The Lowdown Hub

After a year of living dangerously, Boris Johnson bets the house on vaccine salvation

If the Prime Minister gets it wrong, his already badly dented ratings will suffer another pummelling – but if he is right

For governments around the world, the year ends much as it began – worrying about how to tame Covid without crashing the economy. Notwithstanding the success of vaccines in preventing serious illness, it’s fair to say that no-one has yet come up with a comprehensive answer.

In any case, just as we thought it safe to go back in the water, along comes the great white shark of omicron. The latest variant is apparently less deadly, but a lot more infectious, causing the underlying concern that has dictated policy from the start – whether healthcare systems can cope – to come surging back to the fore.

Only this time, it is a different sort of problem. In past waves of the pandemic, the worry was that the sheer number of Covid patients needing hospital treatment would overwhelm already stretched health services. This time, it is less the number of patients – the number of patients in UK hospitals with Covid is actually lower than in the autumn – as the damage the virus is inflicting on the supply of doctors and nurses.

I have been unable to find reliable up-to-date data on the proportion of sick NHS medical and ancillary staff, but according to some estimates, it could already be approaching 20pc, with the problem particularly acute in London, the epicentre of the latest outbreak. The potential vulnerability of insufficient beds has given way to one of insufficient staff.

But however things pan out, we would unarguably be in far worse shape here in Britain but for the relative success of the Government’s vaccine strategy. The year began with a furious row with Brussels over AstraZeneca’s apparent willingness to prioritise the UK in supply of its pioneering vaccine over European Union member states. Temporarily, it put the UK ahead of the game in vaccinating its citizens.

But, politically, it also poisoned the well against the Astra vaccine, enabling the main rival, the hugely more expensive Pfizer/BioNTech’s mRNA vaccine, to effectively corner the market in both the EU and the US. As it is, the emerging evidence is that the Astra vaccine offers better long term protection against severe disease than the alternatives, helping to explain why Britain’s Covid death rate is now quite a bit lower than much of the EU.

The full story of what happened in this unseemly scramble for vaccine supremacy has yet to be told, but that wider public health considerations got forgotten in corporate profiteering and political point scoring is not in doubt. In any case, the slight lead the UK gained in vaccine rollout scarcely seemed to matter in the end. According to the latest comparison from “Our World in Data”, Spain, Italy, France and Germany are now ahead of the UK in terms of the proportion of people fully vaccinated against Covid, with even Brazil not far behind.

On delivery of booster jabs, however, the UK remains well ahead of much of the rest of the world at 47.6pc of citizens, against just 26.4pc for the EU.

Boris Johnson’s gamble in refusing to follow the lead of European peers into renewed mandatory lockdown measures is that booster jabs provide a rather better line of defence, and one moreover that inflicts less damage on the wider economy. Personally, I see this as an entirely reasonable wager, though I wouldn’t like to be the politician making it. If he gets it wrong, his already badly dented ratings will suffer another pummelling. But if he is right…

As it is, the UK has suffered a much worse pandemic in economic terms than all of its G7 peers other than Japan. At the last count, GDP was still 1.5pc lower than its pre-pandemic peak, against 1.1pc for Germany and just 0.1pc for France. The US was actually bigger, by 1.4pc. At least some of this underperformance is down to differences in methodology when compiling GDP; the silver lining is that the UK should overperform in the year ahead.

Even so, there is bound to be a suspicion that at least part of the shortfall is down to Brexit. Some of the more alarmist forecasts of what might happen when Britain finally left the EU’s single market failed to materialise; there was no sign of the predicted long queues at ports, and if the economy was indeed badly affected by the imposition of customs checks and tariffs, it was impossible to tell amid the much greater ruin inflicted by the virus.

But that trade with Europe is down by more than might otherwise be expected, and has not yet been mitigated by growth in trade elsewhere, seems unarguable. Ministers have admittedly had their hands full responding to Covid, which would have challenged even the most sure footed of governments, but you would expect at least some sign of positive divergence from Europe by now. What is the point of leaving the EU, the now resigned Lord Frost asked, if we are only to mirror its diktats. He’s got a point. To date, the evidence is of a fair amount of economic and diplomatic damage for very little countervailing reward.

We need to be a little bit careful attributing the recent surge in inflation to Brexit; lack of once abundant and relatively cheap European migrant labour has surely played a part, but almost incredibly, German inflation is currently higher than the UK, and in any case the main mischief is plainly soaring energy prices, which is a global phenomenon.

UK inflation is rising to worrying levels Line chart with 2 lines. View as data table, UK inflation is rising to worrying levels The chart has 1 X axis displaying categories. The chart has 1 Y axis displaying % change over 12 months. Range: to . UK inflation is rising to worrying levels% change over 12 months End of interactive chart.

What is more, currently elevated levels of inflation are in part due to the so-called “based effects” of artificially depressed levels of inflation during the first lockdowns. As demand surged back, it created bottlenecks in supply, particularly for goods. Since people couldn’t spend their money on services, they splashed out on goods, food and drink instead, which is also where we have seen some of the biggest price increases. As demand flows back into services, the inflationary effect will soon be felt in those sectors of the economy too. With acute staff and skill shortages appearing across the board, we are already beginning to see it. Firms are finding it hard to resist the growing tsunami of inflation matching – or more – wage demands.

Perhaps the markets know something the rest of us don’t; whatever it is, it belies the state of deep uncertainty that continues to hang over the policy response to the pandemic. In the US, the S&P 500 is up nearly 30pc this year, and even Britain’s own benighted FTSE 100 is up nearly 12pc. Whether investors’ implied optimism is justified will be the subject of next Sunday’s column.

CLARIFICATION: This article originally said "the number of patients in hospital with Covid in England is actually lower than in the autumn". In fact, the number of patients in hospital with Covid in England is higher than in the autumn. The number in hospital across the UK remains lower than in autumn, according to the latest available data, and the article has been amended to reflect this.