Newsletter from 8 January 2021
The UK is facing a bleak start to 2021.
Daily new coronavirus cases and hospital admissions are surging to levels far beyond last year’s first peak; and daily Covid-19 deaths are over a thousand for the first time since the spring.
A Financial Times survey of nearly one hundred economists (including several Economics Observatory lead editors and contributors) foresees a slower economic recovery than the country’s peers, in part because of the impact of Brexit.
And the renewed national lockdown, including school closures at least until February half-term, is likely to cause further damage to struggling sectors like hospitality and reinforce the pandemic’s unequal impact on women and the young.
This week’s extraordinary reversal of government policy from Sunday’s claim that ‘schools are safe’ to Monday’s announcement that schools and colleges across England must immediately move to remote provision is the latest example of the costs of indecision in public health. As with the first lockdown in March, it seems clear that imposing the measures even a couple of weeks earlier could have made a big difference to the spread of the virus, pressures on the NHS and ultimately lives lost in this crisis.
But the costs of indecisive public policy-making are not confined to healthcare. As Lindsey Macmillan and colleagues at the Centre for Education Policy and Equalising Opportunities say in their latest piece on the Observatory, they are just as much of a problem in education.
Until this week, the Department for Education promised that high-stakes GCSE and A-level exams would go ahead as usual this coming summer. Now the exams have been cancelled, there is little clarity about the government’s contingency plans beyond an indication that it will ‘trust teachers rather than algorithms’, a reference to the fiasco with last summer’s A-level exam grades – discussed on the Observatory by Steven Proud. The latest astonishing news suggests that the final plan will not be ready until the end of February.
In a previous piece, written while GCSEs and A-levels were still due to go ahead, Lindsey and her colleagues outlined why externally marked exams remained the ‘least worst’ option for assessing years 11 and 13 school students. In the new post, they argue that switching to teacher assessment risks a lack of rigour and fairness. They conclude that there remains a strong case for in-class testing of A-level students – with flexible timing and content – to take account of differences in their learning experiences.
Indecision about how young people are assessed at key points in their education has high potential costs because of what it means for their future lives. Indeed, as has been shown in a series of Observatory articles over recent months, the pandemic, lockdowns and ill-judged policy responses have had hugely damaging and unequal effects – including on migrant pupils, children with special educational needs, the mental health of adolescents, recent school leavers and new graduates.
In a new piece this week, Andrew Eyles and Lee Elliot Major remark that they are also likely to exacerbate educational inequalities. Learning losses from further school closures could have long-term consequences for the life chances of children from disadvantaged backgrounds, leading to a decline in relative social mobility in the UK. Again, this potential outcome demands decisive policy action in the form of additional resources for disadvantaged children and perhaps more radical measures to ‘level the playing field’.
Grounds for optimism
Other pieces we’ve posted this week are a little less bleak. As the Covid-19 vaccine rollout gets underway, Debopam Bhattacharya and Oliver Linton at Cambridge explain what it means to say that a vaccine is 95% effective. This number is not your chance of staying Covid-free after vaccination, they clarify: rather, it estimates how much your chance rises relative to not being vaccinated. With the vaccine, your chance of staying Covid-free is in fact 99.96%.
And Anna Valero and John Van Reenen at the Centre for Economic Performance (CEP) ask how Covid-19 is affecting UK firms’ adoption of new technologies. They note fears that a fall in adoption would add to the country’s persistent problem of weak productivity growth. In fact, CEP’s early evidence is encouraging: businesses have rapidly adopted new technologies and new ways of working in response to the massive disruptions of the pandemic. If such innovation continues, it could boost the UK economy in the long term.
Finally, a reminder of some other things we’ve posted recently:
Do we need a new constitution for central banking? Former deputy governor of the Bank of England Paul Tucker observes that the global financial crisis, persistently weak growth and now Covid-19 have created tensions between politics and central banking. The time is ripe, he argues, for a refreshed constitution, making clear the purpose of independent central banks, and what should fall to fiscal authorities.
Are Bitcoin and other digital currencies the future of money? William Quinn at Queen’s University Belfast looks at the rising price of Bitcoin during the pandemic, which has renewed interest in private digital money. His conclusion: while it is most unlikely that Bitcoin will replace existing currencies, the emergence of ‘cryptocurrencies’ and ‘stablecoins’ has prompted exploration of central bank digital currencies.
Closing price of Bitcoin (USD), 2016-2020
What have economists been writing about in the time of pandemic? Diane Coyle, one of our lead editors, surveys the array of publications from the economics profession stimulated by the coronavirus crisis. She concludes: ‘The debate about how to reshape the economy more fundamentally is likely to continue longer-term – and economic researchers will need to continue engaging in the public debate.’
The Economics Observatory intends to be a central part of that conversation, connecting research with policy and the public in as vivid and accessible way as we can – including with our new website, coming soon. As ever, we welcome your questions to put to our community of economists.
Best wishes for 2021.