Economic advice

¶9.178. During a pandemic, it is essential that decision-makers balance the potential public health impact of interventions against their likely societal and economic costs (while acknowledging that, over the longer term, the interventions themselves, including lockdowns, might shorten the pandemic and reduce the overall societal and economic costs). The roles of SAGE and SPI-M-O did not extend to considering the economic consequences of infection or control measures. Unlike with scientific advice, structures to assess the economic impact of the pandemic and the actions taken in response were not set up by the UK government. There was no equivalent of SAGE to provide expert economic modelling, analysis and advice.

UK government

¶9.179. The UK government primarily relied upon the Treasury as a source of economic analysis, modelling and advice to inform decisions about measures taken in response to Covid-19.

¶9.180. When the pandemic struck, a secondee from the Treasury, Stuart Glassborow (Deputy Principal Private Secretary to the Prime Minister from May 2019 to May 2022), led on engagement between 10 Downing Street and the Treasury and between the Prime Minister and the Chancellor of the Exchequer.³⁰⁶³⁰⁶ INQ000302484_0009-0010 para 33 More broadly, his secondment was intended to assist with the sharing and understanding of economic analysis and advice at the centre of government. Mr Glassborow's role included the commissioning and communication of data, analysis and advice from the Treasury.

¶9.181. From June 2020, regular economic briefings for the Prime Minister were held approximately every three to four weeks and were also attended by the Cabinet Secretary and other relevant ministers. Their purpose was to:

" provide the Prime Minister and Chancellor with the latest picture of the UK economy, reflecting on the impact of the pandemic itself and the measures taken to manage its impact, plus – on occasion – deep dives into specific issues as relevant".³⁰⁷³⁰⁷ INQ000302484_0012 paras 41-43

¶9.182. An economy dashboard was also created for this purpose.³⁰⁸³⁰⁸ INQ000302484_0012 para 43 These briefings ran alongside the other decision-making forums and meetings with the Chancellor of the Exchequer.

¶9.183. At the time, there were concerns across 10 Downing Street and the Cabinet Office and within the scientific advisory community about the lack of economic modelling and the capabilities of the Treasury. There had been a lack of pandemic preparedness, with no pre-existing model or economic analysis of how a pandemic would affect the economy.³⁰⁹³⁰⁹ Clare Lombardelli 6 November 2023 13/1-4 There was, in the words of Clare Lombardelli, Chief Economic Adviser at the Treasury from April 2018 to April 2023, no "ready-made tool kit".³¹⁰³¹⁰ INQ000251931_0009 para 30 As a result, it "was not possible to meaningfully model the overall 'economic cost of lockdown'".³¹¹³¹¹ 'Covid and the UK Economy – Speech by Clare Lombardelli, Chief Economic Advisor, HM Treasury', HM Treasury and Clare Lombardelli, 30 June 2022 (https://www.gov.uk/government/speeches/covid-and-the-uk-economy-speech-by-clare-lombardelli-chief- economic-advisor-hm-treasury; INQ000088016_0006) Ms Lombardelli said that there was modelling of the impact of individual decisions, such as the impact of closing schools on the ability of parents to work. However, she said that there was no estimate of the cost of any lockdown "in terms of jobs or economic activity", or of the cost of not locking down.³¹²³¹² Clare Lombardelli 6 November 2023 15/1-15 The same was true for modelling the economic impact of 'circuit breaker' restrictions.³¹³³¹³ Clare Lombardelli 6 November 2023 17/8-23 This was partly because the Treasury did not consider it possible to produce such a model or to identify a suitable counterfactual (ie the economic consequences of not having a circuit breaker or lockdown with the resultant rise in infections and deaths).³¹⁴³¹⁴ Clare Lombardelli 6 November 2023 13/21-14/13, 15/9-15

¶9.184. Ms Lombardelli pointed to the many uncertainties, with the "known unknowns" being a "formidable barrier to any reliable predictive capability".³¹⁵³¹⁵ INQ000251931_0003, 0009 paras 8-10, 30 The uncertainties included the unknown impact of the virus on the economy, the unknown impacts of measures taken in response and human behaviour, which was a "huge … challenge to the analysis" as a "key driver" of outcomes.³¹⁶³¹⁶ Clare Lombardelli 6 November 2023 16/19-23 The Inquiry notes, however, that the

¶Treasury did not utilise SPI-B. Dominic Cummings, Adviser to the Prime Minister from

¶July 2019 to November 2020, was of the view that:

" HMT's [the Treasury's] analytical capabilities were poor. Although senior HMT officials pushed back repeatedly over policy they never had their own serious alternative based on quantitative analysis. At no point when I was there did HMT produce models of the economy in different scenarios … Many have said there was never a full cost–benefit analysis done on lockdowns including the economic effects. This is true but the Treasury could not and would not produce such analysis, either pre-first wave or later in 2020."³¹⁷³¹⁷ INQ000273872_0021 para 87

¶9.185. This had implications for the advice received by the Prime Minister and other decision-makers. A briefing paper was produced for the Chancellor of the Exchequer relating to the potential circuit breaker short lockdown to be discussed at a Covid-S meeting in September 2020. It set out in general terms the projected economic impact, with advice to "push back strongly".³¹⁸³¹⁸ INQ000184589_0002 The circuit breaker lockdown was said to be "catastrophic" and "severe", but the paper failed to provide any advice or analysis of the economic impact of not having a circuit breaker lockdown.³¹⁹³¹⁹ INQ000184589

¶9.186. Frustrations with the lack of economic modelling and analysis – and, where they were available, of their quality – were voiced at the highest levels of government. As late as October 2020, Mr Johnson noted in a 'Strategy Update': "What do we really ACHIEVE by smashing up the economy if we have no idea how many times we are going to have to do it?" He also commented: "Please can I see some SERIOUS economic analysis" (emphasis in original).³²⁰³²⁰ INQ000146617_0007-0008 More generally, Dr Ben Warner, Special Adviser to the Prime Minister from December 2019 to May 2021, noted:

" [T]he biggest absence throughout the pandemic was the lack of economic modelling in decision making. HMT, who is responsible for economic modelling, has a strong set of policy officials, but when it came to my interactions for all aspects of my work in Government, I found that HMT was severely limited when it came to specialists in science, advanced analytics, technology or data."³²¹³²¹ INQ000269182_0079 para 309

¶9.187. There were also significant concerns about the capability of the Treasury to use modelling tools effectively. For instance, a simplified 'toy model' was developed for use by departments and distributed in January 2021. It was designed to be a basic epidemiological model and was much simplified compared with the models utilised by SAGE and SPI-M-O and necessarily limited in its utility. It was designed as a 'teaching tool' to build "understanding and intuition about how infectious disease systems work" and to improve SPI-M-O commissioning.³²²³²² Angela McLean 23 November 2023 28/16-29/6; INQ000309529_0017-0018 para 61 However, concerns were raised by Professor McLean and Dr Warner in relation to modifications to the 'toy model' implemented by the Treasury and its potential use as a decision-making tool.³²³³²³ INQ000269182_0068-0069 paras 263-270; INQ000196028; INQ000196030; INQ000196029; INQ000196025; INQ000196026 Professor McLean said:

" Given their inability to spot egregious errors in other things they were sent I do not have any confidence in their ability to hack a simple, sensible model."³²⁴³²⁴ INQ000196029

¶This was a reference to another Treasury model, which Professor McLean had identified as having "very substantial flaws".³²⁵³²⁵ INQ000309529_0018 para 62

¶9.188. A single model incorporating economic, epidemiological, health and other factors was not developed.³²⁶³²⁶ Clare Lombardelli 6 November 2023 50/24-52/4 Ms Lombardelli considered that such a model was unworkable. However, models were created that sought to incorporate various such factors, and the Inquiry heard evidence that such a model was possible.³²⁷³²⁷ Ben Warner 6 November 2023 185/18-187/25; Matt Keeling 12 October 2023 176/17-177/22 While appreciating the challenges and difficulties involved, such a model would be a valuable tool and efforts should be made to develop the capability to deliver it.

¶9.189. To ensure the provision of better and more wide-ranging advice to ministers, the possibility of establishing an economic version of SAGE was discussed in June 2020. It did not develop into a proposal by the Treasury or the Cabinet Office because it was thought the Treasury had capability on which to draw, unlike scientific or epidemiological expertise.³²⁸³²⁸ Clare Lombardelli 6 November 2023 50/17-55/6; INQ000235261; INQ000196026; Stuart Glassborow 6 November 2023 103/11-104/12 However, the deficiencies in economic modelling demonstrate that the Treasury's confidence in its in-house capability was misplaced. Dr Warner suggested that "we should be building the people and the structures and the capability to be able to do that for any future crisis", rather than building models.³²⁹³²⁹ Ben Warner 6 November 2023 187/15-25

¶9.190. The Treasury conceded that it should have engaged to a greater extent with external experts.³³⁰³³⁰ Module 2: Written closing submissions on behalf of His Majesty's Treasury, HM Treasury, 15 January 2024, p13, para 39 (https://covid19.public-inquiry.uk/documents/module-2-closing-statement-on-behalf-of-his-majestys-treasury) It should also consider its access to experts from a diverse range of disciplines, such as health economists.

¶9.191. There is now a wealth of data available on the economic impacts of a pandemic, both within the UK and globally. It is imperative that there is the capability within government to collate and analyse those data for use both in pre-pandemic planning and during any future crisis. That capability also includes departments developing or accessing skills and systems to analyse data that can be deployed at the earliest opportunity, rather than needing to build capability during an emergency response.

Scottish Government

¶9.192. Dr Gary Gillespie, Chief Economic Adviser to the Scottish Government from 2011, provided economic advice to the Scottish Government throughout the pandemic.³³¹³³¹ INQ000346410_0003 para 8 Scottish Government Resilience Room meetings, chaired by Ms Sturgeon, were attended by Dr Gillespie. The meetings were the main forum for considering economic impacts before the creation of the four harms framework in April 2020 and the Four Harms Group in October 2020, as discussed further in Chapter 11: Government decision-making, in this volume. This framework was then used as the "main framing" of economic advice for decision-makers in the Scottish Government.³³²³³² INQ000346410_0013 para 43 Prior to these developments, "the economic and wider social impacts of the pandemics were recognised" but were not "fully integrated as was the case with [the] subsequent four harms approach".³³³³³³ INQ000346410_0005-0006 paras 17-19

¶9.193. However, Elizabeth Lloyd (Chief of Staff to the First Minister of Scotland from January 2015 to March 2021 and Strategic Political and Policy Adviser to the First Minister of Scotland from August 2021 to March 2023) noted:

" Teams within [the Scottish Government] did not always appear to be hearing each other, particularly on the interaction between economic and Covid harms, and economic teams did not seem equipped or prepared to explain to stakeholders why certain restrictions were in place and why decisions were taken not to lift them."³³⁴³³⁴ INQ000274006_0011 para 42

Welsh Government

¶9.194. In Wales, a socio-economic sub-group of the Technical Advisory Group was established on 23 July 2020 and chaired by Jonathan Price, Chief Economist to the Welsh Government.³³⁵³³⁵ INQ000239529 Mr Price noted that the sub-group focused on the medium and long-term socio-economic impacts of the pandemic, rather than assessing the immediate effects of specific non-pharmaceutical measures. Immediate socioeconomic impacts were considered by two economists seconded to the Covid-19 Project Team from the Welsh Government's Economic Advice Division.³³⁶³³⁶ INQ000391238_0003-0004 Mr Price explained that there were limitations on the socio-economic advice that could be provided – for example, on the ability of experts to "undertake fully quantified cost- benefit analyses of packages of restrictions" – in light of the inherent uncertainties that came with the pandemic, including the public's modification of its behaviour even in the absence of restrictions.³³⁷³³⁷ INQ000391238_0008-0011 However, some experts felt that more could have been done if further data had been available.³³⁸³³⁸ Michael Gravenor 1 March 2024 187/5-188/2; INQ000347979_0023 para 77; INQ000371584_0027 para 114 Dr Orford believed that economic advice significantly influenced the Technical Advisory Group's recommendations.³³⁹³³⁹ Rob Orford 4 March 2024 93/6-94/5

Northern Ireland Executive

¶9.195. The Northern Ireland Executive did not have any formal structures to advise it on the economic implications of the pandemic. Rather, the Department for the Economy (Northern Ireland) monitored the impact of the pandemic on the economy of Northern Ireland and provided analysis to the Executive Committee through Executive Papers.³⁴⁰³⁴⁰ INQ000219183_0007-0008 para 31 Diane Dodds MLA, Minister for the Economy in Northern Ireland from January 2020 to June 2021, reflected that "there was no impartial counterbalance" (in terms of the impact of health regulations on society, education and the economy) to the medical and scientific advice being provided to the Executive Committee by the Chief Medical Officer for Northern Ireland and the Chief Scientific Adviser to the Department of Health (Northern Ireland).³⁴¹³⁴¹ INQ000436924_0040 para 152 However, when asked whether it would have been helpful for the Executive Committee to have had access to its own independent source of advice on the economic impact of measures taken in response to the pandemic, Ms Dodds said that the Department for the Economy (Northern Ireland) had various stakeholder groups which comprised:

" people who were very eminent in business and the economy in Northern Ireland, so I had my economic advisory panel … they were very significant people – within the economy … I am content that within my department that we had significant recourse to very, very expert advice in terms of the economy."³⁴²³⁴² Diane Dodds 8 May 2024 133/3-134/3

¶9.196. Although structures for providing economic advice were set up in Wales and Scotland, there was little evidence in each of the four nations of substantive economic modelling and analysis being provided to decision-makers. This inevitably hampered the ability of decision-makers to assess and balance relative harms.

¶9.197. Economic decision-making and economic interventions are being considered further by the Inquiry in Module 9: Economic response. The Treasury should ensure that economic modelling and analysis capability is incorporated into pandemic planning. Where it does not have adequate internal capabilities, it should ensure that it is able to draw upon such expertise externally. It must be prepared to provide fully reasoned and robust economic modelling analysis, including the modelling of counterfactuals, from the outset of any future pandemic. This is all the more important when, as in the Covid-19 pandemic, the Treasury is the primary source of economic information. The devolved administrations should also assess their own capabilities, both internally and externally, to produce or access economic modelling and analysis relevant to their own territories. They should consider the extent to which it would be beneficial to work together with the Treasury and with each other to achieve that aim.