Rocio Concha: If the Government wants to build back better, it must put the consumer at the centre

9 Aug

Rocio Concha is Director of Policy and Advocacy at Which?

As we start to look ahead to beyond the pandemic, the Government will have to grapple with how to stimulate an economic recovery and form public policy agendas for a society that in many ways looks different compared to 18 months ago. While there will be a natural focus on investment, innovation and competition, it would be a fundamental mistake to overlook the vital role which consumers have to play.

Because it will be everyday people that drive our economic recovery. The more confident they feel, the more they are likely to spend and shop around, to stimulate competition and to support innovation by trying new products and services – all things which the UK, and businesses large and small, are relying on to bounce back.

The challenge for the government is a daunting one – and the increase in the time we now spend online is illustrative of the delicate balancing act they must achieve. The ability to work, bank and shop remotely offers huge convenience. Many of the changes people have made to their lives will be here to stay. Yet the increasing move to a digital world has presented problems and risks, such as the significant increase in online scams, that haven’t yet been adequately addressed.

Harnessing the positives and neutralising the risks that have arisen for consumers won’t be easy. Changes that may have taken years have happened almost overnight in some cases and that needs to be caught up with.

At Which?, we believe the government should empower consumers to lead our economic recovery, and there are many ways it can do this. Building on already existing legislation or consultations, there are three areas where Ministers can make markets work more fairly, and bring an end to rogue business practices that all too often see everyday people get ripped off.

First, competition and consumer policy requires reform to give such regulators as the Competition and Markets Authority (CMA) sharper teeth, with proper powers to act as deterrents for unscrupulous companies that break consumer laws. In practice, that means swift and effective redress when customers are wronged, and proper accountability for businesses using unfair practices in dealing with consumers – as some have during the pandemic.

In the digital space, a handful of dominant tech giants, including Facebook and Google, can no longer be allowed to stymie competition and reduce innovation in the sector. The newly-formed Digital Markets Unit, operating out of the CMA, is a step in the right direction – but it won’t protect consumers unless it is equipped with the necessary enforcement powers, including the ability to hand down heavy fines.

Second, if consumers are to feel more confident engaging with new technology and new markets, then they will need to feel safe being online. It is no coincidence that fraud has surged by a third compared to last year. Yet with some of the most sophisticated technology in the world, there are measures that giant online platforms – such as those named above – which so many of us use everyday, can and must do to prevent the avalanche of fake adverts that makes it far too easy for fraudsters to target victims from appearing on their sites in the first place.

Which? research earlier this year found that four in ten investment scams begin online. The government has taken positive action to tackle aspects of online safety by introducing the draft Online Safety Bill – but, as it stands, it will fall short of swiftly dealing with all online fraud. Unless it provides online platforms with the legal responsibility to prevent, identify and remove fake and fraudulent content on their sites, including paid for ads, then fraudsters will continue to exploit their systems and services to carry out a crime that can cause a devastating amount of financial and emotional harm for its victims.

Third, as numerous new tech products furnish our homes, customers must be confident that they are safe to use. Smart gadgets and devices can bring huge benefits to consumers’ lives, but these products must be properly safeguarded with strong security protections to prevent cyberattacks.

The Government’s upcoming Product Security and Telecommunications Infrastructure Bill will scrutinise this. However, if Ministers are serious about cracking down on insecure and unsafe products in our homes, online marketplaces and retailers must be given additional legal obligations in the Bill for ensuring the safety and security of the products sold on their sites – and for customers to get appropriate redress when they buy faulty products.

Taking action in these three areas means that the Government needn’t magic legislation out of thin air to begin empowering and protecting consumers. Indeed, the government pledged to give the CMA enhanced powers to tackle rip-offs in its manifesto.

Here are the foundations from which to make people feel confident that the economy is working for them. To do so would really build back better.

John Redwood: Why now that we have left the EU are we still yoked to Maastrict austerity?

26 Apr

Sir John Redwood is MP for Wokingham, and is a former Secretary of State for Wales.

The UK economy is currently being run on the Maastricht rules as if we had not left the EU. The Office for Budget Responsibility made clear in its March report that whilst it awaits the Government’s conclusions on a new fiscal framework, the economy will be guided by the two familiar requirements that we get the running deficit down below three per cent of GDP, and that state debt as a percentage of GDP is declining all the time it is above the 60 per cent level.

It is clear that the whole five year budget in question is dominated by the perceived need to get state debt falling as a percentage of the economy by the end of the forecast period. This has led to a range of measures to increase the tax take, with a large increase in the Corporation Tax rate, and a big increase in the numbers of people paying higher rate income tax through freezing allowances.

My critics will argue that because we were outside the Euro we never had to follow the Maastricht rules. The truth is we did. We still do because we have never changed the rules, even though now we are free to do so.

We faithfully reported each year on progress with hitting the debt rules, and made clear that policy was primarily steered by the need to control debt. That was the central driver of George Osborne’s so-called austerity economics. The latest Government figures after Brexit continue to report our progress against these EU rules. This quote from the OBR’s March Report shows nothing has yet changed:

“The Chancellor has not set new fiscal targets in this Budget (despite two of the existing ones expiring this month) and is instead proceeding with the review of the fiscal framework proposed in last year’s Budget. But the absence of formal fiscal targets does not mean that the Chancellor has not been guided by particular metrics when selecting his medium-term Budget policies. The tax rises and spending cuts he has announced are sufficient to eliminate all but a £0.9 billion current budget deficit in 2025-26, while they are just enough to see underlying public sector net debt as a share of GDP fall by a similarly small margin of £0.7 billion in 2024-25 and £4.1 billion in 2025-26.”

I rest my case.

Requiring states to keep their overall state borrowing low makes a lot of sense in a single currency area where different governments have the right to borrow in a common currency. They need to avoid the free rider problem, whereby some states run up excessive debts, taking advantage of a low interest rate facilitated by the prudence of others.

The UK has no such problem. The UK as a single state with its own currency and central bank cannot take advantage of others. It does of course have to decide how much to borrow with affordability in mind. Borrow too much, and the interest bill could become unaffordable. Borrow excessively, and lenders could start demanding penal terms.

This means the best type of control over debt build-up for the UK should be a control over the size and growth of the interest burden. The UK has a tradition of borrowing long, and can do so in current markets. This protects taxpayers against sudden rises in rates, and reduces any strain from refinancing the debt. The Government has used debt interest targets, and should draw up a new realistic one. Given the way debt interest has fallen despite the increase in debt, this should not prove difficult.

The idea that we should carry on controlling the economy by state debt as a percentage of GDP is particularly silly given the great monetary experiment the UK along with the USA, the ECB and the Bank of Japan is carrying out.

The state-owned Central Bank is buying up large quantities of the state debt. Claiming that the gross debt is still a real debt is therefore wrong. The Treasury pays interest on nearly £975 billion of the debt to the Bank which it owns. If I had bought in my own mortgage but still kept paying the interest, I would not regard it as a real debt in the way I did before I bought in the loan, since I would be paying myself. Despite this obvious anomaly, the Budget is constructed on the basis that we need to get gross debt down, not the debt net of that owned by the state itself.

So what should we use as guides for economic policy? To a control on state interest payments to others, we should add a growth target and we should keep the important two per cent inflation target as a restraint on excessive credit and money expansion. The growth target should encompass aims to increase employment and productivity. What we need is to promote a higher wage, higher productivity economy. Our economic targets should reflect those aims.

The current state debt target is acting a constraint on faster growth. Offering tax rises and threats of tax rises for the years ahead damages confidence and deters new job creation and new investment. The UK’s productive capacity has been damaged by years in the single market where we lost out in many areas from steel to consumer electronics and from temperate food production to electricity generation.

We now need a favourable tax regime on self employment, investment, enterprise and individual incomes to promote a substantial increase in our productive capacity. The state debt control implies more of the same old policies which we had to follow in the later single market years which did not do enough to boost high paid jobs through industrial investment and higher productivity.

David Gauke: My Budget advice to the Chancellor. Raise income tax, not corporation tax.

27 Feb

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

If there is one tax that the Chancellor is likely to increase when he stands up to deliver his Budget on Wednesday, it is corporation tax. Speculation that the corporation tax rate is going to rise has been running for months and if the Treasury wanted to dispel such speculation it could have done so. In contrast to George Osborne’s time as Chancellor – when reductions from 28 per cent to 17 per cent were announced – Rishi Sunak is expected to announce a Corporation Tax rate in the region of 23 to 25 per cent.

Is this a good idea? My view – as the Minister of Tax throughout the Osborne Chancellorship – is that it is not. But it is worth examining the arguments for and against such an approach.

The first argument that will be made is that we might not need tax rises at all. I wish that this was true but sadly this is unrealistic. It is true to say that we can live with higher levels of debt than was the case in the past. Interest rates are low and likely to remain so. Even if they increase, the long dated maturity of our debt gives us a chance to respond. The markets are happy to lend to us, the risk of a sovereign debt crisis is remote. The Covid crisis is the type of event in which governments should be willing to borrow and the consequences can and should be dealt with over a long period of time. In short, we needn’t be in a hurry to pay off the Covid-19 debt.

Even accepting all of this – that ‘this time is different’ – there is still an issue. Even after we are put the economic consequences of Covid-19 behind us, the OBR forecasts a deficit of £100 billion or 4 per cent of GDP. Our debt to GDP ratio would continue growing. Given these forecasts assume tight control over public spending that will be hard to deliver and the significant demographic challenges that face the country in the 2030s, some kind of fiscal tightening in the form of tax rises will be necessary eventually.

The second argument is that now is not the time. I would agree that now is not the time for a fiscal tightening. The economy is currently shrinking and unemployment is likely to increase substantially in the months ahead. The markets are not jittery so there is less of a pressing need to take action. Nonetheless, the Government could increase some taxes without engaging in a fiscal tightening if long term tax increases are accompanied by short term tax cuts or spending rises. So one can announce and even implement tax rises without engaging in an immediate fiscal tightening.

There is also a political issue. Delaying action on fiscal consolidation might make economic sense but it would push tax increases into the last years of a Parliament. Leave it a year or so and the Chancellor might find that his Parliamentary colleagues – not least the Right Honourable Member for the marginal seat of Uxbridge and South Ruislip – might become rather resistant. Now might be the last chance to take action.

The third unconvincing argument is that cutting corporation tax has not cost us any money and increasing it will not raise you any money. Look at how corporation tax revenues have increased since 2010, the argument goes. Sadly, life is more complicated than that. Yes, rates have fallen and revenue has increased but corporation tax receipts reflects where we are on the economic cycle (in 2010, businesses were not making much by way of profits and if they were they had big losses to offset). Furthermore, the post-2010 reforms were Lawsonian in their approach in broadening the base at the same time as lowering the rate (so these were not simply cuts). In addition, lower corporation tax rates have unintended behavioural changes in that more people pay themselves through companies (diverting tax revenues from income tax and national insurance contributions). To put it another way, increasing corporation tax rates really will bring in more revenue.

So, to summarise, it will be necessary to increase tax revenue, it is reasonable to make a careful start on that process now (albeit in a way that does not tighten fiscal policy in the short term) and that increasing the corporation tax rate will bring in additional revenue. I could also add that, of all the potential revenue-raisers, this is likely to be politically less painful than other options. Even businesses will not squeal much because, for many of them, making a profit appears to be a remote eventuality and paying more tax on those profits would be a relatively nice problem to have.

It would still be a bad idea.

Why? If we are going to raise more in taxes – and we are already at historically high levels – we need to have a debate about which taxes are least damaging to economic growth. Over the long term, corporation tax ranks as being one of the worst.

Corporation tax is a tax on profits. Profits are the return on investment; the higher the tax on profits, the lower the rate of return. All other things being equal, the lower the rate of return on investment, the less investment you get.

There is also a tendency to think that corporation tax is something that is paid by, well, corporations. At one level that is true but – to state the bleeding obvious – all taxes are paid by people in the end. Corporation tax is ultimately paid by shareholders in lower dividends, consumers in higher prices and employees in lower wages. There is plenty of evidence to suggest that in an open economy like the UK, it is the workers who lose out the most. Investment goes elsewhere, productivity does not increase as quickly as it would otherwise do and, in the end, wages and salaries reflect productivity.

It is no coincidence that, in the era of globalisation, corporation tax rates have fallen around the world. I spent much of my time as a Treasury minister trying to persuade international businesses to locate more investment and activity in the UK as a consequence of the competitiveness of our corporate tax system. We were starting to see success but there was always a question as to whether the UK was truly committed to corporation tax competitiveness in the way that, say, the Republic of Ireland was. Given the current speculation, it was a fair question. On top of Brexit, a sharp hike in corporation tax rates will be yet another blow to our international reputation as a place in which to do business.

If we need more tax revenue – and we do – we have to make use of our big, broad-based revenue raisers – income tax, national insurance contributions and VAT. The manifesto pledge made in 2019 not to increase the rates of these taxes was unwise at the time but it was made in good faith. However, much has happened since and the Government would be justified in recognising that. Attempting to fill the fiscal black hole by swingeing increases in corporation tax will reduce business investment and damage our international competitiveness. Not for the first time, the politically expedient choice will come with a painful economic cost.

Philip Davies: Our frontline staff are vital to our economic recovery, and we must do more to support them.

6 Dec

Philip Davies is MP for Shipley & Co-Chairman of the APPG on Customer Service

Ten months on from the start of the Coronavirus pandemic, we continue to face daily challenges as we navigate its far reaching impacts on our economy and society.

Since the start of the crisis, we’ve seen inspiring examples of the nation come together, with moving tributes to the NHS and those who have worked tirelessly to keep us safe. Yet, amongst these shows of support, a concerning trend has emerged across the country – with instances of hostility toward frontline staff on the rise.

Research from the Institute of Customer Service indicates that over half of customer-facing staff have experienced abuse from customers since the pandemic began. The worrying figures span every sector – from retail to public transport networks and even financial services. As we deal with the impact of new restrictions and the onset of the busy festive season, it’s more important than ever that we step up and protect our frontline workers.

The new localised tier system will, in itself, present new challenges, as increasingly frustrated customers kick back against restrictions. As customers looking to enjoy traditional Christmas festivities are told they can only enjoy their drinks with a “substantial meal”, and those looking for last-minute Christmas presents are presented with long queues as stores try to ensure social distancing guidelines are met, I fear that the dwindling patience of the public could put our customer-facing staff at even greater risk of abuse.

I am working with the Institute of Customer Service on a campaign, “Service with Respect”, which encourages businesses and the government to do more to protect these workers.

Alongside my colleague, the Labour MP Chris Evans, and over 100 big-name brands, including O2, Boots and Nationwide, we are calling for the introduction of a specific offence for anyone who abuses customer facing staff.

We’re also encouraging organisations across the county to invest in additional training for their employees, to ensure they are adequately prepared for the ever changing requirements of their roles as we continue to navigate these challenging times.

Through a series of All-Party Parliamentary Group meetings, we have heard concerning and wide-ranging reports from across the nation – with instances ranging from verbal abuse, being shouted and sworn at, to more extreme cases of physical violence.

With 80 per cent of the UK’s employees working in the service sector, the scale of the issue is extremely concerning: and research shows it is not limited simply to face to face interactions. Those working in contact centres have reported occurrences of hostility through phone and online chat services. Combined with increased workloads as the number of vulnerable customers rises, the potential psychological impacts of such behaviour should not be ignored.

In Parliament, I recently asked the Home Secretary what steps her Department is taking to ensure that customer service staff are protected from abuse during the Covid-19 lockdown.

In response, she outlined that any such abuse is unacceptable, and that the Government is working closely with the National Retail Crime Steering Group to deliver a programme of work aiming to provide better support to victims, improve reporting, increase data sharing and raise awareness of this crime.

Whilst this initial response is welcomed, and it’s encouraging to see the issue being taken seriously, I fear this narrow view on the retail sector alone does not go far enough. Our research has clearly shown that instances of hostility span multiple sectors, and the plight of those outside of retail risks being overlooked.

Any form of abuse, in all aspects of life, is completely unacceptable, but we should remind ourselves that these workers have been operating on the frontline since the beginning of the pandemic. They have kept our nation running in the most difficult of times – keeping our building lights on, shelves stocked and basic power and water supplies running. We all have a duty to ensure they have the training and respect they deserve to safely carry out their crucial roles.

With different tiered restrictions remaining in place across the country, the role of customer facing staff continues to expand, with many taking on additional responsibilities for ensuring social distancing measures are adhered to and hygiene requirements met. In the face of a progressively frustrated and restless customer base as we approach the busy Christmas season, there is reason that these concerning instances of abuse could continue to rise.

The pandemic continues to bring daily challenges across all aspects of our lives. Yet as we try to rebuild, customer-facing staff will be vital to our recovery, and we must show them they are a valued part of our nation. And this starts by enabling them to do their work safely, effectively and free from the fear of abuse.

Sunak opts to suck it and see

25 Nov

We must be thankful that no-one is forecasting that Government borrowing will rise to record levels this year.  Or Rishi Sunak wouldn’t have been in a position to announce that Government spending will rise at its fastest rate for 15 years.

Apologies for the sarcasm – which isn’t aimed at the Chancellor’s measures, but is meant instead to provide an introduction to the thinking behind them.

One response to a ballooning deficit is to cut the rate of growth of spending.  That’s what the Coalition did after 2010, when the deficit hit seven per cent of GDP.

The Office for Budget Responsibility is forecasting a peak of 19 per this year.  But Sunak’s response is to raise the rate of spending.  Why?

Because in 2010 George Osborne judged the deficit to be structural (he was right), and his successor judges this one to be exceptional (he’s right, too).

It is almost entirely a product of the pandemic and what has followed.  It is in this context that the OBR forecasts the economy to shrink by 11 per cent this year and unemployment to hit 2.6 million next year.

In these circumstances, the Chancellor has found it impossible to produce the four year spending review he hoped for, and has been forced to issue one for a single year instead.

Furthermore, his statement was only one side of the tax and spending coin. Today, we got the spending.  In the Spring, we will get the Budget – and the tax.

Given all this, it will be very odd if Sunak turns up then with large-scale tax rises to raise revenue quickly.  The foundation of his measures today appears to be: suck it and see.

Broadly speaking, the spending package suggests that the Chancellor is going for growth.  That’s the logic of the infrastructure spending, the coming review of regulation, the new northern bank and the enlarged Restart programme.

The Levelling-Up Fund is a classic Treasury exercise in the English centralist tradition, with its central feature of bids from the provinces to Westminster for money.  So it is in a country with relatively few local taxes.

On that point, Sunak announced “extra flexibility for Council Tax and Adult Social Care precept”.  Local authorities will like that, council taxpayers not so much.

It’s worth stressing that the OBR’s forecasts, like all such animals, shouldn’t be taken too seriously.  Our columnist Ryan Bourne debunked its record on this site earlier this week.

If you walk down the sunny side of the street, you will smack your lips at the thought of a Roaring Twenties effect, as employment recovers, consumers spend, the hospitality sector booms and people pile into holidays abroad.

And it may be that post-Covid changes even out for the better, with a shift in activity and spending from city centres to the suburbs and countryside, together with music, art, theatre and all the rest of it.

That might not be such a bad things for towns and their centres, at which the new Levelling Up Fund is partly aimed.  Our columnist James Frayne believes they are a core concern for provincial voters, and government listens to him.

If on the other hand you stick to the shady side, you will point to the economic equivalent of Long Covid: fearsome economic and social bills for damaged mental health, postponed operations, lost educational opportunities.

All that is a big minus for levelling-up – because it’s the disabled, poor and disadvantaged who have been hit hardest by restrictions and lockdowns, especially if they work in the private sector.

The background in recent years is not encouraging.  Since the financial crash exploded, we haven’t grown at more than 2.6 per cent a year.  That suggests recovery may be sticky.

Sunak’s persuasive manner, grip of detail and spare eloquence have served him well during this crisis.  Others holding his post would not have survived roughly ten major finance annoucements in less than a year.

It’s not as though he hasn’t sometimes had to recast his plans – as in October, when he pumped more money into his Job Support Scheme.

And if the economics of his strategy are straightforward enough, its politics was sometimes a bit odd.  If the Government’s overall plan in the short-term is expansionary, why raise the minimum wage but curb public sector pay?

If spending on nearly everything else is rising, why crack down on the 0.7 per cent aid spend?  Doing so because you think aid is wasted or the target is wasteful is one thing.

But that wasn’t the basis of Sunak’s decision – since, after all, he said that the Government intends to return to 0.7 per cent “when the fiscal situation allows”.

The Chancellor also left a big unresolved question hanging in the air.  What will the Government do about the Universal Credit uplift?  Will it be extended or not?

The sense of a statement with contradictory messages was picked up Rob Covile of the Centre for Policy Studies.  (The Treasury would do well when the Budget approaches to look at its supply side ideas.)

“Feels slightly like Treasury couldn’t decide whether the message was ‘tighten belts’ or ‘we’re still spending’,” he tweeted. “So we’re getting two or three minutes of each in turn.”

That first element in the Chancellor’s statement, plus the OBR’s horrid short-term forecasts, comes at a bad time for the Government.

For tomorrow, the toughened tiering details are announced. Lots of Conservative MPs won’t like them.  The detail of which tiers apply in which areas will be published, too.  Many Tory MPs will like those even less.

Graham Brady, Steve Baker, Mark Harper, and the Covid Recovery Group will say that the economic damage of restrictions is so severe that the Commons should not vote for more – at least, without an impact assessment.

They may not be alone.  “These measures may be a short-term strategy, but they cannot be a long-term one,” Jeremy Wright declared in the Commons during the recent debate on the lockdown regulations.

He and Edward Timpson (another ex-Minister) plus other MPs backed the Government but, sounded a cautionary note.

Will the prospect of vaccines be sufficient to rally the doubters round?  Or will they take a leaf from the book of Theresa May, who savaged the regulations during the same debate?

We shall see – but Ministers are not helping themselves by dodging requests for that impact assessment, urged by this site and others, and the subject of a dogged campaign by Mel Stride, Chair of the Treasury Select Committee.

All in all, Sunak is shaping up to go for growth.  Good for him.  Nonetheless, he must watch and wait to see how and when the economy rebounds.  Brady and company are less patient.

Ryan Bourne: If you want to feed hungry children, don’t target food poverty. Aim to reduce poverty as a whole.

28 Oct

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

Covid-19’s initial economic impact fell disproportionately on those least able to mitigate it. An Institute for Fiscal Studies paper in July found that single parents, low educated poor households, and ethnic minority groups suffered the worst relative hit. Since then, workers in low-wage services industries such as hospitality, transport, and retail, have faced both the worst of unexpected job losses and uncertainty about their income.

With this unique shock, it is unsurprising that a welfare state built around previous experiences has exhibited failures in protecting against hardship. Falling incomes, especially for those without savings or access to government benefits, have consequences. The Food Standards Agency reports greater food bank use, self-reported hunger, and families eating out-of-date produce.

That context is why the Government faces intense pressure over extending free school meals during school holidays through Easter 2021. Given the uncertainty around the efficacy of other government support, you can see the temptation to follow the advice of Iain Martin, who proposes caving to Marcus Rashford’s campaign again. Give the “£20m, handshake with Marcus R on steps of Number 10 on Monday and Royal Commission into child poverty,” Martin tweeted.

That defeat might seem a small price to pay to end the optics of opposing meals for hungry children, regardless of any questions you might have about the realities, or the desirability of extending the government scheme. As Isabel Hardman writes, the belief that Conservatives are insensitive to “food poverty,” coming first in righteous anger over food bank use in 2010-2015 and now “free” school meals, has hung around the Conservatives for a decade, whether fair or not.

Martin’s short-term solution, however, neglects that campaigners won’t be satiated by extending out-of-term meal vouchers to Easter 2021. Rashford’s campaign’s ultimate aim, remember, is to implement the Dimbleby Review, which would double the number of kids on benefit-triggered free school meals by extending eligibility to every child from a Universal Credit household (an extra 1.5 million kids.)

Crossbench peer Baroness D’Souza is already pushing for out-of-term meal vouchers to become a permanent feature. Combined, that would be billions of pounds, year on year, not tens of millions.

Come next year, no matter the labour market’s health, the Government will face the same criticism. If much of austerity taught us anything, it’s that even when acute need passes, wrapping up programmess will renew accusations that Conservatives “want to starve kids” by “snatching” their lunches.

Milton Friedman’s warning that “there’s nothing more permanent than a temporary government programme,” in part stems from recipients’ aversion to losses. A Royal Commission packed with do-gooders who examine food poverty in isolation will bring further demands for spending and diet control.

That is why, I suspect, some Conservative MPs vociferously oppose the Rashford campaign. It’s not heartlessness, or even this specific extension they oppose, but the precedent and direction of travel. They can foresee the vision of government this type of reflexive policymaking and its paternalistic particulars end with.

The problem for them is that they are on a hiding to nothing in claiming this specific measure risks creating longer-term “dependency” or “nationalising children” if the public think today’s needs are real. Conservatives who believe in a small, limited state have to have answers —about what responsibility the Government should have in dealing with hardship, what tools it should use, and what its role should be for those falling through gaps.

After ten years in government and riding cycles of support for the welfare state, there’s a lack of clarity in the Party’s position, with a mix of preferences among its MPs for income support, service provision, civil society solutions, and combinations of the three. There is a clear, principled alternative vision of how to deal with poverty if the Tories want it. But it requires getting off the fence.

That alternative would say that “food poverty” is not distinct from poverty. Free school meal campaigners are broadly right that hunger is not usually caused by parental fecklessness.

Therefore, logically, food poverty largely results from insufficient disposable income for some families. If widespread hunger is evidenced, the debate should therefore be about whether benefit levels or eligibility are sufficient to meet basic needs—the goal of a safety net welfare state.

This type of limited support that trusts people to use top-ups for the betterment of their families is vastly preferable to a paternalistic state stripping us of responsibility, through demeaning out-of-term food vouchers akin to U.S. style food stamps.

In deep unexpected crises, the case for additional emergency income relief is greater. But if there really is a more structural problem of hunger, then it demands examining why wages plus benefits are insufficient to deliver acceptable living standards. Rather than just look at benefits then, we should examine living costs, too—the poor spend disproportionately high amounts on housing, energy, food, clothing and footwear, and transport.

My former colleague Kristian Niemietz wrote a free-market anti-poverty agenda back in 2011, which I’ve pushed MPs to adopt since. He showed that market-friendly policies on housing (planning reform), food and clothes (free trade), energy (ending high-cost green regulations), childcare (reversing the credentialism and stringent ratios), and cutting sin taxes to economically-justified levels could shrink poverty by slashing the cost of living for the poor, so reducing food hardship, homelessness and more.

Most of this agenda would require no extra spending or busybodying from government paternalists; some of the policies would bring the double-dividend of raising wages .

The Government has ambitious policies in a number of these areas. But why are they never linked to the poverty discussions? As they press for planning liberalisation, why is nobody highlighting how cheaper housing would lessen these tales of distress? Why is nobody identifying the discrepancy of some campaigning about food poverty while opposing trade deals that would make food, clothes, and manufactured goods cheaper, to the huge relative betterment of poor consumers?

Sure, there would be families who make bad decisions and find themselves in trouble, even in a world of cheap and abundant housing and an effective safety net.

But instances of poverty owing to lack of resources would be much lower and these thornier challenges (often stemming from addictions, loss, ill-health, criminality and more) are much better identified by local charities and civil society groups anyway, as Danny Kruger argued in the Commons last week in relation to hinger. Giving nearly three million kids “free” school meals year-round would be an absolute sledgehammer to crack any remaining nut.

In today’s emotive debates, it’s not enough to just oppose proposals when the need is perceived as urgent. Conservatives must be better at re-setting the debate on their terms—a task much easier if they held a clear vision of the role and limits of state action.

Rachel Wolf: Net Zero risks upending our lives and livelihoods. Here’s why carbon pricing gives it a better chance of working well.

2 Oct

Rachel Wolf is a partner in Public First. She had co-charge of the 2019 Conservative Manifesto. She was an education and innovation adviser at Number 10 during David Cameron’s premiership and was founding director of the New Schools Network.

Worrying about the state of the environment in the middle of a pandemic might feel like rearranging the deckchairs on the Titanic. Will the public question the Government’s sense of priorities if ministers start talking about how to protect the environment in the midst of a health crisis and a long potential downturn?

Actually, no. This week marked the first substantial policy intervention of the Prime Minister in months – a long awaited change to the education system that will make it easier for adults to retrain, and support more technical education. The rationale was clear: now, more than ever, we need to make sure people are trained for their next job.

The same argument can be made for the environment. The hard lockdown and the gentle recovery reminded people of two things: that everyday life is better for everyone when roads are quieter and the air is cleaner; and that economic growth is always precarious. That means we need to focus on industries and technologies of the future that will help maintain jobs and living standards.

In short, precisely because of their Covid-19 experience, the public have seen the importance of a practical, commercially-minded environmentalism.  That is fortunate, because there are some major choices to be made, and we are unprepared for them.

The target of Net Zero emissions by 2050 was passed into legislation with little public notice – most people still haven’t heard the term. There was also remarkably little Westminster debate: all the leadership candidates in 2019 signed up to the policy, so scrutiny was absent. Then, of course, the pandemic halted the entire domestic policy agenda. For this reason, we are still waiting to understand exactly what ending a 200-year dependence on fossil fuels really entails.

In my view, carbon pricing must form a large part of the answer.

As someone on the centre-right, I have always simultaneously applauded the aims and had great fears about the execution of Net Zero.

First, I worry it might upend too much. Our economy and lives are built off copious amounts of affordable energy. It is the main reason we were able to escape the destitution of the past. A life unimaginable to even the elite in the eighteentj century is now accessible to nearly all.

Therefore, any successful programme to reduce emissions must understand that people will not go backwards. Policies must work within the grain of people’s lives – not rewire them. We cannot be against trade; or consumption; or travel.  We just need ways to achieve all three without catastrophic environmental effects.

Second, I worry the plans rely on an implausible level of omniscience and competence from governments. We cannot engineer economies. We do not know exactly what innovations to support. We are likely to end up with endless unforeseen consequences and costs. We can encourage and support technology and invention; but prescribing what it should look like in 50 years time? That’s implausible.

It is for both of these reasons that I have spent much of the last six months working for an independent commission on how carbon pricing might practically, and technically, work.

To put it simply, possibly too simply, a carbon price requires those who produce, distribute, or use fossil fuels – or who produce greenhouse gas emissions in other ways – to make a payment for every tonne of greenhouse gases that enters our atmosphere.

In principle, the arguments for a carbon price are fairly obvious. It works with the grain of the market. It doesn’t make grand regulatory predictions about what will work, what we should do, or how exactly people ought to change their behaviour. It just prices in the ‘bad’ – in this case, emissions.

In practice, too, it has been effective. Electricity is the only area we have had a consistent approach to carbon pricing in the UK, and that is why electricity is the area where we have driven down emissions the most.  But electricity represents only a minority of our carbon emissions, and we now need a clear approach to the rest of the economy.

Carbon pricing also provides two things that we now – badly – need.

First, revenue. In some countries, carbon pricing is completely revenue neutral, and the money is distributed back to households. This deals with the challenges of the environment without leaving people worse off. But in others, it is used to support general government objectives – like funding the health service (or reducing the deficit).

If the Government needs to raise money, doing it in a way that will win public support and support environmental aims, without burdening businesses excessively, is a sensible way to do it. The other way to use revenue is to support transitions to cleaner energy alternatives and new green jobs – incentivising people away from carbon emissions, while supporting innovation.

Second, it provides certainty. A lot of the money for net zero should come from private investment. A fixed, clear price gives them the confidence to spend.

We already have some carbon pricing in the UK tax system. Unfortunately, it lacks transparency, is far too complicated and is piled sequentially on top of electricity bills. It has the bizarre consequence of actively encouraging people to move from electricity to gas – the opposite of what we want if we care about carbon emissions. Neither consumers nor suppliers have a clear idea of who is paying what and why.

Carbon pricing is not a silver bullet. I have oversimplified the changes necessary to reach Net Zero, and in our commission report we outlined a list of complementary policies required for different sectors to reach it. They recognise that the cost of reaching Net Zero is likely to be different for electricity, heating, industry and agriculture, and that the technologies are less mature for some sectors than others. Nor can it be too high: the economy is fragile, and business must be able to recover and grow. But the basic human principles remain – if there is a price, people will change their behaviour, and human ingenuity will always outstrip governments’.

We have been submerged in environmental rhetoric for years. Now the UK, alongside other countries with similar commitments, is having to make some real choices. Often, understandable fear of a public backlash has held them back – our research suggests there’s a credible way of gaining public consent and achieving our environmental aims: by having a clear price, credible alternatives for people to switch to, and cushioning so that no one is too badly affected. That is both deliverable and desirable, and it should form the core of the UK’s net zero roadmap.

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

29 Aug

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Nicky Morgan: Ministers must act swiftly to avoid a disaster – bailiffs abusing vulnerable people over council tax arrears

21 Aug

Baroness Morgan is a former Secretary of State for Education, and for Digital, Culture, Media and Sport

Marie is 76, and usually pays her council tax via Paypoint at the Post Office. However, for the last five months she has been shielding due to a chronic lung condition. Recently, her council contacted her regarding council tax arrears of just £13, threatening court action.

The prospect of council tax arrears escalating to court action and enforcement is an imminent concern for people like Marie. From next Monday, bailiffs are set to restart in-person visits, and will be able to chase Coronavirus-related debts. Yet a knock at the door poses a threat to Marie’s long-term finances, and worse, poses a serious risk to her health.

Across the country, many thousands of people are in a similar situation. Debt advice agencies report that three million people face the threat of bailiff action on missed council tax, while according to StepChange, around a million people are in council tax difficulties directly attributable to Covid-19.

In this environment, pulling the trigger on a wave of high-risk bailiff visits is not a decision that should be taken lightly. While it’s right for councils to seek to recoup their losses to fund essential services, there remain huge questions over the efficacy of bailiffs and whether they are genuinely always used as a last resort.

When I was Chair of the Treasury Select Committee, we reported in 2018 on how local authorities have come to use bailiffs almost by default, with public sector debt collection regarded as ‘worst in class’. With this in mind, what lessons should the Government learn before it allows bailiff visits to resume?

Lesson one: Despite glimmers of progress, council tax debt collection is in need of major reform.

The law governing local authority debt collection means that small debts quickly escalate. Non-binding guidance has failed to stop councils from sending in the bailiffs, with referrals totalling more than 2.6 million last year. That’s despite only 27p of every £1 of debt referred being recovered. Meanwhile, councils can be penalised for trying to offer more sustainable payment plans.

By contrast, household debt problems are dealt with far more sustainably in other sectors. Among mortgage lenders and consumer credit providers, forbearance and debt advice referrals are more widely used. Regulated sectors have seen the benefit of more holistic measures which have resulted in better collection rates and fewer defaults, whilst also crucially giving people mired in debt a sustainable way out.

Support for household finances during the crisis should now be twinned with reform of council tax collection and additional hardship funds. The Government’s initial £500 milion Hardship Fund has offered welcome respite for many, but with increased funding and wider eligibility criteria it could achieve even more. Ministers should also look to introduce a statutory pre-action protocol for debts owed to government. This would help reduce court-based enforcement and enable those most at risk from bailiff visits to set up an affordable repayment plan.

Lesson two: Independent regulation is needed to control the behaviour of bailiffs and bailiff companies.

Aggressive and intimidating bailiff enforcement plagued our system long before Coronavirus: now is not the time to cross our fingers and hope that this might change.

For too long, bailiff self-regulation has failed to protect people in financial hardship from widespread poor practice. Independent polling by YouGov conducted before lockdown for StepChange and Citizens Advice showed one person every minute experiencing a rule-breaking bailiff.

The Government has recognised the case for strengthening regulation,and started a review on this matter back in 2018. However, despite repeated calls from the Justice Select Committee, which ran a parallel inquiry to encourage Government action, the Ministry of Justice has so far failed to report back.

The case for independent regulation has never been stronger. The Government should now commit to plans for bailiffs to follow the rules and ensure the industry is held to account.

Lesson three: The basis for the temporary ban on bailiff visits has not gone away.

The Government’s decision to outlaw bailiff visits in April was welcome. In explaining the ban, the Ministry of Justice correctly identified that incentives in the industry and “financial pressures [from firms and creditors]” would create the risk of poor practice and unnecessary visits “which could endanger the health of both enforcement agents and debtors”.

In the context of an ongoing global pandemic, the nature of bailiff visits – going between people’s homes without knowledge of underlying health conditions – still presents a high risk to public health.

The use of virtual compliance methods is growing and from next week it has been agreed that any enforcement visits will not seek access to premises and will be contactless. But the visits will still happen.

Ministers could give further direction on how bailiffs can operate in a Covid-secure way. That means at the very least, guidance and oversight on test-and-trace, treatment of people in Covid-related difficulties, and suspension of visits during local lockdown.

Without the introduction of new safeguards, strong Government initiatives to help people recover from financial difficulty, such as next year’s Breathing Space scheme, are in danger of being undermined. Far better to change course now than risk a public health disaster and financial catastrophe for millions of people in financial difficulty, people like Marie.

While the original factors that prompted the ban are still in play, the solution is within our grasp. This is an area for Government rather than individual local authorities to take the lead,.  National Government must learn from these three lessons in order to reverse the tide of harmful and unnecessary bailiff visits, and ensure people are protected, as far as possible, when bailiffs return. If the ban on bailiff visits is not to be extended then these changes must be made urgently. In the absence of these modest safeguards, the return of bailiffs is something we can ill afford.

Andrew Bowie: Evidence today that Ministers won’t negotiate trade deals that expose British farmers to unfair competition

29 Jul

Andrew Bowie is MP for West Aberdeenshire and Kincardine.

As someone who believes in the levelling-up agenda and vision of a Global Britain, I am excited by our re-emergence as an independent trading nation. For the first time in more than 40 years, we are able to devise our own trade policy and export the best of Britain abroad in ways we haven’t always been able to.

As MP for West Aberdeenshire and Kincardine, home of the best beef, lamb and malting barley, I cannot wait to see more of our brilliant food and drink sold abroad. But as we develop our own agricultural trade policy once again, it is absolutely vital that the voice of the industry and the public are heard, and that their interests are advanced and protected.

Alongside many colleagues, that is why I welcome the government’s decision to set up the Trade and Agriculture Commission – which launches formally at an event in Whitehall today. Now is the right moment to step up engagement not just with the farming industry, but also with consumer, animal welfare and environmental groups across the UK.

The Commission includes representation from all these groups, and will be engaging more broadly with stakeholders like the RSPCA, British Veterinary Association, National Sheep Association, Food Standards Agency, and Tesco – all of whom are at today’s launch event.

The Commission will work with these and other organisations across the UK to ensure that the UK agriculture sector remains among the most competitive and innovative in the world. Its work will inform the fundamental principles of the UK’s agricultural trade policy, and provide expert advice to government on areas like increasing export opportunities, and on how Britain can remain a world-leader in animal welfare and environmental standards.

To her credit, Liz Truss has been clear that this government will stand up for British farming as part of any trade deal, and will never sign an agreement that means British farmers face unfair competition. I, for one, am reassured by that, and see this Commission as further evidence that the government is serious about taking expert advice and pursuing trade policy that benefits farmers and consumers.

We should be optimistic out there for some of the fantastic opportunities available to out UK farmers and producers. The US, for example, is the world’s second biggest lamb market – if we take a three per cent market share, it could boost lamb exports by £18 million a year. One in five agri-food and drink companies sell abroad, so there is a real opportunity to increase that number and sell more of our brilliant produce overseas.

We also have the opportunity to lead the global debate around agriculture trade policy and drive higher standards across the world. Our environmental and animal welfare standards are among the highest in the world. Leaving the EU actually gives us the freedom to engage the WTO on this issue and build an international coalition that pushes up standards beyond Britain. This is part of the work of the Commission.

Its establishment is a welcome step at a critical time for UK farmers and food producers, and will help ensure British farming and consumer interests are at the heart of UK trade policy.