The Successes and Failures of the Treasury’s Covid Response

Olly Bartrum, Gemma Tetlow

A new Institute for Government report shows how the UK’s finance ministry met the challenge of the pandemic head-on, but that lessons can be learned in its wider approach – most notably on evidence use and sharing.

The coronavirus pandemic is the most significant shock that the UK has faced in living memory and its effects still linger on in our health, economy and politics. The demands that it placed on policy makers – both politicians and officials – were extraordinary, with talented and dedicated civil servants working tirelessly to develop the government’s response to the pandemic.

That is particularly true for the Treasury, whose officials devised and implemented a huge amount of support during the pandemic, and worked closely with the Cabinet Office and the Department of Health and Social Care to develop the overall response to the pandemic, including the use of social restrictions.

Our new Institute for Government report into the Treasury’s role during the pandemic is the result of more than a year’s research and conversations with many people at the heart of key decision making at the time. We have found much to celebrate in how the department handled the unprecedented challenges of the Covid outbreak, particularly in developing the support policies, but we also found many areas in which the way that decision making was carried out limited the effectiveness of policy making.

The Treasury’s economic policy response was impressive

After Boris Johnson made the unprecedented decision to introduce a nationwide lockdown in March 2020, the task facing his chancellor, Rishi Sunak, was clear: to prevent a large rise in unemployment and business failures due to government-imposed restrictions, and ensure as far as possible that people could return to their jobs once the worst of the health crisis abated. The economic support (furlough, support for the self-employed, and loan guarantee schemes) was deployed incredibly quickly and proved very effective at delivering the chancellor’s objectives, thanks to the way Treasury officials worked closely with delivery departments (including HMRC and the British Business Bank) from the start of the policy design process. The department also engaged unusually well with external stakeholders including trade unions, business groups and external experts. Those that we spoke to felt that the department listened closely to their concerns, and they often saw their input reflected in changes to policy.

However, delivering the response so rapidly came with trade-offs. Schemes designed for previous crises and – in the case of labour market support – the tax system had to be adapted to get support out of the door quickly. It would clearly be unreasonable to expect the schemes to have been perfect, but more preparation within the Treasury for the risk of a pandemic of this type or magnitude (the department had done very little) would have put it in a better position – and would have allowed ministers to avoid some of the hard choices between whom to support and increasing fraud risk.

The Treasury and rest of the centre did not bring together evidence effectively in 2020

From exiting the first lockdown in summer 2020 through to the implementation of the second and third lockdowns in autumn 2020 and Christmas 2020, the government became less unified. There were clear tensions between those who prioritised suppressing the virus through social restrictions and others who prioritised a return to normal life and economic activity.

These tensions were unavoidable. The pandemic and associated restrictions had terrible impacts beyond those related to catching the virus: people were suffering falls in incomes, experiencing loneliness and other mental health difficulties, children were missing out on their education, and the national debt was rocketing.

The government’s objective was to find a compromise that balanced all these different considerations. For this to happen policy makers with different priorities should have come together at the centre of government, made every effort possible to gather all the relevant evidence on the various impacts of the pandemic and bring it together in an open way to inform a balanced policy. That did not happen.

Instead, decision-making at the centre of government took place in a chaotic environment with two competing ‘lobbies’ engaged in a ‘tug of war’. On one side health policy makers pushed for further restrictions; on the other, the Treasury argued against. But the Treasury rarely provided rigorous and persuasive evidence or analysis, specifically unpicking the causal economic impact of restrictions and analysis of the complex interactions between public health and the economy, to support its position.

It is not clear whether this analysis was being done and not shared, or simply not being done. Scarred by the adverse publicity received for (among other things) the pre-referendum forecasts for the impact of Brexit, the department has become more reluctant to share its analysis – or perhaps even conduct the analysis for fear it might leak.

The Treasury was an outlier in its apparently low-evidence approach

This is in stark contrast to the way that scientific evidence from inside and outside government was channelled into decision making at the centre of government through SAGE and its sub-committees. This meant that scientific evidence was both more transparent, and much better informed by external expert advice. Ministers claimed repeatedly to be “following the science”, but the reality was that complicated policy decisions reflected a variety of evidence and difficult trade-offs.

However, only one part of the evidence base was ever made public, and the presence of two lobbies presented the policy decision as a choice between two extremes, rather than the complex balancing act it was. A lack of effective synthesis at the centre – primarily the responsibility of the cabinet office – led to suboptimal decision making.

It also meant that economic policy often appeared to be at odds with scientific opinion. In some cases, the imposition of restrictions was delayed apparently because of economic concerns, yet this led to further transmission and ultimately necessitated stricter restrictions at a later date. The result was worse outcomes for both public health and the economy. A lack of communication also led to inconsistency in policy across departments: Eat Out To Help Out, for example, likely led to a (small) increase in transmission and was criticised by many others in government for working against health objectives.

This blog post has been republished with permission from the Institute for Government.