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The year of impossible choices

By SEC Newgate team
22 December 2020

By Simon Gentry

It all started so well.  A natural star, charismatic, good looking (in his own way), a man the public could relate to, had landed the role that many thought he was born to play.  A whopping Parliamentary majority with a clear mandate to deliver the UK’s exit from the EU and to rebalance the country by massive infrastructure investments in the North of the country.  The world was his oyster.  What could possibly go wrong?

Wherever the virus came from and whatever its cause, other than a world war, nothing in modern history has caused the same level of economic and social dislocation.  From the outset the Prime Minister and the government seemed to some too slow, too hesitant to take the bold actions that others had taken.  Why, they ask, were people still allowed into the country after mid-March?  Why was the lockdown so slow and, relative to other countries, so limited?  Why does the Prime Minister over-promise and, apparently, consistently under-deliver?  Where’s the “world-class” track and trace system like South Korea?  Why were hundreds of millions spent on barely legitimate companies during the PPE crisis of the early summer?  Why did they fund ‘Eat out to help out’ when it was obvious that encouraging people to mix would accelerate the spread of the virus? Why did they not go for a suppression strategy, totally eradicating the virus like Australia and New Zealand? At every turn the government has looked baffled, befuddled and, well, plain incompetent.

The problem with that analysis is that it underplays the other side of the pandemic’s appalling cost.  The economic catastrophe.  As one of my senior colleagues is fond of repeating, Covid has wrought the greatest economic contraction in this country for 300 years. The best guesses suggest 2020 will have seen between 8 and 9% of the UK economy vanish.  Nearly a million people have lost their jobs, so far, and nearly half a million have left the country.  The hospitality and entertainment sectors, once star job creators, have been utterly battered, possibly to the point of collapse.  And that’s with staggeringly large amounts of government support being pumped into the economy by way of furlough payments and direct grants. Without that, the number of unemployed could easily have exceeded four million.  Since the beginning of the current financial year, borrowing to cover the gap between the Government’s spending and its tax revenues has reached £ 241 billion, more than £ 188 billion more than a year ago.  The independent Office for Budget Responsibility has estimated that the amount could reach £ 372 billion by the end of the financial year in March.  The national debt now stands at just over £ 2 trillion.  Even before the crisis the payment of the interest on our national debt alone totalled more than the spending on education and defence, combined.  That has probably gone up by about a third in recent months.  The money being paid in interest will have to be found and it won’t all come from the wealthy or companies.  Public services will need to carry their share of the burden too.

The Prime Minister and the Cabinet have been walking, or more accurately weaving, between preserving public health and preserving the economy, making near impossible decisions every day.

As if the pandemic wasn’t enough, the Prime Minister has also been trying to negotiate a trade agreement with our largest trading partner, the EU.  It has been clear from the outset that the UK and the EU had totally incompatible objectives.  In the years between the referendum and the December 2019 election, Brussels believed and colluded with those in the UK who thought that the result of the referendum could be overturned. Viewed from Brussels this was both desirable and likely.  After all, every previous referendum setback whether it had been in France, the Netherlands or Ireland had been reversed by the establishment without too much protest.  Surely Britain would follow.  The election result at 10pm on 12 December punctured that illusion, but Brussels’ key objective, if it could not bring the UK back into the fold, was to avoid one of its greatest fears, a fear that goes all the way back to the 1980s and Margaret Thatcher.  Many Continental Europeans, but the French in particular, had looked at Thatcher’s supply-side reforms with a mixture of fascination and horror because they saw a large economy inside the protective cordon of the EU make itself vastly more competitive.  That same fear shapes the Commission’s negotiating position now.  While Boris Johnson believes leaving the EU gives the UK the opportunity to reform and be more globally competitive, the EU fears exactly that.  It frets that its largest trading partner will reform and out-compete whilst having access to the single market, thereby threatening the EU’s domestic champions, and the ‘European social model’ so highly valued by many.  The two sides objectives are in complete contradiction and as a result, the negotiations are deadlocked, the French have imposed a partial blockade on Dover and we are 11 days away from the end of the transition period.

Notwithstanding all of those social, political and economic travails, we should not forget that the Prime Minister was himself hospitalised with Covid and had receive oxygen.  He got divorced, engaged and became a father again.  All in one year.

This brings us to the most fascinating and counter-intuitive political fact: after all of that, after all the failures, miss-steps, bungles and over-optimism, the Conservative party continues to lead in the polls and Boris Johnson is still seen by most as being a better bet as Prime Minister than Sir Keir Starmer. That defies all political logic and conventional wisdom.  When one digs into the polling, however, you find the public has pretty good reasons for their continued support for the Prime Minister.  They seem to believe that pandemics are awful, but rare and are very difficult to prepare for. They think that it is so unusual that they don’t blame the government for decisions taken quickly with limited information. The public also believe that for the most part everyone is doing the best they can and importantly that nobody would have done a markedly better job.

Of the thirty or so years I’ve been professionally observing politicians up close I’ve seen many have to make very difficult choices.  I’ve never seen a government have to make as many as this.  To say this was the year of difficult choices is an understatement. We all, I’m sure, hope that there are fewer to make in 2021. 

Happy Christmas and best wishes for the New Year.