Wednesday will be a day or reckoning – DIES IRAE, DIES ILLA, that day is a day of wrath. We have paid a high price for less productivity and less enjoyment. If there is such a thing as a lose-lose, the pandemic is it for there is no economic silver lining, unless you consider the Oxford vaccine a game-changer for our economy – which is optimistic in extreme.
SOLVET SAECLUM IN FACILLA, the earth is in ashes. For the second time this century, the prospect of progress has receded and we are shaping up for a second sharp intake of breath as we contemplate who will pay not just for what has happened in 2020, but for the cost of vaccinating us in 2021.
The question is both how we’ll pay and who will pay. Following the financial crisis (the first sharp intake of breath) it became clear that those without money would pay more tax , get less services and receive no pay-rises. This was austerity. It was deeply divisive, not least because the finger of blame could be pointed at those who had created the crisis, for whom austerity was just a fancy word.
The pandemic has hit the poor hardest. The second wave is repeating the first, hitting those on low incomes, in cities and in poor health . But will the poor have to pay the economic price of COVID as they paid the price for the breaking of the banks?
What of the future?
While Wednesday will be about spending and borrowing, at some point the chancellor will have to decide how it will be paid for. He will start to address this in next March’s Budget, although most economic commentators feel the economy will still be too fragile for major tax rises.
It is possible that, with the success of a Covid vaccine, the economy could bounce back, limiting the need for big rises. However, Paul Johnson expects that four or five years down the road he still expects the economy to be about 4%-5% smaller than before the pandemic.
Rein in spending and raise taxes too early, and recovery will be choked off. Leave it too late, and the public finances will spin out of control.
It is possible that the austerity program that was introduced in 2010 could be repeated ten years on, but both Sunak and Johnson have publicly stated this is not the way they will go.
If the price for the pandemic is not dumped on the poor, then it must be paid by the affluent and that will mean taxing us (and most readers of this blog are affluent) on our income and on our assets. Higher marginal rates of income tax, higher taxes on capital gains, lower reliefs on pensions and investments and a reduction in the privileges of those who have the means to pay more . This may not sound very Conservative, but it is the price that will need to be paid for national unity. DIES IRAE
A fair price for us to pay.
I live in the City of London, we have some of the least infected postcodes in London. But I do not have to cycle more than five minutes to be in Lambeth, Southwark, Hackney or Islington where infection rates were amongst the highest in the country earlier this year.
I cycled through Dalston last night and it struck me how huge the gap is between the lives of those I talk with on business calls and the daily lives on the Roman Road. The street that I live on has a hostel for the homeless, it is full and those who cannot get in are in tents along the embankment. Wherever I go , to exercise, I see affluence and destitution living alongside each other.
So my message to Ricki Sunak, as he prepares for DIES IRAE tomorrow is in the great chant.
Or , to put a 21st century slant upon the subject, here is the inimitable Jonny Cash with what Springsteen called the “Momentous – ‘The Man Comes Around’.”