It broke maths' Covid changed the state's role - but it could not last

At 9.26am on Wednesday 18 March 2020, Tim Leunig was cycling to Wimbledon station when he got a text from his boss, Rishi Sunak, urging him to work "at pace", on a scheme to protect UK workers from the looming Covid lockdown.

- Heather Stewart

For the rest of his commute, the economist mulled over what he knew about the furlough schemes that existed in Germany and the US, to protect workers during temporary shutdowns.

When Leunig arrived at the Treasury, where he worked as an adviser, senior officials agreed that this was the right approach.

By noon, they were pitching the Coronavirus Job Retention Scheme to the chancellor (Leunig admits he is envious of the name the Australians came up with for their equivalent: JobKeeper).

"That was the most useful two hours, 34 minutes of my life," he recalls.

Furlough, as it became known, was signed off by Sunak within the hour, and announced two days later, after consultation with unions and business groups.

The policy marked a radical - if temporary - shift in the role of the state, as the Treasury stepped in to underwrite the salaries of millions of citizens whose jobs could otherwise have disappeared.

The scheme went on to cost £70bn.

Agreed by a chancellor who would have much preferred to be slashing taxes and shrinking the state, furlough is perhaps the clearest example of the way the rules were ripped up in that period - often necessarily, but with long-lasting consequences.

As one Treasury adviser said later, as ministers tried to wind up various costly support schemes: "Covid broke maths."

And that is the most direct way in which the travails of the pandemic period are still felt today - through their impact on the public finances.

Public sector borrowing hit almost 17% of GDP in 2020-21, the highest since the second world war, as the government scrambled to gear up the NHS to cope, as well as cushioning the blow for struggling firms and households, by increasing universal credit by £20 a week, for example.

As in many other economies, the result was that public sector debt soared.