Ruth Davidson: The pandemic has been devastating for the world’s poorest girls. We cannot turn our backs on them.

18 Mar

Ruth Davidson is the MSP for Edinburgh Central and Leader of the Conservative Party in the Scottish Parliament. This is a sponsored post by Crack the Crises.

The pandemic has hit harder than I think any of us would have imagined when we first heard of another respiratory virus jumping species and spreading around the world. For over a year, our lives have been turned upside down.

While we have all been touched in some way, nobody would suggest that it has affected us all equally. There are dozens of factors that have impacted the way we’ve experienced the last year – in different parts of the UK we’ve faced different restrictions, our jobs have carried varying degrees of risk, and our age, ethnicity, whether or not we have children and our medical histories have shaped the challenges we face.

Following International Women’s Day, and when the safety of women and girls is hitting the headlines back home, it is worth noting that there are few groups for whom this experience has been more damaging than for the poorest girls in the poorest countries.

The UK Government has done much to highlight the inequality they face – the Prime Minister has been a champion for the power of girls’ education as a transformative force in development, and a series of ministers, including the brilliant Baroness Sugg who recently resigned, have driven that agenda forward.

Even before Covid-19 hit us, 130 million girls were out of school, but after the school closures introduced to restrict the spread of the virus, research suggests that ten million more girls are at risk of never returning to school. The immense efforts taken to get girls the opportunity of a better future that education provides are – in millions of cases – being reversed.

For too many girls, being out of school is not just about not learning. It can mean facing abuse, being put to work, being married off or otherwise having their futures snatched away from them. It is estimated that 2.5 million more girls are at risk of child marriage as a result of the pandemic, and one million more girls are at risk of adolescent pregnancy. For the lucky amongst us, this pandemic may have been a tedious intermission in our lives, but that, at base is all it has been. For these girls, it has taken away their ability to shape their own futures.

Over the last ten years, under Conservative Prime Ministers, there have been fewer more powerful forces for the rights of women and girls on the world stage than the UK Government. Projects like the Girls’ Education Challenge have supported millions of girls through school, our progressive leadership in family planning has helped save hundreds of thousands of lives in childbirth and helped women to control their own futures.

When others stepped back, such as in President Trump’s introduction of the Mexico City Policy restricting family planning, the UK stepped up. But Rishi Sunak’s announcement that the Government will break its promise to keep aid spending at 0.7 per cent of our national income puts this role in jeopardy just when it is most necessary. As every other member of the G7 increases its aid in response to the pandemic, the UK is alone in shirking from the task.

The recent reports of cuts in our support to countries like Yemen and Syria are a stark reminder of the practical impact of our broken promise. But It won’t just be in warzones where it’s felt. Girls growing up in extreme poverty, faced by the injustice of gender inequality and the oppression it brings, will have a lifeline withdrawn just when they need it most. I salute MP colleagues who are making it known to the Conservative whips that they will not be party to this abdication of our moral duty on the world stage.

For so many within the party, support of the 0.7 per cent is a cultural shibboleth helping to define the type of Conservatism we practice – and a quick headcount shows our number can tip the scales. So I welcome weekend briefing rolling back a permanent cut to a temporary one. But, frankly, I’d rather the Chancellor reconsidered his decision entirely. The UK shouldn’t balance its books on the backs of the world’s poorest and what a waste it would be to reverse the phenomenal progress towards gender equality of which we have been a part.

There has been much political discussion in recent years about how women succeed, what the barriers are and how we individually and collectively can overcome them. It’d be patronising to suggest that the intervention of others is the decisive factor in this, but it is absolutely undeniable that the context in which women grow up helps to shape their chances.

Millions of the next generation of women will have a tougher start in life, and a slimmer shot at success, because the withdrawal of UK aid will make it harder for them to learn, harder to avoid abuse and child marriage, and harder to take their futures into their own hands.

Paul Howell and Heather Wheeler: Full HS2 is critical to our election commitment to rebalance the economy

16 Feb

Paul Howell is the MP for Sedgefield and Heather Wheeler is the MP for South Derbyshire.

After our landslide election victory last year, the Prime Minister made a promise to unite the country and level-up our nations and regions. The jobs-first approach and once in a generation levels of public investment in infrastructure announced by the Chancellor in his spending review set our party on course to deliver on these promises, despite the challenges presented by the pandemic.

The Chancellor has invested in supporting businesses and individuals throughout the pandemic – at massive cost to the Exchequer. But now that the vaccine is being rapidly rolled out across the country, we need to start thinking seriously about the economic recovery. We feel strongly that we need to invest in infrastructure and that in particular, investing in new rail lines, upgrades and new train fleets is one of the best ways to do so.

As Members of Parliament representing constituencies in the Midlands and the North East, we are pleased to see reform of the Treasury’s Green Book rules to unlock future public investment for our regions. Too often in the past, a rigid interpretation of the rules has led to spending in London and the South East, with areas such as ours being overlooked. The reforms under consideration have the potential to turn the situation on its head – essential if we are going to achieve our goals of levelling up.

The publication of the National Infrastructure Strategy is also welcome, as is the unequivocal support it provides for High Speed 2 – our flagship national transport project.

When the Government gave HS2 the go-ahead it recognised that it will deliver vital connectivity, cut journey times and boost capacity. We are aware of the current calls to cancel the project outright given the impact of Coronavirus. However, as Andrew Stephenson recently said, to do so would “send a terrible signal out globally about the UK intending to build back better from Covid-19.”

With over half of the Phase 1 budget for the line from London to Birmingham already spent or contracted to, such calls are frankly nonsensical, and would lead to the loss of 13,000 jobs directly employed by HS2 and tens of thousands more in the supply chain.

Construction is well underway across the route, and British businesses are benefiting, such as County Durham based Cleveland Bridge, a world-leading steel engineering company. It produced twenty-four massive steel girders that form part of the first of HS2’s new modular bridges, recently installed over the A446 in Solihull in just 45 minutes.

Instead, we must continue with this once in a generation investment into UK plc. HS2 will serve as a much-needed catalyst for economic change across many of the cities and towns that are now Conservative constituencies. Many of these areas have seen positive change over recent years but such is the scale of the economic challenge that our levelling-up agenda must double down on investments such as these to drive economic growth and opportunity. This is made all the more important in light of the ongoing battle to contain Covid-19 across the UK, but particularly in our Blue Wall areas.

And to counter those who say the impact of home working and changes to commuting, or the future widespread introduction of autonomous vehicles means that we should no longer invest in rail, we say that is wrong. Demand for rail travel rose year on year since privatisation in 1995 – and pre-pandemic was predicted to go on rising – and we see no reason for this to change in the longer term. HS2 is intended to have an operating life of 120 years; it is right that we are thinking long term and investing in high-speed rail, just as virtually every advanced economy in the world is doing.

Try telling people in Japan, Germany, South Korea, China, Turkey and elsewhere that such investment is a waste of money and you will get an incredulous response. With many more countries now developing national and international high-speed rail networks, we have the opportunity in the UK to establish a world leading capability and export new trains, equipment and expertise to the likes of India, Australia, Scandinavia and many more. This opportunity is too often overlooked, but it has huge potential.

Making sure the British public gets the best bang for their buck from our flagship national transport project and that it truly delivers for the whole country will be vital. Anything less would be a missed opportunity. That is why HS2’s Phase 2b, Midlands Engine Rail, Northern Powerhouse Rail, and our plans to reverse Beeching’s cuts must also get the green light from the Integrated Rail Plan, which we are eagerly awaiting. Furthermore, investing in rail, and shifting people away from car and domestic air travel, is critical to achieving the Government’s net zero targets.

The opportunity from this unprecedented public investment is not just about new tracks, wires, bridges and tunnels – important though they are. We represent areas with rich and unrivalled heritage of train building, with two major rolling stock factories (Bombardier Transportation in Derby and Hitachi Rail in Newton Aycliffe) directly employing thousands of our constituents and supporting many thousands more jobs in their British supply chains.

After too many years of decline, when we saw British train building virtually extinguished, train building is back.

We now have two established UK factories employing highly skilled workers who are producing new trains that improve the journeys of British passengers. Were they to secure the order for the new fleet of very high-speed trains it would secure jobs and investment in regions outside HS2’s Phase 1 route, thereby spreading the programme’s benefits more evenly across the country to regions like the East Midlands and the North East. More broadly, it would enhance and protect vital existing investment in rail manufacturing at a time when the pandemic has created uncertainty across the rail sector.

We cannot waste the opportunity that our Government’s high-speed rail investment plans presents. Using it to level-up the economic fortunes of the areas we represent will make good on the Prime Minister’s promise to first time Tory voters at the last election – to unite our country and re-balance our economy. It is time to build back better.

Andy Street: 15 years on, we can finally heal the scars of MG Rover’s collapse

1 Dec

Andy Street is Mayor of the West Midlands, and is a former Managing Director of John Lewis.

The battle to protect our economy from Coronavirus has brought comparisons with previous downturns, re-examining past recessions and reminding us of the impact felt when major industrial players have collapsed.

The levels of borrowing outlined last week by Rishi Sunak are testament to the unprecedented efforts being made by Government to draw on past experiences and protect jobs as we face a new kind of recession.

Here in the West Midlands, there remain acres upon acres of former industrial land which remind us of previous slumps. With government backing, we are now reclaiming these eyesores to provide new homes and job opportunities.

And as we face this latest challenge, I am hopeful that we will finally heal one of the biggest, and most painful, of these scars. Longbridge, in Birmingham, offers an opportunity to use this economic crisis to erase the results of an infamous economic shockwave.

Completing the regeneration of Longbridge would be a powerful example of Conservative policy actively “levelling up” the economy. For 15 years, local people have waited to see this site fully reclaimed. Let’s show them that after three years under a Conservative mayor, and with a new Conservative MP in place, we are ready to deliver it.

For anyone whose roots are in the West Midlands, car making holds a special place in our hearts. As someone brought up in Northfield, just up the road from the famous Longbridge car plant, I am also very conscious of the past of our car industry. Home of “the Austin”, Longbridge at its 1960s zenith was one of the world’s biggest car factories, employing tens of thousands of people producing ground-breaking vehicles like the Mini.

Then, of course, came the painful decline through the disastrous British Leyland years and beyond. The causes of that decline are still the cause of much debate, but no-one can argue about the individual and collective pain that each job loss brought.

This culminated 15 years ago in the collapse of MG Rover, with the loss of the remaining 6,000 jobs. It remains one of the darkest days in the history of Birmingham and the West Midlands.

Psychologically, the closure dented the confidence of a region with a proud automotive pedigree. Economically, MG Rover’s collapse impacted on the thousands of people who worked for the firm and the massive supply chain that supported it.

Physically, when MG Rover shut its gates for the last time it left behind a vast industrial site that reminded us of the closure.

Since then, much of the site has been redeveloped. Developer St Modwen has shown real ambition and vision, effectively building a new town centre on part of site, which also boasts a fantastic college. Aquapak, a firm at the cutting edge of recycled polymers, recently welcomed Alok Sharma to their premises on the new business park there.

The old MG Rover site is being reshaped by a sustainable mix of businesses and housing redevelopment, including state-of-the-art senior living. Yet every time I pass Longbridge, I look across to the parts that remain empty and think about what it once meant for local jobs.

Now I’m determined to complete the regeneration of Longbridge, reclaiming a site that once represented one of our region’s most established industries, by applying one of our newest.

In the last year I have been joined by fellow Brummie Gary Sambrook, the Conservative MP for the area, in this ambition. He has been working with developer St. Modwen to get MG Rover’s “West Works” site redeveloped, and once again generating opportunity for local people.

Together we are promoting Longbridge’s strong business case to be a critical site for Government support through the Urban Transformation Fund. That’s why I submitted Longbridge to Government as one of our region’s top funding bids and it is why Sambrook passionately pitched it to the Chancellor last week in the Commons debate on the Spending Review.

To put it simply, this derelict site – which has been levelled for years – could provide a quite profound and tangible example of “levelling up” in action, and illustrate the West Midlands ability to bounce back from adversity.

That ability is also reflected in the land reclamation technology being pioneered here, which up until the pandemic hit, was cleaning up derelict eyesores like Longbridge and helping us build new homes at record numbers, through our “brownfield first” policy.

The exciting investment in the National Brownfield Institute at Wolverhampton will cement our position as a national leader in remediation and construction technology.

It is fitting that this example of West Midlands 21st Century innovation can be put to use to “level up” Longbridge, given its links to our industrial heritage.

Of course, there is another reason why the fate of the remaining Longbridge site would resonate so much now. The automotive industry is facing huge challenges. The sector is going through a revolution, illustrated by the Government’s ambitious decision to stop the production of petrol and diesel cars in 2030.

Longbridge stood as a reminder of what happens when we fail to invest in our automotive sector. The promise of £500 million in the Spending Review, to back electric battery technology and production shows the resolve not let this happen again. That’s why the Gigafactory that is so critical to our automotive future must be built in the West Midlands.

Longbridge may, sadly, never produce another car – but the site can produce quality new jobs for local people. With a new Gigafactory, we can recharge the automotive industry 15 years after MG Rover’s collapse.

By backing the regeneration of Longbridge, while investing in the West Midland’s automotive future, the Government can not only accelerate its ambitions to “level up” the economy – it can also drive home a profound message about our ability as a nation to bounce back.

The proposed foreign aid cut. Many Tories are against it. But Sunak has limited options as he tries to salvage the economy.

18 Nov

Given the Coronavirus crisis is estimated to have cost the UK £210 billion and counting, the Government is under enormous pressure to explain how it will pay its debt back. One of the ways Rishi Sunak is reportedly planning to do this is by cutting foreign aid, which he is expected to announce in a spending review next week.

Currently, the UK spends 0.7 per cent of gross national income on foreign aid, a target that is recommended by the United Nations and was written into law when David Cameron was in office. But the Chancellor apparently wants to bring this down to 0.5 per cent. The Prime Minister’s official spokesman said of the idea: “we are looking at how the aid budget is spent, ensuring it serves the UK’s priorities and represents value for money. It is legitimate to consider where savings can be made when the public finances are under huge strain.” 

Several prominent Conservatives have opposed the move. Tobias Ellwood, Tory chairman of the Commons defence committee, said: “The damage would be we are retreating from the global stage at the very time when we should be doing exactly the opposite.” Jeremy Hunt and Bob Neill are also against it, as is Dominic Raab, the Foreign Secretary, apparently, who previously dismissed reports it would be cut as “tittle tattle”. Cameron’s disapproval has been made known in several newspapers.

One concern is that a reduction would harm international relations. Andrew Mitchell, former international development secretary, said: “It would be an extraordinary decision at the very point at which Britain is about to take over the chairmanship of the G7, with a new administration in the White House which will strongly champion the international system”, and Anthony Mangnall, the Tory MP for Totnes, echoed these concerns.

Others point out the moral case for keeping foreign aid as it is, given that the pandemic is when the world’s poorest people need help the most. Even before the cut was suggested, the Government was due to spend less than its anticipated £15.8 billion this year, due to a contraction in the economy. When Conservatives have spent tremendous sums on the flawed contact tracing app, PPE, and other Covid projects, some might call foreign aid a drop in the ocean.

And yet, others will say the cut is necessary at a time of intense national need. Given the Conservatives won last year’s election with a manifesto based on “levelling up” the UK, by way of domestic investment and infrastructure, the Government no doubt believes voters want this to be reflected when the Chancellor plans the economic recovery.

If there is a cut to 0.5 per cent, it’s also worth remembering that the UK will still be one of the biggest global contributors to foreign aid. In 2019 and 2018, it was one of only five countries to hit the UN’s 0.7 per cent aid target (level with Denmark, but below Luxembourg, Norway and Sweden), and there’s an argument that other countries need to increase their spending. New Zealand, Canada, Japan and the USA have not reached 0.5 per cent, never mind 0.7 per cent. 

Furthermore, it is understood that Boris Johnson wants this to be a time-limited measure, with a return to 0.7 per cent. In the interim, the UK can make a sizeable difference is by helping to facilitate the global supply of vaccines.

Either way, this is just the beginning of Sunak having to make some incredibly unpopular decisions about how to salvage the economy. Having become one of the most popular politicians in a staggeringly short period of time, he is now going to deliver policies that illicit completely the opposite response to Eat Out to Help Out. There is no painless way out of this. The next few months are going to be testing for the Chancellor to say the least.

Ed Vaizey: Ending tax-free shopping for international visitors would be disastrous for the British economy

19 Oct

Lord Vaizey of Didcot is a Conservative Life peer who has sat under this title in the Lords since 10 September 2020. Prior to joining the Lords, he sat in the Commons as an MP, and was first elected in 2005.

I bow to no one in my admiration for Rishi Sunak.  Taking up the toughest of jobs at the toughest of times, he has played a blinder. Job Support Scheme, Bounce Back Loans, Eat Out to Help Out. Even though I’m not an MP any more, I know from talking to my former constituents how much this help has been needed and welcomed.

But with the Government having to make so many decisions so quickly, it’s unlikely everyone will be bang on the money. Even in normal times (remember those?) we occasionally saw unintended consequences.

I’m afraid to say that the Treasury decision to end tax-free shopping for international visitors at the end of December is one of those decisions. At the moment, visitors can reclaim the VAT on stuff they buy here. From January, this will be stopped.

I can see why the Treasury thought it was a clever wheeze. They think it will only affect a small group of very wealthy people. If it hits anywhere, it will hit Bond Street and Bicester village – not exactly marginal vote territory.

But there’s a problem. These wealthy visitors don’t just shop – they eat out, they go to museums and the theatre, stay in hotels. They also travel outside London, visiting places like York and the Lake District.

Also, the posh stuff they buy is often actually made here. Yes folks, those Burberry suits are made in Yorkshire. And those French Chanel jumpers are actually made in Scotland. Which is why we are now in the weird position of the SNP Finance Minister calling out a Tory Chancellor for not backing British business.

The Treasury assumptions, which I have seen, act as if the vast majority of visitors will still come, so the Treasury will make a net gain from them paying VAT. But why should they when we will be the only country in Europe not offering VAT-free shopping?

As a result of this decision, they are likely to go to Paris, Milan or any other European city instead of London. In fact, a recent poll of these visitors showed that if the UK ends tax-free shopping 93 per cent would not buy goods here and 60 per cent wouldn’t even bother visiting post the pandemic. Maybe that’s why the French are giving them a nudge by lowering their VAT free threshold the day after the Treasury took the decision.

It doesn’t take many visitors to change their plans. 13 per cent of all-tax free shoppers account for 44 per cent of all tax-free sales. All it takes is for a small proportion of high-spending international tourists to go elsewhere before the impact is felt. The end result is an increase in job losses.

Retailers, hoteliers and airport chiefs from all over the country have warned that scrapping tax-free shopping for international tourists has put 70,000 jobs in jeopardy. The decision is a big blow to the regions. Tax-free shopping supports 1,800 jobs in Edinburgh and 1,200 jobs in Manchester alone, and the money spent in London stores helps high streets throughout the UK.

Most flights from the UK’s regional airports are to and from Europe. Stores in Birmingham and Manchester had hoped to double sales to EU visitors on the understanding that tax-free shopping would be extended to EU countries once we’d left the bloc. Now the likes of Selfridges and Marks & Spencer are warning the impact it will have on jobs across the country instead. This is not what those workers voted for.

If allowed to go ahead, the decision to end tax-free shopping for international visitors will put Global Britain at a competitive disadvantage and result in thousands of jobs losses. I hope our pragmatic Chancellor will think again.

Richard Ritchie: The climate crisis – and this pandemic – have made the case for a carbon tax stronger than ever before

15 Oct

Richard Ritchie is the author of a recent history of a secretive group of Conservative MPs called The Progress Trust (Without Hindsight: A History of the Progress Trust 1943-2005). He is Enoch Powell’s archivist and is a former Conservative Parliamentary Candidate. He was BP’s director of UK Political Affairs.

There is something in the air, and it’s not just carbon or virus emissions. Earlier this month, ConservativeHome carried a piece by Rachel Wolf, championing carbon pricing – that is the polite way of describing some form of carbon tax. Then, the influential economist Dieter Helm published in September a new book, Net Zero: How We Stop Causing Climate Change, which explains in detail the rationale behind a carbon tax. And from The Times, we’ve learnt that the Chancellor is considering such a tax for his next, Covid-19 budget.

It’s not a new idea. When I worked for BP and climate change first entered the political agenda – before, the main worry was that oil would run out and become too expensive – thoughts on how to price carbon were already in circulation. The oil and gas industry saw some merit in the concept, but favoured emissions trading over a tax, correctly identifying this as a less expensive, Europe-inspired fudge. Now, the combination of a pandemic and climate crisis gives the idea of a carbon tax real traction.

The political implications are important. Climate change and Covid-19 have much in common. Both require us to “follow the science”, although in neither case is the science unanimous. Both are manna from heaven for those who wish to “shut-down” the economy, and limit personal freedom. Both provide excuses for expanding the state. And in both cases, the cure can prove worse than the disease.

There can be little doubt that, so far, global policies to reduce carbon emissions have failed. This won’t worry those who are sceptical of the causes of climate change. But if one believes a failure to act now is to bequeath a catastrophe to future generations, then those on the “right” should be as concerned as those on the “left”.

Where we differ will be on the remedies. So far, “left-of-centre” remedies have generally been the norm. The Kyoto Protocol in 2007 and the Paris Agreement in 2015 have been little more than an opportunity for governments and lobbyists to parade their compassion. Whatever Trump’s motives may be surrounding climate change, his analysis of the Paris Agreement is basically sound. Some of course think its failure is due to inadequate targets; but their targets would make the economic consequences of Covid-19 seem trivial in comparison.

So the question is whether there is a policy which would reduce carbon emissions effectively, in an economically rational way. This is surely one reason why Rishi Sunak is attracted by the idea of a carbon tax as a means of reducing carbon consumption.

In Dieter Helm’s view, the word “consumption” is pivotal. It is no good concentrating solely on industrial emissions, as these won’t necessarily have any global effect – it simply drives emissions abroad, frequently to China. But a carbon tax which crucially incorporated a carbon border tax on imports would, by targeting attention on everyone’s personal carbon footprint, incentivise many things which probably make sense in themselves anyway.

There will be many Conservatives who will argue that all taxes do harm, and that the introduction of a “new” tax is incompatible with Tory beliefs. But unless one is totally sceptical of the science, and dismissive of the need to balance the books, there is much to be said for taxing “bads” rather than “goods”.

Of course it is open to many objections. For example, does the Treasury regard a carbon tax as an emergency measure to raise revenue, or a longstanding instrument to influence behaviour? If it is to serve its purpose, it will eventually yield less revenue.

Equally, if applied in the wrong way, it could merely make this country less competitive. Without care, it could prove regressive. Indeed, if the Paris riots over fuel duty are any guide, it could also prove politically impossible.

Then, for it to work, there must be alternatives for consumers to choose from. Not many will choose an electric car, for example, if there is no guarantee that it can be charged along the journey. (Although mention of electric cars also serves as a reminder that not everything is at it seems – an electric car takes twice as much carbon to produce than a conventional one. A carbon tax would sort that out too).

On the other hand, if properly devised a carbon tax has the capacity both to raise government revenue and to reduce carbon emissions, and even to incentivise other countries to follow suit. Matters to be decided include how the carbon price is fixed and at what level it should be introduced. Should it be levied on consumption or production? Does the tax provide sufficient time for consumers to adjust?

This is the political danger. Carbon taxes could come to the rescue of a cash-strapped Chancellor, because they hold out the prospect of raising new revenue without breaking a manifesto commitment not to raise existing taxes. But if the carbon tax is set too high at the outset, it will be counter-productive. If the Treasury is following Helm’s advice, “the trick is to start low, but credibly signal that the price is going to go up as high as is necessary to achieve the (carbon reduction) target.”

There is no painless way of reducing carbon emissions. Those on the “left” will embrace a policy which involves “picking winners”, nationalisation, subsidies, exemptions, regulation and illiberal compliance. A lobbyist’s paradise. The alternative is to incentivise new technologies, create new markets and provide practical signals to consumers. This is the purpose of a carbon tax. It will never be “popular” because the costs of transforming the networks, communications and transport of this country to facilitate lower carbon emissions are enormous.

But compared with the alternatives, a carbon tax is at least rational and addresses all the major sources of carbon emissions, namely agriculture, transport and electricity. Moreover, it produces a new source of government revenue at a time when it is desperately needed.

Any new tax is depressing to a free market Tory. But climate change, like pandemics, raises issues which are more important than economics. If it is a whole load of nonsense to claim that today’s climate change is man-made, then we are free to carry on as we are.

But if not, Tories have an obligation to advocate alternative solutions to those of the socialist “greens”. The market is the best way of allocating scare resources effectively. But in a time of war, the market cannot tell us how much to spend on butter or guns. That is a political choice, and it is the nature of the choice presented by climate change, if most scientists are to be believed. On so many levels and for so many reasons, it is hardly surprising if Sunak is pondering one.

Neil Record: Lessons from the recent past for the Chancellor as he seeks to salvage the economy

13 Oct

Neil Record is Chairman of the Institute of Economic Affairs board.

Like many people, I have become increasingly concerned about the long-term consequences of the UK government’s Covid-19-related extraordinary expenditure. Faced with the position the Government’s finances are now in, what would I do if I were Chancellor of the Exchequer?

My first priority, and indeed the core function of any Chancellor, would be to formulate a plan which on reasonable or even conservative estimates of future economic activity would yield enough tax revenue to stop the mountain of public debt growing any larger.

It may be fashionable to argue that with “modern monetary theory” there is a new normal level of fiscal debt which governments can comfortably accommodate that is far higher than, say, the old 60 per cent debt-to-GDP that the EU used to require a country to be under to qualify for membership of the Euro area.

But the UK’s public debt now stands at more than 100 per cent of GDP, and any student of economic history will understand that the higher the national debt level, the more vulnerable a country is to external shocks exactly like the one administered by Covid-19, and indeed to future unknowable shocks.

The consequences of fiscal recklessness can be seen littered not just across the developing world, with serial defaults and bankruptcies, but also in the sophisticated developed world, where the world’s third largest economy, Japan, has been mired in stagnation for 30 years, burdened by enormous public debt which saps confidence and dampens entrepreneurial spirits.

So if the current Chancellor accepts the idea that fiscal prudence is at the heart of his role, then what should he do to combine that constraint with creating the conditions for a vibrant, growing economy providing jobs and opportunities across the board?

Were I Chancellor, my objective would be to initiate policies which have a proven track-record of success on two measures: growth in real Government revenue, and growth in labour productivity. The latter is the heart of the complex modern economic system that delivers real rises in living standards. The former is the measure which, if successful, would minimise the extent to which balancing the fiscal books requires real cuts to public spending. The question of how large a role the State should play in the economy is a bigger question for another day.

Let’s start with government revenue. If we examine the past 40 years of the UK economy, we can search out the best decade for rising government revenue which, as it turns out, is 1993-2003. This decade achieved real growth (i.e. adjusted for inflation) in government revenues of 4.3 per cent per annum – an astonishingly high rate which delivered 51 per cent more real annual government revenue at the end of the period than at the beginning! If the current Chancellor could sow the policy seeds to create another period like that again, he would be rightly acclaimed a hero.

Why was this period so successful for government revenue? The answer is that it was launched on the back of more than a decade of deregulation and reduced marginal tax rates, and that the period itself was one of broad policy stability. This is the more remarkable since it straddled a Conservative government (until 1997), and a Labour one thereafter. It was also a period of strong growth in labour productivity, of which more below.

What were the key tax facts in the successful 1993-2003 period? A top rate of income tax of 40 per cent; corporation tax falling from 33 per cent to 19 per cent; stamp duty top rate of four per cent (after one per cent earlier in the period); VAT at 17.5 per cent; and capital gains tax same rate as income tax, but with taper relief (from 1998-99) reducing the rate on shares by up to 75 per cent (i.e. giving a top rate of 10 per cent).

So here we have a blueprint for a set of tax policies that have been proven to deliver strong rises in Government revenue.

It is always tempting to imagine that as Chancellor you can conjure up any amount of tax revenue by just adjusting tax rates accordingly. The evidence points strongly in the opposite direction. Marginal tax rates send very strong signals to key players in every modern economy, such that economic activity will inevitably shift away from heavily taxed activities or sectors to more lightly taxed (or even, worryingly, to subsided areas).

If you, as a government, want strong economic activity in both the labour market (jobs, productivity) and in the market for capital (infrastructure, homes, machinery, technological change), then each has to be taxed in a balanced way so neither is favoured and neither is avoided.

Which brings me to labour productivity – the engine of living standards. This is a fascinating area – one that, in my opinion, is much under-studied. We had been growing richer and richer in the Post-War period until 2008, when our improvements in living standards came to a juddering halt. There are two “whys” here – why did we grow so consistently for 40 years, and why did we stop growing so suddenly?

On the first question, we had been the beneficiaries of an absolutely remarkable transformation in our technological knowledge, which allowed each worker to enlist more and more power and control over his efforts with the help of increasing amounts of capital equipment. We think recently mainly of the digital revolution, but this comes at the end of a series of revolutions: agricultural, energy, trade and specialisation – all of which have contributed to this quite remarkable success story.

Why did this stop? In 2008, a key specialisation of the UK economy, the financial services sector, had a catastrophic failure. This sector had been an important engine of growth and source of much government revenue. The shorter-term policy response to this crisis protected jobs and the banks.

But the longer-term response to this was to set this sector in a straitjacket of regulation, which has killed its growth, its animal spirits and its tax generation. This enthusiasm for regulation has spread across all sectors, not just financial services, and has had an equivalently dampening effect on growth in those sectors too. Higher tax rates on top incomes have exacerbated this effect.

Governments have choices. This Government may not choose to adopt some or any of the successful policies from the past – and there will be good reasons for those decisions. In the round, however, if the government in general, and the Treasury in particular, is serious about pulling the UK out of the very serious financial and economic position it currently faces, then the arguments presented here should weigh heavily on its thinking.

This article is based on the author’s recent briefing paper, The Chancellor’s Post-Pandemic Choices.

David Gauke: Without a proper state aid regime, the UK is unlikely to make a deal with Brussels

1 Aug

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

Within the next three months, Boris Johnson is going to have to make the decision that will define his premiership and determine the future of British politics – especially the Conservative Party – for a generation. And the subject matter of this momentous decision? The previously obscure issue of the regulatory regime constraining the ability of the Government to provide taxpayer support for private sector companies. In other words, state aid.

Before turning to the issue in hand, let me set out a little context. My last two columns (here and here) have made the case that there is an electoral logic that points towards the Conservative Party moving in a leftwards direction economically but in a rightwards direction when it comes to social issues or, to put it more precisely, issues of national identity. Politics appears to be realigning as the biggest dividing line ceases to be about economic class or ideology but in relation to cultural issues.

The consequences of such a dividing line – and the Conservative Party unambiguously placing itself on one side or the other – is an uncomfortable one for those Conservatives with a desire for intellectual consistency.

At least since Margaret Thatcher’s premiership, the Conservative orthodoxy has been in favour of sound money and free trade. That is not to say that the State had been banished from making any kind of intervention in the economy – no recent government could accurately be described as laissez faire – but that any such intervention would be made carefully, recognising that the market was, by and large, a rather good way of allocating resources.

As for cultural issues, the Conservative Party has been a broad church consisting of social conservatives and social liberals, tub-thumping patriots and committed internationalists. Generally, we rubbed along alright.

These Conservative traditions were abandoned in 2019, resulting in the Prime Minister’s electoral triumph in December when he won previously safe Labour seats. He did so by promising an economic policy that involved more spending and greater government intervention. He also promised to deliver Brexit at whatever cost. It was an uncompromisingly Leave prospectus that appealed to patriotic/English nationalist working class voters.

This brings us to the UK/EU negotiations over a comprehensive Free Trade Agreement. Contrary to promises of an oven-ready deal, discussions have not yet made a lot of progress. There are two sticking points. The first is fish. This is a matter of economic irrelevance (our fishing industry contributes less to GDP than Harrods) but of disproportionate political importance. As one can make a similar point about the EU, it would be an extraordinary failure for this matter to prevent a wider deal being reached.

The more substantive issue relates to the level playing field provisions. These are the EU’s requirements that the UK will not engage in “unfair competition” by undercutting the EU’s social and environmental legislation, nor provide anti-competitive subsidies.

The UK Government’s response to these demands has been to argue that this is an outrageous attempt to fetter the actions of a newly-independent nation. Given that (1) free trade agreements inevitably involve accepting some restrictions on a country’s ability to determine its own rules and (2) the UK accepted the principle of level playing field provisions in October’s Political Declaration, the EU is less than impressed by the argument.

The particular focus of the dispute has been state aid. At one level, this is surprising. The UK has traditionally eschewed state aid spending, seeing it as market-distorting and a wasteful use of taxpayers’ money. We spend less of it than the French and Germans and, as EU members, consistently argued against its use.

Nor has it traditionally been a touchstone issue for Eurosceptics. From my days in the ERG, I recall plenty of conversations about how the EU imposed regulatory burdens on businesses, prevented trade deals with rising economies like China and resulted in too much power in the hands of the unelected (oh, happy innocent days). Restrictions on bailing out private sector companies were not so much of problem for us Thatcherites.

This issue could have easily been de-escalated if we had put in place our own, independent and robust state aid regime, perhaps enforced by the Competition and Markets Authority. Such a regime is probably necessary (albeit not sufficient) in order to reach a compromise with the EU on this topic.

Instead, we have refused to set out our own domestic regime and there is much talk of how we can use our new freedoms as ex-members of the EU to support our own companies, like the rather odd acquisition earlier this month of a £400 million shareholding in a failed satellite company.

According to the Financial Times, Dominic Cummings is digging in against anything other than a “minimal, light-touch” state aid regime, believing that once you have left the EU “you should just do whatever you want”.

This brings me back to the nature of the Conservative victory last year and, in particular, the new supporters. If the Government’s focus is appealing to nationalists who favour an interventionist state, it would want the ability to back national champions or other businesses in favoured locations.

And if you are temperamentally inclined to think that any constraint on your ability to “do whatever you want” (whether by the EU, Parliament or the legal system) is an affront to democracy, then you will be all the more the likely to resist a robust and independent regime.

There are, however, consequences. First, it is very hard to see how the EU will agree to a deal if the UK does not have a proper state aid regime. I wrote in February how there may be a political case for not getting a deal (any deal will be very thin in any event, some parts of the economy will suffer as a consequence of leaving the Single Market, better to collapse the talks and blame the EU for the consequences) and that argument still applies.

But, as a consequence of the handling of Covid-19, the Government is more vulnerable to the charge of incompetence. In addition, a no deal Brexit would be a gift to the SNP, thus weakening the Union yet further.

Second, even putting aside the EU dimension, there are very good arguments for having in place a robust state aid regime. The Treasury will be arguing the case. Both as a finance ministry (ensuring that taxpayers’ money is spent wisely) and as an economics ministry (wanting resources to be allocated productively in order to maximise economic growth), it institutionally hates state aid. Presumably, the Chancellor of the Exchequer, well-regarded by his officials, will have similar views and will be making the case forcefully. At least, he should be.

It will be for the Prime Minister to decide. Go for the purist view of Brexit (“you do whatever you want”), embrace the new political alignment and splash the cash in order to play to the Red Wall voters. Or keep open the possibility of a deal, look after the interests of taxpayers and maintain some kind of consistency with economic orthodoxy. Whichever way he goes, it will be a hugely consequential and revealing decision.

Caroline Nokes: Spare a thought for women. Male ministers have forgotten we exist in their lockdown easing plans.

30 Jun

Caroline Nokes is Member of Parliament for Romsey and Southampton North. 

Covid-19 has taught us many things about the importance of physical and mental wellbeing. We discovered (if we actually needed to be told) that your chances of recovery were greatly improved by being physically fit and in the normal weight range for your height.

We found out that mental resilience was important to cope with long periods of relative isolation, and social contact carried out mainly by Zoom. We were told very firmly that an hour of exercise should be part of our daily routine, and pretty much the only way to escape the house legitimately.

But for women in particular the importance of wellbeing seems to have gone well and truly out of the window as lockdown is relaxed.

Why oh why have we seen the urge to get football back, support for golf and fishing, but a lack of recognition that individual pilates studios can operate in a safe socially-distanced way, rigorously cleaned between clients?

Barbers have been allowed to return from July 4 because guess what – men with hair need it cut. They tend not to think of a pedicure before they brave a pair of sandals, although perhaps the world would be a better place if they did. Dare I say the great gender divide is writ large through all this?

Before anyone gets excited that women enjoy football and men do pilates can we please just look at the stats? Football audiences are (according to 2016 statistics) 67 per cent male and don’t even get me started on the failure of the leading proponents of restarting football to mention the women’s game.

Pilates and yoga (yes I know they are not the same thing) have a client base that is predominantly women and in the region of 80 per cent of yoga instructors are women. These are female-led businesses, employing women, supporting the physical and mental wellbeing of women, and still they are given no clue as to when the end of lockdown will be in sight.

Could it be that the decisions are still being driven by men, for men, ignoring the voices of women round the Cabinet table, precious few of them though there are? I have hassled ministers on this subject, and they tell me they have been pressing the point that relaxation has looked more pro-men than women, but it looks like the message isn’t getting through.

I will declare an interest. Since I first adopted Grapefruit Sparkle as a suitably inoffensive nail colour for an election campaign in 2015, I have been a Shellac addict. The three weekly trip to Unique Nails is one of life’s little pleasures, an hour out, sitting with constituents, chatting, laughing, drinking tea.

It is good for the soul, a chance to recharge and chill out. And for many of the customers it is their chance to not have to bend to get their toenails trimmed, it is a boost to their mood, that can last for a full three weeks until it is time for a change.

And it is a fairly harmless change to go from Waterpark to Tartan Punk in an hour. Natural nails have done very little for my mood since a nice chap from Goldman Sachs told me: “you could go far if only you opted for a neutral nail, perhaps a nice peach.”

At school I was described as a “non-participant” in sport – I hated it, and it has taken decades to find the activities I can tolerate to keep my weight partially under control. Walking the dog is a great way, but nothing is as effective as the individual work-out rooms in a personal training studio – where it is perfectly possible for those of us who do not like to be seen in lycra to exercise in isolation and then have the place cleaned for the next victim.

I am not suggesting it is only women who do not like to exercise in vast gyms, there are men with similar phobias, but what I cannot get over is the lack of recognition that a one-to-one session in a studio is not the same as toddling off to your local treadmill factory.

The Pilates studio owners of Romsey and Southampton North are deeply frustrated at the apparent inability to draw the distinction between their carefully controlled environments and much larger facilities where, to be blunt, there is a lot of sweat in the atmosphere.

I know I get criticised for being obsessed about women – it goes hand in hand with the job description – but I cannot help but feel this relaxation has forgotten we exist. Or just assumed that women will be happy to stay home and do the childcare and home schooling, because the sectors they work in are last to be let out of lockdown, while their husbands go back to work, resume their lives and celebrate by having a pint with their mates.

(And yes I do know women drink beer too, but there is a gender pint gap, with only one in six women drinking beer each week compared to half of men.)

Crucially, women want their careers back and they want their children in school or nursery. Of course home working has been great for some, but much harder if you are also juggling childcare and impossible if your work requires you to be physically present, like in retail, hairdressing, hospitality.

These are sectors where employees are largely women, and which are now opening up while childcare providers are still struggling to open fully – with reduced numbers due to social distancing requirements. It is a massive problem, which I worry has still not been fully recognised or addressed.

Perhaps if the PM needed to sort the childcare, get his nails done and his legs waxed it might be different. But it does seem that the Health Secretary, the Chancellor, the Business Secretary and the Secretary of State for Sport and Culture, who all have a very obvious thing in common, have overlooked the need to help their female constituents get out of lockdown on a par with their male ones.

Am I going to have to turn up to work with hairy legs to persuade them that women’s wellbeing matters?