Easing does it

Economic policy beyond the lockdown

Having weathered the first wave of the coronavirus economic storm, the task now facing the country is how to reopen, revive, and rebuild our economy while the virus remains with us. The Government needs to act as quickly, boldly, and creatively in the recovery phase of the outbreak as it did in the initial rescue phase. Delay or relying on traditional policy levers not tailored to the nature of this crisis risks a widespread failure of firms and a return to persistently high unemployment; either would lead to long-term scarring to our productive potential.

In this report we go further than other studies by providing a comprehensive blueprint for how economic policy can support a rapid, strong, and sustained recovery. Our analysis not only provides a quantitative estimate of the overall size of the fiscal rescue package, which has to be larger – at around £200 billion, or around 10 per cent of GDP – than that seen in previous recessions. It also shows that the exceptional sectoral concentration of the economic hit means that policy measures need to be more targeted if they are to be both effective and provide value for money. And policy needs to build in the flexibility to respond either to a faster-than-expected recovery if a vaccine or an effective treatment is discovered, or to the re-imposition of strict distancing restrictions if there is a national second wave of transmission.