Johnson’s quiet shift to a more permissive migration policy

29 Oct

In the run up to last year’s general election, one of Boris Johnson’s most significant promises was to reduce immigration if the Conservatives won a majority. 

He spoke about the Government’s proposed new Australia-style points-based system, saying that “numbers will come down because we’ll be able to control the system”, adding that he felt it was not “right… to have an uncontrolled and unlimited approach”. 

With that being said, some may have been confused last week when the Home Office reduced its £35,8000 minimum salary threshold for migrants wanting to settle in the UK by almost 30 per cent – in a move that should surely boost numbers. 

The threshold was first introduced by Theresa May in 2011 when she was Home Secretary, and had been tasked with reducing net migration to below 100,000 (something that was never achieved, incidentally. Net migration to the UK has not been under that figure since 1997).

Under this Government, however, the net migration target has been abandoned, and now migrants on salaries of £20,480, but with enough points under a new Australian-style immigration system to take on jobs with occupational shortages, will be able to settle in Britain after six years to become citizens. 

The new rules come into effect on December 1, and follow the Home Office’s decision in January this year to scrap the £30,000 minimum salary threshold for people arriving after Brexit. 

Given May’s concern with numbers, the latest policy marks a significant shift for the Conservative Party on immigration, although it has created little noise in the media. Indeed, the change to the salary threshold was only spotted after Oxford University’s Migration Observatory went through a 507-word rule book, leading to accusations that changes to the threshold had “quietly slipped out”. 

So why is it that the Government has chosen to implement this policy? And what does it tell us about the future of immigration in the UK?

There are a number of perspectives you could have on the change of the salary threshold. The first is that it isn’t actually all that unexpected, given that thresholds for post-Brexit work visas were already lowered. 

As Sunder Katwala – Director of British Future – puts it on Twitter, the drop in threshold is “an obvious piece of tidying up”. It means that there won’t be such a big gap between someone’s salary and the increase they need to stay in the UK. It encourages citizenship, above anything else.

The next thing to say is that it gives the Government much more flexibility over skills shortages in the UK. The previous salary thresholds (£30,000 for getting a job and £35,000 to settle) were a blunt instrument to achieve net migration targets. There are lots of skilled workers the Government wants to attract to the UK, whose roles do not meet this salary threshold. The Australian-style system is much more nuanced, allowing the Government to make targetted decisions depending on the needs of the economy. 

The obvious counter argument to this, of course, is that the Government shouldn’t be recruiting from elsewhere; it should be getting UK citizens into jobs where there are shortages, particularly given how quickly unemployment is rising. This has been Donald Trump’s approach in America, who has essentially ground migration and travel to a halt in order to promote domestic employment.  It is also the thrust of Andrew Green’s articles on this site.

Even so, there has to be a degree of realism about the UK’s employment landscape. Take agriculture. Despite big recruitment campaigns to encourage domestic workers, the National Farmers Union revealed that only 11 per cent of seasonal workers in the 2020 were UK residents, and the country needs thousands more to come by next summer. In short, by lowering thresholds, the Government has much more flexibility to fill occupational shortages.

Migration Observatory has called the reduction in the threshold “the final nail in the coffin of the net migration target”, but the other point to bear in mind is that migration isn’t at the levels it once was because of the pandemic. As Katwala suggests on Twitter, the Government has accidentally hit May’s under 100,000 target. He says that from looking at the Office for National Statistics figures, “[N]et migration has almost certainly been negative this year.” 

Recent events, along with the fall in the pound (an unappealing prospect to workers wanting to be here for a few years, save up money and bring it back to their home country) have changed this area, and the Government will strategise accordingly.

And what does all this tell us about Johnson? It shows, at the very least, he has a completely different view on immigration to May, which was clear when he first abandoned net migration targets. He is averse to using numbers in this respect – perhaps viewing them as an arbitrary measure of how successful an immigration system is.

Many will see his latest policy as more evidence that he has been, and will always be, liberal on immigration. Throughout his career this has been apparent. 

During his time as the Mayor of London, for instance, he called for an “earned amnesty” for an estimated 400,000 people living illegally in London. He was particularly keen that they should be able to gain citizenship after years in the city.

More recently, the Government pledged to admit three million Hong Kong residents into the UK following China’s decision to impose new draconian security legislation.

And in September, the Prime Minister reversed a decision made by May (in 2012 – when she was Home Secretary) that forced oversea students to leave four months after they finished their degrees. They will now be able to stay in the UK for two years after graduation.

In losing the thresholds, Johnson is not only better able to make way for his policies on international students and those fleeing Hong Kong, but projecting his personal philosophy; his open attitude to immigration, and his commitment to fairness.

On the latter point, the new policies could be said to be an extension of the “levelling up” agenda, as the Government is creating parity on the requirements for EU and non-EU migrants coming to the UK (the former of which had more leniency under free movement).

Has Johnson fulfilled his pledge to “take back control”? It is a statement he has said repeatedly over the years. But talk to anyone, and it becomes obvious that there is no clear cut view on what he would do with that control if it was gained, as it now has been.

No doubt many voters saw immigration control as a numbers game, others say it is about “control over who comes in” – something afforded under the Australian points system. The Government seems to believe the new system will achieve both. Whatever the case, by all indications it’s a far more sophisticated way of managing UK immigration than salary thresholds.

Tobias Ellwood: The Government has helped to let Iran, a rogue state, off the leash. It’s time to rein it back in.

28 Oct

Tobias Ellwood is Chair of the Defence Select Committee, and is MP for Bournemouth East.

Javad Zarif, Iran’s Foreign Minister, was in a celebratory mood last weekend, as the United Nations’ long-standing arms embargo quietly expired. The occasion, in accordance with the Joint Comprehensive Plan of Action (JCPOA) nuclear deal, was deceitfully proclaimed as a “win for…peace and security in our region”. This could not be further from the truth.

In reality, Iran is now unencumbered in its ability to purchase advanced weaponry to strengthen itself and its terror proxies, including Russia’s game-changing S-400 missile defence systems, and upgrading its outdated air force. Such systems would provide Iran’s nuclear programme with invaluable strategic protection.

It is for this reason that I have joined over 80 of my Conservative parliamentary colleagues in signing a letter outlining our concerns to the Prime Minister, coordinated by Conservative Friends of Israel.

The strength of feeling among the Conservative ranks is clear to see. There has long been widespread concern about Iran’s malign activities throughout the region, but it has become increasingly apparent that the UK’s response has failed to adequately meet the challenge.

The signatories were united in their view that the United Kingdom should have supported the efforts of the United States to secure an extension to the conventional arms embargo at the United Nations in August.

While recognising the political balancing act necessitated by ongoing Brexit trade negotiations, I fear that the UK’s abstention alongside France and Germany has regrettably facilitated the Chinese and Russians in their quest to sell advanced weaponry to Tehran’s fundamentalist regime. China has reportedly agreed a 25-year $400 billion defence deal with Tehran.

There are major questions hanging over the UK’s strategy towards Iran moving forward. While the EU arms embargo regime on Iran remains in place (until 2023), this will not prevent other actors from selling weapons. Certainly, existing UN resolutions haven’t deterred Iran from supplying arms to its terror proxies, and the UK now needs to work urgently with its allies to enforce existing resolutions more rigorously.

Iran’s support for terrorism has left a trail of destruction and death across the world. From Buenos Aires to Jerusalem and Bulgaria to Yemen, Iran-backed terrorists have killed untold numbers. Iran is not just a threat to Britain’s allies and international peace and stability – it has been linked to the deaths of dozens of British service personnel in Iraq.

Looking ahead, there needs to be a clear-sighted approach to Iran from the Government.

From continuing to enrich uranium closer to weapons grade above the JCPOA limit and increasing its stockpile of low-enriched uranium to ten times higher than permitted, Iran’s flagrant breaches of its commitments under the JCPOA has confirmed that the deal is not fit for purpose.

Time and again, Iran has chosen the path of a rogue state. At the time of the JCPOA’s signing, British officials spoke of an opportunity to reset relations. Iran had no such intentions, as most dramatically illustrated by the detention of our Ambassador for attending a memorial to the victims – including Britons – of a Ukrainian passenger jet in January. Not to speak of the continued imprisonment of British nationals on spurious and indefensible grounds.

Iran’s leadership has not earned the benefit of the doubt. The UK’s ongoing efforts to keep the JCPOA on life-support since triggering the Dispute Resolution Mechanism is not a sustainable strategy, just as the UK’s INSTEX mechanism to facilitate trade by circumventing US sanctions has essentially rewarded Iranian non-compliance.

Our Prime Minister was right when he said in January that the JCPOA has “many, many faults”, and called for a replacement deal. So, too, was the Foreign Secretary right to describe the nuclear deal as a “hollow shell”. Now is the time for UK policy to align with these statements of reality.

The UK is well placed to bridge the US with the EU and push for a new, broad framework. The framework must provide unprecedented regulation of Iran’s nuclear activities, an end to Iran’s support for terrorism and its ballistic missile programme – the primary means for delivering a nuclear warhead.

How do we ensure Iran returns to the table? It is an unavoidable reality that Iran was compelled to the negotiating table for the JCPOA process as a result of one of the most comprehensive sanctions regimes in history. The UK has introduced a welcome set of sanctions against Iranians linked to the Islamic Revolutionary Guard Corps, but has desisted from the US ‘maximum pressure’ sanctions campaign.

Sanctions work, and it is time for the UK to consider further ones it can target against the regime, while making abundantly clear that these do not apply to legitimate humanitarian aid. Snapback of pre-JCPOA sanctions ought to be under consideration and would be in full accordance with United Nations Security Council Resolution 2231, as necessitated by Iran’s “significant non-performance”.

The continued resuscitation of the JCPOA despite Iran’s clear non-compliance is not only short-termist in thinking, it is fundamentally ill-considered. The framework has been fatally damaged for some time and the focus must now be on diplomatic efforts to secure a strengthened, broad deal.

Iran’s defiant advancement of its nuclear programme now risks proliferation across the Arab world, at a time where hitherto unthinkable peace deals are being agreed between Israel and Arab states.

We are at the beginning of a new chapter for the region – one based on prosperity, shared interests and peace. But unless the UK readjusts its current thinking that chapter may never get written.

The Government’s Integrated Review is about re-establishing our post-Brexit global credentials and our desire to help shape the world as a force for good. This must include greater strategic engagement in the Middle East and standing up to the destabilising actions of the Iranian regime.

Alex Morton: How Sunak can save £30 billion a year

21 Oct

Alex Morton Head of Policy at the CPS and a former Number Ten Policy Unit Member.

Today, the Office for National Statistics will announce the provisional figures of Government borrowing for the first six months for 2020/21. They will be truly dire. We know because borrowing in the first five months alone were bigger than the previous annual total, and by August this year the national debt was larger than the UK economy, rising by over 10 per cent from 2019/20’s total.

Putting aside the ongoing – and crucial – debate about the nature of lockdown restrictions, it is clear even on the most optimistic forecasts, and with the best decisions, the UK will end the pandemic with a serious debt and deficit problem. Even assuming higher borrowing for years, something must give.

For that reason, the Centre for Policy Studies today publishes the paper Saving £30 billion: Nine Simple Steps, which discusses, on rough but plausible estimates, nine savings to cut £30 billion a year from the Government’s spending without jeopardising frontline services, or asking the politically impossible.

The Government is in the middle of a Spending Review, and we believe that now is the time for proposals to stop the threat of tax rises which will both hit growth and hard-pressed workers, companies and families. None of the savings would impact frontline delivery and none of them ask for MPs to vote through what would be political suicide.

Government efficiency

Despite the arguments made that austerity means no further reduction in spend is possible, we find significant potential savings across a wide range of areas, none of which impact frontline delivery. The first group of savings are thus about making the state more efficient.

  • We analyse the number of Government administrative staff versus the private sector and find initial convergence but significant disparities in reductions in recent years, with the private sector slimming down this group more effectively. We therefore propose benchmarking Government administrative staff totals to the private sector and reducing these in the public sector once a post-Covid recovery gets underway.

We also propose –

  • To abolish some quangos and to bring all quangos under the control of a relevant department. Each department should create a single body to manage HR, marketing, and other administrative functions for all quangos it oversees. This should also make bureaucracies more accountable and improve public sector productivity.
  • Pushing toward greater use of back office function sharing in local government, as occurs between Westminster and Kensington & Chelsea. There is no need for 350 councils to have distinct IT or press or procurement teams. The Housing and Local Government Department should publish data on the administrative costs for each council to push forward action. This should enable many of the savings around unitarisation without the massive political rows.
  • Improving e-procurement and data sharing, noting that other countries such as South Korea or Estonia have significantly improved productivity and reduced costs through this route, and agreeing with critics of the existing Government procurement systems.
  • Since the state owns land and property worth a staggering £1 trillion, we call for an inventory of all non-operational land followed by a sale and leaseback model across all this non-operational land, rather than past Spending Review’s top down land targets for each department. Just selling off the Network Rail arches gained £1.4 billion while boosting growth, and Covid-19 has changed office work patterns, so this should raise serious sums.

Ensuring a fair state

The second group of savings are about ensuring that the state does not give excessively to one or other group, and create a state focused on the core tasks of government. We propose:

  • Replacing the triple lock with a dual lock, which still gives pensioners the best of inflation or wage growth, and removing the tax anomaly of the Winter Fuel Payment and just treating as taxable income like other benefits.
  • Sell and replace high-value council properties when they fall vacant with a less expensive nearby equivalent. It is deeply unfair there are million-pound council properties in many parts of London and this is not what making sure people have a roof over their heads is about. This doesn’t even mean anyone has to move – just no more new expensive tenancies.
  • Roll child benefit into the child tax credit system with a further taper that reduces the top 10 per cent or so of households (essentially capturing those with two fairly high earners to bring them into line with a single high earner household).
  • Cut overseas aid to 0.5 per cent, still placing the UK in the top 10 donor countries and moving on from 2005 when this target was set at 0.7 per cent at a time when India and even China were legitimate UK aid recipients, not emerging economic superpowers. It would be both immoral and politically toxic to make the other savings while protecting a budget overseas that has nearly doubled in recent years.

Taken together, these savings would help bring down the deficit to an acceptable level. They involve some hard decisions and confrontation of vested interests, but not impossible ones, and all should pass through the Commons, even in its new rebellious state. The alternative, ever higher borrowing, or even worse, ever higher taxes, is unthinkable if we are to achieve what the CPS believes the number one priority post-pandemic must be – restoring sustained economic growth. We call on the Government to investigate and takes forward these ideas as part of the Spending Review process.

Alex Morton: How Sunak can save £30 billion a year

21 Oct

Alex Morton Head of Policy at the CPS and a former Number Ten Policy Unit Member.

Today, the Office for National Statistics will announce the provisional figures of Government borrowing for the first six months for 2020/21. They will be truly dire. We know because borrowing in the first five months alone were bigger than the previous annual total, and by August this year the national debt was larger than the UK economy, rising by over 10 per cent from 2019/20’s total.

Putting aside the ongoing – and crucial – debate about the nature of lockdown restrictions, it is clear even on the most optimistic forecasts, and with the best decisions, the UK will end the pandemic with a serious debt and deficit problem. Even assuming higher borrowing for years, something must give.

For that reason, the Centre for Policy Studies today publishes the paper Saving £30 billion: Nine Simple Steps, which discusses, on rough but plausible estimates, nine savings to cut £30 billion a year from the Government’s spending without jeopardising frontline services, or asking the politically impossible.

The Government is in the middle of a Spending Review, and we believe that now is the time for proposals to stop the threat of tax rises which will both hit growth and hard-pressed workers, companies and families. None of the savings would impact frontline delivery and none of them ask for MPs to vote through what would be political suicide.

Government efficiency

Despite the arguments made that austerity means no further reduction in spend is possible, we find significant potential savings across a wide range of areas, none of which impact frontline delivery. The first group of savings are thus about making the state more efficient.

  • We analyse the number of Government administrative staff versus the private sector and find initial convergence but significant disparities in reductions in recent years, with the private sector slimming down this group more effectively. We therefore propose benchmarking Government administrative staff totals to the private sector and reducing these in the public sector once a post-Covid recovery gets underway.

We also propose –

  • To abolish some quangos and to bring all quangos under the control of a relevant department. Each department should create a single body to manage HR, marketing, and other administrative functions for all quangos it oversees. This should also make bureaucracies more accountable and improve public sector productivity.
  • Pushing toward greater use of back office function sharing in local government, as occurs between Westminster and Kensington & Chelsea. There is no need for 350 councils to have distinct IT or press or procurement teams. The Housing and Local Government Department should publish data on the administrative costs for each council to push forward action. This should enable many of the savings around unitarisation without the massive political rows.
  • Improving e-procurement and data sharing, noting that other countries such as South Korea or Estonia have significantly improved productivity and reduced costs through this route, and agreeing with critics of the existing Government procurement systems.
  • Since the state owns land and property worth a staggering £1 trillion, we call for an inventory of all non-operational land followed by a sale and leaseback model across all this non-operational land, rather than past Spending Review’s top down land targets for each department. Just selling off the Network Rail arches gained £1.4 billion while boosting growth, and Covid-19 has changed office work patterns, so this should raise serious sums.

Ensuring a fair state

The second group of savings are about ensuring that the state does not give excessively to one or other group, and create a state focused on the core tasks of government. We propose:

  • Replacing the triple lock with a dual lock, which still gives pensioners the best of inflation or wage growth, and removing the tax anomaly of the Winter Fuel Payment and just treating as taxable income like other benefits.
  • Sell and replace high-value council properties when they fall vacant with a less expensive nearby equivalent. It is deeply unfair there are million-pound council properties in many parts of London and this is not what making sure people have a roof over their heads is about. This doesn’t even mean anyone has to move – just no more new expensive tenancies.
  • Roll child benefit into the child tax credit system with a further taper that reduces the top 10 per cent or so of households (essentially capturing those with two fairly high earners to bring them into line with a single high earner household).
  • Cut overseas aid to 0.5 per cent, still placing the UK in the top 10 donor countries and moving on from 2005 when this target was set at 0.7 per cent at a time when India and even China were legitimate UK aid recipients, not emerging economic superpowers. It would be both immoral and politically toxic to make the other savings while protecting a budget overseas that has nearly doubled in recent years.

Taken together, these savings would help bring down the deficit to an acceptable level. They involve some hard decisions and confrontation of vested interests, but not impossible ones, and all should pass through the Commons, even in its new rebellious state. The alternative, ever higher borrowing, or even worse, ever higher taxes, is unthinkable if we are to achieve what the CPS believes the number one priority post-pandemic must be – restoring sustained economic growth. We call on the Government to investigate and takes forward these ideas as part of the Spending Review process.

Neil O’Brien: Here are three urgent responses to China’s growing power – which we will soon have an opportunity to make

19 Oct

Neil O’Brien is MP for Harborough.

Are we, in fact, losing the competition with China?

Consider current events. The IMF predicts China will be the only country with a positive growth rate this year. Since 2004 the UK’s share of world manufacturing halved from four per cent to two per cent, while China’s rose from nine per cent to 28 per cent.

Being a surveillance state has proved handy in the crisis: detecting a dozen Coronavirus cases, the Chinese city of Qingdao is testing its entire population of nine million people for Covid-19 over a period of five days.

Whether it’s the holographic windows on the Beijing subway, or the scary videos of the People’s Liberation Army showing off its new mobile drone swarms, the sense that we are being overtaken is palpable.

So is the increasingly authoritarian and militaristic nature of the Chinese regime. Every day the Chinese press is full of two things. First, ever more lavish praise for Xi Jinping, now officially elevated to “People’s Leader”, and increasingly exercising one-man rule. Second, increasingly dire threats to other countries that dare to cross China.

This week it was the turn of Canada, which was warned not to accept refugees from Hong Hong on pain of having more Canadian citizens arrested in China. There’s a steadily louder drumbeat of threats to crush Taiwan: the other day Xi called on troops to “focus all [your] minds and energy on preparing for war”, and Taiwan revealed it had been forced to scramble jets 2,972 times against Chinese aircraft incursions this year.

A new and not very friendly superpower is emerging.  How should we respond?

In the next month or two we should see the publication of the Integrated Review.  This is a big improvement on previous Strategic Defence Reviews in that it goes wider, to think about economic competition, not just military rivalry.

The Review is a big deal, and in a world with no virus it would be headline news.

Other countries are considering the same issues. The EU now officially describes China as a “systemic rival” and “strategic competitor”, while the US is taking a huge amount of actions (on a cross party basis) to protect its interests from China.

While we’ve had less debate in the UK, we face exactly the same challenge.

In a speech last week, the head of MI5 noted that while Beijing’s espionage efforts typically take the form of “hacking commercially sensitive information or commercially sensitive data, and intellectual property”, UK spies have also detected attempts by Chinese counterparts to influence UK politics. China is “changing the climate,” he said:

“Sometimes our role is to spot the hidden State hand in the pursuit of promising UK companies whose acquisition might dent our future prosperity and security. On China, we need expansive teamwork – a broad conversation across government and crucially beyond, to reach wise judgements around how the UK interacts with China on both opportunities and risks.”

This is sensible. So what should the Integrated Review do on China?  For me there are three big things.

First, we need an Australian style counter-influence unit to combat attempts to meddle in our politics

Like the Australian equivalent, it should be empowered to tackle a range of issues. Top London lobbying firms paid by hostile states for starters.  We wouldn’t have let the Soviet Union hire Saatchi & Saatchi in the cold war, so why don’t lobbyists have to declare payments from arms of the Chinese state now?

Universities could use more oversight and guidance too – witness the Chinese cash-for-influence scandal at Jesus College Cambridge. The same issues apply in think tanks, businesses and even the House of Lords. China is quick to snap up ex-permanent secretaries and even ex-spies. We need a coordinated approach.

Second, we need a new partnership with firms and universities to protect our economic and technology security. 

At the moment, we have a completely one-sided relationship, in which China can help itself to whatever university research it wants from the UK, buy up any interesting technology firm and even get our universities to work for branches of their military – an approach described in Beijing as ‘picking flowers in foreign lands to make honey in China’.

Through coercive joint ventures and corporate espionage, China can perform a sort of supermarket sweep on the intellectual property of the west.  Meanwhile China bans investment in swathes of its economy, locks up people suspected of leaking industrial secrets and has just passed tight new laws on the export of key technologies.

It’s a modern version of the same mercantilism that saw China guard the secrets of silk-making for hundreds of years, but the real question is why we allow a one way transfer of technology?

A new unit in Number Ten or the Treasury should coordinate relationships with industry to help identify who is sniffing around new technologies – perhaps we need a UK version of the US Business Entrepreneurs Networks which help US government build up market intelligence.

We also need greater transparency on who is working with our universities. At present we don’t even collect data on who is funding them from overseas.  Many firms would love help to counter hacking of their secrets or advice on tie-ups with Chinese firms.  There should be an obvious place to turn to in government to get it.

Third, we need an “Office for the Future”.

China’s growing dominance isn’t just built on exploiting naive western countries, but on a relentless focus on research and industrial strategy which we should learn from. However, in government I felt that the different bodies which are currently supposed to help us think about technology add up to less than the sum of their parts.

Collectively the Government Office for Science, the Council for Science and Technology, UKRI, BEIS the Research Councils and learned societies have many brilliant people, but the system lacks a controlling mind or plan.

Some of this is about the wider civil service, and we should learn from Singapore: the world’s best civil service. Some of it is about our growing our pitiful level of investment in R&D, which has sunk over the decades just as China’s grew.

But we also need a plan. We need some part of government to be aware of the significance of new technologies and emerging firms before they have been snaffled and carted of to China or anywhere else. Research funding in government isn’t industrially-focussed enough. We need a unit to think commercially about where we should concentrate research investment, and where we shouldn’t. To work out what we need to do to be ready to catch the wave of new opportunities, in the way that Beijing is so good at.

In a new book, “The Wake-Up Call”, John Micklethwait and Adrian Wooldridge sketch out how the virus has exposed the challenges facing the UK and other western countries, and the scale of the challenge we’re facing.

It reminds me a bit of the late 1970s, when Helmut Schmidt, then West Germany’s Chancellor, declared: “England is no longer a developed country,” and Nick Henderson’s famous leaked telegram highlighted our rapid descent.  Eventually we get angry enough to do something about it, and elected Margaret Thatcher.

This time the problems are different and we are already in government. But the urgency is just the same. Let us hope that the Integrated Review can be part of the wake-up call we need.

Claire Coutinho: Amidst the Great Global Data Divide, Britain must lead the charge for digital free markets

16 Oct

Claire Coutinho is MP for East Surrey.

As the world’s first industrialised nation, Britain knows the value of getting ahead of the economic curve. Access to natural resources like coal and oil have driven historic and economic revolutions, but in the future the fuel of our economy will be data.

Data flows are already estimated to be worth up to £3 trillion a year to the world’s economy. But a global divide is opening up between those leaning towards digital protectionism, like China and the EU, and those pioneering data agreements.

Where once we had the iron curtain, we now have digital drapes. We must reject this impulse and secure access to the resource that will drive our future growth. Pursuing freer digital markets can propel a great British leap forward. To achieve this, we must put ambitious digital chapters at the heart of our trading agenda.

The global data divide has been developing over many years. It sees some countries restrict the transfer of whole swathes of data, with others taking a far more open approach.

For China, its restrictions form part of its protectionist Made in China 2025 industrial strategy, as well as reinforcing its Great Firewall.

Others, such as New Zealand and Australia, have pioneered digital agreements to make it easier for their businesses to connect with new customers.

Britain is a services superpower. We are second only to the USA in our volume of exports. The sector contributes over 80 per cent of our economic output and employs 30 million people. Our data centres are world leaders, we have a global financial centre and thriving data-rich sectors like AI and fintech.

In 2018, the digital sector contributed £150 billion to the British economy, and grew at a rate almost six times faster than across the whole economy. As Britain flies the flag for free trade, ensuring the international free flow of data will be crucial to our future prosperity.

Digital Trade Agreements form the foundation of future services growth. Digital exports do not recognise geographic distance, which makes large markets on the other side of the globe even more appealing.

From facilitating e-contracts across borders, to preventing requirements for data to be stored domestically and allowing British companies to access foreign Government data, these agreements will be increasingly important for our services-driven trade. Regrettably, the global data divide is stymieing progress in international regulatory developments, leaving a void that will only become more pronounced.

Data localisation strikes at the heart of efficient business. Without locking in free dataflows, businesses in increasingly broad sectors would face the need for expensive data centres to operate abroad. In the long term, this would hit our national economy. In fact, the US Chamber of Commerce estimates that Chinese data protectionism will reduce its GDP by between 1.8 and 3.4 per cent by 2025.

As a leading digital economy with new control over its trade policy and an ambitious outlook, Britain is uniquely placed to help shape global rules in this emerging arena. A firm focus on digital trade will place Britain at the forefront in the sphere most crucial to the future success of our economy, and lock-in the digital freedoms that our businesses currently enjoy. The UK-Japan Free Trade Agreement stands us in good stead; going further than the EU-Japan deal and the Digital Economy Partership Agreement, it contains arguably the most wide-ranging and ambitious digital provisions of any agreement in the world.

Liz Truss is rightly focused on the Indo Pacific – the world’s fastest growing region. With plans to join the CPTPP, and trade negotiations underway with pioneers New Zealand, Australia and Singapore, Britain is right to side with digital free-traders. Digital Agreements in this region represent a significant opportunity for the UK, and one which we could not have pursued without leaving the EU.

The coming century will be dominated by data-dependent technology. Ensuring that our trade deals contain ambitious digital chapters will put us ahead of the economic curve, building firm foundations for future growth. Britain reaped great economic benefits from leading the first industrial revolution; we must ensure we are well placed for the next.

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.

Ryan Bourne: Johnson’s green jobs. Subsidy-reliant, expensive, price-raising. And a job loser elsewhere.

14 Oct

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

It is said that, during the 1960s, Milton Friedman was visiting China, where guides took him to a canal-building site. Shocked at the prevalence of men bearing shovels, Friedman asked why the project wasn’t utilising modern technologies, such as mechanical diggers.

“You don’t understand, Professor Friedman,” his host explained, “this is a job creation programme.” To which Friedman retorted, “Oh, I thought you were trying to build a canal. If you really want to create jobs, then by all means give your workers spoons, not shovels.”

That tale is beloved by economists because it contains an important truth: gross job creation is a poor metric to judge success when considering government-led infrastructure. We could “create jobs” through getting people to fill in holes.

What matters is the net value added of the output created, as determined in markets – i.e: by consumers and open trade. Using more workers less efficiently to produce a canal reduces the output’s net value, because labour is a cost of production.

This lesson sprang to mind last week during Boris Johnson’s speech to the Conservative Party Conference. As part of his ode to offshore wind, Johnson talked of the UK’s natural abundance of the stuff (the “Saudi Arabia” of wind) and his excitement at the technology (floating wind islands). But he also extolled the idea of a UK “green industrial revolution” that “in the next ten years will create hundreds of thousands if not millions of jobs.”

Any market-led or government-incentivised shift towards wind will see new jobs in the industry “created.” But this shouldn’t be the goal. To echo Friedman, “we thought you were trying to produce electricity, subject to mitigating climate change. If you wanted to create jobs, why not have people make the wind turbines by hand?” We should judge the desirability of a pro-wind energy policy framework, in other words, by its contribution to this social value added, not numbers employed in the sector.

“Gross job creation in wind and other renewable generation is clearly a cost in economic terms,” Professor Gordon Hughes of Edinburgh explained to me last week. “The higher the number [of jobs], the larger the subsidies required and the larger the damage to the rest of the economy.”

He views this outcome as an unacknowledged problem of wind power generally, which does require labour for operations and maintenance, particularly as turbines age. If we are purely looking at how to produce power most efficiently, then these jobs are a hindrance – an economic failure, not success. According to Hughes, talking of creating “millions of jobs” is a “shortcut to national impoverishment”.

Of course, the desire for climate change mitigation means policymakers reject the premise that we just want our energy sector to simply prize efficiency. Due to the “social costs” of carbon, they aren’t just concerned about traditional measured value added, but are explicitly willing to take an economic hit in targeting a broader conception of economic welfare that takes into account these CO2 externalities.

And that’s fine, in principle. Yet even then, “green jobs” shouldn’t be the aim. An economist would say we should try (albeit imperfectly) to price this social cost, and then let markets find the most efficient way of delivering power accounting for it. What that does not require is industrial strategies, picking winners, and seeing the green energy sector as some sort of jobs machine.

Indeed, simple logic would suggest that making energy less efficiently than socially necessary reduces net jobs across the whole economy because of its impact on energy prices. “Energy is a labour-extensive industry. It does not employ a lot of people” Richard Tol, the renowned climate economist, explains. “If the energy sector would start to employ many more people, retail energy prices would rise rapidly.”

Given every other activity uses power as an input, it surely doesn’t need to be said that “more expensive energy means less growth and so less job creation” elsewhere. Given the sizes of the “energy” and “non-energy” sectors too, “a large relative increase in employment in energy is easily offset by a small relative decrease in employment in the rest of the economy.” An explicit aim to “create jobs” in the wind industry, in other words, would be vastly outweighed by job losses elsewhere.

Note: none of my analysis here is passing judgment on the desirability of decarbonisation. Tol believes that given the energy framework of UK policy, wind power will probably be cheaper than coal or gas through the 2030s. What I am simply saying is that aiming for more employment in wind, rather than merely trying to deliver power cheaply subject to any climate goals, is a deeply economically destructive way of thinking.

So why is the Prime Minister talking of millions of green jobs? Well, unfortunately, many politicians have moved beyond simply wanting to set frameworks for energy or even climate goals, and their green credentials have become wrapped with their becoming re-inured to the idea of national industrial strategies.

Not content with allowing consumers and producers to find the best ways to allocate resources, the Conservative Government increasingly wants to decide which sectors the national economy specialises in, thinking the state will this time do a good job of picking winners. And Boris Johnson’s “Saudi Arabia of wind” suggests that he wants to try to use policy to actively push the UK towards exporting wind power.

Would that work? No, says Tol. “Electricity is much more expensive to transport than oil…Wind power in the UK is cheaper than, say, wind power in Italy – but wind power generated in the UK and transmitted to Italy cannot compete with wind power generated in Italy.” Exporting the end product is a non-starter.

What about manufacturing the parts? “Despite what he [Johnson] says, no one is going to manufacture wind turbines in the UK without massive subsidies – that game is long past,” Hughes concludes. So having the Government tilt the deck further to try to create a wind manufacturing export industry would not only drag resources away from other activities with higher net value added, but make us a hostage to technological fortunes.

As Hughes has previously written: there’s no guarantee technological progress is more likely to come in renewables than fossil fuels or nuclear (see, for example, fracking).

To return to the Friedman analogy: we might accept some more shovel than machine use for canal building, if there were greater environmental costs of using machines, though recognising this makes us poorer. It’s another thing to say that rather than building a canal as efficiently as possible subject to this, the national government should intervene to support canal building or our selling shovels around the world. Yet with his promise of a green revolution, that is precisely what the Prime Minister implies.

Ed McGuinness: A lesson for democracy in Europe from an abandoned airport in Cyprus

13 Oct

Ed McGuinness is a former Chairman of Islington Conservative Federation, founder of Conservatives in the City and contested Hornsey & Wood Green during last year’s general election.

In the middle of the Mediterranean atop the Mesaoria plain lies a major European international airport. There is a terminal, a runway, baggage machines and even a first class lounge as you would expect.

What is missing are passengers and the passage of time. The Nicosia International Airport is abandoned in the Cypriot Neutral Buffer Zone between the Greek-Cypriot part of the Island in the South and the Turkish occupied territory in the North.

This no man’s land (though it actually contains several populated villages) was said to have been drawn on a military map in 1963, with a wax pencil, by a British general commanding the peacekeeping force on the island in the wake of the Turkish invasion. In recent times, it has become one of many explanatory points in the EU’s ever increasing complex foreign policy proposals.

Almost two and a half thousand miles away on an brisk autumn day in Brussels, Ursula von der Leyen was delivering her first State of the Union address, amidst the backdrop of a huge coronavirus stimulus package, on-going migration crises and foreign policy dilemmas over Belarus and China.

As it stands at the moment, essentially in order to enact lasting change, the EU requires every member state to agree on such significant issues as economic sanctions. When effective, the result is the world’s second largest economic bloc exerting a hefty punch.

But more often than not, this bureaucratic behemoth ends up in months off stalemate, compromise and early morning solutions – not very conducive to effective law-making. Von der Leyen, frustrated with this, suggested that, for human rights and sanctions implementation, the bloc should move to a “qualified majority voting” whereby 55 per cent of member states (15) comprising 65 per cent of the population can vote for such measures.

The reason why this issue has come to the fore is the failure of the bloc to come up with unanimous sanctions against Belarus and its despotic leader, Alexander Lukashenko, following his blatant rigging of national elections and violent suppression of pro-democracy protests as a result.

The EU is seemingly united on the issue: indeed, all member states agreed to impose sanctions on their immediate eastern neighbour – all, that is, except Cyprus.

Cyprus, that small country in the middle of the Mediterranean amongst other forgotten Southern European countries, is still in a “cold” war against the Turkish invaders to the North. Their air forces engage in mock dogfights, and even their navies have quite literally run into each other.

Cyprus however, has less than two per cent of the population of Germany and just 0.25 per cent of the EU population.  So it has, whilst in an on-going state of conflict with Turkey, to stand by and watch Germany lead on negotiations with its rival over a migration crisis that is, in relative terms, more important to Angela Merkel than it is to the Cypriot people.

As a result, Nicosia has exercised its only real influence over Brussels to allow its people to be heard over what is its most important foreign policy dilemma – a mechanism that would much less effective under the changes proposed by vvon don der Leyen.

Ironically, von der Leyen is indeed correct. The only way to prevent endless vetoes, continuously circling the issue and ending up with watered down solutions is to adopt a voting system based on a simpler majority, but in doing so she fundamentally breaches the “universal value of democracy and the rights of the individual” within the Union – a phrase she uttered in the same breath as her comments on voting reform.

The confusion at the heart of the matter is this: the operative aspect of the EU is in persistent conflict with its aspiration – in short, it is suffering from an identity crisis with limited escape routes. It is trying, and failing, to be both an economic union and at the same time, seemingly whenever it choses, a political union, with both aims simultaneously mutually exclusive and co-dependant.

An example of which may be advocating for voting reform and lowering representation in one sentence, and espousing the democratic rights of its citizenry in another. Stating it stands up for the rights of its smaller nations, whilst its bigger nations club together to secure powers and influence over their own interests.

The EU is now attempting a slow death of democracy which will concentrate power and wealth in the north-western countries to the detriment and federalisation of the southern nations. It is no wonder that pro-sovereignty movements have taken hold there.

The EU faces a stark choice, which will upset a significant bloc either way.

The first course is to follow their stated aim of continual political integration, which is clearly the option favoured by the President and larger countries who will benefit given their scale.

The second is to recognise the value of devolution, and endeavour to support those countries on the periphery of the Union.

A final option is to simply do nothing…and allow these problems to continue to build in a state of perpetual crisis. As with much in the EU, some mixture of choices two and three is most likely followed by an undemocratic push into option one, sometime many years from now.

The result may well be a smoother machine, but will be a further drain on the power, influence and already low democratic representation in the smaller capitals of the Union who are trapped by economic shackles to the centre.

The UK, and Canada, at the time of writing, have enacted sanctions on Belarus, Lukashenko and his senior lieutenants, and have worked swiftly with the US on multiple occasions this year to act on aggression from Chinese and Russian abuses of the rules based international order.

The “take back control narrative” which prevailed in the UK in 2016 has begun to deliver on those promises. The EU, on the other hand, remains confused about its own democratic values and whether it actually works for all its member states, or only does so when it wants to, or when it benefits its larger members.

Ultimately, the smaller countries in the EU will be the losers in the reforms proposed by von der Leyen, echoed in a recent tweet on by Guy Verholfstadt suggesting “unanimity was killing the EU”.

Well, Guy, it will continue to hold back the EU – or else the EU will end up killing its smaller members. The President of the European Commission ought to visit the abandoned airport in Nicosia. There she would see the land that time forgot which would perhaps spur her, and her colleagues, to remember how easily democracy can die.

Bernard Jenkin: The threat of the virus to the NHS hasn’t gone away. How it could overwhelm hospitals – and intensive care.

13 Oct

Bernard Jenkin MP is Chair of the Liaison Committee, and MP for Harwich and North Essex.

The spring lockdown was necessary to avoid the NHS being overwhelmed by hundreds of thousands of seriously ill people. Today, infection rates are rising again.  So again, we must ask the question: what hospital capacity is required to keep pace with rates of infection?

Today, there is far more data, better understanding of the virus, and better treatments, so we no longer need to entertain the most apocalyptic predictions. Nevertheless, the figures are stark.

It is medical consensus that it takes an average of seven to ten days for someone infected with Coronavirus to develop severe symptoms which require hospitalisation. This affects a smaller proportion now, but ONS data suggests it is still significant.

In the week up to the 1st of October, 16,000 people per day were infected with coronavirus in England.  Hospitalisation data for this specific this specific period is still emerging, but already, seven to ten days later, the Government’s daily Coronavirus updates suggest that between 500 and 600 new hospitalisations are taking place daily in England.

This suggests that some three to four per cent of those newly infected with coronavirus will require hospitalisation. This is lower than earlier in the year (which was up to three times higher).

However, the epidemic is currently most prevalent among young adults.  They are far less likely to require hospitalisation.  This is the case in my own county, Essex, but low case rates are now doubling every ten days, as the virus spreads up the age range.  So rising case rates will lead to rising hospitalisations.

Intensive care units will also come under pressure.  Estimates from the spring suggest that up to 17 per cent of those in hospital with cthe Coronavirus required a move to the ICU.  Perhaps that will be lower too.  Let’s assume it will be only 10 per cent (and that optimism makes the sums easier).

The length of hospital stays also matters.  Those infected with Coronavirus can expect a length of stay in hospital of between five and 15 days, depending upon from where the data is drawn.

Here, a consensus has yet to emerge.  (The paucity of studies from outside China and the pandemic’s continuation means that medics are still feeling their way.)  In his presentation on Monday, Jonathan Van Tam, the Deputy Chief Medical Officer, showed a graphic with a range of nine to nineteen days: taking the middle point of that gives an average stay of 14 days. Similar evidence suggests that eight days is also the approximate length of stay for patients in ICU beds.

England has approximately 140,000 hospital beds, and 4,100 adult ICU beds. For this part of the year, we would expect around 85 per cent of beds to be full, which gives ‘spare’ capacity in England of around 20,000 hospital beds.

So what do all this statistical estimates mean, when asking how much hospital capacity will be needed if there is serious Coronavirus spread throughout the UK?

Let’s assume that we let the virus spread, so that, over the next three months, an additional quarter of the population of England becomes infected with coronavirus – an additional 14 million people. This is equivalent to just under five million infections per month, or 156,000 infections per day. 3.5 per cent of five million would become sick enough require hospitalisation.  That is equivalent to 5,500 daily hospitalisations.

We have to date ignored two factors which make things seem better than they would be. First, there would not be a flat rate of infections at 156,000 per day over three months. Instead, the daily infection rate would follow the familiar (and far more disastrous) bell-curve.

Second, we are assuming that the population which falls sick is relatively young and healthy, as now, and that we can protect the vulnerable.  Experience in this second wave already suggests this is most unlikely.

But let’s look again at what would be necessary to manage 5,500 daily hospitalisations. We know that hospitalisations last, on average, for 14 days. This means that we would need 77,000 extra beds on top of what we now have. So in addition to the 20,000 spare hospital beds that we currently have, we would need to find another 57,000 – equivalent to just over 16 new London-sized Nightingale hospitals.

In this (flat) scenario, these hospitals, as well as every hospital in the country, would have to be run at 100 per cent capacity, each and every single day for three months.

We have also assumed that we can perfectly match hospital capacity to the location of infection hotspots, which is not the experience.  Images we have seen of packed hospital corridors in Lombardy or New York demonstrate this task is very difficult, if not impossible.

For ICU capacity, the numbers are even more stark. If one in ten of those requiring hospitalisation require being moved to the ICU, then 5,500 daily hospitalisations becomes 550 daily ICU admissions. At an average length of stay of eight days, England alone would require 4,400 ICU beds, more than the entire capacity of ICU beds in the country.

And if the epidemic spreads to older and more vulnerable people, this shortage would become yet more acute.  In Essex, the NHS is not planning to stop doing anything but Coronavirus.  The aim is to keep the NHS open for as much normal business as possible, but there would be no possibility of achieving that in the scenario above.

This is the maths which is driving the conversation in government around the need for new Covid restrictions. If test and trace was working better, perhaps we would have been better able to keep the number of cases down.

But absent massive test and trace capacity, the Government has no option but to consider the second round of Covid restrictions to get us through this winter.

The reality of this virus is that it is not like ‘flu; something you get once and gives you immunity.  It is also very hard, perhaps impossible, to find a permanent vaccine.  There never was a vaccine for AIDS or for SARS (another coronavirus).

Time and science will improve the resilience of people, society and the economy.  We certainly should not plan to have varying degrees of lockdown every six or twelve months.  The Government should set up a long term strategic group, away from the daily pressures of Whitehall, to draft a strategic White Paper, Living with Coronavirus, which sets out how we can best manage Covid-19 while keeping the economy open.