United Kingdom

HAMISH MCRAE: Growth is just round the corner

Every week matters. It is obvious that the sooner the lockdowns can be eased, the faster the economy can recover – and the faster that happens, the faster the nation's public finances come back towards some sort of sustainable equilibrium. 

But this is not just an economic and financial issue. It is a human one too. People are suffering in myriad ways, and will continue to do so until they have a clear path back to some sort of normality. 

It is a PR device to label last Monday, the third Monday in January, as Blue Monday – the gloomiest day of the year. But it rather catches the mood right now. 

Best foot forward: The Bank of England said that the economy would begin to recover 'at a rate of knots' from the second quarter of this year as the vaccines were rolled out.

So how should we dig ourselves out of this? Two points. The first is that while it is better to have a plan and change it than not to have a plan at all, people do need to know the plan. 

Too often the Government seems to stumble from one half-thought out policy to another, without explaining why. So it is reasonable to ask the Government to explain its thinking about the sequence of reopening the economy. How far do infections have to fall, how many people have to be vaccinated, and so on? And then, given the data, what opens first and what follows on? People are not asking for certainty; they are asking for common sense. 

The second point is that growth is just round the corner. The trick will be to get the economy moving as early as is humanly possible.

The Bank of England has the best handle on the way the economy is developing and its chief economist, Andy Haldane, said last week that it would begin to recover 'at a rate of knots' from the second quarter of this year as the vaccines were rolled out. 

That thought was echoed by the Governor, Andrew Bailey, who said: 'I really do think that we are going to see a pronounced recovery in the economy as the vaccination programme, as it is doing now, rolls out.' 

They are surely right. We can see the dreadful daily toll of deaths. Nothing will take away from the misery of people dying before their time. 

But I don't think we appreciate quite how swiftly the mood will shift once the infection numbers and then the deaths do fall, or indeed how much of a lead the UK will have over Europe in getting the vaccines out. 

We will get new growth forecasts from the Bank on February 4. Expect them to be significantly more positive than those of the Office for Budget Responsibility, and when we know the outcome in a couple of years' time, significantly more accurate too.

Meanwhile, every week does matter, for the more swiftly the economy can safely get moving again the better for all.


Most homeowners will never have felt richer. The average price of a residential property in the UK is now £250,000, and the average in London £500,000. With 62 per cent of our homes being owner-occupied, that is a huge swathe of wealth across the land. 

This would be welcome were it not for two things. Prices have run so far ahead of incomes that many young people are shut out of the market. And the current boom has, to some extent at least, been driven by the stamp duty holiday that ends on March 31. 

Getting young people into home ownership will be the work of a generation. The owner-occupation peak of 71 per cent was back in 2003, and we will need to build a lot more affordable homes and have a long period of stable prices to regain the lost ground. But coping with the end of the stamp duty holiday is a problem for right now. 

The logic behind the holiday is fine. It was an emergency measure designed to prevent the lockdown leading to a collapse of the housing market. Had that been allowed to happen, there would have been grave knock-on effects for the economy as a whole. 

It did the job, maybe rather too well, and now will have to end. The Government desperately needs the revenue. 

But a cliff-edge for a tax break is never a good idea. We are seeing a huge scramble to get sales through, not helped by delays over surveys, conveyancing and in some cases probate. 

We need a Goldilocks housing market: not too hot, not too cold, but just right. 

Extending the holiday for six months at half the original rate would be a sensible way of shepherding homebuyers and sellers through what will inevitably be a bumpy summer.

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