The Economist - USA (2020-05-16)

46 Britain The EconomistMay 16th 2020

“C

are workisn’t just bum wiping,” in-

sists Karolina Gerlich. In the 12 years

since she swapped her native Poland for

Britain, aged 18, she has learnt that it in-

volves being a “pa, a nurse, a therapist, an

occupational therapist, a dietician and a

friend”. She now runs a charity supporting

other carers, while working as one herself.

Yet under post-Brexit immigration rules

due to take effect in January, a similar ap-

plicant would be turned down for a visa,

since the job is classed as low-skilled. “I

feel disrespected, offended and like my

contribution to the economy and to the

country has not been recognised at all.”

The timing of the covid-19 pandemic

puts Priti Patel, the hardline home secre-

tary, in an awkward spot. Recognising that

Britain’s vote to leave the euin 2016 was in

part down to a desire to curb immigration,

she plans to end freedom of movement

from the bloc and apply the same salary

threshold (£25,600, or $31,200, for most)

and skills requirement to prospective mi-

grants wherever they come from. Yet many

of the incomers such a policy would rule

out—including care-home workers—are

those classified by the government as the

pandemic’s “key workers”.

A paper by researchers at Oxford Uni-

versity, published on May 14th, finds that

nearly one in five of those working in es-

sential care-related occupations are immi-

grants. In all, a little more than half of eu

migrants now classed as key workers

would not have qualified for a work visa

under the new dispensation. Using a dif-

ferent definition of key worker (the catego-

ry is blurry), the Institute for Public Policy

Research, a think-tank, finds that 71% of

suchmigrantswouldhavebeenexcluded.

Inonesense,thepandemictakesthe

pressureoff.A deeprecessionshouldlimit

theneedtoimportlow-paidworkers,since

therewillbea largepoolofunemployed

domesticlabour. Yetfarmsareflyingin

workersfrom Romania, suggesting that

Britonsontheiruppersmighthesitatebe-

foretakingback-breakingorlow-paidjobs.

Thepoliticalargumentfora restrictive

regimeisweakening.Voterswerewarming

toimmigrationevenbeforetheyvotedto

leavetheeuand therebyrestrict it(see

chart).Thescandalin 2018 overthegovern-

ment’sshoddytreatmentoftheWindrush

generationofCaribbeanmigrantsillustrat-

edthat,if thepublicsensesinjustice,crack-

downscanproveaspoliticallyperilousas

liberalapproaches.AsurveyinMarchby

Ipsosmori, a pollster,foundthattheover-

whelming majority of voters want the

numberofmigrantscomingtoBritainto

workincarehomestostaythesameorrise.

Sincethepandemicanditsassociatedre-

cessionwill significantly reduce overall

immigrationanyway,MsPatelcanaffordto

bea littlemoregenerous. 7

New immigration rules would exclude

the key workers Britain relies on

Immigration

Who cares?

On the move

“Has migration had a positive or negative impact

on Britain?”, % replying

Source:IpsosMORI

50

40

30

20

60

20191817162015

Positive

Negative

Brexit

referendum

Home Secretary

quits over Windrush

T

he last time Britain’s gdp fell by 2%

quarter-on-quarter, the investment

bank Lehman Brothers had just gone bust,

bringing the global financial system to its

knees. Then, in 2008, Britain was at the be-

ginning of a steady rise in unemployment

that would continue for years, and real

wages had started a decline that would take

more than a decade to undo. So it is alarm-

ing that, on May 13th, statisticians reported

a similar fall in gdpin January to March

2020. The country was in lockdown for
      only a week of that period. The second-
      quarter figures, released in August, will
      make for astonishingly grim reading.
      With many companies shut down,
      whether temporarily or permanently,
      Britons are flocking to the government for
      support. Universal credit, the primary wel-
      fare programme before the pandemic, has
      been swamped with applications, al-
      though it seems to be coping better than
      welfare systems in some other countries
      (see United States section). The govern-
      ment’s scheme for preserving jobs during
      the pandemic, under which the state pays
      up to 80% of a furloughed employee’s
      wages, has seen many more applications
      than was expected, according to Treasury

insiders. More than one in five workers is

now on it.

The mounting costs of providing this

support in part explain the government’s

shifting rhetoric over lockdown measures.

Britons in many sectors have been told to

return to their office, factory or site if tele-

working is not possible (although some

such employees were never told by the gov-

ernment to stop work). Some parliamen-

tarians have been pushing Rishi Sunak, the

chancellor, to wind down the job-protec-

tion scheme. Fearful of mass unemploy-

ment, however, on May 12th Mr Sunak ex-

tended it to the end of October—though he

has sensibly tweaked it to allow bosses to

bring back workers part-time from August.

He also says that employers will soon have

to foot more of the bill.

The extension of the scheme adds fur-

ther costs to an already swollen fiscal bill

(see chart). Even in the absence of any de-

cline in output, and with no fall in tax rev-

enues, this support would push up Brit-

ain’s budget deficit from 2% of gdp, before

the pandemic, to 8%—its highest level

since the global financial crisis of 2007-09.

In reality, nominal gdp may fall by 12% or

more this year, and tax revenues are col-

lapsing. An annual deficit on a wartime

scale looks inevitable, leading to substan-

tially higher public debt.

A leaked government memo published

on May 13th in the Daily Telegraphsuggest-

ed that the deficit could hit around 15% of

pre-pandemic gdp. Measures under con-

sideration for balancing the books includ-

ed raising income tax and freezing pen-

sions spending. A brouhaha followed. In

truth the Treasury has been looking for

some time at how to raise revenue to pay

the costs of an ageing population, regard-

less of the pandemic. For now, with gov-

ernment-borrowing costs near record lows

Mr Sunak seems more focused on support-

ing the economy than on balancing the

budget. But the memo is a sobering re-

minder: though the threat to public health

should eventually pass, the economic costs

of the pandemic will linger. 7

The economic costs of the pandemic

are becoming clear

The economy

Acute to chronic

Costly treatment

Britain, cost to government of covid-19-related

policies, 2020-21, £bn

Sources: OBR; The Economist

Estimated tax loss

Job-retention scheme

(second iteration)

Welfare

Business support

Self-employed scheme

Job-retention scheme

(first iteration)

Public-service spending

4003002001000