Lockdown anniversary special: The 12-month stretch

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Morning all,

A year ago we were encouraged to Stay at Home, Protect the NHS and Save Lives, as the country went into its first full lockdown. I doubt any of us thought we’d be celebrating the anniversary of that moment in yet another lockdown. But here we are. To mark the occasion, this week’s TOTC reflects on the big picture of where the Government has succeeded, and failed, over the past 12 months (read our full report for more).

It’s also a year to the day since we set out proposals for a retention or furlough scheme to see workers through lockdowns – the implemented version of which has paid the wages of 11 million employees at some point since then. If working on policy proposals like that sounds like your thing come and join the Resolution Foundation team.

Happy anniversary everyone,

Torsten Bell
Chief Executive
Resolution Foundation

A vaccination triumph

Attention is currently focused on our vaccination drive triumph. The UK went first and has gone fast. By the middle of March, 25 million people have received a first dose, with doses administered at over three times the rate in the EU. Despite supply concerns this week, the target for the over 50s to be offered a first dose by mid-April should easily be exceeded.

This success is the result of the scale and diversity of the UK Government’s vaccine procurement, along with attention to detail on supply chains to help turn vaccine orders into vaccine reality. Not only are lives being saved as a result, but our economic prospects are being upgraded too: both the OECD and Office for Budget Responsibility recently revised up their short-term forecasts for UK economy on the back of the faster-than-expected progress.

Huge support for families and firms

The second big picture success of the past year has been on economic policy. Recent extension of support in the Budget has taken crisis-related spending to an astonishing £340 billion, with £186 billion of support for households (via furlough, higher benefits, or grants for the self-employed) or firms (including grants). That amounts to around £6,700 per household in the UK.

This scale of action has – inevitably imperfectly – achieved the central economic task of government policy in a pandemic: insuring households and firms against the income shock threatened by the huge virus-induced slump in economic activity. As a result, the worst recession for 300 years has seen the smallest recession rise in unemployment in living memory. Amazingly, household income has been broadly similar in 2020 to its 2019 level in aggregate despite GDP falling by almost 10 per cent.
The delivery, not just scale, of support has also generally been impressive. The Coronavirus Job Retention Scheme was announced on 20 March 2020 and opened for claims on 20 April, ten days ahead of schedule. Universal Credit (UC) has also had a good crisis. The system performed well despite a surge of 2.4 million claims to process in just ten weeks at the start of the crisis.

Recognising this big-picture success does not mean we should overlook the failings though. Delaying the autumn furlough extension helped drive redundancies up to 400,000 in the three months to November. And the strong performance protecting household incomes on average hides the fact that many families have fallen out of work and onto benefits – suffering a typical fall in income of 40 per cent – or have fallen through the gaps in government support. Grants to self-employed workers have been disastrously targeted – with many needlessly getting huge grants, while others received no support at all.

Perhaps the most glaring failure of economic policy is on sick pay, where we have somehow got a year through the crisis without addressing the fact that it is not fit for purpose. Two million low earners are excluded, and even those who qualify only get £96 a week (a quarter of their earnings, on average). Not protecting the livelihoods of those we ask to stay at home to help protect lives has had the entirely predictable result: many have not felt able to do so. This contributed to the weakness of our test and trace system, which has been unable to provide an alternative to lockdowns. But it is not the main policy failure that has led to a higher virus caseload…

Lockdowns have repeatedly come too late

One huge mistake will be the centre of the eventual inquiry into the handling of this pandemic: the failure to lockdown early enough, despite clear evidence of the need to do so. That mistake is all the worse for having been made, not once, but three tragic times. And it is not one that can be justified by claims to be protecting the economy, having not only cost tens of thousands of lives but contributed to our deeper downturn than many similar countries. Despite seeing an Italian national lockdown put in place on 9 March 2020, England did not follow suit for two weeks. At this point, the virus caseload was doubling every few days, so even small delays were crucial. The pandemic clearly posed a huge and entirely new challenge to policy makers, so reasonable people will disagree about how excusable this was. What is inexcusable is repeating that mistake twice in the months that followed.

Despite cases rising from early September, and SAGE calling for a renewed lockdown on 21st September, a second England wide lockdown was not announced until 31 October. When cases began rising almost immediately upon that lockdown being lifted in early December, Christmas was only ‘semi-cancelled’ on 19 December, and a lockdown was not announced until 4 January.

On deaths, the UK has seen high excess deaths compared to many similar countries. We should never forget the inexcusable 20,000 Covid deaths in English care homes in 2020, or the fact that mortality rates in the most deprived areas have been almost twice that in the least deprived areas. A rough upper estimate of the impact of failing to act in the face of fast rising cases in December can be derived if we assume that we had put in place restrictions quickly enough to prevent the death rate rising from early December. Had death rates not risen further, we’d have seen 27,000 fewer deaths, a reasonable upper estimate of the cost of allowing the winter virus wave to get out of control as the Kent variant hit.

Delaying lockdown restrictions hurt the economy too. Because cases were repeatedly allowed to escalate, restrictions that were belatedly introduced had to be tighter and last longer than in other countries to bring the overall caseload down. This partly explains why the UK has had the biggest GDP fall in the G7. This deeper economic hit will have a lasting, and very uneven, legacy for our family finances.
Covid-19 has not been ‘the great leveller’
The workers who have been most affected by the crisis are low earners and the young, who disproportionately work in sectors fully or partly shut down. Those with the least power in the labour market – such as those on insecure contracts or from certain ethnic minority groups – have also been hard hit. Affected workers are more likely to be found towards the bottom of the family income distribution, but the overall impact on families’ incomes, is broadly flat, with low-to-middle income households more likely to have seen income falls cushioned by the welfare system.But incomes alone give a misleading impression of the true, and lasting, impact on household finances, because spending matters too. Spending in the period July to September 2020 was down 10 per cent in real-terms on the previous year because higher-income households were banned from or scared of spending on the likes of holidays and hospitality.Meanwhile lockdowns, with children at home and cheaper shops harder to access, made it more expensive to live on a low income. Despite the headlines of the country spending less, we found that over one-in-three low-income households with children had increased their spending, compared to around one-in-six who reduced it  So many higher-income households have seen spending fall through a lack of commuting costs, or fewer meals out, but some low-income households have been forced to spend more just to get by. This has fed through into very uneven changes to household balance sheets – the lasting inequality-enhancing impact of the pandemic.Overall saving is up by over £125 billion, but it’s higher-income families doing that saving. More of the poorest fifth of households (16 per cent) have seen their savings fall rather than rise (11 per cent). The same story is seen with debt. The richest households are twice as likely to have seen their debts fall as rise, but the opposite is true for the poorest households.

The past year has seen significant successes, but a disastrous, and repeated, failure
We should celebrate the success of our vaccination programme that is not only saving lives but offering us the prospect of a faster recovery. Unprecedented economic policy measures have also insured households and firms against much of the pandemic’s economic damage.But the central, and repeated, failure to act swiftly to prevent the spread of the virus has not only cost tens of thousands of lives: it has also deepened the economic damage with deeper and longer-lasting restrictions on economic activity.This has also deepened the divide between richer households saving more, and poorer households taking on more debt. Indeed, while Covid-19 has touched everyone, lower-income families have borne the brunt of the crisis in terms of their lives and livelihoods. This should not be forgotten as we look to rebuild post-pandemic Britain.