Premierships are often defined by unexpected events. When Tony Blair was re-elected in 2001, few thought that his time in office would be defined by terrorism and the Middle East. Boris Johnson’s first full year in Downing Street may well come to be defined by his handling of coronavirus, I say in The Sun this morning.
Over the last week, concern in Whitehall over the disease has shot up. ‘The infection curve in Italy and Germany has changed things’, says one of those spearheading the government’s response.
‘We’re not far off it absorbing all of the government’s energies’, one Downing Street figure tells me. The intensity of the preparations for it are, this source continues, ‘beginning to feel like no deal planning did in the autumn’ which dominated the time of ministers and civil servants.
The government expects UK factories to have to start to suspend operations in the coming weeks as they can’t source the parts from China. Factories closing will be a big hit to economic growth. The UK—as an open, trading economy—will also be affected by the downturn in the global economic outlook that the coronavirus is causing. The Bank of England is already reporting a slowdown in economic activity related to it. One senior government source says that the economic impacts is ‘totally unknowable’.
I understand that if the virus takes hold here, the official advice will flip from containing and quarantining to, continue going to work. One of those tasked with preparing the government’s response tells me, ‘If 40 percent of the country is infected, there’s no point in isolating’ and warns that people continuing to do so in these circumstances would create ‘economic chaos’.
If economic growth is hit, then the government’s fiscal targets will become even more challenging. Would it be sensible to cut spending or raises taxes to respond to a pandemic?
The threat of the coronavirus also creates even more uncertainty around the economic forecasts that will underpin the Budget. This makes the case for a limited Budget with most of the big decisions moving to the one scheduled for the autumn, by when the situation on both coronavirus and the future trading relationship between the UK and the EU should be clearer