The Guardian view on the UK economy: vaccine bounce? This is a vaccine bubble
Prepare for an almighty sugar rush. There are signs everywhere of a summer spree across the post-lockdown economy. Restaurants and pubs report a flood of bookings. Estate agents in some parts of the country talk of the most buoyant market in 25 years, with six or seven serious buyers jostling for every home on sale. In industry, construction and manufacturing are both humming along. Forget all that talk of a vaccine bounce; this has all the makings of a vaccine bubble.
Wednesday’s GDP report shows that at the start of this year the economy shrank by less than many economists originally expected, and by March it was growing at a fair clip, even though the lockdown across the country was yet to be totally eased. This points to a bumper summer, as more Britons are vaccinated, more families book holidays, and businesses dip into their coffers for a bit of investment.
From this, two big conclusions can be drawn, one political and the other economic. First, this is an utter gift for Boris Johnson. If one lesson of last week’s elections is that voters have forgiven the prime minister for bungling the pandemic while rewarding him for the mass inoculations, then the summer rebound and the economic indicators all pointing up like a picketfence is absolute manna.
Mr Johnson is a good-time leader, who runs on bullishness. Buoyant headlines are his fuel. This summer will give him plenty of that, just in time for the coming byelection to replace Tracy Brabin as MP for Batley and Spen. Watch out, Keir Starmer.
Whether Mr Johnson actually deserves the credit he will claim is a thornier question. Ministers did the right thing in introducing furlough and, however reluctantly, in extending it to the end of September. But with the stamp duty holiday and relaunched help to buy scheme, they have driven the property market into a frenzy that looks set for a messy ending. More widely, whether they have learned sufficient lessons for any third Covid wave is highly doubtful.
This leads to the second moral of this story: however welcome this bounceback, it contains dangers. The biggest is that there is a sharp divide between those who went into lockdown with secure jobs, lovely gardens and hefty savings – and those living on zerohours contracts and universal credit, in cramped and shoddy accommodation and with no safety cushion to fall back on. This rebound will be driven and enjoyed by the first group; it will cut out
those already struggling.
Another lesson from the recent elections is that there is a vast job to be done by politicians and policymakers to right a dangerously lopsided economy, to “level up” all parts of the country, not just those targeted as Tory marginals nor solely north of the Watford Gap. Without measures such as permanently increasing universal credit and other benefits, and pushing up pay for nurses and key workers, this rebound will sputter out fairly soon. After all, it is based largely on the relatively well-off splashing out rather than saving, and as such is not based on increased incomes.
Fairness demands that those 4.7 million already waiting over a year for hospital treatment are seen as soon as possible, while those children who have lost half a year’s schooling are given extra help. Without all that, this is a recovery for the few, not the many, and it will last about as long as it takes to say “watch out! Bubble bursting”.