Cliff Taylor: Gradually reopening the economy in phased way for everyone seems off the table

Talk of the economy rebounding strongly over the summer will have to be put on hold. These predictions were based on reopening proceeding more or less as planned – and there is now a big question mark over the hospitality sector and other indoor gatherings. If this was just a two-week delay then, while awkward and difficult for the sector, it would have a limited wider impact. But now there is real uncertainty over when the sector might open for indoor dining – and under what circumstances, with knock-ons for all kinds of events and holiday plans.

The Government has been caught by surprise by the National Public Health Emergency Team's (Nphet) advice – and in turn Nphet is reacting to emerging international experience on the Delta variant, notably in the UK. Scotland, roughly the same size as Ireland and with close to half the population fully vaccinated, is now reporting a record 3,000-plus cases a day.

It is very difficult to make any judgment on the Nphet modelling – models rely completely on the detailed assumptions used. But businesses are legitimately asking questions about how quickly this all happened, the lack of any independent overview of the figures and a wider debate about how to respond. Reacting quickly is vital during the pandemic, but to go so quickly from all systems go for reopening to putting up a stop sign poses huge issues for thousands of businesses and their employees – and will damage wider economic confidence.

National finances

Caught off-guard – due apparently to extraordinary communication gaps between those managing the pandemic response – the Government’s reaction was a bit of mess and offered no clarity. There is no opening date for indoor dining. Having had one of the tightest lockdowns, Ireland is now looking like it will have one of the slowest reopenings. Politically, the Government may reckon that other countries will have to tighten restrictions too in the light of Delta. We will have to wait and see on that.

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The damage this has caused to businesses and to the national finances may be hidden a bit by the buoyancy in some parts of the economy, but parts of the domestic economy have been hit very hard.

More pubs and restaurants will never reopen if this drags on

The consequences of the latest decisions, taken in extreme haste, are significant. The winding down of Covid-19 supports will take longer and the economic damage left behind will be greater. More pubs and restaurants will never reopen if this drags on. The emergency supports – such as the pandemic unemployment payment (PUP), wage subsidies and other business cash payments – have gone a long way to limit the damage. Now the Government has had to reopen the PUP to new applicants for a week, so that hospitality staff who had signed off to prepare for reopening can sign back on again. The timing of plans to gradually wind down these supports may yet have to be re-examined.

Whether rules will be tightened for other indoor settings already open – cinema, theatres and gyms – remains unclear. The opportunity for consumers to spend more on hospitality will have to be put on hold – and this has implications for tax revenues.

Glidepath upset

So as well as health risks, the Delta variant is going to have an economic cost. It is pushing the Government to somewhere it did not wish to go – giving more options in the economy to people who are vaccinated in an attempt to provide some level of business for sectors like hospitality. This may yet fall apart, given the practical problems and the initial political reaction.

There is a huge job in getting indoor hospitality reopened before the summer is gone. And a lot of wider questions

The glidepath to gradually reopening the economy in a phased way for everyone seems to be off the table. And there are a host of really tricky issues now to decide if the plan of giving access to vaccinated people goes ahead – what happens to a family with parents vaccinated and children not? And what about visiting tourists and unvaccinated waiting staff? How is it all controlled and can it even be made workable?

The Government now has a lot to do in a short period of time. There is a huge job in getting indoor hospitality reopened in some form before the summer is gone. And a lot of wider questions.

Tuesday was a mess from the Government’s point of view, as it was clearly scrambling to respond to the new advice. It needs a new plan – and one which has some ambition in terms of reopening. It surely needs to look at the antigen testing route in some cases and consider what the latest events mean not only for indoor hospitality but for other key markers – like the reopening of schools and colleges in the autumn, the return to workplaces, the future of travel and so on. The planned glidepath to reopening now looks to be off the table.We are not just talking about a two-week delay here but the need for a new plan of action.