Howard Flight: We should be optimistic about the UK’s 2021/22 economic recovery

1 Mar

Lord Flight is Chairman of Flight & Partners Recovery Fund, and is a former Shadow Chief Secretary to the Treasury.

It looks to me as if the UK economy is going to perform markedly better than currently, generally forecast – provided, that is, there are not further unwanted lockdowns.

The IMF forecast is also positive, forecasting an upturn from a 3.5 per cent contraction for Global GDP last year to a 5.5 per cent expansion this year. Again, this does of course hang on a successful Pan EU, vaccine rollout. With the 2020 downturn twice as deep as that which followed the Lehman collapse, so the 2021/22 recovery should be all the greater.

The strongest growth forecast remains the US at 5.1 per cent growth, reflecting particular massive stimulus support from government. Japan’s growth forecast increased marginally to 3.1 per cent with 8.1 per cent and 11.5 per cent, respectively, for China and India. The relatively smaller but faster growing Asian economies – Indonesia and Malaysia – will grow at 8.3 per cent – with the Asian economies now representing a third of the world economy.

In the case of the UK, however, the IMF forecast continues to understate. The IMF is the global lender of last resort and the single most influential institute of economic governments. Last year the IMF forecast the UK economy contracting by 10 per cent – the biggest fall of the G7 countries.

It is correct the UK was particularly susceptible to the Coronavirus pandemic, reflecting the international nature and population density of London. But the key factor responsible for the misleading figures is that the UK public sector includes in its GDP growth data, in a way relating not to spending, as with other nations, but to outcomes.

This means that when schools are closed and NHS operations are down, as during the lockdown, government consumption expenditure – a huge chunk of any advanced economy – drops off a cliff for GDP measurement purposes – even though State spending as a whole is growing fast.

As a result, the irony is that this is why the UK public sector registered a double-digit percentage contraction in our 2020 GDP numbers, while growing fast across the Eurozone.

For purposes of comparison, an expansion of 10 per cent should have been allowed for. The outlook for the real economy for the coming year should therefore be substantially positive. The IMF forecast of 4.5 per cent, and not adjusted for the public sector distortions is only marginally ahead of the Eurozone at 4.2 per cent. The actual, comparable rate allowing for these distortions looks to be of the order of 10 per cent – reflecting the vast vaccine rollout occurring and the fulfilment of massive pent up demand.

The IMF numbers do not acknowledge this conceptual wrinkle stemming from Britain implementing internationally agreed methodological changes before other major economies: and if they did the UK’s 2020 GDP contraction would be near the middle of the G7 pack. The IMF estimate is that the UK economy will expand by 4.5 per cent this year, only slightly faster than the Eurozone. With lockdown continuing into 2021 the same statistical anomaly relating to GDP, when school and health services were disrupted is impacting on current growth numbers as viewed by the IMF.

Of particular importance in accommodating economic recovery is that the G7 can now apparently live with much higher levels of public sector debt, post the Coronavirus crisis. Fiscal rules clearly need some rethinking. But for the next two years, measured meaningfully, the UK should be the fasted growing of the G7 economies. Also, the world will realise that Brexit is no disaster but rather a big positive which could harness growth.

It is forecast that an early end to Covid rules would lift the economy by £26 billion on top of the stimulus from the UK’s advanced vaccination programme.

Howard Flight: Priority spending should go towards training the next generation

1 Feb

Lord Flight is Chairman of Flight & Partners Recovery Fund, and is a former Shadow Chief Secretary to the Treasury.

I submit that the most important territory to address when managing exposure to the pandemic is to ensure that the next generation is trained for worthwhile employment.

I question whether our reformed apprenticeship system is currently either achieving this or in the present context capable of achieving this. It is here that ongoing government management and funding are needed to finance and manage apprentices through their training courses.

My Livery company, the Carpenters, has for over a 100 years managed the Building Crafts College set up by Sir Banister Flight Fletcher. It has a leading reputation for the quality of its training. It has again just been closed due to the lockdown, although it is managing to continue with online teaching. Here I suggest pupils and staff might be empowered to hold their own vote on whether or not to stay open, with full protective clothing and gear provided. I could see an argument for government involvement in offering and financing apprenticeships.

Last August the Government set up a new online telephone support service for apprentices who have lost their jobs during the Covid-19 outbreak. The redundancy support service for apprentices should ensure they can access local and national services providing financial and other support to help them find a new job when they need this. Apprentices can also search and apply for other available apprenticeship opportunities across the country. I hope these support services are continuing during the lockdown.

Also, employers, large and small, have being encouraged to take advantage of generous new cash incentives designed to create more high-quality apprenticeship opportunities, so more people and especially the young can kick start a successful career. As part of the Government’s plan for jobs employers have being offered £2,000 for each new apprenticeship aged under 25 which they hire and £1,500 for each apprentice hired aged 25 or over up to January 31. This includes taking on an apprentice who has been made redundant.

For apprentices I submit government help and support should go further than this. It would be particularly positive if the Government could provide the finance for an apprenticeship and run a service placing young people seeking an apprenticeship – both those who have been made redundant and those new to the apprenticeship market.

The Government has been taking steps through its Plan for Jobs to both support and protect support jobs and to create jobs with a clear focus on ensuring people have the right skills to get into work. This includes creating more high-quality apprenticeship opportunities to help get our economy moving. The Redundancy Support Service for Apprentices should make sure those who have lost their jobs can get the help and support they need to get back on the path to a new career. These have now been damaged by the third lockdown.

Employers who have apprenticeship opportunities and who are willing to take on a redundant apprentice have also been encouraged to sign up to the new service and to advertise their vacancies. Apprentices who are looking for new opportunities can then see what is on offer.

The cash incentives for employers are in addition to the £1,000 payment for new 16-18 year old apprentices and those aged under 25 with an education, health and care plan. To support particularly young people affected by Covid-19, the Government introduced a portfolio of support covering £111 million cash boost to triple the number of traineeships available across England – the largest ever expansion of apprenticeships. The Government recognises we need to ensure more 16 to 24 year olds can get the skills and the experience they need to enter the world of work.

Howard Flight: The halfway house we should build for our farmers post-Brexit

4 Jan

Lord Flight is Chairman of Flight & Partners Recovery Fund, and is a former Shadow Chief Secretary to the Treasury.

A recent question in the House of Lords was to ask the Government what progress it has made on pilot Environmental Land Management Schemes? For me, the best environmental use of land is to farm it efficiently.

When I was a boy, during the 1950s, we celebrated returning to being net food self-sufficient. Under the new EU trade agreement, it will be for us to determine our food/agricultural policies.

The cost of living and of food must, however, be factored into our policies. Food in the 1950s was both absolutely and relatively much more expensive than it is today. I support limited subsidies for our agricultural industry: it has to compete with France in particular, largely to provide the finance for massive EU subsidies of French food and agricultural products. We should both benefit from this by cheaper food in some areas and, in others, we should be prepared to provide an element of subsidy to render us on a par with French prices.

Balance in these territories can be helped or hindered by exchange rate factors: if the pound is strong, imports are automatically cheaper in sterling; if the pound is weak, exports are cheaper and we should sell more.

The UK is also fortunate in benefitting from climate change. We can now grow things we could not grow even ten or 20 years ago. It is heartening that we are being recognised as a producer of some of the world’s best white wine.  Though while we are benefitting, others are suffering: here I point to China, which can grow little else than rice.

Our objective should be “a full house” of agricultural food production land usage, with limited subsidies and exchange rate policies to assist this. Some will be hostile on the grounds that any attempt to control markets delivers more expensive food than a free market. The reality of this is that we benefit from the massive EU subsidy of food costs. As a fundamental policy, we want to see our food industry competing with France and participating in new developments. So the logical solution is to seek to manage a halfway house of relative free trade in areas where we compete strongly, and subsidies for parts of our food and agricultural industry which need support.

Once we have grasped our newfound political and economic independence, we need to approve and agree what are our new economic policies for the next decade. It is apparent that the EU’s own have been little short of a disaster with minimal rates of growth and a shrinking proportion of global growth.

Part of this is to be expected, since the EU is a mature economy, but European growth has been markedly less than American growth. I assume that the majority of people would like to see better rates of growth, reflected in increases in their standard of living – although not all may necessarily agree here.

The questions are what economic policies and what changes should deliver a higher a rate of growth? My answer is relatively traditional – a more open, capitalist economy. The objective should also be to reduce over time the Government’s involvement in the economy.

Here there are lessons to be learned from the 1930s; economic growth of four per cent a year was achieved, making this the highest UK growth decade of the twentieth Century. It was also a positive decade for new business start ups and new technology – for example, the decade in which UK motor car manufacture really took off.

The Government needs to decide what industries/economic activity should have UK ownership as an ultimate protection should any hostilities arise. Here, I question our over dependency on French Nuclear Power production. But Britain is a fortunate country in which to live, where we need to make the best of our opportunities.

Howard Flight: Sunak’s Keynesian interventions are working. Here’s what the Treasury should consider next.

30 Nov

Lord Flight is Chairman of Flight & Partners Recovery Fund and is a former Shadow Chief Secretary to the Treasury.

Western Governments continued “Keynesian” deficit spending in the 1950s/60s and 70s, long after western economies had recovered from the 1930s depression when they needed the economic stimulants. As a result, the unnecessary public spending caused inflation and damaged Keynes’ reputation.

We are, however, now back to a depression economy which needs the sort of deficit public spending Keynes advocated and implemented in the 1920s and 1930s depression. To give him credit, the Chancellor was quick to move to provide Keynesian stimulus to keep businesses and employees “alive”, as the pandemic hit.

The biggest area of deficit spending has been in the retail and related sectors: here are the largest number of jobs/employees and some 55 per cent of the economy.

I would hope the Treasury has researched which areas of expenditure have the largest spending multiplier effects. Logically, these should be the first areas in which to increase public spending.

In a different context, infrastructure spending is the second area in which to boost public spending. Such infrastructure spending has a good economic multiplier and also represents an investment for the future.

With an economic explosion of the size we have experienced this can also help provide the stimulus for major longer-term changes in capital and consumption spending.

Arguably the NHS could do with major changes of the management. There also needs to be a thorough review of our energy policies. Is it the right thing to do to for the future to accelerate the supply of offshore wind and solar power and to move to a majority of electric and hydrogen cars; or would such a major shift be risky in terms of being able to assure the supply of the new sources of needed energy?

We also need to investigate what changes in our economy are going to remain, versus where, in due course, we will broadly revert to previous patterns of behaviour. It does, however, look very probable that much more work will be done from home, reducing travel costs and travel times. This must have implications for the volume of road, rail and hotel facilities needed, which will likely reduce.

It should also mean pricewise that good quality/suburban residential properties will outperform city centres, pricewise; although it remains to be seen how much residential housing demand and prices will actually weaken in central London. Where people live will also affect where more or fewer schools are needed; the implication is less in city centres and more in country/suburban areas. Thorough and intelligent research is needed to expose such changes in behaviour consumption and habits, which are likely to stick, and the contrary.

We do not want to find ourselves building more schools where there is not an increase in pupil demand or increasing electricity power supplies where power demand is reducing.

I think it would be useful to draw up a “picture/inventory” forecasting how economies will look in the future versus how they were before the pandemic hit. As time passes the previous estimates of how economies will change can be compared with what happens.

Largely owing to the Chancellor’s timely Keynesian interventions the economy, and in particular, the state of individual’s economic affairs, have held up remarkably well. It will, however, only be time to turn down and then turn off the Keynesian spending taps when there is the evidence of major economic recovery actually occurring.

On the positive side there is the scope to implement changes to our economy and economic behaviour which support an increase in future economic growth rates.

A friend of mine produced an analysis a few years ago which showed that most of our economic output in terms of value depended on the work of some 18 per cent only of the population. Investigation of this sort of information need to be undertaken in earnest. The significant majority of the nation is under contributing to the economy’s performance. This needs to be addressed in earnest.

Howard Flight: The Lords have tabled key amendments to the Immigration and Social Security Bill

2 Nov

Lord Flight is Chairman of Flight & Partners Recovery Fund and is a former Shadow Chief Secretary to the Treasury.

British in Europe has persuaded peers to propose three amendments to the Immigration and Social Security Bill.

The first would prevent the removal of the existing right of UK citizens who moved to the EEA to return with families they have established there. The second and third amendments are to prevent the Bill’s regulation-making powers from being used to breach the UK/EU Withdrawal Agreement.

The main amendment is to preserve the right of UK Nationals living in the EEA and Switzerland, who return to live in the UK in the future, to then bring with them or to be joined by non-British family members on the same terms as have applied up until now.

If the Bill is not amended, British citizens who moved to the EU/EEA while the UK was a member will lose their right to return to their country of birth with a non-British partner or children unless they can meet financial conditions beyond the reach of many. If they need to return to look after and elderly parent, they will have to choose between either returning alone and leaving their families behind, or abandoning their parent to stay with their non-British family in the EEA.

The problem arises because the Government is using the end of free movement to make these British citizens meet, for the first time, “the minimum income requirement” for family reunion. The MIR has been criticised both because the level is high, which 40 per cent of UK workers would not be able to reach; and because of the Catch 22 rule that the non-British partners income can only be taken into account if they have been working in the UK for 6 months. But how do they get into the UK to work if they cannot satisfy the MIR?

It is doubly unfair to apply the MIR to this group of British citizens where the change is retrospective. When they left their homes in the UK to move to the EU/EEA they were safe in the knowledge that if they established a family while abroad, they would be able to bring them back to Britain. The parents they left behind had the same expectations.

The rules also lead to the perverse result that the Government’s approach involves discrimination against its own citizens. While British citizens who moved to the EU/EEA before the end of 2020 have these new restrictions; EU citizens who moved to the UK before the end of 2020 will not. They will have the right under the Withdrawal Agreement to bring existing family members to the UK for life, as well as keeping their existing right to return to their country of origin with families they have made in the UK.

The Government’s response is that they have allowed 15 months from the end of transition to return with families to the UK. For many their plans to return to the UK are in retirement, well beyond 15 months.

The other two amendments are designed to ensure that the power created can only be used in a way consistent with the UK’s obligations under the UK/EU Withdrawal Agreement. Clause 4 of the Bill enables regulations to be made to amend earlier primary legislation. The UK/EU Withdrawal Agreement is incorporated in UK law by the EU (Withdrawal Agreement) at 2018 as amended. It follows that, as drafted, the Clause 4 power enables the Secretary of State, by regulation, to modify the application of the Withdrawal Agreement in the UK.

The Withdrawal Agreement is the vital underpinning of the rights created in UK law for UK citizens living in the EU and EU citizens living here. It is thus a matter of constitutional concern that the Agreement should have the maximum possible legal protection. As far as immigration is concerned, it underpins the UK’s EU Settlement Scheme for British citizens in the UK and is thus essential, for both EU citizens in the UK and British nationals in the EU, that the Withdrawal Agreement remains sacrosanct. Where any proposed legislation might be seen as breach of the Withdrawal Agreement, the decision as to whether it does so should be a matter for Parliament to consider through primary legislation.

The second amendment to Clause 5 is to ensure that the power created by this clause can only be used in ways which are consistent with the UK’s obligations under the UK/EU Withdrawal Agreement.

The three aspects of this legislation to British citizens covered by the Withdrawal Agreement are the continued right of UK State Pensioners living in the EU to receive their pensions and any pension increases and the continued right of pensioners to healthcare under the “SI Scheme”, which enables a pensioner living in a country which is not responsible for their pensions to receive healthcare in their county of residence at the expense of the country where they paid their pension contributions.

It applies to British pensioners living in the EU and vice versa, and allows those who have worked in the UK and one or more EU countries have their contributions aggregated so as not to fall foul of National rules on minimum contribution periods.Unless this amendment is made it would be possible for a Government, by regulation alone, to modify these vital provisions, in breach of the Withdrawal Agreement. This amendment is necessary to prevent Governments acting in breach of an international Treaty in connection with social security provision.

Howard Flight: Venture capital? I’m loving angels instead

5 Oct

Lord Flight is Chairman of Flight & Partners Recovery Fund and is a former Shadow Chief Secretary to the Treasury.

The UK needs business angels and has been fortunate in producing them. Much of our economic growth and job creation comes from innovation and most of that takes place with early stage, entrepreneurial businesses. New ventures have never been well served by banks – it is not their job. The importance of angel finance and involvement has been recognised by the Government, who so far, have seen the wisdom of keeping our tax incentives for angel investment.

The term Angel Investor has been around for over 40 years. Business angel investors are simply wealthy individuals who invest their money in early stage companies. Venture capitalists provide similar funding but more typically on a corporate basis. The two economies which have grown large teams of business angels are the USA and the UK. It is estimated that there are some 300,000 angel investors in the USA. Venture capitalists typically do not invest below $1-2m, angels are needed to fill the equity gap this creates.

In 2012, in the USA, angel financing provided $23 billion to 67,000 companies creating 274,800 new jobs – compared to $29 billion of venture capital funding for 3,752 companies. Technology was the predominant venture-backed start-up industry and Silicon Valley businesses accounted for 40 per cent of angel investment.

The technical boom that has exploded in the last few years led to United States venture capital investment mushrooming to $130bn in 10,777 deals in 2019.

In the UK, angels make a significant contribution to the economy as in the USA. It is estimated there are some 15,000 angel-backed businesses in the UK with a combined turnover of £9bn and which have created some 70,000 full-time equivalent jobs.

The best study of UK angel investing is the 2018 British Business Bank Study – the UK Business Angel Market.

The study’s central message is that angels play a vital role in the economy bringing patient capital, business experience, and skills to support growth of smaller businesses. Its main conclusions are that the UK business angel market is maturing; angels now invest patient capital. Angels can help entrepreneurs with business and fund raising and over half of the angels and the businesses they support are in London and the South East. The tax advantages afforded to new companies have been a major factor in their growth.

Investment by angels is a vital bridge between start-up finance from friends and family – and growth finance from venture capital. Almost all aspiring entrepreneurs need money from others. In recent times, venture capital investment and funds have been driven by the success of technology investment. Venture capital funding figures here have been extraordinary. UK early stage companies raised more than £10bn in 2019 – an increase year on year of 44 per cent, and where approximately half the funds came from the US and Asia. The amount invested in the UK was a third of total European investment. UK Governments have recognised the importance of angel funding to the success of new companies which bring economic growth. Here the Enterprise Investment Scheme (EIS) and its sister small cap Seed Enterprise Investment Scheme have provided highly successful incentives to creating angel Investors.

Angels and venture capital differ but provide successfully the range of funding support. Angels invest their own money whereas venture capitals invest other people’s money, usually structured as a fund. Venture capital funds have time scales determined by their Fund structure. Angels have no such restrictions. Angels are quick decision makers. Angel syndicates can be difficult to pull together because they make decisions independently of each other. Angels usually opt for a simple investment structure. Typically, angel investors are older than venture capital investors. They are normally less punitive if things don’t go to plan.

Angels have been extremely important in the UK to the development of innovative young companies. They are a vital presence amongst the providers of long-term capital and essential for ventures needing £2m or less of equity capital.

An interesting picture of business angel investors emerged from the 2018 British Business Bank survey. They are mostly male, white, and live in the South East: the average age is 52 but 61 per cent are over 65: angels typically have 8 years investment experience with 56 per cent having more than 5 years. 65 per cent of angels have made over 10 investments. The most experienced angels invest 22 per cent of their investable wealth while the less experienced invest 14 per cent. The median first investment is £25,000. 79 per cent of angel investment is done as part of a syndicate. Angel investors typically spend one and a half days a week on angel activities. They hold investments for 6 years on average and make use of EIS and SEIS schemes. Typically, angels invest across the commercial sectors but in recent years this has been dominated by technology.

53 per cent of angels thought their portfolio met expectations and 16 per cent of their portfolio exceeded them. 58 per cent of angels over 55 thought their portfolio met expectations and 19 per cent said it exceeded their expectations. The numbers were lower here for this under 55. The two principle reasons for expectations not being met were poor management and a need for more money than anticipated.

All this amazing data comes from Richard Hargreaves’ new book ‘How to be a Business Angel’. I end with his comments on the requirements to be an angel. Angel investing is a risky venture which needs a detailed strategy. Only invest when you like and respect the management and when you accept the risks. Spread the risks and invest systematically. Take advantage of the available tax reliefs. Invest mostly in things which you understand. Do due diligence on the target company and check their claims are true. Avoid investing good money after bad when things don’t go to plan. Above all, enjoy being an angel. If you don’t find it fun, you should not do it.

For civil servants, note that it has been the rising flow of venture capital and angel financed investment which has created the growth and successful new areas of our economy. It has been the EU which has sought, so far unsuccessfully, to constrain the tax incentives which have made these new areas of investment in the UK blossom.

Howard Flight: From rising demand for out of town housing, to increases in savings, the Covid trends to look out for.

31 Aug

Lord Flight is Chairman of Flight & Partners Recovery Fund and is a former Shadow Chief Secretary to the Treasury.

I expect the UK to emerge from this Covid-related economic and health shakeup with permanent major changes of behaviour. These should in turn impact on the values and relative prices of goods and services.

The first most obvious area is housing, house prices and where you live. The discovery with modern communication and technology that people can work at least three days a week from home without their output suffering looks set to release a large “working from home” revolution, particularly in London and the home counties.

As a friend recently commented to me, it is a pleasure to be living most of the time in the country; it adds two hours a day to his free time and £500 per month (effectively tax free) to his disposable income.

This implies, longer term, upward price pressure on out of town housing and downward relative pressure on city centre properties. Also surely the correct economic policy for the rail operators would be to reduce fares to encourage greater usage of the network?

This economic crisis has already unleashed a significant increase in the savings rate – in the home counties plus £2,000 pa per person and rising. The main reason looks to be fear of unemployment, but there is also, clearly, a risk of interest costs rising substantially at some stage in the not too distant future.

A relatively permanent increase in the savings rate implies bad news for the service sector. Higher savings are likely to be made across the young, middle aged and older sections of the community where the latter is helping to finance the young.

Savings should logically be the largest amongst the middle aged part of the population. We are likely to see the young as the key inventors; the middle aged as the investors, and the older part of the population financing the young and predominately financing new investment.

A trend which is not yet apparent is the relative performance of Greater London versus the “Rest”. House price and interest rate developments leave London relatively less affluent and the rest of the country better off.

An apparent trend is a greater interest in education by both the young and their parents – particularly amongst the rising immigrant community who have been performing extremely well academically. This should be good for the economy.

The Conservative Government has had a rough time, at least half of this, their own fault. As the General Election witnessed, and I believe is still the case, the electorate is not interested in Communism. What it wants, particularly, is what is perceived as “fairness”.

Fairness is not just financial fairness. As the Government’s education blunders have witnessed, young students, their parents, teachers and many Conservative members of Parliament have been driven by the wish to see fairness as amongst the young effected.

As Liz Truss, the Secretary of State for International Trade, has commented, fairness is the main case for free trade. After joining the EU, we fell behind our allies in terms of trade; now we have the chance to change this.

We are in a series of negotiations with the US, Japan, Australia and New Zealand to strike new, fair free trade agreements and lower tariffs for our exporters. Talks with all four are progressing well. Round Four of the US negotiations starts soon.

From Japan we have consensus on the major elements of a deal that will go beyond the agreement the EU has with the country. We aim to have agreement in principal by the end of August. Round two of talks with Australia start in mid September and the second round of discussions with New Zealand start a month later.

These deals are an important step towards accession to the Comprehensive and Progressive Agreement for the Trans Pacific Partnership Agreement which will hitch Britain to one of the fastest growing parts of the world.

CPTPP reduces tariffs on 95 per cent of goods between members and also sets high standards in areas like digital trade and data. Membership will help put Britain at the centre of a network of free trade agreements where parties treat each other fairly, play by the rules, and help make us a hub for businesses trading with the rest of the world.

Howard Flight: Parkinson’s Law revisited

3 Aug

Lord Flight is Chairman of Flight & Partners Recovery Fund and is a former Shadow Chief Secretary to the Treasury.

An old friend of mine sent me a very interesting article on Parkinson’s Law Today. The theoretical law of the 1950s has changed to a mathematical equation describing the rate at which bureaucracies expand over time. Two different case studies of our times are financial regulators and the NHS. The numbers employed in both territories continue to grow way beyond any practical justification.

There are some fascinating facts supporting the arguments. At a time when the British Empire was in decline, the Colonial Office had its greatest number of staff who were folded into the Foreign Office, due to a lack of colonies to administer! Such contrarian growth is explained by two key factors – officials want to multiply subordinates, not rivals; and officials make work for each other. The number of people employed in a bureaucracy tends to rise by between five and seven per cent a year. That was irrespective of any variation in the amount of work – if any – to be done.

Parkinson also proposed a rule about the efficiency of Administrative Council. He defined a coefficient of inefficiency with the number of members as the main determining variable. This is an attempt to define the size at which a committee or other decision-making Body will become wholly inefficient, if not useless. In Parkinson’s Law, “The Pursuit of Progress”, a chapter is devoted to the basic question of what Parkinson called Comitology – how committees, government candidates, and other such Bodies are created and eventually grow irrelevant, if they are not initially designated as such. Interestingly the world Comitology has recently been invented independently by the EU for a different non-humorous meaning. Empirical evidence is extracted from historical and contemporary government candidates. Most frequently the minimal size of a States’ most powerful and prestigious Body is five members.

From English history, Parkinson notes a number of bodys that lost power as they grew.

The First Cabinet was the Council of the Crown, now the House of Lords which grew from a handful to 29, and then to 50 by 1600 by which time it had lost most of its power. A new Body in 1257 numbering fewer than 10; it grew to 172 members and ceased to meet. The third incarnation was the Privy Council, initially numbering less than 10 members but rising to 47 in 1679. In 1715 the Privy Council lost power to the Cabinet Council with eight members, rising to 20 by 1725. Around 1740 the Cabinet Council was superseded by an inner group called the Cabinet, initially with five members. In the 1950s the Cabinet was still the official governing Body. From 1939 until the 1950’s there was an effort to save the Cabinet as an institution. Membership had been fluctuating from a high of 23 down to 18 in 1954.

Parkinson proposed a detailed mathematical expression for the coefficient of inefficiency, featuring many possible influences. In 2008 an attempt was made to verify empirically the proposed model. Parkinson thought that membership exceeding around 20 makes a committee manifestly inefficient. Less certain is the optimal number of members which is somewhere between three and 20. For a group of 20, individual discussions may dilute the power of the leader. Common sense suggests eight may be the optimum number, but this is not supported by observations. No contemporary Government in Parkinson’s data set had eight members and only the unfortunate Charles 1st had a committee of State of that size.

This territory should merit regular measurement, reviews, and analysis. It is painfully clear to citizens that when organisations become too big, they also become inefficient and vulnerable.

Increases in NHS staff have accounted for nearly all the increase in public sector jobs – numbers now stand at 1.75 million, 32 per cent of all public sector jobs and five per cent of all jobs in the UK. It is surely self-evident to conclude that a monolithic approach to providing and managing healthcare makes no sense and invites bad experience and outturn. Logically the unit size should be broken down to leadership teams of under 20 with sufficient staff numbers to operate the range of services provided by each particular hospital. Staff could be lent to and borrowed by particular hospitals as and when required. Accountability should probably be to the relevant local authority, Cabinet or constituency MPs.

Civil Service jobs hit a record low in 2016 but have been increasing again recently. Currently, they stand at 460,000. There are nearly four times as many people working in the NHS as there are in the Civil Service.

This is the territory which the Chancellor needs to research and examine in detail. It is probable that Civil Service numbers could be reduced by 60,000 to 400,000 with anybody scarcely noticing. This should save of the order £500 million a year. The NHS is a more difficult proposition as a result of the support it has achieved for dealing honourably with COVID-19 patients. My view is that restructuring into manageable sized units is the key to better and greater efficiency and that in time it too could effect cost savings of £50m pa.

Howard Flight: High streets, air travel, restaurants, the arts. How the virus is transforming our lifestyle.

6 Jul

It is becoming clear that the Covid-l9 crisis will lead to substantial changes in the British lifestyle.

First of all, a significant part of the workforce will be working from home on line. People have learnt from current experience that board and other meetings can be conducted quite satisfactorily on Zoom or Teams.  Employees will not need to travel, at great expense in discomfort with no seats, and can live away from London and the South East, where good houses are cheaper.

The knock on effects of Zoom and Teams are also going to reduce the demand for office space in London and other major cities.  Office space could be converted into residential use – so reducing the cost of residential property.  Much of the massive increase in office space over the last three years may end up to being converted into accommodation.

The Office for National Statistics (ONS)  has found some surprising results from its recent surveys.  The impact of lockdown on people’s lives has been revealed in official figures, showing that more than a quarter are considering changes to their relationships (divorce), job or home.

For the first time, the ONS has focused on aspects of life that are the cause of unhappiness.  Big life changes after recovery from the Coronavarius are being planned by 28 per cent of adults and, of these, 42 per cent want to make a change to their work; 38 per cent are looking to move on from relationships and 35 per cent are inclined to move home.  Family lawyers have already reported an increase in the number of divorce cases exacerbated by financial problems.

Researchers have also found that 40 per cent of adults feel that some parts of their lives have changed for the better. Of those who reported positive lifestyle changes, 56 per cent said they were able to spend more time with their family and close friends.  The ONS also found that nearly half of those aged between 60 and 69 had experienced positive lifestyle changes compared with only 24 per cent of respondents aged over 70. Exactly half said they were enjoying a slower pace of live.

It remains to be seen how many of these intentions will be carried through, albeit that a lot of people will need to change jobs as there  their previous jobs will no longer be available.

There are four related territories which are exposed to massive change for survival: the high street, travel, hospitality and culture.

The high street is still threatened by online shopping in an unfair tax regime.  The Government has permitted the online shopping industry to enjoy substantial tax advantages, undercutting the high street.  It pays no business rates and is maybe registered abroad, so saving on VAT and corporation tax.  What is needed overall is a level tax  playing field.

Travel is probably the biggest area effected by Covid-19.  The total value of cancelled flights amounts to £8 billion for the last four months.  Liability for this will be fought over for a long time to come, where there are now two key  legal principals – in the UK “Acts of God” and, imported from Europe, “Force majeure”.  The industry cannot afford to refund the £8 billion total, and it is governments that have insisted on the closure of air travel.

Restaurants, pubs and hotels have had mixed and an often interlinked experience – overall, a negative one caused by Government lockdown requirements.  Some opening up is now occurring, and local authorities are encouraging and supporting the provision out outside restaurant facilities There is an economic need for restaurants..

The territory which the Government has now announced a £1.5 billion package for us the performing arts.  The individual performers have had all their bookings cancelled, through to Christmas with no compensation and no future bookings.  It should be remembered that the arts contributes more to Britain’s international earnings, in aggregate, than does the City of London.

The Government seems to be waking up to the importance of Britain’s musical industry.  One of our friends who is an internationally recognised opera singer is trying to set up a major outdoor performance in Hyde Park, similar to the Pavarotti Concert over ten years ago.  This, however, will require the Government to provide the insurance cover against the risk of Covid-l9 infection.  There are three historic precedents where the Government had to put up such cover – and, ironically, made a good profit from so doing.