Iain Dale: We all want our city and town centres to return to normal. But that isn’t possible at present – so we must get used to it.

25 Sep

Iain Dale presents the evening show on LBC Radio and is a commentator for CNN.

A sign of a Prime Minister in trouble is when journalists start writing articles about possible successors, and who might be the runners and riders in a leadership contest.

Given that Boris Johnson has only been the Conservative leader for just over a year, it comes as something of a surprise that he’s already being written off by some of his colleagues and commentators.

Some allege that it’s clear that he’s suffering from so-called “Long Covid”, and knows in his heart of hearts that he’s not performing on all six cylinders. Others reckon that if he gets a free trade agreement with the EU and the post- Coronavirus economy returns to something like normality, he might decide his work is done and he’ll be off to enjoy the fruits of a post Prime Ministerial career.

The truth is that no one knows. I find both these scenarios entirely plausible, if not wholly likely. It is very rare for a Prime Minister to give up office voluntarily, even when they might not be in the best of health. Tony Blair did – sort of, although a Gordon Brown shaped gun had been put to his temple. Harold Wilson did, but he knew his mental capacity was on the decline.

A party leader only serves at the pleasure of the Parliamentary Conservative Party. Yes, there are rumblings of discontent but, again, this is nothing unusual. Margaret Thatcher experienced such tremors throughout her leadership, but it took the cowards 15 years to get rid of her.

I find it difficult to foresee that things would get so bad within the next twelve months that Tory MPs would get rid of the man who brought them an 80 seat majority only 10 months ago. But in politics, the unexpected often happens.

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On Matt Forde’s Political Party podcast this week, I recounted a tale from my schooldays which left him open- mouthed with horror.

Back in 1978, when I was 15  my school held an end of term fancy dress disco in the cavernous school hall at Saffron Walden County High. I decided to go as a gamekeeper, given I had all the gear.

I arrived at the do dressed up in proper ‘Seth Armstrong’ gear (if you aren’t an Emmerdale fan, you won’t get that reference), replete with flat cap and wellington boots.

But more to the point, I was also carrying a double barrel twelve-bore shotgun (my father’s) and a cartridge belt full of live cartridges. No one batted an eyelid. If I did that now, the Police would be called and I’d probably get a mention in the Daily Mail, and get an ASBO. Innocent times.

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I am starting a new series of 55 podcasts on each of our 55 Prime Minsters to accompany the book I am editing on the subject which comes out in November.

Yesterday, one of the contributors pulled out of recording the podcast, because his three meetings in London that were summarily cancelled and transferred to Zoom calls – so he didn’t want to come in just for one.

In Scotland, Nicola Sturgeon had continued to urge people to work from home if they could, whereas in England we had all be encouraged to return to work outside it if we could from July onwards. In hindsight, that was wrong.

Of course, we all want to get our city and town centres back to normal, but policy cannot be guided by an understandable desire to keep sandwich shops in business. We are not yet ‘Pret a Manger’.

The thought that this could all go on for another six months is not one any of us relishes, yet I think it was quite right of the Prime Minister to say that.

In March, he was criticised for what some described as false optimism, when he intimated that everything would be back to normal by Christmas. Now he’s being criticised for being a doomster…Sometimes, as a politician, you just can’t win.

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There’s a new authorised biography of Diane Abbott out this week. In the index it says I get a mention on page 52. The only Dale mentioned on that page is Diane’s maternal grandmother, Dinah Dale. I wonder if we are by any chance related? Now there’s one for Who do you think you are?  It’s entirely possible we could be related, you know – I can’t count either.

Raghib Ali: Covid-19. The pluses and minuses of the Government’s new plan – and why there should be no more lockdowns.

25 Sep

Dr Raghib Ali is an Honorary Consultant in Acute Medicine at the Oxford University Hospitals NHS Trust, and a Visiting Research Fellow of the Department of Population Health, University of Oxford. He writes in a personal capacity.

Last week, I explained on this site why there is still significant potential for harm from a second wave – both directly from Covid-19, and indirectly from its effect on the NHS’ ability to keep all essential services running.

Today, I will try to address the key question as to what our response should be. The situation now is almost the exact inverse of the one I discussed in June in relation to lifting lockdown restrictions. The divisions remain, and the public health messaging still needs to improve but there is now wider acknowledgement of the need to balance the harms of Covid-19 with those of lockdown.

I wish I had the same confidence as the armchair epidemiologists about the best course of action, but the truth is that although we do now have actual experience of dealing with first waves (as opposed to just modelling), ‘the science’ is still highly uncertain, with conflicting evidence for the effectiveness of different strategies (mitigation vs. suppression) in different countries.

I have set out in more detail on my blog why it is difficult to draw definitive conclusions but, in brief, the evidence we have is generally from low quality observational data which have significant limitations – and so we don’t know for certain if the reduction in disease was due to the intervention or other factors.

Also, many interventions were instituted simultaneously and so we don’t know which had the biggest effect in reducing infection. However, it is clear that the measures taken pre-lockdown (self-isolation and social distancing) did reduce infections and must remain the cornerstone of our response.

Between-country comparisons are particularly problematic as countries differ in so many important ways but I will briefly discuss the experience of Sweden as its approach has attracted so much attention (and supporters and detractors). Compared to its nearest neighbours, it has (so far) had a five to ten times higher death rate with a similar economic decline. This supports the case that those countries that locked down earlier had less deaths from Coronavirus (because they had less cases) – as would be expected given the virus needs human interaction to spread.

However, when compared to the UK, Belgium or France, Sweden has a similar level of deaths with a much better economic performance and has demonstrated that first waves can be ended with measures short of a full lockdown (including, crucially, keeping schools open).

But it is too early to say that Sweden has escaped a second wave as they generally occur about three months after the end of the first and Sweden’s only ended in July. However, I think it is unlikely as they have not reached the 20 per cent antibody level which may provide herd immunity (they are at about seven per cent.)

Also, in general, lockdowns postpone rather than prevent infection (although the death rate should be lower in second waves, due to better treatments) and Israel provides an example of their limitations where they now have a much larger second wave of deaths which has led to a second lockdown. And this cycle of lockdowns would need to be repeated until vaccines / very effective treatments become available – of which there is no guarantee.

Of the large European countries, Germany has (so far) managed the Coronavirus most effectively, with lower deaths in the first wave (and less economic damage) and no second wave yet – which seems to be due to better testing and tracing, and shielding of those at highest risk.

However, it is still too early to say which countries’ strategies are correct, and we won’t know until the end of the pandemic. But, of course, we have to make decisions now based on the best evidence we have.

Although I don’t agree with all the measures, I think the approach outlined by the Prime Minister and Chief Medical Officer – which can be seen as a hybrid mitigation / suppression strategy – is broadly correct ,and rightly focuses on the balance of benefits and harms in order to produce the best overall outcome.

And although there is now broad agreement that we must try to prevent a second national lockdown, there is already pressure to increase the restrictions further.

But before doing this, I would urge the Government and Parliament to ask these three questions:

  • First, how good is the evidence that the intervention works in reducing Covid-19?

We have a much better evidence base now, with the different interventions used over the summer and some data from the ‘natural experiments’ being conducted as devolved nations introduced slightly different measures (e.g. on the rule of 6, size of bubbles, household mixing, etc.)

Measures should also be in place for at least two weeks to assess effectiveness before considering new ones; but should also be reviewed regularly, and not kept any longer than necessary. (The Government should also urgently fund trials to test different interventions in different regions to get better evidence.)

  • Second, is it clear that making these restrictions mandatory (with penalties) makes a significant difference to compliance/ effectiveness of these measures?

In some cases, this is clear (e.g: breaking self-isolation rules where the voluntary system was not working well) but, in general, the harms of (particularly social) restrictions could be reduced by making them voluntary.

  • Third, and most importantly, does it clearly have more benefit than harm in relation to overall health, quality of life, education and jobs?

It is hard to see how a second national lockdown could be justified, even on health grounds, with the Government’s  own health cost-benefit analysis  showing that, in the long-term, the health impacts of the two month lockdown and lockdown-induced recession are greater than those of the direct Covid-19 deaths. (Importantly, this analysis was on the basis that mitigations to reduce Coronavirus infections (e.g. social distancing) were in place – otherwise the harm from Covid-19 deaths was more than three times greater than lockdown.)

Other analyses have also come to the same conclusion – particularly when also considering the economic costs of lockdown – which also harms health and society.

The evidence for the effectiveness of local lockdowns is mixed, but they will still have associated harms – and will exacerbate inequalities and so similar comprehensive, cost-benefit analyses are needed – with the input of economists and educationalists as well.

New lockdowns should only be considered when there is clear evidence of more benefit than harm, and closing schools must be the last resort.

We need to prioritise those interventions that most reduce the direct and indirect harms from Covid-19 (which will therefore decrease the need for more restrictions) while doing the least harm to everything else – particularly other health harms, education, and the economy.

Based on our experience, these are three interventions which could save thousands of lives this time:

  • First, improving the public health messaging and reducing fear. Thousands died and suffered at home either because they thought they needed to ‘stay at home’ to ‘protect the NHS’ even when they were seriously ill – or they were too scared to come to hospital. We need to reassure the sick and ideally provide separate Covid-19 units/ hospitals to give them more confidence to attend – which also means keeping Covid-19 hospitalisations at a low enough level to enable this.
  • Second, ensuring that all NHS services are kept running. while also managing Covid-19. Millions have suffered, and thousands will die, through the closure of NHS services – which we now know was not necessary and mustn’t happen again. We must urgently establish the level at which Covid-19 admissions will overwhelm the NHS – not in the sense that we used before (i.e. emergency and critical care) – which is no longer a risk – but all other essential services as well. And this time, we must use the increased capacity available from the Nightingales and private hospitals.
  • Third, protecting those at highest risk including care home residents and hospital patients with regular testing & isolation, and ‘smarter shielding.’  This can be much better targeted now with all the data we have and individual ‘Covid-19 risk calculators’ should be urgently rolled-out to help people understand their own risk and make their own informed decisions. It will also help people to overcome their fears and seek medical help when required, as well as help to reduce Covid-19 disparities.

I do not, however, believe this shielding should replace the other measures to suppress the virus in the general population. There is currently not enough evidence to show that it is possible to effectively shield all those at high risk or to reach herd immunity without significant direct harm to the lower risk groups where adverse health effects occur in about a third of cases, including the young and those with mild symptoms.

(Of course, test and trace is also critical – and there is certainly room for improvement, particularly in schools, but the UK does have one of the highest testing rates in Europe.)

The public have the most important role of all in controlling the virus, and so must be convinced to follow the current restrictions and given support, as needed, to do so. To improve public consent and compliance, the Government should publish and explain the evidence – and be honest about the decision-making process, the uncertainties and the trade-offs.

The coming months will be challenging for all of us, and we will need to learn to live with the virus and change our behaviour accordingly. For some, that will mean reducing our social contacts; for others – overcoming our fears; and for all, looking out for the vulnerable, being patient and making sacrifices for the common good.

Finally, having served on the front-line, I am only too aware of the death and suffering that Covid-19 causes – but the harms of a second lockdown would be greater. And so we must follow the current measures and by protecting society, education and the economy – as well as the NHS – we will save, and improve, the most lives.

Andrew Griffith: How the Government can put enterprise at the heart of the recovery

19 Sep

The author is a former Chief Business Advisor to Boris Johnson, former Chief Operating Officer of Sky plc and founder Chairman of the Campaign for Economic Growth. Follow the Campaign @C4EG_UK.

Economic statistics each week now reveal the state of the Covid-impacted economy like charred stumps emerging from clearing smoke.

This week it was the turn of the employment data, which showed 700,000 jobs have been lost since February, and unemployment will get worse before it gets better despite the Chancellor’s excellent interventions.

The Government is rightly shifting gears from an immediate crisis response to fostering a post-pandemic recovery. There is a vibrant debate about how to do this but it is widely recognised that private sector businesses have to be at its heart.

That’s one reason why I have founded a new group – the Campaign for Economic Growth – to utilise the expertise of those who have started and run businesses to promote ideas for growth. It is the challenge of our time if we are to deliver employment and prosperity for current and future generations.

With a Budget and a Comprehensive Spending Review as well as COP26 and EXPO2021 on the horizon, the Government is presented with the perfect platform to support those growing sectors where the UK already has competitive advantage. With the right policies, we can create excellent new jobs in all parts of the country, unleash billions in private investment, and grow the export revenues that are vital to maintain our standard of living and pay for the quality public services we demand.

The good news is that Covid-19 spared or even accelerated many of the sectors in which objectively the UK already has a world-leading position: artificial intelligence, quantum computing, the life sciences, FinTech, space, sustainable aviation and clean energy. No need here to “build back better” as these were already thriving, and each represents an outsize opportunity to create multiple billions of revenue and thousands of new high quality jobs.

Hydrogen is one good example. The UK has best-in-class academic institutions and pioneering businesses producing cutting edge hydrogen technology. The world’s first hydrogen ‘giga-factory’ will open in Sheffield next year, the world’s first tests of hydrogen in the gas grid are taking place in Cumbria, and the world’s first hydrogen double-decker buses are made in Northern Ireland. The UK really does have the ability to lead the global hydrogen economy. And unlike either oil or rare-earth-rich electric batteries, hydrogen can be produced entirely domestically, without the geo-political challenges of relying on supplies from the Middle East or China.

My own constituency of Arundel and South Downs looks out over the Rampion Wind Farm off the Sussex coast. This area alone has the potential for a four-fold expansion that could be used to generate clean, green hydrogen and provide the same boost to the British economy that North Sea oil gave in the early 1980’s.

The global hydrogen economy is set to be worth $2.5 trillion by 2050, create 30 million jobs, and meet a quarter of the world’s energy demand, and the UK should aspire to a big slice of this. This is precisely the sort of opportunity the Campaign for Economic Growth wants to see the UK seize. The Government has recognised the potential, recently establishing a Hydrogen Advisory Council, but it has many more levers to pull – not least as a major player in the purchase of the next generation of buses, trains, lorries and ships.

As in many other aspects of policy delivery, we must not allow the tendency of Whitehall departments to operate in Nineteenth Century silos to result in a merely linear response to exponential opportunities for growth.

Whilst some of our public services have been found sadly wanting, by contrast businesses have demonstrated their resilience during the pandemic. After the psychological ‘wobble’ of consumers panic buying, private sector food supply chains have been remarkable for quietly and capably getting on with their important job of feeding the nation. Many other businesses have re-purposed or reinvented their operating models and got back to work – again without fuss or headlines. Whilst the state and voluntary sectors have a vital role to play in society, we forget at our peril it is only businesses that create jobs, investment and tax revenues at scale.

The Covid-19 pandemic has had a devastating effect on families and economies alike. The road to recovery will be hard, but it also presents us with the exciting opportunity to use this as an inflexion point and to shape the economy of the future. The right decisions now will ensure the UK emerges from this challenge stronger and better equipped for the next one.,

Angus Groom: Sunak must act to unshackle business from the dead weight of Covid debt

10 Sep

Angus Groom is a Research Fellow at Onward and the author of ‘Paying it Forward‘. He is also an ESRC Doctoral Training Partnership scholar studying Economics at Nuffield College, University of Oxford.

The economic recovery may be gathering pace, but we are not out of the woods yet. In our focus on how quickly demand will return to pre-crisis levels, it is easy to forget that many firms have spent the last six months piling on unprecedented levels of additional debt.

This is a double-edged sword: many have survived the worst of the crisis as a result, but there is a risk if ministers do not act that companies will spend the next few years paying down their liabilities rather than driving a dynamic recovery.

The coronavirus pandemic has meant that, both as a result of mandatory closures and lockdowns and due to voluntary public health precautions, people have been spending less and so businesses in almost all industries have been making less money. The unprecedented grant support from the Treasury, from the furlough scheme to tax payment holidays, has helped many businesses through the worst of the crisis. My new report for the thinktank Onward estimates that 350,000 businesses, employing five million people, would have faced a cash flow crisis in the absence of this government support.

But in addition to grant support the Government has provided what they call “liquidity support”: new debt that weighs down corporate balance sheets and that is mostly or entirely underwritten by the taxpayer. The CityUK’s Recapitalisation Group estimates that by March 2021 UK business will be holding £35 billion in coronavirus debt, accumulated in the space of a year. Even if the demand-side of the economy quickly recovers, this debt pile means that economic problems are far from over.

In fact, my report today estimates that nearly one in twenty firms are now technically insolvent as a result of losses and debt built up since March, and over one in five (21 per cent) could now be classified as so-called zombie firms, in that their operating profits at best only just cover their debt interest payments. There is a real risk that these companies spend the next few years worrying about how to make their repayments rather than investing in jobs and growth to spur the recovery.

Research published by the Bank of International Settlements, the OECD, and the NBER shows that zombie firms can harm investment, employment and productivity growth. Using this research, we estimate that the drag caused by the growth of zombie firms so far this year means that business investment will be lower by more than £40 billion annually and that productivity growth will be lower by by 0.39 percentage points – meaning missing GDP over five years equal to 1.9 per cent of current GDP, or over £500 per person in the UK.

Meanwhile the drag on employment suggests that unemployment will still be 6.4 per cent at the end of 2024, rather than the 5.1 per cent predicted by the OBR. This equates to an additional 400,000 unemployed in the year of the next general election.

To deal with this looming crisis, we propose a simple scheme, New Start, to allow firms to transfer their coronavirus debts into a long-term tax liability repaid out of profits—shifting payments to when firms are able to make them in the same manner as student loan repayments.

The benefit of the CBILS and BBLS, and to an extent the CJRS, is that they were designed in Whitehall but implemented by banks and businesses in the real world. The New Start Scheme keeps this flexibility as it can be run by the banks who have already issued the debts, and the scheme can run regardless of who owns, buys or sells the underlying asset.

The growth of corporate debt sounds like something that occurs in the balance sheets of City firms, but how it is dealt with will determine the strength of the recovery. The Chancellor has so far been reluctant to intervene in this debate, but this position cannot hold without the scarring effects of debt taking hold in the economy.

Roderick Crawford: The EU has an obligation to improve the flawed Northern Ireland Protocol. And isn’t meeting it.

10 Sep

Roderick Crawford works on conflict resolution in countries such as Yemen, South Sudan and Iraq, and on Brexit-related matters. He is a former editor of Parliamentary Brief.

The Northern Ireland Protocol is back in the news again. This time, attempts to address problems with the Protocol are further haemorrhaging confidence in the Government at home and abroad. The proposal to provide powers to ministers that, if used, would, it is claimed, breach its obligations under an international treaty, has caused uproar.

There are a number of problems with the Protocol that have received widespread coverage since its publication in its original form in 2018; despite the important changes to the Protocol that were negotiated by the Prime Minister, the amended Protocol remains unsatisfactory.

The Protocol’s preamble declares in Article 1, that it is

‘without prejudice to the provisions of the 1998 Agreement regarding the constitutional standing of Northern Ireland…’; it ‘respects the essential state functions and territorial integrity of the United Kingdom’; it ‘sets out arrangements necessary to address the unique circumstances on the island of Ireland, maintain the conditions necessary for continued North-South cooperation, avoid a hard border and protect the 1998 Agreement in all its dimensions’.

The problem is that the Protocol does not achieve these aims. The constitutional position of Northern Ireland is changed by the Protocol; the essential state functions of the United Kingdom are not respected, and the Belfast Agreement is not protected: in David Trimble’s words, the Protocol drives a coach and horses through the Agreement.

It was always going to be hard to make the Protocol achieve all these aims, but in truth it was designed to do only two things: secure the EU internal market whilst avoiding a hard border on the island of Ireland. The text that was agreed was a case of might creating right – hardly for the first time, and an example of what the UK itself has done in the past.

However, as we have discovered across the centuries, such rights rarely last. It is a well-established rule that agreements reached when one party is compelled to sign up under intense pressure are unstable, and are at high risk of breaking down. The EU held the whip hand in 2018 and got an agreement on its terms, but it always looked unsustainable – and so it still looks today. It remains an example of poor statesmanship.

The UK is committed to the Protocol, despite this. However, in practice, a workable protocol requires arrangements that its wider aims – respect for the UK state’s functions and for the territorial integrity of the United Kingdom as well as the protection of the Belfast Agreement in all its parts.

In 2019, Theresa May’s government published ‘UK Government’s commitments to Northern Ireland and its integral place in the United Kingdom’. This set out unilateral commitments to build on commitments already made in paragraph 50 of the December 2017 Joint report ‘to protect Northern Ireland’s place in, and maintain access for Northern Ireland businesses to, the UK internal market. It is worth recalling the relevant sections of the Government’s 2019 commitment (paragraphs 35-37):

‘At the heart of preserving the economic and constitutional integrity of the United Kingdom is the maintenance of the UK’s internal market as we leave the European Union. This was reflected in the December 2017 Joint Report between the UK and EU. At paragraph 50 it set out that, in all circumstances, the UK will ensure the same unfettered access for all Northern Ireland businesses to the whole UK internal market.”

This commitment provided the platform for maintaining the integrity of the UK internal market, and ensuring that sales by Northern Ireland businesses to Great Britain, which are so critical for business and the economy, are protected.

‘The Protocol protects Northern Ireland’s position in the UK internal market through a series of safeguards and provisions within the legal text. For goods that are moving from Northern Ireland to Great Britain, the Government has committed to ensuring that Northern Ireland businesses will continue to enjoy the same unfettered access to the whole of the UK’s internal market.’

‘The Protocol expressly confirms that nothing provided within it will prevent the UK from ensuring this unfettered access. It is also clear that there will be no tariffs, quotas, or checks on rules of origin between Great Britain and Northern Ireland.’

‘At the same time, we recognise the imperative to underscore that protection domestically as well. And that protection must be robust and lasting. That requires strong protections in law that guarantee unfettered access for Northern Ireland businesses when placing goods on the rest of the UK market. This of course must recognise the devolved competences of the Scottish and Welsh governments, and recognise that we need to preserve a level playing field for businesses throughout the UK. But it is critical that the law is unequivocal in setting out that businesses in Northern Ireland would retain full access to the whole UK internal market, even in a backstop scenario. We will enshrine this protection in primary legislation.’

It was hoped that the consent clause that the Prime Minister negotiated last autumn would provide an added incentive for European Commission co-operation to make the Protocol workable. But rather than work with the UK to address the operational challenges and address the stark contradictions in the protocol, the Commission has treated the Protocol as a test that the UK must pass to be rewarded with a free trade agreement.

This has not helped. There are real, practical problems to implementation that require EU engagement and flexibility – we have seen very little of that so far. The Commission is happy to dictate the rules, but not prepared to lift a finger to help achieve our shared objectives.

Because the vast majority of Northern Ireland trade is with the rest of the United Kingdom, it is vital to ensure that this trade is fully protected and also, in line with the Protocol’s aims, the UK’s internal market is respected too. The original intention for the protocol was that it would be minimalist – it would require the minimum necessary alignment with EU law in order to avoid a hard border.

The Protocol allows for different treatment for goods deemed ‘not at risk of entering the Single Market’. Goods for sale in retail outlets have been proposed as falling within this status, thereby avoiding a rise in household shopping costs, but not even retail goods have thus far been designated ‘not at risk’ by the Joint Committee.

In failing to designate goods as ‘not at risk’ is the Commission not guilty of breaching, by omission, its international obligations under the Protocol. The difference between the UK and the EU is that the UK government is highly accountable: the Commission is not – not by the European Council, the Parliament nor by the Press.

In 2019, the Government set out in a unilateral declaration its understanding that if an agreement to supersede the Protocol cannot be concluded, in whole or in part due to a breach of good faith, then it would not be prevented from instigating measures that could lead to the disapplication of obligations under the protocol – but with the proviso that it would uphold its obligations under the Belfast Agreement and in all circumstances avoid a hard border.

We are not exactly in new territory. The powers proposed for ministers would allow them to fulfil the aims of the protocol in the event of bad faith by other parties and fulfil their responsibilities under the Belfast Agreement. Let us hope that this is just a storm in a tea cup.

Neil O’Brien: Introducing the new Levelling Up Taskforce – and its first report on how we can measure progress

7 Sep

Neil O’Brien is MP for Harborough.

Were you still up for Penistone? One of joys of election night last December was winning so many seats we’ve not held for decades.

The constituencies we won over in 2019 are quite different from the party’s traditional base, in the deep red bits of the map above. Seats we gained last year don’t just have lower earnings than the seats we held, but earnings five per cent lower than Labour seats. Of the bottom quarter of seats in Great Britain with the lowest earnings, more are now held by us than Labour. Compared to seats we gained, homes in Labour constituencies are a third more expensive.

Many of the places we won have felt neglected for a long time. And led from the front by the Prime Minister, the new Government has committed to “levelling up” poorer places. But what does that really mean? How can we measure if we are succeeding? How can we get the private sector growing faster in these places, making the country stronger overall?

To help the Government answer these questions, I and 40 other Conservative MPs have formed a new Levelling Up Taskforce.

Our first report is out today, looking at how we can measure progress. It also examines what’s been happening in different parts of the UK economy over recent decades.

Income per person in London (before paying taxes and receiving benefits) grew two thirds faster than the rest of the country between 1997 and 2018: it’s now 70 per cent higher in London than the rest of the country, up from 30 per cent higher in 1997.

While the divergence seen since the 90s has been a story of London pulling away from all of the rest of the country, it follows decades in which former industrial areas in the north, midlands, Scotland and Wales fell behind. Between 1977 and 1995 South Yorkshire, Teesside and Merseyside saw GDP per person fall by 20 per cent compared to the national average, and most such areas haven’t caught up that lost ground.

Why does this matter?

It matters, first, because opportunity is linked to the economy. There are fewer opportunities to climb the ladder in poorer places. Not just fewer good jobs, but less opportunity in other ways.

In London, over 45 per cent of poorer pupils who were eligible for free school meals progressed to higher education in 2018/19. Outside London there were 80 local authorities where richer pupils who were not on free school meals were less likely than this to go to university. Overall, more than 60 per cent go to university in places like Kensington and Chelsea and Westminster. But less than a third go places like in Knowsley, Barnsley, Hull, and Thurrock.

It also matters because more balanced economies are stronger overall. In an unbalanced economy, resources like land and infrastructure are overloaded in some places, even while they are underused elsewhere. This might be particularly true where cities have seen population shrinkage, and have surplus infrastructure and land. If there are greater distances between workers and good job opportunities that makes it harder for people to get on: not everyone can (or wants) to move away from family to find a better job.

More balanced is stronger overall, but on a wide range of measures the UK is one of the most geographically unbalanced economies. In Germany 12 per cent of people live in areas where the average income is 10 per cent below the national average, while in the UK 35 per cent do. It is very striking that there is no industrialised country that has a more unbalanced economy than the UK and also a higher income, while all the countries that have a higher income have a more balanced economy.

What are we going to do about it? Well, that’s the question our new group will try to answer.

The answer isn’t any of the traditional Labour ones: pumping public sector jobs into places, or subsidising low wage employment, or trying to hold back successful places: we’re interested in levelling up, not levelling down.

Different things will work in different places.

For example, transport improvements might make a bigger difference for remote areas. The ONS defines certain places as “sparse”: the north of Devon and Cornwall, most of central Wales, Shropshire and Herefordshire, most of Cumbria and the rural north east, along with large parts of North Yorkshire, Lincolnshire and North Norfolk. In these places income levels are 17-18 per cent lower. Even controlling for the qualifications and age of people living there, these sparse areas have income levels between £600-£1,300 a year lower, likely driven by poor connectivity.

In other places, the answers are different. I’ve written before about how the way we spend money on things like R&D, transport and housing is skewed towards already-successful areas, creating a vicious circle. We should change that.

But tax cuts could also play a bigger role in helping poorer areas. There’s actually been convergence between regions at the bottom end of the earnings distribution, driven by things like the National Living Wage, tax cuts for low income workers, and things like Universal Credit, which have reduced the differences between places by levelling up the poorer areas more. In poorer places, more people benefit from these policies.

The reason there are growing gaps between areas overall is divergence higher up the income scale.
Looking at the gap between earnings for full-time workers in London and the North East, the pay gap shrank for the bottom 30 per cent of workers, but grew for those higher up. For those at the 10th percentile the pay gap between the two places shrank from 32 per cent to 20 per cent. But for richer folks at the 90th percentile, it grew from 62 per cent to 88 per cent.

So how do we get more good, high-paying jobs into poorer areas? There are a million different specific opportunities, but one that’s relevant in a lot of Red Wall seats is advanced manufacturing.

Over recent decades, Chancellors have tended to cut capital allowances (a tax break for investment) in order to lower the headline rate of corporation tax. I’m not sure that was a good idea: Britain has a lower rate of fixed capital investment than competitors and our tax treatment of investment is stingy. But either way, this change has had a pronounced regional impact: it favours services over manufacturing, so helps some areas more than others.

One way to blast our way through the current economic turmoil would be to get businesses investing again by turning capital allowances right up (“full expensing” in the jargon). That would be particularly likely to help poorer areas. Indeed, when we have tried this in a targeted way before it worked.

Government should think more about how tax and spending decisions can help us level up. It should produce geographical analysis of all budgets and fiscal events, setting out the different impact that tax and spending changes will have on different areas. The Treasury’s Labour Markets and Distributional Analysis unit should have geographical analysis added to its remit.

This whole agenda is exciting. But a lot of people are cynical, because they heard New Labour talk the talk – but not deliver. We’ve got to deliver. So let’s hold ourselves to account, and set ourselves some ambitious goals.

Let’s get earnings growing faster than before in poorer areas. Let’s get unemployment down in the places it’s worst. They say that “what gets measured gets managed.” So let’s “measure up” our progress on levelling up.

Alexandra Marsanu: Working from home – and why we need evolution, not a revolution

6 Sep

Alexandra Marsanu is a Ward Chair at Holborn and St Pancras Conservatives and Deputy Chair for London at Conservative Young Women. She works professionally as a strategy consultant.

A polarising debate has been taking place recently.  On one hand, there is a rare alliance between the Government, media and auxiliary businesses denouncing the impact of homeworking on highstreets, career growth and the mental health of the workers themselves. On the other, you see a majority of workers perfectly content to keep calm and carry on.

No more squeezing on the tube at rush hour; no more money wasted on soggy sandwiches and coffee; no more interruptions or time lost in pointless chitchat over what you did last weekend. An era of high productivity and improved home life is upon us. But would it really be that easy?

Rather than an expected gradual shift to flexible working driven by innovation in collaboration tools, an increase in the ‘gig economy’ or drive for decarbonisation, we have not been given time or choice.

Over the course of a few unusual days, offices were shut down and kitchen tables were seized for the new digital future of the 2020s. We have made do so well with Zoom and Teams and home-made banana loaf that office life seems from a bygone era – not fit for the modern days of self-driving cars and 3D printed buildings. But let’s not forget that they say ‘good things take time’ for a reason.

Although our homes may be packed with monitors and Amazon boxes, many business owners are looking at the empty chairs and aisles and wondering for how long they can still go on. The furlough anaesthetic is due to wear off, and with money quickly running out many are in for a tough autumn.

And for some, it may indeed be time to close shop. Why should taxpayers prop up a chain business just because they hire many people? For many others, it may be difficult to see the value in what they offer. Why would we need to go out and spend our hard-earned money on overcrowded trains and £3 coffee?

Of course, it is difficult to empathise with businesses. After all, the free market will take its tool eventually. But with a £2 trillion debt and still many months of uncertainty to come, there is a case for the economics that has worked so well until now.

Through the measures seen so far, the Government seems to be doing just that. Taking a page out of Keynesian economics, it’s looking to maintain today’s supply for when demand recovers, hopefully next year. And given how symbiotic our economy is, nothing makes more sense.

Many professional areas can be taken as examples. In consulting, banking and legal services the mix of industries needing support is under a constant shift. Where public sector work may be building up in the short term for areas such as consultancy, the impact of huge retailers or automotive companies shutting down is already playing out, and will do so during the months and years to come

Similarly, jobs supporting the most affected industries ranging from marketing to accounting may take a hit as cuts to the frontline are slimming down operations. Even a coveted career in technology may not be completely safe, since technology changes take years to implement and big players such as Accenture or IBM are already reporting job cuts in the past few months. If the impact is big enough, one way or another thange will reach all of us.

So what is there to do? Isn’t the Government’s job to save jobs? Is it really up to each of us to dash to the office so we can put yet another plaster on the economy? After all, we have already eaten our way towards the hospitability recovery last month.

Well, the fact of the matter is that we can’t just go back to the old ways. You see, there wouldn’t really be the space for all of us to go back in the office due to social distancing.

But we can’t expect that the world we see today is here for the long run. Not in an economy which is 30 per cent based on consumption. Unemployment benefits and a significant decrease in tax receipts will only divert from spending which can help make public services better or ease the debt for future generations. Considering a phased or rotational return to the office may be our best contribution until the tourists are back or workers can re-skill.

An exciting ‘future of work’ revolution is already here – one where we balance our work and home life in hybrid working patterns fit for a highly productive economy. And it may indeed be a useless pursuit to spend the money today in saving something that won’t be required tomorrow. But no revolution comes without pain and time to rebuild is what’s needed now.

James Frayne: Big tax rises would make Tory campaigning impossible – in Red Wall seats as well as traditionally blue ones

1 Sep

James Frayne is Director of Public First and author of Meet the People, a guide to moving public opinion.

In my last column, I suggested that the best hope for the Conservatives in building an effective campaign infrastructure in newly-won Northern and Midlands seats was by developing a new business-led coalition in these places.

Many of these towns and small cities have no activist networks of any description, and new voters come from families that openly despised the Tories a generation ago. Practically the only truly culturally Conservative people here – in the North East, the far North West and South Yorkshire – are businesspeople. Businesspeople are relatively large in number and are trusted by their local communities; they would be a perfect launchpad for a new Conservative Party.

It’s early days, of course, and details are yet to emerge, but news of a major assault on British businesses via higher taxes would make such a campaign totally impossible to run. It would be a massive set back to Conservative plans to become a regional party.

If reports are to be believed, amongst other things, the Treasury is considering significantly raising Corporation Tax, as well as Capital Gains Tax (CGT) and taxes on pension payments.

“Corporation Tax” is badly named; it’s a tax on pretty much any significant business, not on “corporations” – but, while larger businesses have both the resources and the endless budget lines to be able to minimise profit and keep corporation tax bills down, SMEs just have to lump it.

And increases in CGT and pension payments will put fear into small businesses, because they ultimately allow business owners to take a lower income now in the hope and expectation of being able to enjoy pay-offs in the future – with their currently lower income supporting their ability to employ others.

All of this would be a bad idea politically at the best of times. But doing it now, just when businesses have been struggling very badly, would be unbelievably risky. It’s not just high street retailers that have bit badly hit; vast numbers of firms have been hit either directly by the logistical difficulties of running a business while social distancing is required, or by a collapse in the confidence of their customers, or both.

New, higher taxes would make it harder for businesses to earn a living, and they would also make redundancies more likely and the scrapping of recruitment plans much more likely. Many businesses will be looking to develop a decent financial cushion over the next year or two – with at least six months’ operating costs in the bank – having been scarred by how close they came during lockdown to oblivion.

They would not be able to generate such a cushion with higher taxes on their profits. (Some businesses are also complaining that this comes on top of Brexit – something else that they would sooner not manage).

Aren’t these businesspeople effectively locked-in to the Conservative Party? Where would businesses go to vote? It’s true to say there are many, many businesspeople across the Midlands and North that would be very unlikely to vote Labour – on the basis the Conservatives would pretty much always be better for them.

But we’re not talking about simply securing their votes for future elections; we’re talking about trying to energise businesses so that they became local recruiters, fundraisers and campaigners for the Party in places where there are no activists. They simply won’t do this if the Conservatives turn them over. Again, if the businesspeople of Rotherham, Doncaster, Barrow, Workington, Bishop Auckland and so on aren’t going to create a new Conservative campaign network, who on earth is going to do it?

While major tax rises on business would make the growth of new regional Conservative Party much more difficult, I strongly doubt it would retain any medium-term popularity with the public either. Public opinion polls always lag behind business polls – and these are showing extreme concern about the state of the economy.

The public would catch up when reality bit and growth slowed and redundancies rose; at that point, the public would see that raising taxes on employers doesn’t help anyone. So where should the Treasury look? There are already suggestions they are being strongly encouraged to look at spending cuts first; only when they have exhausted what’s reasonable morally, economically and politically should they turn towards tax rises.

David Gauke: We’re urged to return to the office – but Ministers must face the fact that the world of work is changing.

29 Aug

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

Some months ago, I made the observation on this site that there was a danger that the Government’s then message – ‘stay at home’ – might work too well. Given that the Government is launching a campaign to get us back in our offices, it looks as if they have reached the same conclusion. By international standards, far fewer of us have returned to our place of work and, as a consequence, businesses that depend upon the custom of office-workers are suffering terribly. In the view of the Government, as we inch back to some kind of normality, now is the time for us to start to go back to the office.

This is understandable. For some people, working from home is a miserable experience and bad for their mental health. Creating an environment where people have the opportunity to go to work is to be welcomed. But there are five reasons why I would urge a degree of caution in the messaging.

First, and perhaps most fundamentally, it is not obvious why a return to work will not increase the infection rate. The UK has seen a lower return to work than other countries but it has also seen a smaller increase in infections (so far). Cramming people into trains and then into offices will increase social interaction and, therefore, the opportunity for the virus to spread. Given that the Prime Minister, Health Secretary, Cabinet Secretary, Chief Medical Officer and half of Whitehall appear to have caught the virus in the office, I do not think this concern can be dismissed.

Other activities, such as getting the schools back, are more important than getting those who can work from home to work in the office. So, in the event of a second wave, any messages about getting back to work will need to be reversed.

We must not forget that what really drives behaviour is the perception of the health risks. Of course, the Government can help inform the public of the real risks but, fundamentally, people will be happier to return to the office if they think it is safe. So my second point is that demonstrating we have the virus under control – with an effective test, trace and isolate system that identifies and suppresses local outbreaks – will count a lot more than exhortations to get into the office.

Third, the decision of where someone works is principally one to be worked out between employer and employee. Some employers are keen to get their staff back; some employees are desperate to return to the office. But that is not always the case and, as Matt Hancock has said in the context of the Department of Health, his concern is that his staff can do the job. His experience, and the experience of many employers, is that they can.

We do not live in a command economy and the man or woman in Whitehall (or Godalming or Hitchin or wherever it is they might live and, currently, work), doesn’t necessarily know best. It is particularly unhelpful if Ministers give the impression that working from home is a step in the direction of being made redundant. This is neither true nor helpful to businesses who have sought to reassure their employees.

What appears to be driving the Government’s message is concern about businesses located in city centres. Although entirely understandable, my fourth point is that we also have to face the reality that the world of work is changing. We are likely to see a structural change with people spending more time at home (and spending more money close to home) and spending less time and money in cities. Trying to push-back against a long term change in consumer preferences will only preserve economic inefficiencies. More people are going to mix working in the office with working from home and our retail and hospitality sectors are going to have to adjust.

And, finally, giving the impression that the Government thinks that the very many people who want to work from home are lazy and unpatriotic does not strike me as obviously good politics.

– – – – – – – – – –

The row over the Last Night of the Proms has probably come as a bit of a relief to the Government. Speaking as a metropolitan, liberal, remoaner type, attempts at cancelling the lyrics of Rule Britannia! and Land of Hope and Glory results in me getting in touch with my inner Nigel Farage (to be fair, we are not in regular contact).

It is hard to believe that anyone really takes offence at the lyrics, but rather that a patriotic celebration of this country should not even be permitted. It is an attitude that infuriates large numbers of people, feeds into a cultural backlash and does nothing to help the disadvantaged.

As an event, it is not to everybody’s taste. I can see why people might find the whole occasion anachronistic, absurd and a bit naff, but surely that is the essence of good Saturday evening telly? After all, the same could be said of Eurovision and Strictly.

If the Last Night of the Proms is too jingoistic for your tastes, the solution is to watch something else. Don’t spoil the innocent fun for the rest of us.

– – – – – – – – – –

Brexit has rumbled on. I have always been a bit of a pessimist as to whether a deal would be reached and, after an apparently acrimonious round of talks earlier this month, the odds of No Deal are increasing.

Both before and after the 2016 referendum, plenty of advocates for Brexit made the case that we would get a very good deal that would mean we would have control over our own laws and excellent access to EU markets. It was argued that anyone who doubted that failed to appreciate how we held all the negotiating cards, especially given the large trading deficit we run with the EU.

When such an offer was not forthcoming, this was blamed on the failure of the May Government to play hardball or the ‘Remainer Parliament’ of 2017-19. Now those impediments have been swept aside and we have a Government that would be prepared to end the transition period without a deal, the EU will presumably accept our demands.

The counter-argument has always been that the EU has certain interests it will be determined to protect, such as the integrity of the Single Market, and considers itself to be better able to withstand the disruption of no deal. Consequently, the threat to walk away was never the bargaining chip some people believed.

In the next few weeks, as the negotiations come to a head, we will find out which interpretation of the EU’s motives and actions – and the efficacy of particular negotiating strategies – will have turned out to be correct. Will the EU cave or not?

This won’t necessarily tell us whether Brexit is a good idea or not, but it will mean that the promises and predictions of politicians and commentators over the last four years or more can be scrutinised in a more informed way. If we get very good access to EU markets and complete regulatory autonomy, I for one will have to admit that I got it wrong. If we do not get that, others are going to have to eat some humble pie.

David Gauke: We’re urged to return to the office – but Ministers must face the fact that the world of work is changing.

29 Aug

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

Some months ago, I made the observation on this site that there was a danger that the Government’s then message – ‘stay at home’ – might work too well. Given that the Government is launching a campaign to get us back in our offices, it looks as if they have reached the same conclusion. By international standards, far fewer of us have returned to our place of work and, as a consequence, businesses that depend upon the custom of office-workers are suffering terribly. In the view of the Government, as we inch back to some kind of normality, now is the time for us to start to go back to the office.

This is understandable. For some people, working from home is a miserable experience and bad for their mental health. Creating an environment where people have the opportunity to go to work is to be welcomed. But there are five reasons why I would urge a degree of caution in the messaging.

First, and perhaps most fundamentally, it is not obvious why a return to work will not increase the infection rate. The UK has seen a lower return to work than other countries but it has also seen a smaller increase in infections (so far). Cramming people into trains and then into offices will increase social interaction and, therefore, the opportunity for the virus to spread. Given that the Prime Minister, Health Secretary, Cabinet Secretary, Chief Medical Officer and half of Whitehall appear to have caught the virus in the office, I do not think this concern can be dismissed.

Other activities, such as getting the schools back, are more important than getting those who can work from home to work in the office. So, in the event of a second wave, any messages about getting back to work will need to be reversed.

We must not forget that what really drives behaviour is the perception of the health risks. Of course, the Government can help inform the public of the real risks but, fundamentally, people will be happier to return to the office if they think it is safe. So my second point is that demonstrating we have the virus under control – with an effective test, trace and isolate system that identifies and suppresses local outbreaks – will count a lot more than exhortations to get into the office.

Third, the decision of where someone works is principally one to be worked out between employer and employee. Some employers are keen to get their staff back; some employees are desperate to return to the office. But that is not always the case and, as Matt Hancock has said in the context of the Department of Health, his concern is that his staff can do the job. His experience, and the experience of many employers, is that they can.

We do not live in a command economy and the man or woman in Whitehall (or Godalming or Hitchin or wherever it is they might live and, currently, work), doesn’t necessarily know best. It is particularly unhelpful if Ministers give the impression that working from home is a step in the direction of being made redundant. This is neither true nor helpful to businesses who have sought to reassure their employees.

What appears to be driving the Government’s message is concern about businesses located in city centres. Although entirely understandable, my fourth point is that we also have to face the reality that the world of work is changing. We are likely to see a structural change with people spending more time at home (and spending more money close to home) and spending less time and money in cities. Trying to push-back against a long term change in consumer preferences will only preserve economic inefficiencies. More people are going to mix working in the office with working from home and our retail and hospitality sectors are going to have to adjust.

And, finally, giving the impression that the Government thinks that the very many people who want to work from home are lazy and unpatriotic does not strike me as obviously good politics.

– – – – – – – – – –

The row over the Last Night of the Proms has probably come as a bit of a relief to the Government. Speaking as a metropolitan, liberal, remoaner type, attempts at cancelling the lyrics of Rule Britannia! and Land of Hope and Glory results in me getting in touch with my inner Nigel Farage (to be fair, we are not in regular contact).

It is hard to believe that anyone really takes offence at the lyrics, but rather that a patriotic celebration of this country should not even be permitted. It is an attitude that infuriates large numbers of people, feeds into a cultural backlash and does nothing to help the disadvantaged.

As an event, it is not to everybody’s taste. I can see why people might find the whole occasion anachronistic, absurd and a bit naff, but surely that is the essence of good Saturday evening telly? After all, the same could be said of Eurovision and Strictly.

If the Last Night of the Proms is too jingoistic for your tastes, the solution is to watch something else. Don’t spoil the innocent fun for the rest of us.

– – – – – – – – – –

Brexit has rumbled on. I have always been a bit of a pessimist as to whether a deal would be reached and, after an apparently acrimonious round of talks earlier this month, the odds of No Deal are increasing.

Both before and after the 2016 referendum, plenty of advocates for Brexit made the case that we would get a very good deal that would mean we would have control over our own laws and excellent access to EU markets. It was argued that anyone who doubted that failed to appreciate how we held all the negotiating cards, especially given the large trading deficit we run with the EU.

When such an offer was not forthcoming, this was blamed on the failure of the May Government to play hardball or the ‘Remainer Parliament’ of 2017-19. Now those impediments have been swept aside and we have a Government that would be prepared to end the transition period without a deal, the EU will presumably accept our demands.

The counter-argument has always been that the EU has certain interests it will be determined to protect, such as the integrity of the Single Market, and considers itself to be better able to withstand the disruption of no deal. Consequently, the threat to walk away was never the bargaining chip some people believed.

In the next few weeks, as the negotiations come to a head, we will find out which interpretation of the EU’s motives and actions – and the efficacy of particular negotiating strategies – will have turned out to be correct. Will the EU cave or not?

This won’t necessarily tell us whether Brexit is a good idea or not, but it will mean that the promises and predictions of politicians and commentators over the last four years or more can be scrutinised in a more informed way. If we get very good access to EU markets and complete regulatory autonomy, I for one will have to admit that I got it wrong. If we do not get that, others are going to have to eat some humble pie.