What’s more, the Government didn’t just want to give restaurants a temporary boost in August. They wanted to encourage more economic normality. Data from OpenTable and others suggests they were successful, on this basis.
Diner numbers averaged 28 percent below last year for the week before EOTHO began. By the end of EOTHO, people were eating out excessively relative to previous years — averaging 44 percent per day above last year’s “normal” levels in EOTHO’s final week. Now numbers are back to around last year’s — i.e. dining is back at the good old days pre‐Covid days of last year, despite the pandemic. This is in stark contrast to the U.S., where dining levels are still down over 40 percent.
It’s difficult not to conclude that, because of the message the scheme sent out or the habits it entrenched, EOTHO proved far more than a gimmick to give restaurants a temporary fillip. Instead it made people think restaurants were a‐ok for people to party like it was 2019. That becomes more problematic now schools are open and more people are back to work too, bringing clear evidence networks of transmission have densified.
Unfortunately, people respond to this as if pointing it out means critics wanted restaurants permanently shuttered until a vaccine was available. But there’s a wide range of options between enforced closure and actively subsidising restaurants, including, well, not subsidising them, or subsidising outdoor dining and takeaways, tax breaks for investments for patios or delivery, and more.
What’s baffling economically is the thought process behind actively subsidising indoor gatherings. Social interactions right now impose negative externalities — risks on others beyond the diners themselves, for which the affected cannot receive compensation. Basic economics, if anything, suggests imposing taxes rather than handouts on these activities, to account for this social cost. Social distancing protocols and regulations seek to proxy for these taxes, of course. But it made no sense to undo this by overcoming people’s voluntarily choices and risk preferences in this world through taxpayer incentives.
Covid‐19 debates, sadly, are more defined by culture wars and crude commercialism than economics these days. Many who usually oppose state subsidies backed this scheme loudly, not least because its use generated “buzz” about getting people out and about.
But that’s the problem. During the summer, many deluded themselves that the virus’s threat was deterministically and consistently falling, and we were on a one‐way street to economic normalisation. Rather than adapting to live with the virus at the lowest overall cost, people thought that “restoration” should be the aim of government policy.
That was a grave error, of which EOTHO was Exhibit A. And with restaurants now facing restricted hours and a potential lockdown, even those short‐term commercial benefits look a pyrrhic victory for the businesses who lauded the Chancellor at the time.