Covid recession: how to bounce back?
Andrew Sentance, the well-known economist previously on the Bank of England’s Monetary Policy Committee and now an advisor to Cambridge Econometrics, made some interesting points in an interview recently discussing ‘what does the Government need to do to help the UK economy bounce back’? It’s worth repeating them:
1. Consumption stimulus – The Government needs to get us spending again. The easiest way to do that is to make stuff cheaper. Sentance suggested a VAT cut as one tool. And initiatives in areas that align with other Government policy agendas: more home insulation incentives, more financial inducements to make us buy electric cars, more enticements to make us invest in renewable energy etc.
2. Retraining schemes – Unemployment is going to balloon. How do we get the newly unemployed retrained and re-employed as quickly as possible? Well we should focus (a) on sectors that are already short of staff (construction, agriculture, the army, NHS, etc) and (b) sectors we wish to invest in and expand (housebuilding, modern methods of construction, green tech, AI, 5G, freeports etc).
3. Locked out sectors – Those sectors that are going to struggle for some time – hospitality, travel, the holiday industry – are going to need specific, targeted Government interventions if we are to save them and keep them from having mass business failures. Could the more general furlough scheme be reimagined for just those sectors, for example?
4. Trade deals – The much trumpeted Brexit bonus trade deals need to happen ASAP. Better to get the easy elements agreed and up and running and then come back to the more complicated areas afterwards in slower time rather than painfully and slowly slog through long winded, all-encompassing single deals.
Much to do, which needs Government focussed on ‘setting the right environment’ for entrepreneurs and businesses to flourish rather than ‘picking winners’, the failed strategy of yesteryear.