The governor of the Bank of England today issues a stark warning that Britain should be cautious about lifting the coronavirus lockdown too early.
In his first interview since taking the top job, Andrew Bailey told the Daily Mail that a premature end to the restrictions could cause a severe loss of confidence and inflict further damage on the economy.
‘I think we have to be careful when thinking about human psychology,’ he said. ‘If we had a lifting and then [lockdown] came back again, I think that would damage people’s confidence very severely.
‘If we have a false start… that would have potentially quite difficult effects I think.’
The new governor’s stern intervention comes at a time of increasingly heated debate over how soon the lockdown can be lifted. ‘Hawks’ advocating an early easing of restrictions point to the huge costs to the economy of remaining in a deep freeze.
In his first interview since taking the top job, Andrew Bailey (pictured) told the Daily Mail that a premature end to the restrictions could cause a severe loss of confidence and inflict further damage on the economy
But on the other side, ‘doves’ argue that relaxing the constraints too early would be reckless and could lead to a devastating second wave of infection which would hit an enfeebled economy even harder.
Mr Bailey’s stance puts him at odds with one of his predecessors, Mervyn King, who was at the helm of the Bank during the financial crisis in 2008.
Lord King said recently that young people would question why their futures were being put at stake ‘to help prolong the life expectancy of older people’ and that they might rebel if curbs are in place for too long.
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But Mr Bailey, who took over as governor in the middle of last month, said: ‘I would apply slight caution to the Mervyn King line, which I have read and seen when he has been on television.’
He added that before the lockdown is lifted, employers need to ensure that their staff are not being put at risk in offices or when travelling to work.
Mr Bailey said: ‘As an employer – and we have this at the Bank of England – you have to be able to answer the questions for your staff: is it safe to come to work?
‘And what constitutes being safe, not just for people when they are in the building but travelling to and from the building?’ The governor is splitting his time between working at the Bank on Threadneedle Street in the heart of the City and his family home in Kent.
A mounted police officer was pictured speaking to dog walkers on Primrose Hill on Tuesday, April 14. Police have ramped up measures to ensure those out for their daily exercise maintain social distancing
‘It is weird going in the building with almost nobody in it,’ he said. ‘Most of our operations are running from people’s homes, including some very big and novel ones.’
These include a multi-billion pound scheme to lend money to large businesses.
The governor said that not enough finance has got through to small firms under the bailout loan programme set up by Chancellor Rishi Sunak.
Only around £2billion has been lent to UK firms under the Covid Business Interruption Loan scheme – far less than in countries such as the US, Switzerland and Germany. Mr Bailey said there are a number of ‘bottlenecks’ in the system.
These have been created because the banks are finding it hard to deal with a huge surge in demand for loans at a time when many of their own staff are sick or self-isolating, he said.
Lenders are also struggling to assess how big a risk there is that small firms will not be able to repay any loans they are given.
Mr Bailey said: ‘This gums up the operational side. It is clearly not satisfactory and [the system] clearly needs to be un-gummed.
‘I gee up the banks regularly. The Chancellor and I are both extremely keen that credit flows to firms.’
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He added that he is watching closely to make sure the banks do not repeat the mistakes they made in the meltdown of 2008.
Following that crisis, relations soured between many firms and the banks, who were accused of exploiting their customers’ misery by charging them high fees or seizing their assets at knockdown prices.
‘I know from a painful past that lending to small firms is not easy,’ he said. ‘I am very keen, very sensitive that we don’t get back into a situation we are still trying to clear up after the last crisis.
‘The last thing we need is a re-run of those problems.’
The governor said UK banks now have much stronger balance sheets than they did in the run-up to the financial crisis.
But he admitted they had not been stress tested to see if they could withstand a deadly pandemic like Covid-19.
He said that the Bank would report on how resilient lenders are next month. He conceded that if the pandemic is worse than expected, they could buckle under the strain.
‘Yes, there is a breaking point in any system, we can’t deny that,’ Mr Bailey added.
Matt ‘the dove’ Hancock holds out no hope of end to lockdown as depressing death and infection charts stay obstinately high – and Boris Johnson sides with ministers pushing for restrictions to stay, possibly for months
by James Tapsfield Political Editor for MailOnline
Matt Hancock tonight insisted the coronavirus lockdown must stay until there is no risk of a second peak – as scientists warned the outbreak might not be fading.
The Health Secretary vowed not to compromise the national effort against the disease as Professor Jonathan Van-Tam told the daily Downing Street briefing that while hospital occupancy rates had dipped in in London the picture in other parts of the UK was ‘more of a plateau’.
The figures – along with another 828 deaths being declared in the UK – add weight to the arguments of those who want to err on the side of caution despite the devastation being wreaked on the economy.
Divisions have emerged between Cabinet ‘doves’ such as Mr Hancock and ‘hawks’ who believe the NHS has capacity and would prefer to loosen the draconian social distancing measures earlier.
The PM has intervened from his recuperation at Chequers to snuff out speculation about an imminent easing, with Downing Street making clear his priority is avoiding a ‘second peak’ in the outbreak.
There are reports Mr Johnson’s inner circle has stopped using the phrase ‘exit strategy’ and instead wants to signal a ‘next phase’ of lockdown, with varying levels of restrictions set to continue for the rest of the year until the virus gets ‘close to eradication’ or a vaccine is found. Australia has successfully suppressed cases to very low numbers.
Scientists have been telling ministers behind the scenes that control of the outbreak is still so uncertain that even slight changes to the curbs on normal life could result in a disastrous flare-up.
Mr Hancock said tonight: ‘We have been clear that we will not risk lives by relaxing the social distancing rules before our five tests have been met.
‘First, that the NHS can continue to cope, bda second, that the operational challenges can be met, third, that the daily death rate falls sustainably and consistently, fourth, that the rate of infection is decreasing, and most importantly, that there is no risk of a second peak.’
Deputy Chief Medical Officer Prof Van-Tam said: ‘It is not absolutely clear that there have been peaks, nor is it absolutely clear that the number of cases is dropping.’
He warned that meant ‘we must keep pushing’ on social distancing.
In other developments today:
The UK has announced another 828 deaths from the coronavirus today, taking Britain’s total number of victims to 17,337. Although the rise in fatalities is the biggest since Saturday, April 18 (888), and almost double the number that were announced yesterday (449), it does not necessarily mean the outbreak is getting worse because the deaths are backdated;
Official figures suggest the true number of coronavirus victims in the UK may be 41 per cent higher than previously announced. Mortality data released by the ONS imply the death toll might be closer to 23,000 up to April 10;
Mr Johnson appears to be gearing up to take back the reins of government, speaking to Donald Trump on the phone today, although Downing Street insisted he is not doing any ‘official work’;
An RAF plane sent to collect crucial PPE for the NHS from Turkey still has not started its return journey with ministers admitting it might be ‘days’ before the supplied arrive;
The House of Commons has returned from its Easter recess, but only to approve a ‘virtual’ Parliament that will kick off tomorrow.
How members of the cabinet are currently split over the ending of the lockdown. Mr Johnson (top left) and Matt Hancock (bottom left) are classed as ‘doves’; Michael Gove, Liz Truss and Rishi Sunak (right, top-to-bottom) as ‘hawks’; and Foreign Secretary Dominic Raab (top centre) is among those in the middle, with Gavin Williamson (centre) and Alok Sharma (centre bottom)
Professor Jonathan Van-Tam told the daily Downing Street briefing that while hospital occupancy rates had dipped in in London the picture in other parts of the UK was ‘more of a plateau’
Deputy Chief Medical Officer Prof Van-Tam (left) said the stubborn level of hospital admissions meant ‘we must keep pushing’ on social distancing. Health Secretary Matt Hancock reiterated at the update that the lockdown will not be relaxed until there is ‘no risk of a second peak’