The former governor of the Bank of England, Lord Mervyn King, has warned that an extended lockdown due to coronavirus could result in a “rebellion” if it is enforced for too long.
Lord King, who served as governor during the 2008 financial crisis, said it was “unrealistic” to think the lockdown could continue for “months and months on end” and called for a gradual exit strategy to protect the economy and citizens’ well-being.
The comments came during a round-table webinar organised by Policy Exchange involving Lord King, former chancellor Lord Alistair Darling, former permanent secretary to the Treasury Lord Nick Macpherson and Dr Gerard Lyons, Boris Johnson’s former economics adviser as Mayor of London.
The Government has announced a raft of measures in recent weeks aimed at supporting workers and businesses amid a lockdown due to the spread of coronavirus.
The Bank of England also announced two interest rate cuts in recent weeks in an attempt to mitigate the impact of the pandemic.
However, Lord King suggested the lockdown could be “potentially damaging” to the well-being and mental health of citizens, particularly stressing the impact on younger people, as he urged the Government to consider its “exit strategy” for when the lockdown unwinds.
Meanwhile, Mr Lyons praised the Government’s approach to dealing with the financial impact of the virus but warned it was “not simple enough”.
He said: “The Chancellor said the response would be coherent, coordinated and comprehensive, but I fear it was possibly too complex.
“I think there were too many thresholds and too many delays, but do think overall he’s done a good job.”
Meanwhile, Lord Macpherson suggested the crisis could be used as an opportunity for new financial policies, such as a potential “health tax”.
Lord Darling suggested the Government could plan for a temporary reduction in VAT in a bid to help stimulate spending after the pandemic subsides.
Last week, financial analysts warned that the economic shock caused by coronavirus is set to plunge the UK into a steeper recession than that of the financial crisis.
Economists are predicting double-digit declines in gross domestic product (GDP) that would dwarf the 6% decline seen between 2008-2009.