The Government must act now or a triple Covid storm will destroy it

State failure, Tory splits and an economy in freefall could add up to an ‘ERM moment’ for Boris Johnson

Which governments will the virus destroy? Will Donald Trump be toppled in November, the first domino to fall? Who will survive in Covid-struck France, Italy and Spain, as the crippling fallout, the job losses and the recriminations drag on for years? And what will happen to Boris Johnson, and his plans to remake Brexit Britain in his image?

It would be idiotic for anybody to write off Johnson: the election is years away, and the Government’s poll ratings remain at Thatcher-era levels. The Dominic Cummings row cut through, and finally ended the PM’S Covid-bounce, but was no terminal, “poll tax moment”. So far, his 2019 voters remain loyal.

Yet for the first time, plausible scenarios exist under which a series of events triggered by the virus lead to the Government being annihilated, John Major-style, by a Keir Starmerled Labour Party that is fast consolidating centre-left support from the Lib Dems. Johnson and the Tory party must urgently recalibrate to prevent such a nightmare: the world has changed, and they must react more forcibly. The old levelling up and green agendas alone won’t cut it.

The UK has suffered some 64,000 excess deaths so far, caused by the virus or a side-effect of the lockdown, a number which could end up being one of – or even the worst – in the West, when adjusted for population. But that is merely the backdrop to the looming storm in three acts that is about to engulf the Tories.

The first is that the failures of the bureaucratic state are catching up with them: the incompetence of Public Health England, of the NHS logistics operation and of many other parts of the state apparatus have been on shocking display.

The scientific advice was all over the place, relentlessly out of date and ever-shifting, but that was to be expected of a virus the Western establishment still doesn’t understand. The truly unforgivable failures were the “system’s” lack of preparedness for an epidemic other than flu; its inability to react to changing information; its pathetic struggle to source and deliver PPE; its refusal to cooperate effectively with the private sector; its failure to set up testing properly; and, worst of all, that care homes went unprotected and are still suffering huge death rates.

Johnson rightly hired Baroness Harding and Lord Deighton to shake things up, and tracing will doubtless improve; but he must do a lot more. It isn’t the Johnson Government’s fault that PHE was set up in 2013, that nobody learnt from the Sars epidemics or that the “Blob” was so shockingly dysfunctional that it allowed the virus to spread easily in care homes. But it will certainly be its fault if it doesn’t rectify these flaws urgently, ahead of any potential second wave.

Johnson should give a televised address to the nation in which he accepts that bad mistakes have been made, where he states that the system he inherited turned out to be catastrophically unfit for purpose and where he vows to change it. He must announce sweeping changes, highprofile sackings, greater accountability, a new policy to cocoon care homes, the abolition of PHE, the creation of a British version of the US Centers for Disease Control and Prevention, able and willing to work with the private sector, and an NHS that reports directly to the secretary of state. The longer Johnson waits, the more toxic the errors of the past few months will become for him.

The second act follows from the first. The Government is unlocking too slowly because it fears that we are still suffering too many infections. It feels obliged to impose crude policies such as travel quarantines because its testing and tracing capacity remains feeble. Its new lockdown rules are in some cases unenforceable or unjust, partly because it is worried about the prospect of a flare-up. Tory MPS are starting to panic, and lashing out in all directions. Here, too, Johnson needs to step in and address concerns head-on in a televised address: he needs to explain his strategy and the rationale behind his actions more clearly. He must do more to keep MPS on side.

But it is the looming economic storm that poses the gravest risk to the Government’s survival. Growth and employment will bounce back, but not by enough to prevent a surge in unemployment when the furlough and other support schemes are wound down. So far, the solutions that have been mooted have been what the Government wanted to do anyway, such as “green jobs”. The answers are excessively Keynesian: the kind of spending a Starmer or Emmanuel Macron would adopt. Yes, it makes sense to fast-forward infrastructure projects (but HS2 must be scrapped), especially roads and broadband.

But doing so isn’t commensurate with the scale of the crisis. The Tories must relearn to love economic growth, and remember that allowing the private sector to create wealth still works beautifully. The Government was right to borrow more to cushion Britain from the epidemic; it must also borrow to “invest” in supply-side tax cuts to unleash enterprise. The fiscal rules must be ditched, and there mustn’t be any tax increases.

Stamp duty should be slashed. Hiring staff in deprived areas should be Nic-free. All business investment should become immediately expensable. Numerous regulations should be axed, and banks allowed to dip into their capital. Freeports should be extended to cover larger, deprived areas. The planning rules should be changed properly, and a large amount of land released for new suburbs and garden cities. Tax cuts should be worth at least 3 per cent of GDP. The Bank of England should target nominal GDP growth, not consumer prices.

Johnson must at all cost avoid an “ERM moment”, an episode in which confidence in his Government evaporates overnight. A recession met by conventional Treasury policies, combined with a second wave of the virus and an unreformed public health system, would be fatal.

There is only one way for Johnson to rescue a Government blown off course by the pandemic. As with Brexit, he needs to be bolder and more radical than anybody could possibly imagine, and then sell his vision to a country desperate for the kind of sunlit uplands the PM has always specialised in.