The economy is paying for the government’s pandemic mistakes as restrictions are extended

The furlough scheme is high on a short list of things that the government has done well during the pandemic, writes James Moore, and the decision not to extend it is unforgivable and will have lasting consequences

(REUTERS)

The risk of the government’s failure to get the Delta strain of coronavirus under control is yet another lockdown. That would be economically horrible so its decision to delay the lifting of the remaining pandemic restrictions is the correct one.

Handily, the four-week delay also means the new reopening date coincides with when schools will be closing for the summer break, creating a little additional breathing space by removing a potential source of spread, assuming no further delay.

However, the parallel decision to go ahead without addressing the economic cost is astonishing.

This is going to feel like a right hook delivered with heavyweight force to important parts of the economy. Businesses that have spent money on stock in anticipation have been left high and dry. Plans which have made have (once again) had to be put on ice.

Allowing this situation to develop is beyond awful from a government that already has an unenviable record on that score.

Maybe its concerns about borrowing are understandable, but pushing large parts of UK plc onto the hard shoulder is the last thing it should be doing to address that.

The way to deal with the debt is recovery and growth. One wonders why the concept is proving so hard for chancellor Rishi Sunak to grasp. With the G7 just having closed, the contrast with the boldness of the Biden administration across the Atlantic could scarcely be starker.

The best of it is that the government’s job retention scheme, in particular, has been one of its best policies. An unequivocal win as part of the package of economic support that has been doled out.

It has largely kept a public health crisis from morphing into a full-scale jobs crisis, with all the malign consequences of the latter (debt, depression, addiction, familial break-up, crime etc).

There’s a case for putting it next to the vaccine rollout on the too-short list of “things the government got right during the pandemic”.

The difference between the two, however, is that the government has been given far more credit for the latter than it deserved given the real achievement is that of scientists and an army of NHS staff who’ve worked above and beyond the call of duty to get shots into people’s arms.

The furlough scheme is different. It is true that Sunak called upon the expertise of people like the TUC and the CBI to help it with its construction. But the achievement of Sunak and the Treasury is still considerable. They ultimately did the smart thing in picking up the phone before putting the thing together at an impressively fast pace.

Set against that it beggars belief that the government now seems so willing to sully its achievement, leaving Britain’s hospitality and cultural industries particularly badly exposed.

Next month the job scheme starts to “taper” off with employers having to start contributing to the wages of furloughed staff.

As well as paying national insurance contributions and pension payments for furloughed employees, as they do now, they will have to start contributing 10 per cent of wages but at a time when, as a result of the extension, their revenues may be severely constrained.

Social distancing does that with cinemas, for example. It makes live performances of any kind completely unworkable.

As a result, people are going to lose businesses and jobs.

The best of it is, the government created this mess in the first place through its laxity when it comes to Britain’s borders.

It’s decided to make the economy, British businesses and British workers pay for its errors of judgement. It’s a shameful way to behave, but that’s sadly hardly unusual with this lot.