In an interview with the BBC‘s Laura Kuenssberg UK Labour leader Jeremy Corbyn said that the coronavirus has proven that the state has to spend more money “to right the social wrongs of this country.”
Indeed, the British Government has resorted to spending unprecedented amounts of money to help alleviate the economic effects of Covid-19. Chancellor Rishi Sunak unveiled a £330 billion guaranteed loan system to aid businesses that have been ravaged by this pandemic. Other measures include increased grants and rate relief for firms, while the self-employed are being provided with up to £2,500 a month to cover 80 percent of their wages.
Coronavirus Will Shape How Britons View Their Government and Institutions For Years to Come
What type of Britain will emerge from this crisis remains to be seen. Despite this, Covid-19 will not only be remembered as a devastating pandemic, but also as one of those events that changed the course of history in the long-term. The coronavirus will shape the way the British people view their government and institutions for years to come.
Will Hutton, the Principal of Hertford College, was quoted in Sarah Whitebloom’s Oxford University Science Blog for praising the return of state expansionism, Keynesianism, and government responsibility. Yet John Maynard Keynes warned against increasing inflation to “pay for the war” (in reference to the Second World War), so instead he proposed that taxes on higher wealth and incomes should rise.
UK citizens enjoy different rates of direct taxation depending upon their income bracket and if the Government went down this route, this nation would witness a reversal of the tax cuts this country has benefited from since 1979. That all depends on how soon this virus goes away.
Support for the NHS Will Increase
Nonetheless, support for spending more money on the NHS will only increase after this crisis. Prior to the coronavirus outbreak, 89 per cent of people surveyed by the Health Foundation believed that the health service should be tax-funded and be free at the point of use. In last year’s general election, the Conservatives pledged to recruit 20,000 new nurses. Over 400,000 people have signed up to become NHS volunteers since this pandemic started and last week, millions of citizens applauded NHS workers on their doorsteps.
The Ongoing Crisis is No Excuse for ‘Coronomics’
As the IEA’s Ryan Borune argues, once this crisis is over, the Government must reinvigorate the economy by relaxing labor market regulations on overtime, Sunday trading, and working hours rules. They should also improve tax incentives to provide retailers and manufacturers with an opportunity to compensate for lost activity when the rebound comes. In these unique circumstances, GDP must increase, but this crisis is not an excuse for long-term “coronomics.”
Furthermore, This Is Money has warned that the middle classes will see their pensions, investments and house values hit by the stimulus that Sunak has implemented.
The coronavirus has impacted the UK at a time when it is leaving the EU and embracing trading opportunities with other countries. Prior to this pandemic, China was one country being considered for a post-Brexit trade deal. The Institute of Export and International Trade anticipates that there will be a reduction in demand for British whisky, salmon and chocolate in China, which reduces the trading opportunities for both nations beyond this virus. It is also likely that British businesses like airline companies will introduce internationally validated systems that test the health of patients arriving in the UK.
Does Boris Want to Let Corbyn Win the Economic Argument?
Covid-19 will undoubtedly shape the rest of this parliamentary term, but if Prime Minister Boris Johnson is serious about making this country thrive again, he must not transform himself into a converted Keynesian, because then Corbyn will have won the economic argument after all.