Talk of tax rises is one thing – but we are in denial about the damage our economy faces

Even now, the effects of Covid-19 have been delayed and disguised by the various loans, subsidies and support schemes

Coronavirus, Brexit, a crisis in the public finances, international trade wars... any one of these would be sufficient to ensure a sharp if not prolonged economic recession.

But taken together? And if you throw in the growing impact of the climate crisis? Can we even imagine the scale of the damage to people’s lives the combination of these misfortunes will – very soon – inflict?

It certainly doesn’t seem that we want to. Such imminent realities haven’t really sunk in, even now. We seem more bothered about what happened to Harry Maguire than economic armageddon. The mood is of denial.

Take the stories about swingeing public spending cuts and tax hikes over the weekend. Scary stuff, maybe put around to gauge reaction for a later fiscal adjustment – no one thinks they’ll happen this year or next. But they did not provoke much of a debate about what will be the consequences of having an economy that is scarred by Covid-19, Brexit and the rest. Instead the rumours seem only to have served to provoke a Tory backbench and Labour backlash, to the effect that they are not likely to happen.

Some have remembered the comforting promise by Boris Johnson that there’ll be no return to austerity, as if it was some holy amulet of hope, rather than a casual meaningless soundbite.

There seems something of an air of unreality about this, a bit of a “phoney war” atmosphere. It is as if we’ve been arguing and prophesying calamity for so long about catastrophe – without it actually yet transpiring – that we think perhaps it was all exaggerated and that all will be well, and all will be well, and all will be well, after all. After all, we’ve had more important things to occupy our minds, such as statues and the Proms. The economy can look after itself.

Of course, it won’t, and it’s not going to look after us either. Even now, the economic effects of Covid-19 have been delayed and disguised by the various loans, subsidies and support schemes, notably the furlough, which has protected jobs. In a matter of weeks, however, much of that underpinning will be phased out.

That would be bad enough, but we also have the very real prospect of a potential second national lockdown, or at least some new restrictions on travel and economic activity. If it comes to pass, will it be accompanied and answered by Furlough 2.0? There is no hint of it. Those noises coming from HM Treasury over the past few days suggest that the days of doing “whatever it takes” may be over. Some token schemes will no doubt be offered here and there, but otherwise the pandemic will take its economic course. Eventually, the British will run out of people willing to lend them money. Then what?

It seems almost cruel to mention Brexit, but even the most boosterish of Brexiteers cannot deny it will have an impact, deal or no deal. What Michael Gove euphemistically describes as “bumps in the road” will send businesses to the wall, shred jobs and push families into poverty. The worst predictions of “Project Fear”, vintage 2016, haven’t yet materialised because fiscal and monetary policy have been used to prevent them, and because there was hope of a close deal and because we’re still in the transition period, with no barriers to trade imposed – so far.

In a few months from now that will end. There will be major effects on exports of goods and services, and on the competitiveness of the British economy stretching years into the future, far far beyond the immediate hold ups at the ports on New Year’s Day.

Like the changes to economic life Covid-19 is bringing, Brexit too will mean a long term adjustment, to put it mildly. There is hardly a sector of the economy that will not be affected, from high street dry cleaners to international airlines, from sandwich bars to commercial property investment, from commuter train operators to car makers, from hill farming to universities. All will need to adapt, if they can, and many “old” jobs will go and businesses will fail before the new ones are created – that takes far longer.

Meantime, the public finances are squeezed through loss of taxes and higher social security payments; and the currency will take a hit as the external value of the pound will have to be the prime mechanism to rebalance our international trade. That too will hurt domestic living standards as the price of imports rises sharply. The worst-off parts of the country will be those where the effects of the pandemic and Brexit will form a double, reinforcing whammy.

That might include areas that haven’t experienced economic hardship in a considerable time, such as London and its dormitories in the home counties. The shock for them will be even greater.

It is so long, indeed, since Britain has experienced a really prolonged period of painful adjustment, mass unemployment and stagnant or declining living standards that it is hard for many to envisage that such a turn of misfortune is almost upon us. You have to have been around in the grim 1980s to have lived through such a time, which is now as long ago as the Second World War was to people then.

The great British economic disaster of the 2020s will not be a re-run, because it could not be; but the slump will very possibly be worse and take longer to emerge from. Society, too, is if anything even less cohesive now than it was then, our culture wars of age and race adding to older class divisions – which means more civil disturbance and periodic riots as the inexorable toll on the most vulnerable in society is meted out.

Politically? It almost seems irrelevant, because no British government has the means to resist or even ameliorate such massive waves of economic dislocation. No amount of borrowing for public services or investing in Dominic Cummings-inspired future technologies will prevent the British economy going through a decade of hardship, comparable to the slumps of the 1930s and the 1980s.

The shocks and the aftershocks will keep coming for years as markets disappear, businesses shut down, and investment grinds to a halt. We can all see it coming, or rather we could if we cared to look ahead, but we choose not to. That’s human nature, I suppose.