Sunak fears economic calamity of classroom closures
Mr Sunak has said the UK is facing ‘a recession like we have never seen’ and that school closures are a huge factor in that
‘You’re still looking at 4 to 5 per cent of the workforce not being able to work. You won’t get a V-shaped recovery till schools open’
RISHI SUNAK has warned that the closure of schools has been as disastrous for the British economy as the 2008 financial crisis.
The Chancellor has told colleagues that reopening schools is crucial to getting the economy back on track, and is concerned about the long-term effects on gross domestic product of continued school closures.
Economists have said that the Vshaped economic recovery the Government hopes to achieve – in which the country bounces back as quickly as it declined – is impossible as long as schools remain shut, preventing parents from returning to work because they have to stay at home to look after their children.
Yesterday, Gavin Williamson, the Education Secretary, effectively abandoned the Government’s target of getting all primary schoolchildren back to school for at least a month this term, and refused to say that all children would be back by September.
Mr Sunak has publicly stated that the effects of coronavirus on the economy means Britain is facing a “recession like we have never seen”, and he has privately said school closures have been a huge factor in that. He has said that the impact of closing schools has been the same as the 2008 financial crisis, which cost taxpayers £137billion in bailouts.
The Bank of England has estimated that, long-term, the crash will cost the country £1.8trillion-£7.4trillion in lost output.
Economists argue that the damage to the UK’S output is both direct and indirect, but adds up to a potential £9billion a month – the equivalent of more than a penny on the basic rate of income tax.
The UK produces around £180billion of economic output every month, with the education sector – which also includes nurseries and universities – directly accounting for 5.6 per cent of gross domestic product.
In March alone, when schools shut for the last time on the 20th, and there were only 15 out of an expected 22 school days over the month, Office for National Statistics figures show a 14.5 per cent fall in output across the sector.
In April, an entire month of closures implies a 46 per cent slump – around 2.5 per cent of GDP or around £210million a day.
Daryn Park, an economist with the Centre for Economics and Business Research, said: “Since the easing of lockdown and the return of pupils to some schools, the impact now would likely be less. This can be thought of as the impact during the midst of the harsher lockdown conditions.”
But he suggested that even if a third of the direct hit to growth is unwound as some pupils returned in June, the drag is still close to 2 per cent of GDP a month, or around £3.6 billion.
The indirect effects are more difficult to estimate but are likely to be on a similar, if not larger, scale, according to experts.
There are 8million families with dependent children, of whom 2.5million are thought to be unable to work without childcare.
That pressure will have eased slightly since the beginning of June,
but the impact remains considerable, according to Samuel Tombs, chief UK economist at Pantheon Economics.
“Only about a third of children are eligible to go back this month, and not all parents are sending their children back, so you are still looking at 4 to 5 per cent of the workforce not being able to work,” he said.
“You won’t get a V-shaped recovery until the schools are open.”
The longer-term impact of missed education on lifetime earnings is higher still, according to Robert Halfon, chairman of the education select committee, who has warned of an “epidemic of educational poverty” in the UK unless schools are reopened soon.
Paul Johnson, director of the Institute for Fiscal Studies, has said that closures are entrenching educational inequality as privately educated pupils enjoy more support.
He said: “We really could see this having a significantly negative effect on educational attainment among those from less well-off backgrounds.”
The scarring effect of lower wages on young people entering the job market in a recession is well-documented, but the impact of lost learning on future earnings is also high.
Economists who studied the impact of lost education among Thirties-born children in the Second World War, contrasting Germany and Austria with non-combatants Switzerland and Sweden, found that in Germany and Austria there was “an earnings loss that is still noticeable in the Eighties”.
Vicky Redwood, senior economic adviser at Capital Economics, said: “The bigger risk is arguably that a period of disrupted education reduces the earnings and productive potential of that group of children and students.
“That could provide a lasting hit to productivity, reducing the chances that the economy recovers fully to its pre-crisis path.”
A Treasury source said: “We don’t recognise this, and it has not been the focus of our discussions.”