2. Mr George Osborne
MR GEORGE OSBORNE (sworn).
Questions From Counsel to the Inquiry
Ms Blackwell: Is your full name George Gideon Oliver Osborne?
Mr George Osborne: Yes, it is.
Counsel Inquiry: Thank you for the assistance that you have given to the Inquiry thus far, Mr Osborne, provision of your witness statement and also documents, and thank you for coming to give evidence to the Inquiry today.
Please keep your voice up and speak into the microphones so that the stenographer can hear you for the transcript.
You were Shadow Chancellor from 2005 to 2010, then Chancellor of the Exchequer from 2010 to 2016, and First Secretary of State from May 2015 to July 2016.
Your witness statement is at INQ000187308. It’s on screen now. Please can you confirm that that is your witness statement and that it’s true to the best of your knowledge and belief?
Mr George Osborne: Yes, it is.
Counsel Inquiry: Thank you.
My Lady, may we have permission to publish it?
Lady Hallett: You may.
Ms Blackwell: Thank you.
You can take that down.
Before we start, Mr Osborne, I understand that you want to say a few words.
Mr George Osborne: Well, I just wanted to express my heartfelt sympathy to all those who lost a loved one during the pandemic, and for those who feel things could have been done differently, I hope the Inquiry gets to the bottom of what those things might have been.
Counsel Inquiry: Thank you.
I’m going to ask you questions about whether or not the Treasury had a plan for a pandemic, and if so what that was, and how the Treasury contributed to the government’s planning for a pandemic.
I emphasise from the outset that this is not a discussion or a debate about the merits or otherwise of the government’s fiscal policy or indeed the imposition of austerity. We will touch upon the effects of a sustained period of austerity in the United Kingdom, but only insofar as it relates to the state of the country’s preparedness and resilience when Covid hit.
In order to put your evidence in context, Mr Osborne, the Treasury is the government’s economic and finance ministry, it maintains control over public spending and sets the direction of the United Kingdom’s economic policy. As Chancellor, you were the minister of the government in charge of the Treasury.
There are other important entities in the financial architecture that we will touch upon, including the Office for Budget Responsibility, which you set up during your tenure as Chancellor.
In your witness statement, at paragraphs 7 to 11, we don’t need to look at it, I’m going to attempt to summarise it, when you came to power immediately after the 2008 financial crisis, you imposed an economic policy intended to improve the United Kingdom public finances, and meaning that the United Kingdom was in better financial shape to face the pandemic when it hit.
You say in your statement that your handling of the Treasury allowed the government to fund the furlough scheme and the Bounce Back Loan Scheme and other pandemic fallout, that you made reforms to financial services which meant that there wasn’t a banking crisis as a result of the Covid pandemic, and that you invested in research and development, importantly vaccine development, which was important when Covid hit.
Is that a fair summary of your explanation as you give it in your witness statement of the policy that you implemented?
Mr George Osborne: Yes, it is.
Counsel Inquiry: Thank you.
So that gives us an understanding of how you believe the Treasury, under your watch, contributed to the government’s preparedness for a pandemic. But I want to explore with you the plan that the Treasury had for a pandemic.
You say at paragraph 16 (sic) in your witness statement that, for the risks where the Treasury is allocated as a lead department, it develops scenarios and determines the potential impacts and likelihood of the risk in question. That was the case prior to the Covid-19 pandemic.
So does it follow, Mr Osborne, that where the Treasury was not the lead government department, it didn’t develop such scenarios?
Mr George Osborne: Basically, yes. So, if I may elaborate, I mean, there are certain crises for which the Treasury is, clearly, directly responsible.
Counsel Inquiry: Such as a banking crisis?
Mr George Osborne: A banking crisis, an economic crisis, a run on the pound. Sadly our country has experienced many of these over the decades, and the Treasury is clearly the lead department, to pick up on the conversation that you’ve just been having with Oliver Letwin –
Counsel Inquiry: Yes.
Mr George Osborne: – for those crises. But when it comes to other kinds of crises that might affect a government, the Treasury is a contributor to the whole of government plan that usually another department leads, in the case of pandemics the Department of Health.
Counsel Inquiry: The Department of Health, yes. So we’ll look in a moment at how the Treasury assisted the Department of Health, being the lead government department for pandemic preparedness. But before we do, could we please display on the screen page 8, paragraph 20 of your witness statement and read through it together, please. You say here:
“Between 2010 and 2016, [Her Majesty’s] Treasury, and therefore the Chancellor, contributed to cross-government preparations for civil emergencies. This contribution broadly fell into four categories:
“a) The monitoring, assessing and managing of economic and fiscal risks;
“(b) Leading responsibility in government for monitoring and responding to risks to the stable operation of the UK financial system, learning the lessons of the financial crisis …
“(c) Setting budgets and applying spending controls and/or conditions for government departments – although noting that it was ultimately for the relevant Secretary of State to decide how to allocate their budgets; and
“(d) Preparing [Her Majesty’s] Treasury’s own corporate structures to enable effective crisis management, working closely with the Permanent Secretary and other senior officials, again learning from the … financial crisis …”
So, summarising those four points, you believed that the Treasury’s job was to plan for economic and fiscal risks, a stable operation of the United Kingdom financial system, setting the budgets and applying spending controls, and also preparing the Treasury’s own corporate structures to enable effective crisis management?
Mr George Osborne: That’s right, yeah.
Counsel Inquiry: Yes. Whilst this may well be a form of pandemic planning, these are all purely economic risks and matters which fall directly under the Treasury’s remit in any event; these are the Treasury acting on business as usual, aren’t they?
Mr George Osborne: Well, the only thing I would draw attention to is that most whole-country crises, of which a pandemic is an obvious example, but, you know, a devastating military attack, you know, a catastrophic civil emergency of some kind, would probably lead to a second crisis, which is an economic or financial one. And indeed in the spring of 2020 – you know, I wasn’t in government, but it was clear for everyone observing government that they were not only dealing with a health emergency but they were dealing with an economic emergency and a financial emergency, and a huge amount of effort – successful as it turns out – was put into trying to stabilise the markets, making sure the banking system didn’t fall over.
So I think, you know, it’s quite hard to think of, you know, crises on the scale of Covid that would not also have the potential to tip into a fiscal crisis and/or a financial crisis. Fiscal being about the ability of the government to fund itself, financial being about the ability of the banking system to cope with the crisis.
So I think, you know, unlike other things which you might look at, the – you know, most major civil crises have the potential to tip into an economic and financial crisis.
Counsel Inquiry: All right. But given how central the Treasury is to the functioning of the United Kingdom and its economy, do you agree that there appears to have been no planning for external shocks which would have a major economic impact? In other words, no specific pandemic planning, no plan in the Treasury?
Mr George Osborne: Well, you know, I’ve been following the evidence given to this Inquiry –
Counsel Inquiry: Yes.
Mr George Osborne: – with interest before appearing here, and you’ve covered this territory, I’m happy to cover it myself. But clearly, you know, the UK, as indeed I think is the case with most western democracies at the time, has an influenza plan, and the Treasury had done some work on what the impact of that would be, and it’s a hit to GDP, there’s an expected period when of the workforce might be absent from work for an week or two, and there is – you know, tragically in that case there would be a high mortality rate.
The Treasury basically had the structures to deal with that because there are already sickness benefits, there are already structures available for companies to pay people who are not working who have the flu, and in the exercises that had been done before I came into office there were some very specific supply chain issues that had been established, if there was an influenza pandemic, around things like the impact on the travel industry and the like.
Given what subsequently happened, very small-scale.
Counsel Inquiry: Yes.
Mr George Osborne: You’re absolutely right that there was no planning done by the UK Treasury or indeed, as far as I’m aware, any western treasury for asking the entire population to stay at home for months and months on end –
Counsel Inquiry: Yes.
Mr George Osborne: – essentially depriving large sectors of the economy, like hospitality, of all their customers for months and months to come.
Counsel Inquiry: That could have been done, couldn’t it?
Mr George Osborne: Well, you’re completely right, but if someone had said – and I know that is absolutely core to what this module of the Inquiry is looking at, if someone had said, “You, the UK Government, should be preparing for a lockdown that might last for months”, then I’ve absolutely no doubt the Treasury would have developed the schemes that it did subsequently develop, around the furlough, the Covid loans and the like.
What I would say, you know, in defence of the officials I worked with, who were some of the most hardworking and dedicated public servants I’ve ever come across, was that in 2020 it turned out to be fairly easy and rapid to be able to put those support systems in place. Not all the other areas we’re going to, I’m sure, cover around the health service, but the actual economic support schemes, like furlough, were designed by hard working Treasury officials in – under a pressure situation, very quickly and put in place.
So yes, planning could have been done for an furlough scheme in advance. I’m not clear, observing it as, at that point, just a citizen, I’m not clear that that would have made a better furlough scheme than the one we actually as a country saw.
Counsel Inquiry: All right. Well, taking other examples than lockdown and furlough, using, for instance, a plan to consider the economic output required for self-isolation or the Covid Business Interruption Loans or any economic effect of a mitigation action, none of that was done. There could have been planning, joined-up planning between the Department of Health identifying what the mitigation actions were being considered and the Treasury then coming in and dealing with a worst-case scenario, a middle-case scenario, and assessing whether or not the proposed mitigation actions were economically worthwhile.
None of that sort of planning took place, did it?
Mr George Osborne: Well, you’re right that there was no planning in Britain or indeed, as far as I’m aware, in France, Germany, the United States or anywhere else –
Counsel Inquiry: Well, we’re dealing just with –
Mr George Osborne: Well, it’s important because I think if you’re challenging – you know, the phrase that’s come up here – groupthink, you know, it was not a groupthink unique to this country. There was no assumption that you would ask the population to stay at home – or not ask, sorry, mandate that the population stay at home for months and months on end and what that … and so there was no planning for the – for a lockdown.
Counsel Inquiry: Whose fault was it that there was no prior thinking that that could take place?
Mr George Osborne: Well, I don’t think it’s particularly fair to sort of apportion blame, because, you know, the entire scientific medical community – again, you know, hard working individuals with the best of intentions – you know, were not, were not elevating this particular possibility of a coronavirus that would have this level of contagion, have asymptomatic patients, and that, you know, the Treasury or indeed the education department or the criminal justice system should pay attention and come up with some plans for if that was to happen.
If we had – I mean, I think, if we had – sorry to – you know, if you look then at the planning for the influenza pandemic – and of course we don’t know in practice whether – had that come into contact with reality, how it would have fared, but it’s clear that the Treasury, and indeed the rest of government, responds to reasonable requests by saying yes. You know, “Please stock antivirals.”
“Yes.”
“Please have in place advance vaccine purchasing agreements.”
“Yes.”
“Let’s have some money set aside for call centres being set up.”
“Yes.”
Counsel Inquiry: That is very different to sitting down with the Department of Health and working out whether or not there would be such a catastrophic effect to a lockdown that it would have to be considered, and the benefit of considering that prior to the incident hitting is you’re not making these decisions on the hoof?
Mr George Osborne: What I would – what I would observe now, just as, you know, a citizen who very much wants this Inquiry to come up with some good answers, is I don’t think we still know the answer to some of those questions.
You know, I don’t want to jump ahead for this Inquiry, but should the schools have been locked down in the way they were? Even now after the Inquiry – after the pandemic we don’t know the answer to those questions, or certainly I don’t, and maybe the Inquiry can get to the bottom of that.
Counsel Inquiry: They’re certainly worth asking –
Mr George Osborne: But, you know, they are absolutely – absolutely critical questions about balancing, you know, the life expectancy of a 80-year old versus the educational opportunities of an 8-year-old, incredibly hard questions, and it’s not absolutely clear to me now that, as a country, or the rest of the world, knows what the answer to those things is.
So I think it’s – you know, the idea that all of this could have been sort of forethought, I don’t think is the case. What I think is certainly the case is that if the – you know, if the expert community and governments had anticipated that there could be a pandemic that was not an influenza but was another form of respiratory disease, and had characteristics that weren’t like influenzas, like asymptomatic patients and so on, then clearly we could have done certain things, which hopefully I’m sure this Inquiry will get around to recommending, to prepare for those things in advance, like stockpiling more PPE.
But I’ve absolutely no doubt that as Chancellor – and indeed any of the Chancellors before me or subsequent to me, if they’d been asked to provide a budget for stockpiling PPE, £10 million, £20 million, £30 million, whatever it would have been, as Oliver Letwin was pointing out, these are very small sums in the overall scheme of the government budget, and I’m pretty certain, like, we said yesterday, everything we were asked to fund with an influenza pandemic, we would have said yes to those things too.
Counsel Inquiry: Should those questions have been asked?
Mr George Osborne: Well, I’m – you know, I’m – with hindsight, yes, but – I mean, the one – I would say the one thing a Treasury can do – and I think this is a very powerful statement from the chair of the OBR, in the witness evidence that I was shown, is – you know, he says, Richard Hughes, in the absence of perfect foresight, fiscal space may be the most valuable risk tool.
Above all as a country, whatever hits you, you need to be able to respond, to throw, in this case, large amounts of public funds at the problem, without it leading to the thing I mentioned earlier, the fiscal crisis or the banking crisis that makes either the situation very much worse or, indeed, just removes the option of funding – I mean, poorer countries in the world were not able to afford lockdowns. Poorer countries in the world were not able to provide loans for businesses to stay in operation.
Counsel Inquiry: All right.
Mr George Osborne: So, you know, this is not some academic question. And indeed in our own country in the last 12 months, we saw in the autumn of last year, with the funding crisis for government debt, that this is not some abstract problem for the UK either. You know –
Counsel Inquiry: No, no –
Mr George Osborne: – if you can’t fund yourself, you cannot spend £340 billion on Covid support.
Counsel Inquiry: Well, you’re going back, with respect, to the issue of funding. The questions were based around the lack of –
Mr George Osborne: Sure.
Counsel Inquiry: – preparation and the lack of planning.
You’ve raised –
Mr George Osborne: No, no, just – sorry – I would say that part of preparation and planning –
Counsel Inquiry: Yes.
Mr George Osborne: – is, as an economy, to have flexibility to deal with whatever the world’s going to throw at you.
Counsel Inquiry: But that’s only part of it, isn’t it?
Mr George Osborne: Of course.
Counsel Inquiry: And even recognising the questions that need to be asked is not a plan. Once those questions have been identified, there then has to be planning for the practicalities of what might take place.
I just want to go to the statement of Richard Hughes, please, as you mention him. He is the chair of the Office of Budget Responsibility, as you say. His statement is at INQ000130270.
If we could go to page 5, please, and look at paragraph 6(d) of the witness statement.
Whilst we’re waiting for that to be put up on the screen, you’ll be aware of the evidence that Mr Cameron gave to the Inquiry yesterday, that in his view, and indeed since he was instrumental in bringing into being the national security committee and with the security adviser supporting it, he believed that only a whole cross-government response to a pandemic and to these huge catastrophic risks was suitable and was going to work.
Do you agree, Mr Osborne, that unless the Treasury is involved in proper joined-up thinking with the other lead government departments, then there is a piece of the jigsaw missing and it is not a cross-government response?
Mr George Osborne: Yes, I do agree with that, and, I mean, institutionally the Treasury is involved in every government decision, because decisions can’t come to the Cabinet, for example, until the Treasury has given its sign-off. So the Treasury, uniquely among the government departments, is already in the weeds of many, many decisions across government. But obviously the nature of that involvement and the nature of the co-operation is incredibly important and, you know, I listened with great interest to what my former colleague Oliver Letwin was saying.
I’d make one observation to the Inquiry, unfortunately not all ministers are like Oliver Letwin, with the kind of self-starting capacity to check everything and chase everything, and you can’t build an entire system unfortunately around a future supply of Oliver Letwins.
Counsel Inquiry: No. That’s a shame.
Mr George Osborne: It is.
Counsel Inquiry: Looking at the document that we’ve got on screen, then, this is, just to remind ourselves, from Richard Hughes, the Chair of the Office for Budget Responsibility, and he says this:
“While it may be difficult to predict when catastrophic risks will materialise, it is possible to anticipate their broad effects if they do. The risk of a global pandemic was at the top of government risk registers for a decade before coronavirus arrived but attracted relatively little (and in hindsight far too little) attention from the economic community.”
I’m going to pause there. Do you agree with that statement?
Mr George Osborne: Yes, I do, with –
Counsel Inquiry: We can take that down.
Mr George Osborne: – as he points out, with hindsight.
Counsel Inquiry: Yes.
Mr George Osborne: It’s not just the economic community, obviously, that doesn’t give sufficient attention to the – you know, the possibility of a coronavirus pandemic, it’s all sorts of other communities, including the health community.
Counsel Inquiry: Yes.
Mr George Osborne: So I think there is – you know, your line of questioning is completely correct to – because it – in my view, you’re trying to get to the point, which is – sorry, I shouldn’t be anticipating what you say, but you’re saying: why didn’t we plan for a lockdown? Why didn’t –
Counsel Inquiry: I am.
Mr George Osborne: Right. And the truth is we didn’t plan for a lockdown. No Treasury did. Before me, after me, no Treasury as far as I’m aware in the rest of the western world. The influenza pandemic was not going – did not pose the same economic planning challenges that coronavirus subsequently did, because in an influenza pandemic lots of people get sick, there’s, you know, tragically a mortality rate, and you have to deal with that, but people are off work for one week and then they come back to work. They’re not off work for months and months and months – or not – well, not off work but absent from the workplace for months and months and months. There are not whole sectors of the economy, like airlines that don’t have anyone flying on them, or restaurants or pubs that don’t have anyone visiting them, so –
Counsel Inquiry: No, and there is clearly a difference, isn’t there –
Mr George Osborne: So there’s a massive difference. So I think, you know, on the influenza pandemic planning, the Treasury – I mean, it was – actually the work was done before I arrived in office by the previous government, but they’d made an estimate that it would hit the economy at around 3% of GDP, they’d made an estimate about how many people would be sick over a six-month period, they had done some planning to make sure – and indeed during my period in office, there was planning to make sure that the banking system and the financial system could cope with the expected absenteeism of people having flu at home.
Counsel Inquiry: Yes.
Mr George Osborne: It’s completely different to what actually happened in 2020/2021, where for months and months on end no one was at work.
Counsel Inquiry: No, but if the –
Mr George Osborne: No one was at work in the workplace, I should – obviously people were working remotely.
Counsel Inquiry: If the analysis that you’ve just performed in the witness box had been undertaken prior to Covid hitting, then the Treasury would not have been flying blind in having to make the decisions and give the advice that they did. Why did that not happen?
Mr George Osborne: Well, because no one in – no one said to us – I’ve said this actually in my witness statement, in hind – no one said to us there could be a health pandemic that is not influenza which could – for which the likely response is you’re going to have to shut down the economy for months and months on end. So that was not elevated to us as a health risk. And obviously the Treasury, not trying to second-guess all the, you know, health experts – and this is not – I’m not disparaging the health experts, who I worked with very closely in government. It’s just, it doesn’t seem to me, you know, in all the documentation I’ve read, everything I’ve seen in the rest of much of the world, that anywhere else in the world people are saying, “You’ve got to prepare for this thing”. And obviously the entire world is caught out by what has happened. And indeed, I don’t actually – it’s an interesting question, which is only entirely sort of unknowable, would we all have gone into lockdown if China had not locked down in January or February? I think the Chinese lockdown is what gives the rest of the world the idea of a lockdown, and it’s the overwhelming of the hospital system in northern Italy that leads all western governments to reach basically the same conclusion, which is: we’ve got to do what the Chinese have done in order to try and preserve our capacity in our emergency wards.
I wonder, but it’s unknowable, that if we had done a kind of tabletop exercise in 2011/2012 –
Counsel Inquiry: Yes.
Mr George Osborne: – that we would have come to the conclusion you could lock down the entire population, whether that would have even been a feasible policy option, as it turned out to be.
Counsel Inquiry: Well, we’ll never know because it was never done, was it?
We asked the Treasury to provide us with any plans, pandemic plans, and evidence of what in fact was done in the time that you were Chancellor, and Catherine Little, who was the Treasurer’s second permanent secretary, has provided a witness statement which I know you will have read, Mr Osborne.
Mr George Osborne: Yeah.
Counsel Inquiry: In it she says that because the Treasury doesn’t hold direct responsibility for pandemic preparedness, that is at the door of the Department of Health, we should ask them for any pandemic preparations and to see whether they have any records of any pandemic preparations including the Treasury.
So we have been provided with plans such as they existed, and they are appended to Catherine Little’s statement, the ones that remain with the Treasury.
The only material which the Inquiry has been furnished with post-2010 is a project to fund a call centre and purchase antibiotics, both in 2012, and requests dealing with the funding of the pandemic flu clinical countermeasure Tamiflu.
Other than those, held within the Treasury there are no plans, no reaction to any of the Department of Health mitigation proposals, and nothing specifically relating to any pandemic threat. Do you accept that?
Mr George Osborne: Well, what I would accept is that there are – I would say the items you cite are examples of – to my knowledge, 100% of the requests made of the Treasury to fund things that would help deal with an influenza pandemic are funded. And you gave the examples there. There is also a whole set of planning that goes on during this period to deal with banking crises and endless, you know, exercises which I took part in and structures with us and the Bank of England and the Prudential Regulation Authority.
Counsel Inquiry: But we’re talking about pandemic planning.
Mr George Osborne: So pandemic, I think, you know, that would have been part of the thinking, which is: look, if there’s a crisis, you know, can the banking system cope? But there is not – you know, we’ve – well, I don’t want to repeat myself, there’s certainly, there is not planning for a coronavirus pandemic.
Counsel Inquiry: Should there have been a plan, a blueprint, some sort of playbook from the Treasury containing strategies and plans that could have been turned to and considered when something like the pandemic occurred?
Mr George Osborne: Well, with hindsight, yes. But as I’ve said, I question whether in 2011, 2012, 2013, if someone had come to us and said, “Right, there’s going to be a coronavirus pandemic and we’re going to ask the whole population to stay indoors for three months”, I wonder in 2011, 2012, 2013, whether anyone would have thought that was a plausible plan. I mean, it turned out to be one, but after other parts of the world had started doing it.
Counsel Inquiry: Right. If there had been a series of papers, a series of levels of consideration given to different scenarios dealing with different assumptions, so whether what was coming down the line might be systematic or asymptomatic, how quickly it was likely to reproduce as a disease, then in advance of Covid hitting you would know, as Chancellor, which economic levers would need to be pulled and how best the Treasury could support the mitigation actions of the Department of Health. And the problem with not having that thinking taking place some time before the pandemic hits is that, as I’ve said before, the result of that is the Treasury’s acting on the hoof?
Mr George Osborne: Well, I don’t think that’s entirely fair. So, first of all, you know, the Treasury is by its nature – you know, it’s not a big delivery department. It has around a thousand individuals who are, you know, exceptionally capable civil servants who can deploy their talents and abilities to different policy problems as the world throws them. You know, in the last two years they’ve certainly had to deal with the Ukraine and energy supplies in the way that, you know, the Treasury would not have had a big, standing capability to deal with before, but that’s one of the big strengths of the British Treasury.
There are definitely, you know, following your line of questioning, things that we could have done if this kind of threat of a coronavirus pandemic had been identified in advance, so we could have – I’m making sort of, you know – sort of I think straightforward observations, like we could have stockpiled more PPE, because we wouldn’t have – we might have anticipated that the whole world would want to get hold of this material and it was only being produced in a certain number of factories on the other side of the world, and the US government was doing everything to get hold of it, and so we could have stockpiled more of that. You know, for example. We could have maybe looked at things like having more respirators in hospitals than we would normally carry in the health service, but that was not identified as a particular need.
I think the – you know, the sort of broader question of – I don’t want to repeat myself, you know, would we have anticipated the lockdown? I just don’t know the answer to that. All I know is that when it came – when the actual debate came in March 2020, there was a lot of uncertainty in our own country about whether it was the right policy response and whether the population would accept it as a policy response.
So I wonder, ten years in advance, whether we, you know, would have resolved those questions.
The one thing I’m sure of is, you know, there’s no point having a contingency plan you can’t pay for, and absolutely central to all of this is the ability of your economy and your public finances to flex in a crisis.
Counsel Inquiry: The OBR, mentioned it a few moments ago, is an organisation that you implemented during your time in office, and part of the assistance that it gives to the Treasury is the preparation and presentation of fiscal risk reports. Can you explain to us what those are, please?
Mr George Osborne: So the OBR was created very shortly after I came to office, it gave an independent assessment of the public finances, and it’s not just – I think it’s important for people to understand, it’s not just another think tank, with a sort of – another set of finances – sorry, another set of forecasts. These are the government’s forecasts. There’s not some other set of government forecasts. In other words, the forecasts for GDP, for unemployment, for tax revenues and so on are independently produced but they are the official government forecasts, and that is the central role of the OBR.
To do that it is privy to secret information in government. So it is privy to the budget decisions – I gave eight budgets – it knew what was in the budget weeks before the general public did, or, indeed, weeks before members of the Cabinet would know what was in a budget. So it’s a very important institution at the heart of government. And we sought to add to its capability by asking it to undertake essentially assessments of potential risks to the UK and what impact they would have –
Counsel Inquiry: Fiscal –
Mr George Osborne: – on the public finances – well, they were issues like – I think, you know, they looked at everything from a no-deal Brexit to climate change to all sorts of, you know, things that might, you know, have an impact on the UK, and what the fiscal consequences of that would be. So the actual crisis was not a fiscal crisis, it was what was going to be the cost, basically, of these various things that they looked at.
Counsel Inquiry: There were business as usual risks, as they defined, weren’t there, and then there were also one-off events recognised and reflected in their risk analysis? In July of 2017, the OBR produced as part of its report this statement:
“On top of the business as usual risks, there could be one-off events that generate demand for additional health spending such as a large-scale outbreak of disease, for example an influenza pandemic, which the Cabinet Office considers to represent the most significant civil emergency risk. Long-term systemic cost pressures could also arise from sources such as an increase in antimicrobial resistance.”
So there was some recognition in the risks that were identified by the OBR of that which is contained in the National Risk Register?
Mr George Osborne: Yes, that’s right. I think – I mean, I’d left office by this point – I think the OBR actually tell us that they had considered doing the influenza scenario planning but in fact they switched their resources to looking at a no-deal Brexit scenario instead.
Counsel Inquiry: Right. Well, my question for you on this topic is this: does it surprise you, given what I’ve just read out, to know that, despite there being an acknowledgement of the influenza pandemic being the most significant emergency risk identified by the National Risk Register, that it – the pandemic – did not appear as a risk on the fiscal list?
Mr George Osborne: Well, I think – I mean, I don’t know if you are taking evidence from the OBR, oral evidence, but, I mean, they – they made their own decisions about what they thought were – part of their independence was to make their own decisions about what they thought they should look at. I imagine the government at the time would not have wanted them to look at a no-deal Brexit scenario, for example, so it’s incredibly important they’re independent and made those decisions.
So you’d have to ask them that question.
Counsel Inquiry: All right. Well, do you accept – I appreciate you’re not in office anymore, but perhaps you will accept from me – that by July 2021 the OBR had changed its approach to risks, particularly those identified in the National Risk Register, in two ways: firstly, there was a broader focus in its report of three major risks, rather than 97 individual risks, and one of those three major risks that is now covered in great detail is the risk of a pandemic; and, secondly, there appears to be much more joined-up thinking now between the risks identified by the OBR, the fiscal risks, and those identified in the National Risk Register? So they have adapted and learned from –
Mr George Osborne: Yes.
Counsel Inquiry: – what happened during the crisis?
Mr George Osborne: No, that’s absolutely right, and I think they specifically in that case are looking at what happens if there is a coronavirus strain that the vaccines aren’t work – effective against. So yes, absolutely, but of course – you know, look, I would say, you know, what it points to is, look, try and put in place the right machinery. You know, I wish this Inquiry, you know, every success in trying to anticipate what we could do in the future for different crises, but the truth is we’re not going to be able to anticipate every crisis that hits the United Kingdom over the rest of our lifetimes, and therefore having, you know, a strong OBR, you know, a Treasury with a capacity to come up with quick policy making, central government machinery that can respond quickly to – you know, that is also important. You know, that’s also important as well as trying to anticipate specific crises that you can specifically plan for.
Counsel Inquiry: Can we put up, please, the witness statement of Sir Mark Walport, which is at INQ000147707, and go to paragraph 86 at page 33.
Given what you’ve just said, Mr Osborne, about the fact that not every eventuality can be predicted or planned for, I’d like your view on what Sir Mark says here at paragraph 86.
“Every national emergency has knock on effects on citizens’ lives beyond the immediate impact of the emergency itself – and there is always the possibility that the ‘cure’ for the specific emergency in terms of the policies and actions directed at stemming the primary damage causes harmful ‘side effects’. In the case of a pandemic, lockdowns and quarantining, closing international borders and other restrictions to travel, closing of institutions such as schools and businesses all have serious adverse consequences. This raises important questions for policy makers about how to balance direct harms from the pandemic infection against the adverse consequences of interventions, singly or in combination.”
That statement highlights, does it not, the importance of a department trying its level best to anticipate not only what’s coming down the line but also what is going to be the effect of the mitigation actions that might have to be taken?
Mr George Osborne: I mean, yeah, I mean, this – you know, I know Mark very well and have worked with him, you know, this goes, to my mind, the heart of the, you know, very difficult question that the government of the day had to wrestle with, and any future government will have to wrestle with, which is, you know, what is the – what are the costs and benefits of dealing with the health problem, the spread of the disease, versus the impact of closing a school? I had school-age children at the time of the pandemic. You know, closing the court system, so that people don’t get their trial. You know, locking down prisoners in prisons. You know, all sorts of other things that, you know, had a really –
Counsel Inquiry: Yes.
Mr George Osborne: – damaging impact, and, you know, you go to the heart of very difficult sort of societal questions, of which frankly I don’t – you know, you can produce any amount of economic analysis of what’s the, you know, benefit of, you know, controlling coronavirus for a day and shutting a school for a day, but I think in the end they come down to essentially kind of human societal judgments of what are the things we value, and the truth is, you know, different human beings will value different things. Some people will say the education of the child is more important than, you know, protecting older patients in, you know, our care homes. But that – I mean, that – ultimately we have democratic governments that are accountable to the general public in order to try and make those very difficult decisions.
If this Inquiry can help any future government, I – I’m not sure, my Lady, if I’m allowed to say this, but I personally think of this, your Inquiry, which I strongly support – if you can come – if you can give some kind of guidance to answering that question, it is the single most useful thing this Inquiry can do for any future government, which will be faced with very difficult questions, like the government was faced in 2020.
Counsel Inquiry: Are you suggesting, Mr Osborne, in the answer that you’ve just given, that it was not worth the Treasury attempting to engage in any significant planning because the decisions have to be made when the pandemic hits?
Mr George Osborne: No, I’m – the Treasury did not engage in the planning because no one had anticipated that you would have to – or you would have the option of, or it would be something you should consider, locking down the economy in order to deal with an asymptomatic non-influenza respiratory pandemic.
Counsel Inquiry: Which is an answer you’ve already given.
May I suggest that had the Treasury been interested in engaging in pre-pandemic planning, then it would have taken a bigger part in the two exercises that took place during your tenure and just after you’d left.
Looking at the reports into Exercise Alice that took place in February of 2016, and indeed was an exercise dealing with the outbreak of a coronavirus, the Treasury wasn’t even present. In Exercise Cygnus, which was delivered shortly after you left office but, as we know from yesterday, planning for which commenced in 2014, although the Treasury is recorded as being present at that exercise, there is no evidence whatsoever of any participation or of any evidence of any lessons to be learned.
Is that the sort of action that the Treasury could have taken in order to engage itself with these important exercises looking at what the result and the reaction of the government would be in the outbreak of these sorts of diseases?
Mr George Osborne: Well, I – you know, this is territory that the Inquiry has covered and we’ve covered a bit in the evidence, I think the Treasury was very engaged in drawing up an influenza pandemic plan. I think those exercises were kind of operational exercises in how that plan might actually be put into practice in hospitals and other, you know, facilities, in which there wouldn’t be a sort of particular role at that moment for a Treasury policy maker. The Treasury being, as I say, a department of policymakers rather than a delivery department, so it wouldn’t have been directly affected by what the delivery services of government had to do in an influenza pandemic. You know, and there was a general – the Treasury had signed off, indeed I had signed off on the 2011 influenza plan in which the Treasury had – as you can see from the material, in 2009, had assessed the economic costs, had identified a couple of specific issues, but essentially was – you know, said: okay, it’s a 3% hit to GDP but we’re not going to have widespread sectoral impacts which we need to think of or we’re not going to have to design some system to pay people to work from home.
Counsel Inquiry: All right. Do you agree, Mr Osborne, that by the time Covid-19 hit, the consequences of austerity were a depleted health and social care capacity and rising inequality in the United Kingdom?
Mr George Osborne: Most certainly not. I completely reject that. I would make two points. The first of all, it’s not surprising that the biggest economic crash that Britain experienced since the 1930s has an impact on Britain and on poverty and on unemployment and on people’s life chances. That’s unfortunately what happens when your country experiences such a massive economic shock as we experienced in 2008/9.
The – what flows from that is a whole set of things, and one of them is seriously impaired public finances, which you then have to repair. That is what we set about doing. I would say if we had not done that, Britain would have been more exposed, not just to future things like the coronavirus pandemic but indeed to the fiscal crises which very rapidly followed in countries across Europe such as Spain, Italy, Greece, Ireland, Slovenia, all across the continent. Indeed, at one point there was a question mark over whether France itself would experience a fiscal crisis. So all across the continent other countries were experiencing problems of being unable to fund themselves on the international debt markets. As I point out, in the autumn of last year Britain went through this briefly, for a couple of weeks, so this is not some kind of academic problem that doesn’t materialise, it’s a very real problem. And if we had not had a clear plan to put the public finances on a sustainable path, then Britain might have had – experienced a fiscal crisis, we would not have had the fiscal space to deal with the coronavirus pandemic when it hit seven years later, and indeed, as Mr Cameron pointed out yesterday, the example in many of those countries that did have those crises was there were real cuts in health services and other public services that went far beyond what the UK experienced or, in the case of the NHS, actually, budgets went up in real terms.
Counsel Inquiry: Do you agree that during your time in office the state of the social care system became worse?
Mr George Osborne: I’m not sure I would accept that. I would certainly accept that there are rising pressures that – including during my period in office, on the social care system. They are –
Counsel Inquiry: All right, well, can we ask you –
Mr George Osborne: Yeah, but they are driven by the fact that Britain has a rapidly ageing population.
Counsel Inquiry: Yes.
Mr George Osborne: Well, not rapidly, sorry –
Counsel Inquiry: Well, we will come –
Mr George Osborne: – an ageing population, at a relatively rapid rate, and that, you know, the cost of medical treatments are going up.
Counsel Inquiry: All right.
Mr George Osborne: Which is actually generally a good thing, because these are new treatments that can help people, but, you know, the UK social care and health system is experiencing exactly the same kinds of pressures as the pressures being experienced in most western democracies at this moment.
Counsel Inquiry: Right, well, let’s look at the detail, please.
Can we have up on screen INQ000189677.
This is a report by the Institute for Government, the government think tank, whose strapline is “inspiring the best in government” and “working to make government more effective”. This is a report that was prepared by the authors sitting in the bottom left-hand corner. It’s headed “How fit were public services for coronavirus?” We don’t need to go to it but just to set this in context, this is a report based on extensive desk research, analysis of government data and interviews of civil servants, frontline staff, representative bodies and other experts.
Can we go, please, to page 8 of this report and highlight the final two paragraphs and zoom in on those.
“Even before the crisis began [that’s the Covid crisis], public services had seen reduced access, longer waiting times, missed targets, rising public dissatisfaction and other signs of declining standards. Most notably, GPs and hospitals were missing almost all routine targets while prisons had experienced a dramatic increase in levels of self-harm, violence and poor prisoner behaviour. This context made it far harder for services to maintain acceptable standards while also managing a disruption as wide-ranging and long-lasting as that wrought by the coronavirus.
“The response has also been hampered by historic underinvestment in buildings and equipment. Government has consistently underspent its capital budgets, often using money that had been earmarked for long-term investment to cover holes in day-to-day budgets. As a result, public services have had to operate out of crumbling prisons, courthouses and hospitals that are difficult to clean or repurpose in line with coronavirus health measures.”
Can we move down to finish this on the following page, please:
“The sale of courthouses and police stations, and the failure to build new prison places, have similarly made it harder to maintain social distancing. And inadequate ICT has reduced the ability of police officers and local authority staff to work from home, made it far harder for prisoners confined in cells for more than 23 hours a day to access training or speak to their families, and meant that schools, hospitals, GPs and criminal courts have all struggled at times to provide services remotely – even when greatly reduced.”
Now, there is reference, repeated reference there to prisons and court centres, and indeed those will be covered in detail in later modules, so I just want to focus for the moment on what the Institute for Government have found in terms of the state of the health public services and the ability for them to react to coronavirus.
Is that picture something that you recognise?
Mr George Osborne: The short answer is no, because by the time I left office there were more doctors working in the NHS, more nurses working in the NHS, as Mr Cameron pointed out yesterday diagnostic testing had increased in the NHS, and public satisfaction had remained broadly constant during a difficult period for the economy and for the constraint of spending in public finances.
I would make a general observation. I mean, if you put all this together, the health service, the criminal justice system, the education system, the social care system – I think basically you’ve just left out defence, but if we had some generals here they’d no doubt want some more tanks – that is public spending. So you can’t just say, “Well, we’d like public spending to be higher”, without then explaining where you’re going to get the money from. I’ve pointed out the risks of borrowing the money. So you can certainly go to the general population and say, “Please will you pay more taxes”. I would note the present Prime Minister just last year proposed a national insurance rise to pay for the NHS and it was rejected by his own party and by the Opposition.
So, in other words, this is the job of the Chancellor of the Exchequer. You are going straight to the heart of it, which is you’ve got to balance all of these completing demands –
Counsel Inquiry: Quite so.
Mr George Osborne: – within public services, for different services wanting more money, plus the, you know, constraints on a country of borrowing the money in international markets, plus the constraints on the general population just willy-nilly paying more tax. And, you know, the taxpayer is also a core participant, in that sense, to this Inquiry, which is it’s got to pay for all of this.
Counsel Inquiry: All right, I understand the point that you’re making, Mr Osborne, and in your witness statement you claimed that the Department of Health funding for the NHS was ringfenced or was increased in fact year on year during the course of your time as Chancellor whilst other departments were reduced by up to 19%.
Mr George Osborne: Yes.
Counsel Inquiry: Right. Well, I’d like to explore that with you, please, in terms of –
Mr George Osborne: I would make one point, that was –
Counsel Inquiry: Please just let me ask my question.
Mr George Osborne: Of course.
Counsel Inquiry: I’d like to explore that in terms of social care and in terms of public health, because from the time of the implementation of the Health and Social Care Act of 2012, it’s right, isn’t it, that certainly certain of the public health responsibilities moved from the National Health Service over to local authorities, and therefore came outside of the budgets, that part of the budget that the Department of Health would give to the National Health Service. Do you agree with that?
Mr George Osborne: Yes.
Counsel Inquiry: Yes. So in terms of whether or not the funding for public health had been ringfenced in the way in which you describe in your witness statement, what we have to in fact look at is how the local public health was being funded through the local authorities.
In order to do this, and to demonstrate my point, can we put up, please, INQ000205178, which is the witness statement of Dr Claas Kirchelle.
Can we go to page 70 and paragraph 108. I would like your comment on this, please, once we’ve read through it, Mr Osborne:
“Functioning of the new local and national … public health structures was compromised by austerity politics. At the local level, the abolition of PCTs meant that overall public health performance was strongly dependent on local authority capabilities to commission and deliver effective services. Ministers had promised to ringfence the public health budget for local authorities. However, an in-year cut of £200 million in 2015 was followed by further reductions over the next 5 years. According to the Local Government Association, this amounted to a real term reduction of the public health grant from over £3.5 billion in 2015-16 to just over £3 billion in 2020-21 ([a loss of] 14 percent). Other estimates by the Institute for Public Policy Research spoke of an even more dramatic reduction from £850 million in net expenditure between 2014/2015 and 2019/2020 with the poorest areas in England experiencing disproportionately high cuts of almost 15 percent. Resulting pressures on local public health were exacerbated by an overall 49 percent real term cut in central government funding for local authorities between 2010/11 and 2016/17 and a resulting practice of ‘top slicing’ whereby authorities re-allocated ringfenced public health budgets to other services broadly impacting health and wellbeing such as trading standards or parks and green spaces. In 2010, Healthy Lives, Healthy People had promised to give ‘local government the freedom, responsibility and funding to innovate and develop their own ways of improving public health in their area’; freedom and responsibility had been granted, but funding was often lacking.”
What do you say about that, Mr Osborne?
Mr George Osborne: Well, there are several things I’d say about this. I mean, first of all, I think it’s universally accepted that the decision, which was not mine, it was taken elsewhere in the government, but the decision to transfer public health from the NHS to local authorities has turned out to be, broadly speaking, a good thing. There is no one, as far as I’m aware, arguing that it should be returned to the NHS –
Counsel Inquiry: What about the funding position?
Mr George Osborne: Well, we’ll come on to the funding position, but, you know, the central – because this is actually – you know, also helps address the funding point. So, first of all, that was an important decision, and it meant that public health decisions were tied in with other decisions that local government takes around housing and the like, licensing, recreation facilities, and so on.
Second, as it happens, during the period I was Chancellor the public health budget went up. The numbers you refer to are from 2015 to 2020 –
Counsel Inquiry: Yes.
Mr George Osborne: – and I’d left office shortly after 2015. But I would make a broader point which is, you know, here there’s a kind of challenge, which is a classic policymaking challenge, of to what extent do you try and ringfence things and say local authorities must spend this money on this particular thing. Indeed, public inquiries of all kinds have generally led to conclusions that budgets should be ringfenced for the thing the public inquiry was looking at.
Counsel Inquiry: Yes.
Mr George Osborne: Then, over time, a local authority has less and less discretion about how to spend money, because this bit’s ringfenced and that bit’s ringfenced and so on, and you either – you (a) erode local decision-making and local democracy, and you also end up with a whole load of siloed individual ringfences. So, as a government, the Cameron government, of which I was an active part, was actually promoting localism, and indeed we went further in devolving power, such as indeed the NHS and public health and social services in Manchester to the Greater Manchester authority we created –
Counsel Inquiry: But to work, the system has to be properly funded, doesn’t it?
Mr George Osborne: Well, then you come to the point which is – and by the way, local government has its own resources, it can raise – or cut – local taxes. Part of the taxation system is in the hands of local government. But I would make a –again, then I make the point, first of all, money is not the solution to all public health problems. I introduced a sugar tax which has had, I believe, a big impact on reducing sugary drinks and helping with obesity levels in the UK, smoking during the Cameron government reduced as a – quite dramatically the amount of – the proportion of the population smoking.
So you can do all sorts of other things to help with public health. If you’re coming back to, like, the public health budget, well, then, you know –
Counsel Inquiry: That’s what the question was.
Mr George Osborne: Okay, well, then, you know, that will straddle several different parts of government. Again, comes into the general question you’ve got of which budgets you’re going to cut or what money you’re going to borrow or what taxes you’re going to put up. And we’d made a decision to ringfence the NHS and, indeed, to ringfence some of these public health grants.
By the way, I might just observe that Public Health England, which we created, was absolutely instrumental in coming up, I think within three days, for a test with coronavirus. So we did put in place structures that in 2020 did deliver in the case of developing a very rapid test which was required for this brand new disease.
Counsel Inquiry: Well, I’m going to suggest, Mr Osborne, that Public Health England failed in its mission to increase the country’s public health. You will know that your Secretary of State for Health and then Health and Social Care, Jeremy Hunt, has provided a witness statement to the Inquiry in which he says that he acknowledges that during his time as Secretary of State the NHS required more funding. There was, as you have already acknowledged, a rapidly rising demand for services, an ageing population, that he considered that there were staffing capacities within the system that were causing difficulties, and that the NHS workforce requirements, which have historically been considered in an ad hoc way, need to be sorted out in order for the National Health Service to properly support the capacity that’s required.
That’s in normal circumstances, but when one takes that into account when the pandemic hit, do you accept his criticisms that the system was not working as properly as it should be, and that part of the reason for that must have been the funding?
Mr George Osborne: Well, I’ve read his evidence, which I thought was very good and had some interesting constructive ideas for the future around testing capabilities and so on and lessons to be learned from South Korea and Taiwan and other countries. I think, from memory, he actually identifies Brexit and immigration as one of the problems: that the health service had relied on a stream of people coming into the country to fill posts in nursing and, you know, other parts of the medical profession, and that, you know, proved problematic during the period he was health secretary.
Counsel Inquiry: Do you –
Mr George Osborne: I had by then left the government.
Counsel Inquiry: All right. Do you agree that, however well funded you say the NHS was during your time as Chancellor, it simply wasn’t enough?
Mr George Osborne: No, I don’t accept that. I mean, what I accept is you could spend more money on the NHS, just like you could spend more money on the court system, more money on the school system, more money on the army, but you have to make a calculation of, you know, balancing the resources each of those services get, and the central calculation, which every household has to make, is: what can we actually afford? Because – what’s the revenue that’s coming in?
So I think, you know, we prioritised health, I would also – you know, it’s not insignificant, this, that at the 2010 general election this is exactly what we said we were going to do, cut other areas but increase health. We went into the general election telling the public we were going to cut those other services. And in 2015 we also said the same thing, and on both cases, you know, the public put their confidence in us. So, in terms of also democratic accountability, I don’t think the public were misled about what the government would do and, the evidence of the 2015 election, were prepared to continue to place their trust in us.
Counsel Inquiry: Can we display, please, INQ0000119293.
This is the OBR’s first fiscal risk report from July of 2017. I’ve already made reference to it. Can we go to paragraph 162 and look at – sorry, page 162, and look at paragraphs 6.66 and 6.67.
This was the risk report provided a year after you had left office and, if we can look, please, at in fact 6.66 we will start with. Thank you very much. It’s headed “Pressures on the adult social care budget and how government has responded”:
“As with health, there are visible signs of pressure on the adult care system. In the past two years, governments have announced top up funding and delayed reforms that would increase costs further. This Government has stated that ‘further reform is required to ensure that the system is prepared to meet the challenges of the increasing numbers of over 75s’ and that it will ‘work with partners at all levels, including those who use services and who work to provide care, to bring forward proposals for public consultation’.
“6.67 Signs and sources of pressure on the adult social care budget include:
“Pressure on local authority budgets has fed through to adult social care: For those authorities in England with responsibility for adult social care, it is their largest item of discretionary spending. Local authority budgets have been squeezed by cuts to grant funding and limits on council tax rises. As a result, English local authorities’ total net current expenditure fell by 13.3 per cent in real terms between 2010-11 and 2015-16. Within this, total spending on adult social care fell by less, but local authority spending on it still fell by 9.1 per cent over the same period, including transfers from the NHS. Spending on adult (and children’s) social care exceeded local authorities’ budgets in 2014-15 and, by a bigger margin, in 2015-16.”
This is the organisation that you created telling us here that, so far as local authority budgets are concerned, and adult social care is concerned, the picture was not great. Do you agree?
Mr George Osborne: Well, I’m not saying – I’m sure it does say that, to be honest. I mean, I think it points out that there are pressures on the adult social care system. That’s a statement of the obvious. In all advanced democracies at the moment. Then it goes to point out that there were reductions in the local government budget.
Yes, there were. We announced – they’re not like secret reductions in the local government budget. They were publicly announced as part of a programme of trying to reduce government expenditure. But if you exclude local government, education, defence, criminal justice, and the NHS, you haven’t got anything left. That is what public expenditure is. Plus welfare spending, which, you know, people are also not keen on having reduced, welfare entitlement.
So yes, there were reductions in local government budgets. That’s because the country had had an enormous financial crash, was poorer than it had been before, was going to be permanently poorer, there was an impact on – you know, its permanent potential had been impacted by the crash, and we had to try to make sure that public expenditure fitted the size of the economy, whilst getting the economy growing and putting people into work and reducing poverty, which all happened under our watch as well. So we got the economy going so that you could afford to spend, ultimately, more on those things.
I would just say, on social care it’s really straightforward. There are two people who can pay for social care: the taxpayer can pay, and then you’ve got to be prepared for higher levels of general taxation. Rishi Sunak’s NHS and social care levy was rejected by the Conservative Party and the Labour Party in the last year. Or you can ask people to sell their homes, the assets they have, to pay for that social care. There is no one else who is going to pay for it. The taxpayer or the individual. And the political system for 20 years under governments of all colours have rejected those two options, which is why you continually read that there is an ongoing, you know, debate about what the – the social care problem is unsolved. That’s because the solutions are currently unpalatable to the political system, which I would suggest is a reflection of being unpalatable to the broader taxpayer and society.
Counsel Inquiry: But what about the effect of falling expenditure? You know that last week the Inquiry has heard from Professors Marmot and Bambra, who told the Inquiry that changes in the social determinants of health because of austerity since 2010 were likely to be the causes of the adverse changes in health and health inequalities in the UK.
Also I know that you’ve had sight of the statement of Professor Kevin Fenton, the president of the United Kingdom Faculty of Public Health, who has told the Inquiry that a key lesson learned through the pandemic has during been the importance of robust engagement with potentially disproportionately affected populations both in the planning and preparedness.
What I want you to consider, Mr Osborne, is, firstly, that government policy had an effect on health and social care which meant that those in the worst situations of society were disproportionately affected when Covid hit; and secondly, that that was identifiable, it was predictable, and it should have been part of the government planning?
Mr George Osborne: I just completely reject that. And, you know, in the case of the Marmot and Bambra report, you know – and obviously they – there’s a lot of very interesting work on health inequalities which we did a huge amount to seek to address, they had this statement, at paragraph 151:
“National economic wealth (ie … [GDP]) has long been considered as the major global determinant of population health …”
Of course. In other words, that’s what happened. Britain had a huge economic crash, the greatest since the 1920s and ’30s Great Depression, and of course that had an impact on poverty in the country. It would have been worse, in my view, and in the view of many other people, including the Governor of the Bank of England at the time, Mervyn King, had we not then also tried to address the risk to the public finances, because that would have led to a fiscal crisis, like you saw across much of Europe, that would have meant even less funding for these public services. We tried to protect to health service during that austerity programme. And I – you know, Marmot and Bambra themselves say that they can’t directly establish causality between austerity and the mortality rates they look at, and the only example I can find in their report of a country that they cite that had a stimulus programme is Iceland – which, by the way, has a population about the size of the borough that this courthouse is in – right, and then even in the same paragraph go on to point out that Iceland had some severe health effects from the crisis. And they leave out the United States, which was the primary example of a country in the west that tried a stimulus programme as opposed to an austerity programme, because they say, oh, yes, well, actually, mortality fell there. I’ve even done my own research and found out that mortality fell in Germany for the poorest part of the population during the period I was Chancellor, and I don’t think anyone thinks that Germany pursued a particularly tough austerity programme during that period. So I just reject –
Counsel Inquiry: All right, I understand.
Mr George Osborne: I just reject – I would centre on their central conclusion, which is:
“National economic wealth … has long been considered as the major global determinant of population health …”
Counsel Inquiry: So your evidence, Mr Osborne, is that, although you acknowledge that, in certain aspects, the effects of Covid were felt more keenly by those most disadvantaged in society, that has no connection whatsoever to the effects of austerity that were brought in in 2010?
Mr George Osborne: That’s absolutely my contention.
Counsel Inquiry: Right.
Mr George Osborne: It is true that pandemics will affect poorer people –
Counsel Inquiry: Yes.
Mr George Osborne: – more severely, and that is one of the great tragedies, which – I was trying to try to alleviate poverty and direct services towards them. I think everything we did, to try and ringfence the NHS budget, to provide stable finances so that they were not further affected by fiscal crisis, things like universal credit which were introduced, all of these things were done to try and protect the poorest part of the population. Indeed, I was the first Chancellor ever to publish distributional analysis of the effect of my policies, budget after budget, precisely to show that we were trying to direct resources in constrained times to the poorest and most vulnerable –
Counsel Inquiry: Yes, all right –
Mr George Osborne: – who are, indeed, generally more exposed to things like pandemics, tragically.
Lady Hallett: Ms Blackwell, how are we doing? Because I think, if I may say so, Mr Osborne and I share a tendency which is to speak very fast, and the stenographer, I’m afraid, has had a tough morning.
Ms Blackwell: I only have two more questions.
Lady Hallett: You think you can finish by 1.00?
Ms Blackwell: Yes, I will finish by 1.00.
Mr George Osborne: Can I apologise through you, my Lady, for talking too quickly for the stenographer.
Lady Hallett: Don’t worry, I do it too.
Ms Blackwell: Two final questions, please, the first going back to health economics, and I’d like to put to you the statement made by Professor Sir Chris Whitty in his witness statement – we don’t need to put it up, but he has told the Inquiry this:
“There may be a need to look at operational issues and the cost-effectiveness of particular interventions within CMO or SAGE advice, so health economics … may be relevant to the medical and scientific advice. This is because giving advice which is operationally unfeasible or substantially disproportionate in cost or difficulty is not especially helpful.”
That is mirrored and expanded by the witness statement of Professor John Edmunds from the department of infectious disease epidemiology at the London School of Hygiene and Tropical Medicine. He says this:
“There needs to be far greater attention paid to the economic impact of pandemics and the interventions aimed at controlling them.”
Thank you very much, it’s on the screen.
“The economics of outbreaks is a specialised field. Interventions can have major knock-on effects, so that individuals who are not directly reached or targeted by the intervention can still benefit, as they have a reduced risk of infection from others. These knock-on effects need to be incorporated into the analysis to avoid underestimating the benefits of public health actions.”
Pausing there, do you agree with these two scientific experts that there needs to be joined-up thinking between the science and the economy?
Mr George Osborne: Yes, absolutely. I mean – but I would observe that, you know, if you’re trying to think through how a future government might deal with a pandemic –
Counsel Inquiry: Yes.
Mr George Osborne: – it’s not just the health impacts. You know, you have to – what I think the government wrestled with at the time, I wasn’t in it but I can see as an external observer and with my experience, was also the educational impacts, the criminal justice impacts and the like of the lockdown and trying to balance those, if you can apply more – and, indeed, you know, the impact on businesses and, you know, people’s employment. If – you know, trying to – you can certainly apply more analysis to all of that. I personally think you’re going to end up with a very different, difficult essentially sort of human judgment of are you valuing education over health, in some cases, you know, and that is a very, very – or – and other examples like that. And that’s an incredibly hard trade-off which I guess we have, in our country, elected governments to try and make on our behalf.
Counsel Inquiry: All right, thank you.
Finally, let’s just look at the consequences of failing to plan, and can we display, please, INQ000087205 and look at paragraph 16 at page 4 of the Pandemic Diseases Capabilities Board review of April 2022.
Paragraph 16, please:
“… in line with the National Security Risk Assessment … methodology, revised pandemic reasonable worst-case scenario models … represent unmitigated scenarios and so do not include a full risk assessment for the use of NPIs [non-pharmaceutical interventions]. Given that the imposition of lockdown in part accounted for a 25% drop in GDP between February and April 2020, the largest drop on record, and numerous secondary and tertiary impacts on all sectors, this represents a significant gap in the UK’s assessment of pandemic risk. Noting that, even without government intervention, we would anticipate spontaneous behaviour change and subsequent economic damage. What is more, the secondary and tertiary impact of these measures will have been unevenly spread throughout society, highlighting – and in areas exacerbating – pre-existing inequalities.”
Can we go to page 5 and paragraph 18, and can we highlight 18, 19 and 20, please:
“The unprecedented use of NPIs and significant changes in public behaviour seen during the Covid-19 pandemic required the provision of far greater economic support than pre-Covid planning assumptions suggested.
“The planning assumptions in the 2011 UK Influenza Pandemic Preparedness Strategy focused on the economic impacts of sickness absences. As a result, the strategy did not include many of the significant economic impacts we have seen during this pandemic, such as the dramatic drops in economic activity, significant shifts and reductions in consumer spending and disruption to global supply chains. The OBR’s fiscal risks report from July 2021 [which we’ve looked at] suggests the United Kingdom’s real GDP declined by an unprecedented 9.8% in 2020 and, as of September 2021, the NAO estimated the lifetime cost of government spending on Covid-19 will reach £370 billion.
“Clearly then, in line with recommendation 2.1, our economic risk assessment for pandemics must be updated to include a broader range of impacts, including the significant potential impacts of NPIs and behavioural changes on different sectors of the economy.”
Do you agree with that conclusion, Mr Osborne?
Mr George Osborne: Well, I do, I absolutely agree with the conclusion. Knowing the brilliant civil servants of the Treasury, I suspect they’ve already done it for you. There already will be a load of internal assessments of the future effect of, for example, coronavirus variations that don’t have vaccines at the moment that are effective, were they to emerge.
Counsel Inquiry: Yes.
Mr George Osborne: But I would make, you know, I would – I guess my sort of – where we started with this was: did the Treasury or indeed any other government, or part of government, or indeed any other western government, anticipate that it might require a lockdown that would impact the economy, as it says here, by a drop of 25% GDP? No, they didn’t. But we – through the programme we pursued, as a government, we created the fiscal space so we could end up spending £370 billion to help people deal with all the adverse effects that the lockdown introduced in terms of their education, the way the criminal justice system worked and, above all, their employment, and we kept people, as a country, economically in a much better shape than they would have been if we had not been able to spend that money. And that’s because we created the fiscal space, it meant we avoided the banking crisis and we did that because of the reforms that happened during the period that I was in government and as a result of the determined effort to fix the roof.
Counsel Inquiry: I’m sure that in subsequent modules the Inquiry will be told whether or not these plans are indeed now in practice, but if that’s right, Mr Osborne, it’s a shame that this wasn’t done before, isn’t it?
Mr George Osborne: Well, I would just point out no one I’m aware of anywhere in the western world, maybe anywhere in the world, said, “You know what governments should prepare for? They should prepare for a coronavirus pandemic that will require us to lock down the entire economy for months on end”. Obviously if someone had said then that there would be a legitimate question, which is: why aren’t you preparing for it? But unfortunately no one did. And as I say in my own evidence, I of course dearly wish that they had.
Ms Blackwell: My Lady, that concludes my questioning of this witness. There are no Rule 9 requests by any other core participant. It’s now 1.00. Would you like to rise, please?
Lady Hallett: I will indeed. I shall come back at 2.00. Thank you very much indeed, Mr Osborne, and I’m glad we could complete you before lunch.
Thank you.
(The witness withdrew)
(1.02 pm)
(The short adjournment)
(2.00 pm)
Lady Hallett: Yes, Mr Keith.
Mr Keith: My Lady, this afternoon we’re hearing from Professor Dame Sally Davies, notably the former Chief Medical Officer for England between 2010 and 2019.