Pedestrians cross the road in view of skyscrapers in the financial district of the City of London, UK. File photo: BLOOMBERG/Jason Alden
Pedestrians cross the road in view of skyscrapers in the financial district of the City of London, UK. File photo: BLOOMBERG/Jason Alden

London — Two of Boris Johnson’s senior ministers laid bare the competing pressures facing the British government as it attempts to drag the economy out of its worst recession in at least a century without triggering a new wave of coronavirus infections.

Hours after foreign secretary Dominic Raab on Sunday reiterated the government’s push to “get people back to work” and lamented the damage done by locking down the economy, health secretary Matt Hancock warned that a recent spike in coronavirus cases among young people could “lead to the sort of problems that we saw earlier in the year”.

The surge could undermine the government’s push to encourage people to return to their workplaces after schools reopened across England last week. But it is also a sign of how the next couple of months threaten to play out for Johnson’s administration, amid warnings from medical officials about a possible resurgence of Covid-19. On Monday, environment secretary George Eustice said the government wanted to avoid a second national lockdown “at all costs” but would not rule one out.

“What we’ve developed since the original lockdown is much more targeted local lockdowns,” Eustice told Sky News. “The idea of going into a total national lockdown again is something we don’t want to do. The impacts on our economy are significant.”

The UK reported 2,988 new coronavirus cases on Sunday, a 64% jump on the previous day’s and the highest level since May 22. That was despite the number of new cases typically dipping at weekends when reporting is more limited. The average was about 1,600 new cases a day in the past week.

“The cases are predominantly among younger people, but we have seen in other countries across the world and in Europe this sort of rise in the cases among younger people lead to a rise across the population as a whole,” Hancock said.

Resistance

Johnson has said that any measures to kick-start the economy must be “Covid-secure,” so the sudden increase is likely to trigger further pushback from labour unions and workers on pressure to return to the workplace.

But a report by accountancy firm PwC published on Sunday showed the annual economic cost to the UK of people working remotely could be £15.3bn due to lower spending from workers who are at home and the knock-on effect on those who rely on them for business.

A no-deal Brexit could saddle Johnson’s government with an added challenge in turning the economy around. Carmakers, for instance, have warned that the burden of higher tariffs or border disruption would make British plants less competitive. On Monday, Nissan said it would hold off on a £400m investment at its Sunderland factory to make the next version of its Qashqai sport-utility vehicle.

Nissan said in February that making cars in the UK “would not be viable” with the 10% tariff that would be triggered without a UK-EU trade deal. The Financial Times reported earlier that production of the Qashqai, originally slated for October, was delayed until after April, when new trade terms are clear.

Stimulus measures

Johnson is also facing calls from Conservative Party members to explain how the government will pay for stimulus measures introduced during the pandemic.

There has been fierce debate on the effectiveness of raising taxes to tackle borrowing in the UK as policymakers face the challenge of reining in debt that has ballooned to more than £2- trillion for the first time.

Chancellor of the exchequer Rishi Sunak has promised Tories there would be no “horror show” of tax rises, but left himself room for temporary hikes to pay the pandemic debts.

Sunak and Johnson will try to keep voters onside with a plan to cut personal taxes ahead of the country’s next general election — due in 2024 — the Sunday Times reported, without saying where it got the information.

Sunak is expected to say that the government must raise funds to pay for stimulus packages, with November’s budget likely to increase the burden on high-wage earners, according to the report. Tax cuts may then be implemented in 2023 or 2024.

Competing demands

There are also groups demanding spending. On Monday, a group of 40 Conservative MPs was planning to present a “levelling-up task force” to promote the case for the government’s key election pledge to boost deprived regions of the UK. The group, which includes Tories elected for the first time last year to seats typically held by the opposition Labour Party, cited research showing average earnings in Conservative districts are now lower than in Labour-held areas.

“The coronavirus crisis has only made the case for levelling up stronger so we can get the economy moving in areas that are less well off,” MP Neil O’Brien said in a statement. “Our new task force will be spearheading this vital agenda.”

Meanwhile, manufacturers group MakeUK called on Sunak on Monday to emulate Germany by extending the government’s furlough programme beyond October, something the chancellor has repeatedly refused to do.

“We do need to get people back to work,” Raab told the BBC on Sunday. “It is important to send the message that we need to get Britain back up and running, the economy motoring on all cylinders.”

Bloomberg

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