Home Economics Possibly The CEBR Should Already Know This?

Possibly The CEBR Should Already Know This?

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The Centre for Economic and Business Research tells us that reopening the schools will produce a £70 billion boost for the economy. This is either something entirely, wholly and gaspingly obvious or it is wrong. Your choice here.

Reopening schools to deliver £70bn boost
The reopening of schools will deliver a ‘substantial’ bounce worth around 3.3pc of GDP over the next year, according to the CEBR

That’s interesting, so, how is that going to happen?

“There will be people who are able to get to work who previously couldn’t get to work, and secondly there will be rising productivity of people at home who are no longer having to juggle childcare with work,” Doug McWilliams, CEBR chief executive, said.

The consultant estimates a 2.2 percentage point lift to growth from a full reopening of an education sector which accounts for 6pc of the economy.

We rather hope that few are paying for the output of this consultancy for this estimate is either completely wrong or entirely superfluous. For the Office for National Statistics told us something about GDP and the education sector:

The national accounts provide a conceptual and practical framework for recording and reconciling different economic flows. Market transactions of goods and services are well represented by this framework. However, non-market output has long been recognised as a measurement challenge and is one that is likely to be impacted considerably by the coronavirus (COVID-19) pandemic. Non-market output comprises the production of goods and services by the government or non-profit institutions serving households (NPISH), either supplied for free or at prices that are not economically significant. In the UK, this includes most healthcare and education provision.

Briefly, because there is no market price we count education, in GDP, at the cost of providing it. This valuation method obviously goes kablooie when no bugger is getting educated bu all teachers are still getting paid. So, the adjustment to GDP:

Meanwhile, output of human health and social work activities fell 27.2%, reflecting cancelled operations and lower accident and emergency attendance, while output of education fell by 34.4% as a result of school closures throughout the lockdown period.

Education is about 6% of GDP, falls by 35%, so, by about 2% of GDP. We reopen schools and we get a 2% boost to GDP therefore. So, CEBR, you’re either telling us something blindingly obvious – a 2% or so boost to GDP – or you’re wrong, it should be a 4.2% boost.

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