UK failed to plan for economic impact of flu-like pandemic, says watchdog

There was an “astonishing” failure by government to plan for the economic impact of a possible flu-like pandemic, parliament’s financial watchdog has said.

MPs on the cross-party public accounts committee concluded that government schemes were drawn up “on the hoof” in mid-March by Rishi Sunak’s Treasury, weeks after the first case of coronavirus was detected in the UK. The delay risked leaving sectors of the UK economy behind, according to a report published on Thursday.

MPs questioned why there was no economic equivalent to Exercise Cygnus, the 2016 simulation of an international flu outbreak that involved 950 emergency planning officials.

Key government ministries such as the Department for Business, Energy and Industrial Strategy [BEIS] were not made aware that Cygnus had taken place and so had little idea of the possible impact of a major outbreak, the report said.

Meg Hillier, the chair of the committee, said members were shocked to discover from senior civil servants that pandemic planning had been treated solely as a health issue, with no planning for the economic impact.

“The economic strategy was of necessity rushed and reactive, initially a one-size-fits-all response that’s leaving people – and whole sectors of the economy – behind,” she said. “A competent government does not run a country on the hoof, and it will not steer us through this global health and economic crisis that way.

“Government needs to take honest stock now, learning, and rapidly changing course where necessary. We need reassurance that there is serious thinking behind how to manage a second spike.”

The committee said that although the first case of coronavirus was confirmed in England in January, the Treasury did not announce plans for significant funding to support businesses and individuals until the budget on 11 March.

“The lack of prior thinking on the types of schemes that may be required led to a delay in implementation because the government needed to design the schemes from scratch,” the report said.

Ministers eventually mounted one of the most aggressive economic responses to the Covid-19 pandemic in the world.

This included the coronavirus business interruption loan scheme (CBILS), the coronavirus large business interruption loan scheme (CLBILS), under which companies with a turnover of more than £45m can borrow up to £200m, and the bounceback scheme, which was launched in May.

UK government support for workers and businesses during the coronavirus crisis

Direct cash grants for self-employed people, worth 80% of average profits, up to £2,500 a month. There are similar wage subsidies for employees.

Government to back £330bn of loans to support businesses through a Bank of England scheme for big firms. There are loans of up to £5m with no interest for six months for smaller companies.

Taxes levied on commercial premises will be abolished this year for all retailers, leisure outlets and hospitality sector firms.

Britain’s smallest 700,000 businesses eligible for cash grants of £10,000. Small retailers, leisure and hospitality firms can get bigger grants of £25,000.

Government to increase value of universal credit and tax credits by £1,000 a year, as well as widening eligibility for these benefits.

Statutory sick pay to be made available from day one, rather than day four, of absence from work, although ministers have been criticised for not increasing the level of sick pay above £94.25 a week. Small firms can claim for state refunds on sick pay bills.

Local authorities to get a £500m hardship fund to provide people with council tax payment relief.

Mortgage and rental holidays available for up to three months.

MPs called for more transparency in government decision-making which it said had been “poorly co-ordinated” by the cabinet office and No 10.

“The Cabinet Office should review crisis command structures to ensure that longer-term decision-making, as well as the immediate operational response, is properly informed,” the report said.

MPs warned that plans must be put in place if the government is to deal with a possible second spike of Covid-19 cases or a different, similar disease.

“We are astonished by the government’s failure to consider in advance how it might deal with the economic impacts of a pandemic,” the committee said in a statement.

The Cygnus simulation took place over three days in October 2016 and asked 950 participants to imagine that they were fighting a fictitious “worst-case scenario” flu pandemic affecting up to 50% of the population and causing up to 400,000 excess deaths.

The report questioned why BEIS had not been told about the simulation.

“Exercise Cygnus may have been health-focused but it is astounding that the government did not think about the potential impact on the economy, and that the Department for Business, Energy and Industrial Strategy was not even aware of the exercise,” it said.

The committee warned there would be a long term impact of school closures on children which had not been part of the government’s planning.

“Yet, while school closures were predicted in pandemic planning, there seems to have been no plan for how schools and pupils would be supported to continue to learn,” the report said.

The committee’s conclusions followed evidence from Sir Tom Scholar and Alex Chisholm, the permanent secretaries in the Treasury and the Cabinet Office respectively.

Scholar told MPs: “We developed our economic response in the weeks leading up to the budget … We didn’t have these schemes ready and designed and ready to go. We have been designing them as we have gone along.”

A UK government spokesperson said: “As the public would expect, we regularly test our pandemic plans – allowing us to rapidly respond to this unprecedented crisis and protect the NHS.

“It was clear that coronavirus would affect all areas of the country, that’s why we immediately put in place an unprecedented initial economic support package for jobs and business worth £160bn. The next stage in our economic response will make a further £30bn available to ensure all areas of the UK bounce back.

“We’re providing over £100m to support children to learn at home and a £1bn Covid catch-up fund will directly tackle the impact of lost teaching time, as schools and colleges welcome children back in September. In addition, we’ve committed almost £28bn to local areas to support councils, businesses and communities.

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