Bank of England governor Andrew Bailey has warned against lifting coronavirus lockdown measures too quickly and putting people’s safety at risk in a bid to boost the economy.
Bailey added that a “false start”, when lockdown measures had to be reinstated, “would damage people’s confidence very severely”.
The governor’s intervention come amid a heated debate within government. Reports say the cabinet is split about when to start lifting stay-at-home orders and letting people go back to work.
“Hawks” such as chancellor Rishi Sunak and cabinet secretary Michael Gove arguing that the economy needs to be returned to normal quickly.
On the other side are the “doves”. These include Prime Minister Boris Johnson and health secretary Matt Hancock, who fear the damage a second wave of infections could do.
In an interview with the Daily Mail, Bailey said that employers need to be sure they are not putting their staff at risk in coming back to work.
He said: “As an employer – and we have this at the Bank of England – you have to be able to answer the questions for your staff: is it safe to come to work?”
Government must consider ‘human psychology’
Bailey added that the government had to consider “human psychology”. He said a situation where a lockdown was lifted but then restrictions had to return due to rising cases would be damaging.
“I think we have to be careful when thinking about human psychology,’ he said. ‘If we had a lifting and then [lockdown] came back again, I think that would damage people’s confidence very severely.”
“If we have a false start… that would have potentially quite difficult effects I think.”
Bailey’s comments echo those of Bank of England deputy governor Ben Broadbent who on Monday highlighted the importance of safety and psychology.
Broadbent said that for the economy to pick up again, it is important that “when it is safe for people to go back to work that [the government] actually positively encourages people to do so”.
Bailey increases pressure on banks to lend
Bailey also renewed his call for banks to increase their lending to struggling small businesses.
He said not enough money has reached firms through the coronavirus business loans interruption scheme (CBILS).
Roughly £2bn is thought to have been lent so far, well below equivalent schemes in other countries. City A.M. revealed yesterday that businesses are calling on banking body UK Finance to publish a bank-by-bank breakdown to see who is lending.
Bailey said banks have themselves been struggling with coronavirus. He said they are also struggling to work out how high the risks of lending are.
He said: “This gums up the operational side. It is clearly not satisfactory and [the system] clearly needs to be un-gummed.”
“I gee up the banks regularly. The chancellor and I are both extremely keen that credit flows to firms.”