Leading article

The cure to this crisis can be found in our communities

21 March 2020

9:00 AM

21 March 2020

9:00 AM

For the Chancellor to produce an emergency bailout package just six days after delivering his Budget is an extraordinary state of affairs, but such is the fast-moving nature of the coronavirus crisis. The virus itself is growing along the expected trajectory, testing the limits of the NHS — but no one could have modelled the economic response. The decision by the government to shut down large tracts of the economy and ask workers to stay at home — with the prospect of this lasting for months — will deliver a shock far greater than the economic crash of 2008. Its effects can already be seen everywhere.

This week Capital Economics said the economy could shrink by 15 per cent over the space of a few weeks. That would be a contraction without parallel in modern times. By contrast, the last recession saw a peak-to-trough fall in the economy of just over 6 per cent. Today, entire sections of the workforce find themselves grounded and smaller companies are faced with the prospect of no customers and no income — and no money with which to pay staff. Mr Sunak was right to offer £350 billion of loans, just as Donald Trump was right to back an $850 billion stimulus. Help now is needed to prevent longer-lasting damage later.

The economy is crouching, not imploding. After the 9/11 and 7/7 terrorist attacks we were encouraged to go out to restaurants, bars and shops to support the economy. In this case the government is asking us to do precisely the opposite: to stay indoors. Moreover, it has hinted that its policy of social distancing could last many months. But once it is over, things should improve quickly: there is plenty of reason to expect a V-shaped recovery, as millions return to work. There is more chance of this if viable businesses are kept intact through this period. So the economic medicine required this time is fundamentally different.


This is why interest-free loans, rather than million-pound grants, will be most effective: a 12-month business rate holiday for the catering and hospitality sector as well as grants of up to £25,000 for small businesses. These are welcome and necessary measures and the Chancellor hinted that more may well be on the way. But at every stage, care must be taken to match the solution with the problem. Too often, in financial crises, a scattergun approach is adopted, to little effect. Quantitative easing, or money-printing, would not be much use in this situation.

But the most powerful response here is a social one. We can look after each other. A decade ago David Cameron devised the concept of the ‘big society’. It was a poor name for a good idea: that we, the general public, can act to complement the state, and that neighbourliness can be encouraged through the right government action. People want to help, and they will. The calm, reasoned language of the Chief Medical Officer, Professor Chris Whitty, has achieved through persuasion what the Chinese brought about through coercion: streets, shopping centres and other public spaces have fallen quiet.

Business itself has a responsibility to use the government loans and grants in order to support employment through lean months. The hospitality sector itself employs 1.75 million people. In normal times it makes no sense to hang on to under-productive staff who could be better employed in growing businesses, but these are not normal times. Offices will be closed, but what about those who clean the offices? A responsible business should keep paying these workers for as long as is feasible. Big business is often much maligned, but is responding in commendable ways. The food chains Iceland and Sainsbury’s have, for example, offered specific opening times reserved for the elderly so that they can do their shopping without having to mix with the crowds. This helps reduce their risk of exposure to the virus and ensures they can stock up without being swamped by the mob.

Even if we can’t go to restaurants, we can still use their takeaway services. When wine giants are unable to take online orders and Ocado tells customers that they are 14,179th in its digital queue, we can turn to smaller off-licences and grocers. If we want local and independent stores still to be there when the Covid-19 crisis is over, we can and must support them now. We can help theatres by donating (rather than reclaiming) the cost of tickets for cancelled performances. Music and even gym classes can be continued via Skype. The internet can help us keep our communities together.

Never was there a greater need for a flexible, imaginative and grown-up government. So far, it seems to be up to the job. But there is only so much any government can do. The most effective response in a public health crisis comes in the way in which the people of a country help each other.

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