Lord Mervyn King, the governor of the Bank of England at the time of the 2008 global financial crisis, has warned that an indefinite Covid-19 lockdown is unrealistic and ministers need to work on an exit strategy.
King said he understood the reasons for quarantining most of the population, but that there would be a backlash if the restrictions were kept in place for too long.
Speaking at a webinar organised by the Policy Exchange thinktank, King said: “The idea that you can have a lockdown that goes on for months on end is unrealistic. The government needs an exit strategy, which may be gradual and initially involve those who have had the virus and are able to travel and go back to work. If we have a lockdown for too long there will be a rebellion against it.”
King said it was pointless to speculate on the extent of the health and economic damage caused by the crisis, but emphasised that there would be significant costs in terms of failed businesses, lost jobs and increased unhappiness.
“It is understandable that health officials focus on the broad-brush aspect of this – the need for a lockdown to diminish the spread of the virus,” he said.
But the former Bank governor said it was also important to think about the mental health of people being made unemployed, or whose businesses were going bust.
“There are people struggling to get out to buy food and who are stuck on their own. Young people are having their university education and school exams cancelled, and that it is going to have a significant impact of their wellbeing and future careers.”
King added the government had made a deliberate decision to lock down the economy and so had a responsibility to ensure cash flow to businesses big and small, and to act as the customer of last resort.
The Treasury needed to speed up its plan to offer financial help to the self-employed because the target date of early June would be too late for many, he said.
Alistair Darling, the chancellor responsible for bailing out stricken banks at the beginning of the 2008 crisis, said the government was failing to provide a consistent message on testing for Covid-19.
“It is critical in any crisis that the message has clarity”, Darling said. “At the moment we don’t know whether the government is going beyond NHS staff to the public as a whole. Unless we know who has got it or who has had it, we are always going to be on the back foot.”
Darling also said the chancellor, Rishi Sunak, needed to make sure measures were having an impact where they were needed.
“It is very easy to announce a policy, but much more difficult to get it delivered. The economic measures are absolutely vital, but for the self-employed delivery is going to take longer than people have got in many cases.”