21 April 2020

A traffic-light system is the best way to lift the lockdown

By Gerard Lyons

After weeks of lockdown, the public are naturally wondering how the Government plans to get us out of this extraordinary situation.

In my view a traffic light approach – red, amber, green – is the best way to unlock the country and allow the economy to be revitalised, while ensuring the virus continues to be brought under control. This approach is easy to understand and gives a clear sense of direction, with economic activity, schools and shops opening in stages in a gradual and predictable way. 

Scientists and social scientists can work together to devise the optimum exit strategy from the lockdown. To that end, Professor Paul Ormerod of University College, London and I have produced a discussion paper and policy paper on this subject. We used the analytical framework of epidemiological models alongside the key behavioural insight from economics to determine an exit strategy.

The lockdown was a necessity and has been a success. Its extension was justified and it is vital that we do not unlock prematurely – only when the virus has been brought under control can the economy be unlocked. No one is advocating being blasé.

The Government has outlined five steps that need to be overcome. First, the reproduction rate of the virus must fall below one, meaning that a person with the virus infects less than one other person. Equally, deaths need to be clearly trending down. More people are now being tested and so, on a like for like comparison, new infections must also be on a clearly downward path.

There has already been a significant change in behaviour by the British public as they have adhered to the lockdown. The importance of behaviours will have a significant bearing on the exit route too, supporting unlocking by economic activity.

However, we must not rely solely on epidemiological models in determining the exit strategy. These models do not take into account endogenous behavioural responses. Because of their very structure these models are likely to assume a return of the virus and recommend leaving the lockdown too late. 

In an ideal world we would like there to be a vaccine and mass testing in place, but until then there is the need to be flexible, with adaptive triggering an option.  Adaptive triggering means reinstating lockdown measures if the virus shows signs of a strong return. However, with appropriate policies and suitable behavioural responses from the population, the large second wave predicted by epidemiological models can be avoided.

The lockdown has come with a large economic cost. One in six people work in sectors impacted directly by the lockdown and one in three are exposed. The longer the lockdown lasts, the more likely it is that a temporary hit to the economy results in a permanent loss of firms and jobs. The scale of permanent loss will rise in a non-linear way with the length of the lockdown. There is also a high health cost associated with the lockdown including mental health issues, domestic abuse and loneliness. 

Given the virus must also be kept under control, unlocking should therefore happen gradually, in predictable stages. We are in a vaccine gap, so in any unlocking, increased testing and utilising technology to enhance tracking are essential. Also, behaviours will be a vital feature of any unlocking. It is essential that behaviour continues to be different to what it was pre-crisis. This includes social distancing and the wearing of masks on public transport in order to ensure a reduction in the risk of passing on the virus. Also, at risk groups need to be more careful and employers will need to ensure all measures are in place to safeguard their staff. 

We favour unlocking based on economic activity, as this is the only way that is guaranteed to help the economy and the most likely way to ensure that people behave cautiously and keep the virus under control.

It is appropriate to explain what we do not believe works. The call for unlocking based on age groups would not be the best route to kick-start the economy. The argument that 20-somethings would be immune and not infect others would require impeccable behaviour and perhaps take months. Furthermore, innovation from younger people alone is not going to fill the economic void. So behaviour, timing and economic impact argue against unlocking by age cohorts.

Just as it is hard to imagine keeping people apart if different age cohorts are released, it is also difficult to imagine unlocking based on geographic region, too. It would be hard to enforce and London’s predominance means unlocking by geography will be less effective than by economic activity and sector.  

Unlocking by those who have passed an immunity test would at least satisfy the health criteria, but it is hard to see it achieving the need to revitalise the economy, particularly given the low level of antibody tests in UK.

Instead the only credible route to take is a traffic light approach based on economic activity, including schools. This allows the health crisis to be kept under control and addresses the economic crisis. 

After ending the lockdown, we move to the Red Phase – so we “stop” doing things we did before the crisis. A range of activities would open, including small shops and nurseries, plus many others.

Then, two or three weeks later, would be the Amber Phase, so we should still be cautious. All schools could reopen. Private car use would be permitted for non-essential reasons. Masks would be mandatory on public transport.

Then, three weeks after this would be the Green Phase, allowing mass sporting events and religious services, plus large stores to reopen. Each phase should last two or three weeks, allowing time for the effectiveness and safety of each phase to be assessed, before proceeding to the next one.

The important issue is to unlock in a gradual and predictable way that gives hope to people, allows business to plan ahead, keeps the virus risk under control and restarts the economy. 

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Dr Gerard Lyons is chief economic strategist at Netwealth and senior fellow at Policy Exchange.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.