the rest of us too—those trying to run charities or businesses. We are all trying to guess what the government will do. Click To Tweet

This blog was originally published in The MJ.

We are all currently and rightly obsessed with trying to get through this crisis. The here and now is what consumes us. Health measures, and the case for and against more testing and more social distancing, will go on but the end goal of getting us through this with the minimal amount of deaths, is not in doubt. Equally, the government – and governments across the world – have moved fast to try to prop up their businesses and their economies which the lockdown approach seriously threatens.

In many ways the old rulebooks have been thrown out of the window in terms of economic policy. New, massive schemes are announced as soon as they are ready to go; holes in them are patched up afterwards as faults emerge. There is no piloting, no deep analysis by commentators or select committees or experts before they go live.  And generally the cry has been for more action rather than screaming that what has already been done is wrong in itself.

Yet at some point we have to start coming out of all these special and unprecedented measures and I expect that rather many heads in the Treasury are trying to think of how on earth we do that. But exiting from all this will not be easy. At a macro level , we know that after we are out of the crisis the government will have racked up a whole lot of extra debt and, however much and however fast the economy gets back to normal, how to deal with the debt will be a major political  and economic headache.

But of more immediate concern will be how to exit from the special measures. At present these come in several varieties. One set are the loans that most firms can (theoretically) get. Then, a bit similar, are the deferrals of VAT payments and various other costs, plus the temporary exemption from being evicted from a property or a business premises by your landlord. Second, is the massive furloughing scheme, being used to keep firms and charities going who otherwise would have already closed down as their work – and their finance to do that work – has disappeared. Third, are the changes to welfare policy, especially around rules on benefits – like the Local Housing Allowance being made more generous and increases in Universal Credit payments.

Abruptly switching these all off on the day it is decided we no longer need to be keeping away from work or not gathering in restaurants, would be pretty catastrophic for the economy and many people’s livelihoods. So decisions will have to be made of whether to extend them, how to ease them over time, and what other support to put in while these are withdrawn. Grants for instance may need to replace loans; VAT deferrals may have to be written off completely. In some areas, and especially the welfare changes, government may well find – and it was probably always a Treasury fear – that there will be no going back to the older more miserly measures. The public simply would not accept it.

This is a really complex task for policymakers. But it matters to all the rest of us too – those trying to run businesses or charities, or to local council leaders trying to rebuild their communities. Because we are all trying to guess what the government will do so that we can make our plans accordingly.

If furloughing ended say at the end of June but it took three months to get your business fully back up and running you might go bust or need to make many redundancies. But if instead the government keep furloughing a bit longer, say until the end of August, you might be able to survive. If the loans had to be paid back fast then you may go bust, but if you get help with paying them or a delay of say a year, you may decide its worth carrying on. As a council, if the slightly more generous benefits are suddenly to be turned off you will have a bigger workload coming than if they are not and you will need to plan accordingly.

This agenda is not at the top of many lists at the moment. But as with wars, the exit strategy is often as important as the decision to go to war in the first place.

Dan Corry is our Chief Executive.  He is a former Treasury and Downing Street economic adviser.


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