Rebooting Britain: How the UK Economy Can Recover from Coronavirus

Abstract

The uncertainty created by the COVID-19 has reinvigorated old debates about the role of the state, highlighting the flexibility of private businesses and civil society and illustrating weaknesses in state planning. The UK healthcare system has struggled to keep up with those in other countries, where market forces play a bigger part. Business activity has further slumped during lockdown, as many businesses simply cannot operate in the new world of social distancing and suffer severe reductions in output. However, if markets are liberalised and allowed to operate freely, the recovery may be quicker than many think. This could mean eliminating occupational rules that reduce labour market flexibility and employment obligations that reduce job opportunities. Another way of rebuilding a prosperous economy is to restore full employment, and not to price workers out of jobs or disincentivise them from seeking work by increasing taxes on individuals and corporations. The fiscal costs of the crisis could be manageable without tax increases. Government borrowing will shrink again as the economy recovers and the emergency fiscal measures are wound down. The gradual easing of restrictions and the return of consumer and business confidence could suffice to kickstart the economy. The Coronavirus Job Retention Scheme (CJRS) has played a valuable role in protecting jobs and incomes in the short run, but it is expensive and distortionary, and there are dangers in keeping defunct businesses on life support.