Tory Government Mulls Policy Rejig Amidst Its Falling Ratings Over Pandemic Response

Summary

• Boris Johnson government has been witnessing fall in ratings over its lacklustre response to the coronavirus pandemic
• The impact of the Falling GfK- consumer confidence index levels is also being seen on the ratings of the government
• The Tory party had made big promises to the British people during the re-election campaign and its March 2020 budget announcements
• The Boris Johnson government will have to combat the twin threats of falling ratings and a slump in economic growth

The Boris Johnson government has in the recent past faced major public flak in mishandling the coronavirus pandemic. Allegations are being levelled against the government ranging from the late imposition of lockdown to an inadequate preparedness of healthcare administration and no clear indications regarding when the lockdown is finally going to end. Several recent opinion polls conducted on the public confidence on the Johnson government have indicated that its rating has fallen sharply and have now come very close to its main opposition, the Labour Party. The conservatives who had won the December 2019 elections on the poll plank of increasing the public spending to spur high growth and improving the employment in the country are now faced with a dilemma, either to go ahead with their expansionary spending agenda or follow an austerity programme as was adopted by the labour party government during the 2008 financial crisis.

One of the major economic indicators that have a significant bearing on public opinion in the country is the GfK consumer confidence index. The GfK company which conducts a survey every fifteen days, has for the last two fortnights come out with very discouraging numbers. The consumer confidence index for the second half of May 2020 stood at -36, which was a decade low since the financial crisis era. Incidentally, the index numbers of the first half of May 2020 were also weak and stood at -34 and for the last fifteen days of April 2020, it stood at -33. The consumer confidence of the general public of the country speaks of how the citizens feel how their livelihood prospects are currently. The index levels have for long has had a positive correlation with the sentiments people have with the present government and its policies. Though currently there is no impending elections threat to the Boris Johnson government, it would certainly not be in their interest to fester the public ire for long.

The IHS Markit/Crips construction Purchasing Managers Index (PMI) also came out with its latest report last week. This index is another important leading indicator of what the procurement managers in the construction industry think about how the mid-term economic outlook for the industry is going to be like. The construction sector is an important industrial sector for the British economy, contributing nearly 6 per cent to its GDP and employing more than 2.4 million people. The news from the construction sector, however, has been encouraging compared to what the GfK consumer confidence report had stated. The construction PMI index which had hit a lifetime low of 8.2 in the month of April 2020, had made a sharp recovery in the month of May 2020 to 28.9 though still less than 50 and in the contraction zone. This index, since its aggregate is the barometer of production purchase managers, giving an advance indication of what the short to the mid-term economic outlook of the country is going to be like. This indicator thus clearly suggests that the economy is going to make a sharp recovery in the coming months, albeit the economy would still be in the contraction phase. For the Boris Johnson government, thus, this report brings some respite, although the general public sentiment still remains pessimistic.

The Boris Johnson government when it had started its re-election campaign for the December 2019 elections, had promised the people, it would initiate big public expenditure programme to build roads, hospitals and other major infrastructure rebuilding drives, which would create jobs and put the country in a high growth trajectory matched by only a few select emerging economies worldwide. The government though had kept its promise and had made major public expenditure announcements in its March 2020 Budget spanning more than £650 billion to be spent over the next few years. However, soon after the announcements were made, the pandemic struck the country, and a countrywide shutdown had to be imposed for a period of seven weeks. There are many economists and policy observers who have suggested that given the gravity of the situation the government should initiate austerity measures to bring the country out of this crisis and hold on to its aggressive economic policy stance for a while. The Tory government, however, does not believe in the ideas floated by the labour party government during the 2008 financial crisis and is more inclined to a high growth strategy to phase out its debt burden that has been accumulating since it started rolling out its stimulus measures.

It is not likely that the Boris Johnson government will walk back of its commitment of aggressive public spending and would rather borrow more to further its objectives, it is highly likely that there will be a shift in spending from some industries to another. The economic situation that has emerged after the coronavirus pandemic has taken several industries to the verge of collapse. These industries are strategically important for the British economy, and the government would certainly take great interest in ensuring that they are adequately recapitalised, and jobs in those industries are protected. The decision to reopen the economy, however, is unlikely to hit any roadblocks. A potentially promising vaccine is still under progress and is only set to become available for the public by September this year. The biggest challenge before the government, however, will be the spiking unemployment numbers, which could very much derail the rebound process. The key to that, however, depends on how soon the pandemic is brought into control, and people resume their day to day lives as usual.