Stephen Booth: Joining the CPTPP is how this country can show it’s serious about being “Global Britain”

9 Jul

Stephen Booth is Head of the Britain in the World Project at Policy Exchange.

Last week, the Prime Minister announced that in the wake of the pandemic the Government will “double down on levelling up”. It is clear that the domestic political agenda will be driven by this overriding social and economic objective, not to mention electoral imperative, as the country emerges from the Covid-19 crisis.

However, the UK also needs a narrative for its new place in the world, which promotes our interests and frames how we would like to be viewed by others. The question is not so much what Global Britain should “stand for”: the rules-based international system, open markets, defence of human rights and the rule of law. The question is by what means does the UK continue to further its interests and values in the new post-Brexit, post-corona world and how best do we resource ourselves to do so.

Ultimately, medium-sized powers will struggle to achieve their global ambitions on their own: the UK must invest in deepening its networks of alliances and building new relationships to form effective coalitions. And in that regard, next year will be an important one for UK diplomacy.

The UK’s exit from the Brexit transition period on January 1, 2021 will coincide with the UK taking on the annual presidency of the G7 and hosting the delayed UN climate summit, COP26. The UK has placed itself at the forefront of the ambition to build a “greener and more resilient global economy.” Meanwhile, the pandemic has also delayed to next year the World Trade Organisation (WTO) ministerial conference, the organisation’s topmost decision-making body that usually meets every two years.

Trade is the area of UK international engagement most transformed by Brexit, since 2021 marks the point at which full responsibility for trade policy returns to the UK. Brexit also emphasises the need for the UK to recalibrate its relationships with the world’s three major economic and geopolitical hubs – North America, Asia-Pacific, and Europe.

The pandemic has resulted in a steep decline in global trade when protectionism is already on the rise, fuelled by increasing US-China tensions that look set to continue. The current crisis has understandably prompted calls for greater national resilience.

Strategic stockpiling for a limited array of products may be part of the solution. But the UK’s wider interest is served by counting on security and diversity of supply chains. The UK must also seek to influence the terms of trade in services, data and the new technologies, where our comparative advantage increasingly lies. This requires international rules and willing allies to uphold them.

Multilateral efforts at the WTO would be best, but these have faltered in recent years. The Government is therefore embarking on an ambitious strategy of concluding free trade agreements covering 80 per cent of UK trade within the next three years.

As we know, negotiations with the European Union are in a critical phase and while the prospect of a deal before the end of the year looks more promising, it is not guaranteed. Talks with the US have begun and any conclusion will now have to wait until after the Presidential election later this year. The UK may be able to make swifter progress with Asia-Pacific economies.

The top priority is securing a successor agreement with Japan, as the existing EU-Japan deal will cease to apply to the UK in January. Japan is keen to move quickly on a bespoke agreement. The UK has also officially opened negotiations with Australia and New Zealand.

All of these agreements, and a Japan deal in particular, would provide trade benefits in their own right but the bigger strategic prize is UK accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP is the third largest trade area in the world and has been signed by 11 countries around the Pacific rim, including Japan, Canada, Australia, New Zealand and Singapore.

Last week, Policy Exchange held a webinar with a stellar cast to discuss the UK’s accession to CPTPP. It was surely significant that Liz Truss, Trade Secretary in this “Get Brexit Done” government, and Lord Mandelson, an arch-Remainer, both stressed the strategic value of the UK joining.

Truss made it clear that she sees CPTPP as “part of a broader strategy of the UK becoming a central hub in a network of free trade agreements, a networked Britain if you like rather than a fortress Britain.” Lord Mandelson emphasised that the process may take time but “the UK aligning itself with a Pacific Rim agenda of this kind is a good thing.”

Chan Chun Sing, the current Singaporean Trade Minister, stressed how keen he would be to see the UK join, while Tony Abbott, the former Australian Prime Minister, noted that joining “would be the best possible sign that Britain really does want to be a global country again.”

Joining CPTPP will not be without its challenges. Stephen Harper, the former Canadian Prime Minister, noted that “[j]oining a plurilateral trade agreement is not frankly going to be a matter of a lot of negotiation. The others are largely going to have a take it or leave it approach.” He added, “You can seek tailor-made provisions, but that will add time to what will be a long process”.

Nevertheless, the prize would be hugely strategically significant. Grouping together with like-minded nations would provide the UK with a new platform to promote global trade liberalisation and multilateral reform.

It would enable the UK to join others in addressing China’s global rise from a greater position of collective strength. Indeed, this was an original objective of the project. Although potentially a long process, UK accession might help to convince the US to join the agreement, following President Trump’s decision to pull out of the precursor Trans-Pacific Partnership.

As Harper noted, Britain joining would offer some significant advantages to the existing members. “This would go from being a purely regional pact to now being the beginning of an alternative global order,” he said.

It might be tempting to view “Global Britain” as a distraction or diversion from pressing domestic issues. However, it is a necessary compliment to levelling up. Global Britain does not just mean reaching out to other countries, it means enabling more of the country to benefit from and compete in a globalised world. Moving forward with the CPTPP would demonstrate that the UK is serious about furthering both of these goals.

Stephen Booth: Joining the CPTPP is how this country can show it’s serious about being “Global Britain”

9 Jul

Stephen Booth is Head of the Britain in the World Project at Policy Exchange.

Last week, the Prime Minister announced that in the wake of the pandemic the Government will “double down on levelling up”. It is clear that the domestic political agenda will be driven by this overriding social and economic objective, not to mention electoral imperative, as the country emerges from the Covid-19 crisis.

However, the UK also needs a narrative for its new place in the world, which promotes our interests and frames how we would like to be viewed by others. The question is not so much what Global Britain should “stand for”: the rules-based international system, open markets, defence of human rights and the rule of law. The question is by what means does the UK continue to further its interests and values in the new post-Brexit, post-corona world and how best do we resource ourselves to do so.

Ultimately, medium-sized powers will struggle to achieve their global ambitions on their own: the UK must invest in deepening its networks of alliances and building new relationships to form effective coalitions. And in that regard, next year will be an important one for UK diplomacy.

The UK’s exit from the Brexit transition period on January 1, 2021 will coincide with the UK taking on the annual presidency of the G7 and hosting the delayed UN climate summit, COP26. The UK has placed itself at the forefront of the ambition to build a “greener and more resilient global economy.” Meanwhile, the pandemic has also delayed to next year the World Trade Organisation (WTO) ministerial conference, the organisation’s topmost decision-making body that usually meets every two years.

Trade is the area of UK international engagement most transformed by Brexit, since 2021 marks the point at which full responsibility for trade policy returns to the UK. Brexit also emphasises the need for the UK to recalibrate its relationships with the world’s three major economic and geopolitical hubs – North America, Asia-Pacific, and Europe.

The pandemic has resulted in a steep decline in global trade when protectionism is already on the rise, fuelled by increasing US-China tensions that look set to continue. The current crisis has understandably prompted calls for greater national resilience.

Strategic stockpiling for a limited array of products may be part of the solution. But the UK’s wider interest is served by counting on security and diversity of supply chains. The UK must also seek to influence the terms of trade in services, data and the new technologies, where our comparative advantage increasingly lies. This requires international rules and willing allies to uphold them.

Multilateral efforts at the WTO would be best, but these have faltered in recent years. The Government is therefore embarking on an ambitious strategy of concluding free trade agreements covering 80 per cent of UK trade within the next three years.

As we know, negotiations with the European Union are in a critical phase and while the prospect of a deal before the end of the year looks more promising, it is not guaranteed. Talks with the US have begun and any conclusion will now have to wait until after the Presidential election later this year. The UK may be able to make swifter progress with Asia-Pacific economies.

The top priority is securing a successor agreement with Japan, as the existing EU-Japan deal will cease to apply to the UK in January. Japan is keen to move quickly on a bespoke agreement. The UK has also officially opened negotiations with Australia and New Zealand.

All of these agreements, and a Japan deal in particular, would provide trade benefits in their own right but the bigger strategic prize is UK accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP is the third largest trade area in the world and has been signed by 11 countries around the Pacific rim, including Japan, Canada, Australia, New Zealand and Singapore.

Last week, Policy Exchange held a webinar with a stellar cast to discuss the UK’s accession to CPTPP. It was surely significant that Liz Truss, Trade Secretary in this “Get Brexit Done” government, and Lord Mandelson, an arch-Remainer, both stressed the strategic value of the UK joining.

Truss made it clear that she sees CPTPP as “part of a broader strategy of the UK becoming a central hub in a network of free trade agreements, a networked Britain if you like rather than a fortress Britain.” Lord Mandelson emphasised that the process may take time but “the UK aligning itself with a Pacific Rim agenda of this kind is a good thing.”

Chan Chun Sing, the current Singaporean Trade Minister, stressed how keen he would be to see the UK join, while Tony Abbott, the former Australian Prime Minister, noted that joining “would be the best possible sign that Britain really does want to be a global country again.”

Joining CPTPP will not be without its challenges. Stephen Harper, the former Canadian Prime Minister, noted that “[j]oining a plurilateral trade agreement is not frankly going to be a matter of a lot of negotiation. The others are largely going to have a take it or leave it approach.” He added, “You can seek tailor-made provisions, but that will add time to what will be a long process”.

Nevertheless, the prize would be hugely strategically significant. Grouping together with like-minded nations would provide the UK with a new platform to promote global trade liberalisation and multilateral reform.

It would enable the UK to join others in addressing China’s global rise from a greater position of collective strength. Indeed, this was an original objective of the project. Although potentially a long process, UK accession might help to convince the US to join the agreement, following President Trump’s decision to pull out of the precursor Trans-Pacific Partnership.

As Harper noted, Britain joining would offer some significant advantages to the existing members. “This would go from being a purely regional pact to now being the beginning of an alternative global order,” he said.

It might be tempting to view “Global Britain” as a distraction or diversion from pressing domestic issues. However, it is a necessary compliment to levelling up. Global Britain does not just mean reaching out to other countries, it means enabling more of the country to benefit from and compete in a globalised world. Moving forward with the CPTPP would demonstrate that the UK is serious about furthering both of these goals.

Daniel Hannan: What broken windows can teach the Chancellor about mending the economy

8 Jul

Daniel Hannan is a writer and columnist. He was a Conservative MEP from 1999 to 2020, and is now President of the Initiative for Free Trade.

Anyone can spin the spending taps open. It’s screwing them back again that is the problem. Once vast subsidies have gurgled down the plughole, it becomes almost impossible to resist demands for an extra spurt here or there. Sums that were considered colossal in February now seem, next to the hundreds of billions of pounds spent on quantitative easing and the furlough scheme, almost trivial.

Don’t get me wrong. The Coronavirus outbreak was an exceptional event that called for an exceptional response. Almost every small-government type I know acknowledged that there was a one-off case for interventions. The worry is that these interventions will turn out not to be one-offs; that, rather as happened after 1945, the electorate has come to expect a higher level of state intrusion, so the dial won’t return to where it was.

There was a practical and moral case for helping businesses through the lockdown. The practical case was that keeping a firm’s heartbeat going is cheaper, in the long run, than letting it expire and requiring a completely new business to be launched afterwards. The moral case was that the government had a duty to rescue its own victims: if an otherwise profitable enterprise, such as a pub or a theatre, was closed by law, it had a claim to compensation.

So far, so uncontroversial. But what when the restrictions are lifted? Should the state carry on supporting sectors that have been adversely affected? Should it, for example, continue to subsidise pubs or theatres, even when they are allowed to operate again, on grounds that their customers are staying away? What about sandwich shops hit by the shift to working from home – a shift that may be permanent? Or charities hit by a general drop in donations?

What of payouts that are not directly to do with the lockdown? It was striking, for example, that the clamour for more free school meals was far louder than the clamour for schools themselves to reopen in full. Demanding money on someone else’s behalf is always satisfying and, in current circumstances, the demands are hard to resist. When we are spending a hundred billion on the furlough scheme alone, who is going to cavil about £19 million for poor kids?

The dynamics of that decision illustrate, in microcosm, why demands for higher spending end up being granted. Those who called for higher spending were described as brave and principled, their opponents as selfish and stingy.

In fact, there is nothing brave about saying “Listen – hear me out on this, I know it’s controversial – we should do more to feed poor kids”. That position might be justified, but expressing it requires no courage. Indeed, by far the bravest thing I saw during the controversy was a Tweet by the kind and clever Therese Coffey, gently correcting Marcus Rashford’s claim that people might be cut off by water companies for want of means. Therese pointed out that that would be illegal, prompting a pile-on of the nastiest kind from an online mob who did not want facts to interfere with their self-righteous rage.

Few MP want to be accused of being “mean” or “heartless” (to quote the adjectives chosen by Sir Michael Wilshaw, the former head of Ofsted). They know that, however absurdly, they will be judged as if it were their own money they were trying to save, not taxpayers’.

Yet the economic facts remain. Britain’s output is down by more than a quarter. So far, the hit has been taken largely by business but, eventually, it will be felt by everyone: students, public sector workers, pensioners and, not least, those the poet calls “your children yet unborn and unbegot”. I wish it weren’t so. But we can’t defy economic gravity by intoning “Our NHS heroes deserve a pay rise!” or “Supporting the arts is an investment in the future!” or “The government needs to create more green jobs!”

Yes, fiscal loosening is appropriate in the aftermath of an economic catastrophe. Yes, it makes sense to bring forward some spending, especially on infrastructure. But the only way out of this mess is economic growth, and the way to get growth to cut taxes.

Think of it like this. The government can put more cash into circulation by spending more or by taxing less. The argument for the second is that the money will be more wisely directed by individuals on the ground than by civil servants drawing up project criteria. Britain’s immediate priority, as the furlough scheme tapers out, must be to get businesses investing and hiring. That means cutting corporation tax, stamp duty, national insurance and capital gains tax.

Why tax cuts rather than grants? Partly because grants are blunt instruments, expensive to administer and prone to unintended consequences. Mainly, though, because of what the nineteenth-century French economist Frédéric Bastiat called “ce qu’on voit et ce qu’on ne voit pas” – what we see and what we don’t.

Bastiat famously gave the example of broken windows. Replacing a shop window generates lots of activity: the shopkeeper pays six francs to the glazier, who can then spend that sum on new shoes, meaning that the cobbler now has more to spend and so on. Why, then, can’t a country make itself rich by hiring boys to go around smashing panes of glass? Because, Bastiat says, of the unseen costs: the shopkeeper could have invested the six francs on something more productive, the glazier had to turn down another customer to make time to fix the window and so on.

It’s an argument a ten-year-old can understand, yet we seem unable to internalise its logic. When a government takes money out of the economy to spend on, say, green jobs, it is creating unseen costs. We might regard those costs as justified in the name of environmental protection; but they are still costs. Subsidising jobs is no more a route to growth than smashing windows.

Who, though, is prepared to make that case in the current mood? Who will argue for balanced budgets and low taxes? The lockdown may be ending, but I fear our economic woes are just beginning.

Daniel Hannan: What broken windows can teach the Chancellor about mending the economy

8 Jul

Daniel Hannan is a writer and columnist. He was a Conservative MEP from 1999 to 2020, and is now President of the Initiative for Free Trade.

Anyone can spin the spending taps open. It’s screwing them back again that is the problem. Once vast subsidies have gurgled down the plughole, it becomes almost impossible to resist demands for an extra spurt here or there. Sums that were considered colossal in February now seem, next to the hundreds of billions of pounds spent on quantitative easing and the furlough scheme, almost trivial.

Don’t get me wrong. The Coronavirus outbreak was an exceptional event that called for an exceptional response. Almost every small-government type I know acknowledged that there was a one-off case for interventions. The worry is that these interventions will turn out not to be one-offs; that, rather as happened after 1945, the electorate has come to expect a higher level of state intrusion, so the dial won’t return to where it was.

There was a practical and moral case for helping businesses through the lockdown. The practical case was that keeping a firm’s heartbeat going is cheaper, in the long run, than letting it expire and requiring a completely new business to be launched afterwards. The moral case was that the government had a duty to rescue its own victims: if an otherwise profitable enterprise, such as a pub or a theatre, was closed by law, it had a claim to compensation.

So far, so uncontroversial. But what when the restrictions are lifted? Should the state carry on supporting sectors that have been adversely affected? Should it, for example, continue to subsidise pubs or theatres, even when they are allowed to operate again, on grounds that their customers are staying away? What about sandwich shops hit by the shift to working from home – a shift that may be permanent? Or charities hit by a general drop in donations?

What of payouts that are not directly to do with the lockdown? It was striking, for example, that the clamour for more free school meals was far louder than the clamour for schools themselves to reopen in full. Demanding money on someone else’s behalf is always satisfying and, in current circumstances, the demands are hard to resist. When we are spending a hundred billion on the furlough scheme alone, who is going to cavil about £19 million for poor kids?

The dynamics of that decision illustrate, in microcosm, why demands for higher spending end up being granted. Those who called for higher spending were described as brave and principled, their opponents as selfish and stingy.

In fact, there is nothing brave about saying “Listen – hear me out on this, I know it’s controversial – we should do more to feed poor kids”. That position might be justified, but expressing it requires no courage. Indeed, by far the bravest thing I saw during the controversy was a Tweet by the kind and clever Therese Coffey, gently correcting Marcus Rashford’s claim that people might be cut off by water companies for want of means. Therese pointed out that that would be illegal, prompting a pile-on of the nastiest kind from an online mob who did not want facts to interfere with their self-righteous rage.

Few MP want to be accused of being “mean” or “heartless” (to quote the adjectives chosen by Sir Michael Wilshaw, the former head of Ofsted). They know that, however absurdly, they will be judged as if it were their own money they were trying to save, not taxpayers’.

Yet the economic facts remain. Britain’s output is down by more than a quarter. So far, the hit has been taken largely by business but, eventually, it will be felt by everyone: students, public sector workers, pensioners and, not least, those the poet calls “your children yet unborn and unbegot”. I wish it weren’t so. But we can’t defy economic gravity by intoning “Our NHS heroes deserve a pay rise!” or “Supporting the arts is an investment in the future!” or “The government needs to create more green jobs!”

Yes, fiscal loosening is appropriate in the aftermath of an economic catastrophe. Yes, it makes sense to bring forward some spending, especially on infrastructure. But the only way out of this mess is economic growth, and the way to get growth to cut taxes.

Think of it like this. The government can put more cash into circulation by spending more or by taxing less. The argument for the second is that the money will be more wisely directed by individuals on the ground than by civil servants drawing up project criteria. Britain’s immediate priority, as the furlough scheme tapers out, must be to get businesses investing and hiring. That means cutting corporation tax, stamp duty, national insurance and capital gains tax.

Why tax cuts rather than grants? Partly because grants are blunt instruments, expensive to administer and prone to unintended consequences. Mainly, though, because of what the nineteenth-century French economist Frédéric Bastiat called “ce qu’on voit et ce qu’on ne voit pas” – what we see and what we don’t.

Bastiat famously gave the example of broken windows. Replacing a shop window generates lots of activity: the shopkeeper pays six francs to the glazier, who can then spend that sum on new shoes, meaning that the cobbler now has more to spend and so on. Why, then, can’t a country make itself rich by hiring boys to go around smashing panes of glass? Because, Bastiat says, of the unseen costs: the shopkeeper could have invested the six francs on something more productive, the glazier had to turn down another customer to make time to fix the window and so on.

It’s an argument a ten-year-old can understand, yet we seem unable to internalise its logic. When a government takes money out of the economy to spend on, say, green jobs, it is creating unseen costs. We might regard those costs as justified in the name of environmental protection; but they are still costs. Subsidising jobs is no more a route to growth than smashing windows.

Who, though, is prepared to make that case in the current mood? Who will argue for balanced budgets and low taxes? The lockdown may be ending, but I fear our economic woes are just beginning.

Luke Evans: Snapshot from Leicestershire. We haven’t beaten the Coronavirus. But nor are we letting it beat us.

8 Jul

Dr Luke Evans is a member of the Health Select Committee, and is MP for Bosworth.

I left you last week on something of a ‘columnist’s cliffhanger’.

The County of Leicestershire, and the city of Leicester that lies in its centre, had gone through days of speculation about the possibility of a local lockdown, and subsequent uncertainty about exactly where lines would be drawn. On a personal level, that included working out whether my own constituency of Bosworth would be affected, and if so how, and what that meant.

As it transpired, in the end Bosworth remained free from local lockdown. Even the areas which may loosely be described as the outer suburbs of the city were left untouched.

The focus for my own constituents quickly, and understandably, changed from fear that they could be part of a Coronavirus spike with all the implications which that brings, to concern that, especially as nationally enforced lockdown restrictions were being lifted, what might be the implications of Leicester residents escaping their locked down city to enjoy the pubs and restaurants of Hinckley and Bosworth?

After I left you last week, a great deal of time was spent trying to answer exactly that question.

I held several meetings with our local policing unit commander and two further ones with the County’s Chief Constable.

County MPs, all Conservative, met virtually to discuss strategy; and, as you would expect, I stayed in close contact with council leaders, chief executives and the head of our local resilience forum.

Not least, I spoke with councillors, especially those whose wards lay nearest to the city, and whose concerns were entirely understandably at their most heightened.

There were serious discussions about whether, even at an informal level, the lifting of lockdown restrictions should be postponed. Should I speak with publicans and ask them to stay closed? Should they take a further hit to their livelihoods to ensure that the heightened spread in the city could not be brought out to our rural communities?

As with so many other things there is seldom a binary choice when it comes to protecting health and livelihoods and inevitably, as with crime, there is a significant difference between the fear of what might happen, and what actually does.

It was interesting to see that research published by YouGov last Friday indicated that in this case the fear of what might happen was substantially greater than the likely reality.

In one of those oddly specific polls that the YouGov panel seems so proficient at producing, regular pub goers, regular prior to lockdown that is, were asked how soon they would return to their locals after July 4th.

Just four per cent of regulars said they would venture out on the day itself, and another four per cent in the first week, but not on Saturday.

Of course, that type of research certainly doesn’t mean that city dwellers would definitely stay at home but it does indicate that whatever happens it wasn’t going to be likely that pubs, and the police, would be inundated.

My conversations with the police were clear. They had planned, and part of their planning meant having more officers on duty than they would typically have on New Years Eve – but they weren’t expecting a day of mass rebellion.

I was delighted on Monday morning to be able to share a tweet from the Chief Constable stating that over the weekend in Leicester ‘the was huge compliance with the lockdown rules’, whilst in the county the ‘vast majority of residents were acting responsibly and adhering to guidelines’.

Of course, we always knew there would be incidents, which with a camera to hand and a media willing to share them will always gain penetration.

But we can’t lose sight of the fact that the overwhelming majority of decent people within the city and county are doing all that they can, and all that they have been asked, to beat this virus. I keep coming back to the same point that when the majority stick together we will win this fight.

Last weekend wasn’t the end of the local lockdown and it isn’t the end of the lifting of restrictions. We know that there are going to be outbreaks, people testing positive leading to the need to track and trace and temporarily close pubs. Indeed there have already been such cases.

But those cases aren’t indications that lifting the restrictions are failing but rather signs that this new normality is working.]

We haven’t got to the stage where we can say we have beaten Coronavirus, but by the great majority of us following the rules we can at least say we are not letting it beat us.

Ryan Bourne: Sunak should not and cannot try today to restore pre-virus Britain. It’s gone – and we must now adapt.

7 Jul

Ryan Bourne holds the R Evan Scharf Chair in Public Understanding of Economics at the Cato Institute. 

Rishi Sunak earned plaudits for his dealing with the immediate economic fallout from Covid-19. Yet today’s summer statement presents a thornier challenge than playing Emergency Santa, dishing out funds to keep businesses alive. For today requires taking steps to further facilitate the “normalisation” of economic life.

Boris Johnson waded into economics last week, arguing (rather conveniently) that the Coronavirus highlighted the need for his pre-pandemic “leveling-up” agenda. Exactly how Covid-19 proves the need for, say, HS2 is unclear. But underpinning the Prime Minister’s argument was an assumption that, post-lockdowns, we can get back to focusing on pre-virus priorities – in the Government’s case, state-led economic rebalancing.

Similar “back to our future” thinking underpins business representations ahead of this statement. From calls for taxpayer-financed high stcororeet spending vouchers, to VAT cuts for hard-hit sectors, the prevailing discourse appears to be “now the virus is less of a threat, let’s incentivise returning to normal activity,” with “norma”l meaning “what happened in early March 2020.”

Perhaps it’s because I’m in the U.S. and so have been to this reopening BBQ before, but I bear bad news: while the UK can expect a relatively sharp bounce-back in things such as retail activity, “normalisation” will not and should not mean a return to the economy of March 2020.

Before a vaccine, consumers will go where they feel safe, businesses from restaurants to cinemas will be supply constrained by social distancing, and certain behaviors (from the demand shift from restaurants to supermarkets, to the supply shift to working from home) will partially remain. That will bring major reallocation costs: businesses will close and lay off workers, while other sectors grow.

It was understandable that the Chancellor, not knowing which businesses would be viable after lockdown, set up a furlough scheme to avoid companies and jobs perishing. This helped protect important “job-matching capital” and “firm-specific capital” – i.e. people doing jobs they are good at and firms as important bundles of productive relationships. But one risk was always that businesses would interpret support not as mere lockdown relief, but a commitment to ensure their survival through the whole pandemic.

Some aspects of the campaign for arts subsidies, rumblings by MPs for ongoing aerospace supply-chain support, and the Resolution Foundation’s gimmicky “high street vouchers” idea suggest that some now do believe the Government should support sectors, even after full re-openings, precisely because consumers would otherwise continue to reject them, preferring not to fly as much, attend as many in-person events, or go to fewer restaurants or stores.

This is a very different policy proposition. Attempting to keep the March 2020 economy preserved as some eternal truth would mean workers and funds not being where businesses and consumers actually value them given today’s circumstances, bringing large economic costs beyond the fiscal.

For example, if more professionals now work from home semi-permanently, then tastes will shift from buying lunches within cities to local delis, online, or at supermarkets. Hence why Pret is laying off workers.

But as Julian Jessop has said, the purpose of economic policy should not be to protect Pret jobs. What normalisation should instead mean is the return to a functioning market economy where the rise and fall of businesses depends on their ability to meet our wants and needs in today’s circumstances. Sunak’s aim, in other words, should now be “market-led adaptation to the virus.”

We want businesses to figure out how to serve us in safe, cost-effective ways. The alternative – having the government tilt activity towards our early 2020 preferences – would not only encourage activity worse from a public health risk perspective, but also inevitably subsidise much that would take place anyway.

So Sunak should today reject “painting by numbers Keynesianism” that sees industry spending collapses as holes taxpayers should help fill in. He should snub VAT cuts or vouchers. If, with the virus still around, people would rather spend money on food to cook at home, Netflix subscriptions, and a hot tub for the back garden over restaurants, cinemas, and trips to the Lake District, workers and capital should flow accordingly. Economic activity serves consumers, not vice versa.

That’s not to say government cannot make this process less painful. But we need to be clear about the challenge we face: a supply-side shock we hid with relief. New realities mean workers in the wrong jobs, businesses serving customers in the wrong ways, and capital in the wrong places. Government policy should focus on removing barriers that gum up businesses, landlords, workers and entrepreneurs adjusting.

Sunak appears to get this on the worker side. He is tapering the furlough scheme gradually to give businesses breathing room, but inevitably those with newly uneconomic business models will make some permanent layoffs.

It’s crucial to try to get workers reallocated into new roles quickly to avoid the scarring effects of unemployment. Direct financial incentives for new hiring, even beyond subsidies for traineeships trailed in the papers, would encourage this. The reported plans for expansions of jobcentre capabilities are important too to try to speed up the matching process of unemployed workers to new roles, as would re-training efforts be. Some U.S. states are rolling back licensing restrictions on people shifting to different jobs too. With child-care difficult to come by, now would be a good time to review the UK’s oppressive childcare regulations, for example.

Yet the Conservatives should do more to facilitate the adaptation of businesses as well. Repurposing premises to earn consumers’ confidence often requires upfront investments that the Chancellor should write-off entirely for the basis of tax, through full expensing of investment. The planning law reforms should have an eye to business activities too – if more out-of-town activity is demanded, let it bloom.

The case for allowing existing businesses and property owners more flexibility – on how they operate, opening hours, what premises can be used for etc– is overwhelming as well. With apologies to my Editor, when we are seriously discussing throwing billions at retailers such as John Lewis or Topshop through vouchers, it seems daft to consider it beyond the pale that such retailers open beyond 6pm on a Sunday. Give freedom to businesses to adjust to what customers want: what barriers exist to entrepreneurs developing drive-through cinemas, for example? These are the sorts of supply-side questions that should animate government.

As always with fiscal events, any financial support to industries will be heralded as ‘good news’  and absence of it denounced as throwing sectors to the wolves. But it’s time for Sunak to be bold and honest: his task is not to “normalise” activity by resuscitating the composition of the March 2020 economy, but to “normalise” the market-led economy that makes us rich by meeting our demands.

Ryan Bourne: Sunak should not and cannot try today to restore pre-virus Britain. It’s gone – and we must now adapt.

7 Jul

Ryan Bourne holds the R Evan Scharf Chair in Public Understanding of Economics at the Cato Institute. 

Rishi Sunak earned plaudits for his dealing with the immediate economic fallout from Covid-19. Yet today’s summer statement presents a thornier challenge than playing Emergency Santa, dishing out funds to keep businesses alive. For today requires taking steps to further facilitate the “normalisation” of economic life.

Boris Johnson waded into economics last week, arguing (rather conveniently) that the Coronavirus highlighted the need for his pre-pandemic “leveling-up” agenda. Exactly how Covid-19 proves the need for, say, HS2 is unclear. But underpinning the Prime Minister’s argument was an assumption that, post-lockdowns, we can get back to focusing on pre-virus priorities – in the Government’s case, state-led economic rebalancing.

Similar “back to our future” thinking underpins business representations ahead of this statement. From calls for taxpayer-financed high street spending vouchers, to VAT cuts for hard-hit sectors, the prevailing discourse appears to be “now the virus is less of a threat, let’s incentivise returning to normal activity,” with “normal” meaning “what happened in early March 2020.”

Perhaps it’s because I’m in the U.S. and so have been to this reopening BBQ before, but I bear bad news: while the UK can expect a relatively sharp bounce-back in things such as retail activity, “normalisation” will not and should not mean a return to the economy of March 2020.

Before a vaccine, consumers will go where they feel safe, businesses from restaurants to cinemas will be supply constrained by social distancing, and certain behaviors (from the demand shift from restaurants to supermarkets, to the supply shift to working from home) will partially remain. That will bring major reallocation costs: businesses will close and lay off workers, while other sectors grow.

It was understandable that the Chancellor, not knowing which businesses would be viable after lockdown, set up a furlough scheme to avoid companies and jobs perishing. This helped protect important “job-matching capital” and “firm-specific capital” – i.e. people doing jobs they are good at and firms as important bundles of productive relationships. But one risk was always that businesses would interpret support not as mere lockdown relief, but a commitment to ensure their survival through the whole pandemic.

Some aspects of the campaign for arts subsidies, rumblings by MPs for ongoing aerospace supply-chain support, and the Resolution Foundation’s gimmicky “high street vouchers” idea suggest that some now do believe the Government should support sectors, even after full re-openings, precisely because consumers would otherwise continue to reject them, preferring not to fly as much, attend as many in-person events, or go to fewer restaurants or stores.

This is a very different policy proposition. Attempting to keep the March 2020 economy preserved as some eternal truth would mean workers and funds not being where businesses and consumers actually value them given today’s circumstances, bringing large economic costs beyond the fiscal.

For example, if more professionals now work from home semi-permanently, then tastes will shift from buying lunches within cities to local delis, online, or at supermarkets. Hence why Pret is laying off workers.

But as Julian Jessop has said, the purpose of economic policy should not be to protect Pret jobs. What normalisation should instead mean is the return to a functioning market economy where the rise and fall of businesses depends on their ability to meet our wants and needs in today’s circumstances. Sunak’s aim, in other words, should now be “market-led adaptation to the virus.”

We want businesses to figure out how to serve us in safe, cost-effective ways. The alternative – having the government tilt activity towards our early 2020 preferences – would not only encourage activity worse from a public health risk perspective, but also inevitably subsidise much that would take place anyway.

So Sunak should today reject “painting by numbers Keynesianism” that sees industry spending collapses as holes taxpayers should help fill in. He should snub VAT cuts or vouchers. If, with the virus still around, people would rather spend money on food to cook at home, Netflix subscriptions, and a hot tub for the back garden over restaurants, cinemas, and trips to the Lake District, workers and capital should flow accordingly. Economic activity serves consumers, not vice versa.

That’s not to say government cannot make this process less painful. But we need to be clear about the challenge we face: a supply-side shock we hid with relief. New realities mean workers in the wrong jobs, businesses serving customers in the wrong ways, and capital in the wrong places. Government policy should focus on removing barriers that gum up businesses, landlords, workers and entrepreneurs adjusting.

Sunak appears to get this on the worker side. He is tapering the furlough scheme gradually to give businesses breathing room, but inevitably those with newly uneconomic business models will make some permanent layoffs.

It’s crucial to try to get workers reallocated into new roles quickly to avoid the scarring effects of unemployment. Direct financial incentives for new hiring, even beyond subsidies for traineeships trailed in the papers, would encourage this. The reported plans for expansions of jobcentre capabilities are important too to try to speed up the matching process of unemployed workers to new roles, as would re-training efforts be. Some U.S. states are rolling back licensing restrictions on people shifting to different jobs too. With child-care difficult to come by, now would be a good time to review the UK’s oppressive childcare regulations, for example.

Yet the Conservatives should do more to facilitate the adaptation of businesses as well. Repurposing premises to earn consumers’ confidence often requires upfront investments that the Chancellor should write-off entirely for the basis of tax, through full expensing of investment. The planning law reforms should have an eye to business activities too – if more out-of-town activity is demanded, let it bloom.

The case for allowing existing businesses and property owners more flexibility – on how they operate, opening hours, what premises can be used for etc– is overwhelming as well. With apologies to my Editor, when we are seriously discussing throwing billions at retailers such as John Lewis or Topshop through vouchers, it seems daft to consider it beyond the pale that such retailers open beyond 6pm on a Sunday. Give freedom to businesses to adjust to what customers want: what barriers exist to entrepreneurs developing drive-through cinemas, for example? These are the sorts of supply-side questions that should animate government.

As always with fiscal events, any financial support to industries will be heralded as ‘good news’  and absence of it denounced as throwing sectors to the wolves. But it’s time for Sunak to be bold and honest: his task is not to “normalise” activity by resuscitating the composition of the March 2020 economy, but to “normalise” the market-led economy that makes us rich by meeting our demands.

Radical: Our top five reads for the summer – on gender-related issues

7 Jul

Victoria Hewson is a solicitor and Rebecca Lowe is the former director of FREER, and a former assistant editor of ConservativeHome. Together they found Radical, a campaign for truth and freedom in the gender recognition debate.

Last week, it was reported that Dominic Cummings had set the special advisers (SpAds) some books to read ahead of an “away day”. Dubbed “spad school”, by Times journalist Stephen Swinford, the advisers’ homework allegedly included reading all 350 pages of Philip Tetlock’s Superforecasting, alongside Andrew Grove’s (only slightly shorter) High Output Management.

Now, whatever your preferred method for predicting the future, it seems unlikely that the reading-list-story trend will stop here. It’s a yearly classic, after all. Whether you’re a school-leaver preparing for university entry, or a Government minister intending to use time away from Westminster to learn the historical context of your brief, your summer plans probably include some targeted reading. 

So, here are our top five Radical reads for the summer. As regular readers of this column might expect, they’re not cheerful page-turners. But they may well change your life.

1) It’s a badly kept secret that the Equality Act (2010) and the Gender Recognition Act (2004) aren’t exactly the best-drafted pieces of legislation. Discrimination solicitor Audrey Ludwig’s deep dive into the former – published just a few days ago on the WPUK site – emphasises its incredible complexity, in a neatly practical manner: she explains how she goes about determining whether someone has faced unlawful discrimination under the Equality Act’s purview.

Along the way, Ludwig highlights the lack of “objective research and analysis” into the impact the introduction of “self-IDwould have on sex discrimination, and related issues, such as pay. Key to these matters, she reveals, is the role the “legal comparator” plays in discrimination cases: self-ID would change “who and who cannot be used as a legal comparator”, and this would have serious repercussions. 

2) Employment solicitor Rebecca Bull’s recent briefing note for MBM Policy Analysis, Impact of Gender Recognition Reform on Sex Based Rights, sets out the implications of proposed Gender Recognition Act reforms on sex-based rights and protections under the Equality Act.

Like or loathe the Equality Act (and there’s a lot to criticise about it), it’s now woven into the way in which every business and public-sector organisation has to operate. How services are provided, and how employees are paid and treated at work, are prescribed by the Equality Act.

Where Audrey Ludwig’s blog gives a snapshot of how self-ID would affect the way in which the Equality Act works in cases of workplace discrimination, Bull sets out the “significant concern that single sex service provision on the lines of natal sex will be rendered unworkable and severely compromise the rights which women currently have to single sex services”.

3) The NHS recently edited its guidance on puberty blockers as a treatment for transgender children, to remove the claim that suppressing puberty with synthetic hormones is reversible, and to introduce a description of harmful side effects.

Much concern has arisen about the medical path increasingly regularly embarked upon by children who identify as the opposite sex. And, in Growing Pains: Problems with Puberty Suppression in Treating Gender Dysphoria, professors of medicine, Paul W. Hruz, Lawrence S. Mayer, and Paul R. McHugh, give a clear and comprehensive account of the use of puberty blockers, and the subsequent hormone therapies and surgeries that many of these children move on to as young adults.

The authors rebut the claim often preferred by medical professionals and advocacy groups that puberty suppression is fully reversible, and highlight a lack of scrutiny of the safety and efficacy of what they consider to be “experimental medicine” being practised on vulnerable children.

Anyone who’s concerned about the treatments currently being administered to hundreds of UK children who’ve been diagnosed with gender dysphoria will find this article useful and troubling in equal measure.

Published last month, Joanna Williams’ Civitas report, The Corrosive Impact of Transgender Ideology, is as punchily written and hard-hitting as its title, and her spiked credentials, suggest. But it’s also well researched and argued, with Williams’ experience as an academic grounding her readable style.

Culminating in five policy recommendations – including the immediate prohibition of the prescription of puberty blockers and cross-sex hormones to children – this paper (or short book, really, as it comes in at about a third the length of Tetlock) addresses the “social impact” of the “emergence of the idea of transgender”.

It also provides a neat summary of a shift in “progressive” rights-based activism – away from demands for “more freedom from the state for people to determine their sex lives unconstrained by the law’, and towards demands for “recognition and protection from the state […] to regulate the behaviour of those outside of the identity group”. 

5) Deep philosophical claims and arguments lie beneath all policy recommendations and legal analyses, and the written output of the sex/gender debate is no exception. Indeed, those of us who write about these matters are often criticised for being too esoteric, and for failing to engage with the real world.

Hopefully, the practical focus of the works listed above will serve to counter that criticism sufficiently, however, for us to be able to end this week’s column by recommending some top philosophical writing. We have great hopes for Sussex philosopher Kathleen Stock’s upcoming book, Material Girls: Why Reality Matters for Feminists, due out in 2021.

But, until then, check out her recent TLS review of Judith Butler’s The Force of Nonviolence, and her 2019 Aristotelian Society talk on sexual orientation as a “reflexive disposition to be sexually attracted to people of a particular biological Sex or Sexes”.   

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

6 Jul

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

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

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

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

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

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

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

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

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

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

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

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

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

David Gauke: I fear the Conservative Party is lost for small state free marketeers and One Nation social liberals

4 Jul

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

Are we seeing a fundamental realignment of British politics? It is a question that has often been asked in the wake of last year’s general election in which Boris Johnson won an 80 seat majority on the basis of winning traditionally Labour seats in the midlands and northern England.

During the last two weeks, we have seen three pieces of evidence suggesting that we are seeing such realignment.

First, a report by Matthew Goodwin and Oliver for the Joseph Rowntree Foundation studying the election . Goodwin and Heath make the case that in 2019 the Conservatives established a 15-point lead over Labour among people on low incomes (the first time in recorded history that the Conservative Party has outpolled Labour among people on low incomes); the Conservatives are now more popular among people on low incomes than they are among people on high incomes, whilst the Labour Party is today just as popular among the wealthy as it is among those on low incomes; consequently, both the Conservatives and Labour have inverted their traditional support base; and that Labour must improve its offer to low income voters and the Conservatives must work hard to retain their support.

Second, a report by UK in a Changing Europe which was discussed by its Director, Anand Menon on this site
This report compares the attitudes of MPs, party members and voters, by asking each group a series of questions about fundamental ideological attitudes on a left-right spectrum for economic issues and a liberal-authoritarian spectrum for social issues.

It reveals that, on social issues, the Conservatives at all levels are relatively united (MPs are a bit more socially liberal than Conservative voters) but, on economics, there is a much bigger divide, with Conservative MPs are a long way to the right of Conservative voters.

But perhaps most interesting of all (if not altogether surprising), were the survey responses for those voters who switched from Labour to Conservative at the last election. These are the people who decided it and, in all likelihood, will decide the next one.

On social issues, these voters were slightly more authoritarian than Conservative voters as a whole and a lot more authoritarian than Conservative MPs; on economic issues, they were to the left not just of the typical Conservative voter (who, remember, is somewhat to the left of Conservative MPs) but of the average voter.

The lesson for Labour from both analyses is straightforward. If it wants to win back the support of those Red Wall voters who switched to the Conservatives in 2019, the party should avoid the culture wars. When the Left go woke, their voters walk. It is lesson that Keir Starmer, who is trying to steer through the Black Lives Matter controversies with caution, appears to have learnt.

What about the positioning of the Conservative Party? This brings me to the third piece of evidence of realignment in British politics – the recent rhetoric from senior members of the Government embracing Franklin Delano Roosevelt and his New Deal. First, Michael Gove and then Johnson went out of their way to endorse FDR’s approach to an economic crisis, provoking free marketeers like Daniel Hannan and Ryan Bourne to point out (correctly) that the US’s economic record in the 1930s was much worse than that of the UK’s, and that many of the President’s policies were deeply flawed.

Of course, one can simply shrug off the talk of being Rooseveltian as a rhetorical flourish (the measures announced by the Prime Minister were limited but perfectly sensible), and there is a strong economic case to the effect of there being a vital role for active Government in the current circumstances.

Nonetheless, the references to FDR are consistent with a Government that is essentially tacking Left on economic measures. Meanwhile, there is plenty of evidence that it is tacking Right on social measures. And if it wants to retain those low income, Red Wall, Labour switchers who delivered the Prime Minister his Parliamentary majority that seems to be the sensible approach. Hug those voters close and give them what they want. It was an electoral strategy that worked in 2019 and, the argument goes, should work again in 2024.

There are, however, risks.

When it comes to pursuing a socially authoritarian agenda, this may well appeal to the new Conservative voters, but it could come across as divisive and mean-spirited to the wider electorate. For younger and better-educated voters, it can contaminate the brand. One shouldn’t carry the parallel too far, but being a cultural warrior doesn’t look as though it will guarantee Donald Trump re-election in November.

On the economy, Conservative MPs are more right wing than the new Tory voters not out of spite or contrariness, but because they believe that the best way to create wealth is to have a flourishing private sector, that the market is generally more efficient at allocating resources than Government, and that one person’s prosperity does not cause another person’s poverty.

This raises two problems. Either Conservative MPs ‘do not want to meet the losers of globalisation halfway’ (to use Matthew Goodwin’s phrase), which causes a political problem, or they will accommodate the views of these voters, which will cause economic problems.

Economic nationalism, a hard Brexit, high levels of Government borrowing, and more taxes on the wealthy and big business may well be popular with these voters, but it is not consistent with a dynamic, open and enterprising economy. As many of us used to argue against Labour politicians who themselves argued in favour of some of these measures, pursuing left wing economics makes working class voters poorer.

Then there is the question of competence. People decide on how they vote on the basis of a combination of factors. Partly it is economic self-interest, partly about values. But there is also a sense of whether the individuals concerned are trusted to be up to the job. Politics has changed a lot in recent years but there has traditionally been reluctance in the British voter to trust social authoritarians or economic left wingers. Politicians that just reflect back the views of voters can, ultimately, be perceived as insincere and insubstantial. And when it comes to competence, Keir Starmer will set the bar much higher than Jeremy Corbyn.

Those are the risks. But what choice does the Conservative Party have? The nature of the coalition of support it created in 2019, built on the basis of ‘getting Brexit done’ and successfully capturing large numbers of northern and midland low-income Labour voters, means that a return to a more traditional, liberal, middle-class Conservatism would doom dozens of newly elected MPs. If Boris Johnson wants to retain the Red Wall (or, if he prefers, consolidate the Blue Wall), the war on the woke and Rooseveltian economics is the way forward.

If you are a small state free marketeer, or a one nation social liberal, it is a depressing conclusion to reach. But when it decided to be the Party of Brexit, when it decided that it should focus on Red Wall voters, the Conservative Party made its choice. I fear it is too late to turn back.