Sunak’s measures: What do they look like, where’s the money coming from and how do they compare to other countries’?

9 Jul

The public has fast become used to radical economic announcements from Rishi Sunak, starting with his budget in March, and yesterday was no different in terms of shock factor. Standing in the House of Commons, he laid out how the Government will further try to ease the economic damage from Coronavirus, in a £30 billion plan. “We need to be creative”, he said, and he did not disappoint.

In the immediate, Sunak wants to stop a wave of mass unemployment. To do this, the Government will incentivise firms to hang onto their employees – paying them a £1,000 bonus for every staff member kept on for three months after the furlough scheme ends (as long as they are paid a minimum of £520 on average each month between November and January).

Sunak’s employment measures are especially geared towards the young, who have already been badly affected by the Covid-19 fall out. The Government will spend £2 billion on a “kickstart” work placement scheme, to get up to 300,000 16 to 24-year-olds into employment, as well as paying firms a £2,000 apprenticeship bonus for each new apprenticeship they create over the next six months.

Sunak is also keen to breathe life into the hardest-hit sectors. To boost the hospitality industry, he has cut VAT on food, accommodation and attractions from 20 to five per cent from next Wednesday. The measure will remain in place for six months, will benefit an estimated 150,000 businesses and is said to cost about £4 billion

Perhaps the most memorable announcement from his budget is the “Eat Out to Help Out” scheme. It means that anyone visiting a restaurant or pub between Monday and Wednesday in August can get up to 50 per cent off their bill, with a maximum of £10 per customer. Businesses can then claim the money back from the Government.

How much will it cost?

None of this is cheap, of course. The Institute of Fiscal Studies (IFS) suggests that borrowing will exceed £350 billion as a combined result of previously-announced policies and the recession. The FT estimates that the deficit will reach 18 per cent of national income, and will be almost twice the size of the deficit at its peak in the 2008-09 global financial crisis.

Aside from borrowing, many details remain unknown as to how this will be paid back, and where Sunak’s plans are ultimately leading us. John O’Connell, Chief Executive of the TaxPayers’ Alliance, told ConservativeHome today: “Tax receipts have absolutely plummeted since the arrival of coronavirus. Total HMRC receipts in April and May 2020 were £45.2 billion lower than the previous year.

“At the same time, the OBR estimates that the total cost of the job retention scheme could exceed £50 billion by the time it ends in October. To pay for these massive shortfalls the Debt Management Office revealed that Britain is set to sell a record £275 billion of government debt in just five months between April and August. Incredibly, this is more than two and a half times the gilt sales for the previous financial year.”

He added: “As usual there have been calls for taxes to rise to balance the books but this isn’t sensible or feasible when the tax burden is already at a 50-year high. The last thing we need is to inflict austerity on taxpayers. It would be far better to eradicate wasteful spending and grow the economy by slashing taxes and cutting red tape.”

As ConservativeHome reported yesterday, centre-right think tanks have generally been concerned about the tax burden. Following yesterday’s announcement, Sunak was quizzed on LBC about whether there would be tax rises, which he did not rule out.

What do economic measures look like elsewhere?

While there are concerns about how enormous Britain’s payments will be, the UK’s stimulus actually puts the country “in the middle of the pack” of spending when compared to others across the world. Data from the Resolution Foundation measuring countries on the size of their fiscal response to coronavirus as a proportion of GDP (as of June 2020) puts the UK behind the US, Germany, Japan and Australia, but above Canada, France, the Netherlands and Italy.

Other data from Bruegel Datasets is around ‘discretionary fiscal measures adopted in response to coronavirus’ by June 15 2020, as a percentage of 2019 GDP, with UK standing at 4.8 per cent; the US at 9.1 per cent and Hungary at 0.4 per cent, alongside other countries.

So while Sunak’s measures look drastic, it’s worth remembering that the UK’s economic snapshot cannot be taken as a standalone, as others are taking serious action too. The eventual cost for the UK, and what happens next in the pandemic, is anyone’s guess.

Matt Vickers: The lockdown has increased loneliness. Some will need help to reconnect.

9 Jul

Matt Vickers is the MP for Stockton South. He is a member of the All-Party Parliamentary Group on Loneliness.

Are you itching for things to get back to normal?

Are you looking forward to that holiday, trip to the pub, meal with friends?

Like me, do you feel like you’ve been cooped up at home forever, and are just bursting to live a full life again?

What is it you’re missing most?

A long walk on a sandy beach? That first cold frothy pint? Your favourite restaurant’s fish and chips?

Probably. But it’s bigger than that, isn’t it?

It’s the people we miss most.

As lockdown eases and we venture out more, it’s the people we’re looking forward to seeing – our family, friends, and workmates; people we connect with at our football matches, bingo halls, and places of worship.

For many, that will be easy but, for some, they will face challenges that make it harder to get back to normal because lockdown has compounded their isolation and loneliness.

A new British Red Cross report – Life after lockdown – reveals how big those challenges are and, this week, I chaired the All-Party Parliamentary Group on Loneliness where we discussed its findings. What the report shows is that lockdown is affecting some people more than others.

People from Black, Asian and minority Ethnic (BAME) communities, younger people, those on lower incomes or unemployed, people who live alone, those with underlying health conditions, and parents with children at home are the loneliest of all.

As many as 41 per cent of UK adults surveyed feel lonelier since lockdown began, with 33 per cent saying they haven’t had a meaningful conversation in the last week. We all have work to do to help people connect and feel part of their communities again.

At this week’s APPG, we heard from 22-year-old Harry Foreman from the Co-op Foundation’s Lonely Not Alone campaign and he told us of his experiences graduating from university and suddenly having to leave behind some of his closest friends during the Covid-19 crisis. He said:

“There’s no handbook for graduating during a pandemic.”

But that’s true for all of us, isn’t it? We’ll all have to adapt in some way.

I’m lucky to be part of a vibrant community in Stockton and have been inspired by the sight of volunteers – both organised and spontaneous – who have been helping the most vulnerable with things shopping and other essentials.

I’ve been trying to play my part too, teaming up with Age UK to help constituents who are feeling lonely.

That spirit must blossom beyond this crisis because people were feeling very lonely before lockdown and many are feeling lonelier because of it – they’re going to need our help as we recover. Members of Parliament have a big role to play.

We must argue for sustained funding for services that help people overcome loneliness while looking to find ways of addressing the reasons why people become so lonely in the first place, like financial hardship and mental health.

We can champion approaches to health like social prescribing that put the focus on activity and interaction, helping people connect and improve their wellbeing through groups, classes, and events.

Rather than looking just at medical options, we need to look at social solutions – doing something you enjoy, meeting other people, forging quality relationships, feeling less lonely, feeling healthier.

It’s clear that, whenever we look at people’s health, there are inequalities at play in our society that impact on our ability to thrive, strive and prosper – MPs have to be at the forefront when it comes to tackling those too.

We can perhaps see loneliness as a signifier that other things may be going wrong in a person’s life and get to work addressing those issues and health concerns.

The Red Cross, Age UK, Mind, Sense, and many others have been supporting people throughout this emergency and will continue to do so when the crisis is over.

The examples of this sort of good work in my own constituency are just too numerous to mention and I know those people who have leapt to action to support others will want to continue to play their part in helping the most vulnerable.

Now is not the time to simply salute that good work alone. Now is the time to build on it.

Franco Frattini: Turkey’s actions in Libya risk another Europe-wide migrant crisis – and Brexit will not exempt the UK  

9 Jul

Franco Frattini is a former Foreign Minister of Italy and European Commissioner.

Libya’s bloody and destructive civil war has dragged on for almost a decade now, stamping out the hopes the nation held when it emerged from the brutal dictatorship of Colonel Gaddafi. On Europe’s southern border, a hotspot of instability and chaos, where Islamist extremists have been free to exercise disturbing influence, has arisen.

A de-escalation in the conflict is not just in the interests of the Libyan people after years of suffering, but necessary to end the growing risk of a new migrant crisis, from which no European nation, in or out of the EU, will be immune. However, in recent months there has been one major obstacle to achieving this long sought-after goal: Turkey.

At the Berlin conference back in January of this year, before the world’s attention fixed firmly on the coronavirus pandemic, a major breakthrough was achieved, with a multilateral, UN-backed agreement to end external arms supplies to Libya’s belligerents.

Turkey was a signatory to this deal, yet it has used the following months not as an opportunity to further diplomatic efforts, but to up its supply of arms to the patchwork of Islamists, jihadists and organised criminals propping up the Government of National Accord (GNA). Indeed, with the ink barely dry on the Berlin agreement, the Turkish ship Bana had set sail with crate loads of arms bound for the port of Tripoli.

This stream of arms supplies, counter to the UN embargo, has since increased over recent months, with the Bana signalling the start of a steady flow of illegal shipments. With Europe’s attentions understandably fixed firmly on the dealing with the Coronavirus outbreak, Turkey has been allowed to get away with this largely unchallenged by the international community.

Conditions for a second migrant crisis, with the heightened conflict in Libya, have been allowed to brew unnoticed. European nations, particularly those in the south, stand to bear the brunt of a potential fresh wave of asylum seekers. The UK, regardless of Brexit, will also inevitably be dragged into the situation, having received tens of thousands of extra asylum applications per year at the height of the last crisis.

Furthermore, Erdogan has exhibited rank opportunism with the world’s focus turned elsewhere, by pumping thousands of Syrian fighters, many with links to violent extremist groups in their native land, into the conflict. With promises of Turkish citizenship, high financial bonuses and full medical expenses in return, these fighters have been all-to-eager to jump into the fray. The ultimate goal is clear – for Turkey to tip the odds in favour of the GNA, and hold unrivalled influence over the subsequent Islamist Libya that emerges.

Should that Libya emerge, EU nations and the UK can expect the flow of migrants to continue unabated, as citizens seek to escape the brutal reality of a newly Islamist, harder-line nation. As countries with deep and lasting ties to Libya and values of liberty, liberalism and democracy at their heart, in contrast to the political Islam increasingly espoused by Turkey and their proxies, the UK and my native Italy will likely be first choice for thousands of fleeing Libyans.

Libya overrun by extremist fighters, adhering to an Islamist ideology which views the West as its opponent, rather than as a partner, is now a very distinct possibility. The last thing Europe needs as it recovers from the devastating impact of the Coronavirus pandemic is a Turkey-induced migrant crisis on its southern border, but without firm resistance from the continent’s major powers, including the UK. This looks increasingly likely to become reality.

Europe and the international community must wake up to the threat posed by a destabilised Libya on the shores of the Mediterranean. Turkey’s culpability, with its reckless pumping of billions of dollars of weapons and thousands of extremist fighters into a conflict it had signed up to de-escalate is a security crisis waiting to happen on Europe’s southern flank. With attentions still firmly fixed on the fallout from the coronavirus pandemic, Turkey has been allowed to quietly get away with reckless behaviour largely free of scrutiny. If this continues unabated, another migrant crisis beckons.

Rough sleeping has fallen sharply. The challenge is to stop it rising again.

9 Jul

Ending rough sleeping poses a particular challenge in a free society. That is because it is not only a matter of making help available, but of persuading those who need it, to accept it. Another complication is that the help required goes beyond accommodation. The lack of a bed to sleep in is invariably a symptom rather than the cause of an individual’s difficulties.

The coronavirus prompted greater urgency for the Government to take action. Ministers had already outlined in February a determination to find a long term solution – with the assistance of Dame Louise Casey.

Though this issue is a moral disgrace and source of national shame the numbers involved are relatively small. The latest snapshot survey for those sleeping rough on one particular night last autumn came up with a figure of 4,266. The BBC gave a figure of 28,000 (based on FOI requests to local authorities) of different people who had slept rough at one stage or another over 12 months.

How many have come off the streets during the coronavirus crisis? 15,000 have been provided emergency accommodation – though not all of those were rough sleepers. Some are from hostels and shelters which have had to close due to social distancing rules. Others will be those who would otherwise have got by as “sofa surfers”. There will also be those escaping domestic violence. However, there might also be around 5,000 who came straight from the streets.

What is impressive is how high the acceptance rate has been from the rough sleepers offered a room. Many have been surprised it has been so high. Only a few hundred are thought to have spurned an offer. It could be the attraction of a hotel rather than a more humble shelter. It could be fear of the coronavirus. Then there is the tough choice that getting food – or the money to buy food – while staying on the streets would be harder. As noted, coercion is not available, but the tone of encouraging people to accept help has been emphatic rather than passive.

Amidst the statistical fog, a couple of points emerge. Firstly, that in proportion to the population, the number of rough sleepers was already tiny. The population of England is 56 million. It follows that accommodating them is a relatively modest claim on the public purse. Providing for others – children, pensioners, the unemployed, the disabled – are vastly more costly items. Secondly, that the already small number sleeping on the streets before the pandemic has fallen substantially.

Dame Louise says in an interview for The Big Issue:

“I was due to do a review into rough sleeping and homelessness but we have all been turned upside down by Covid-19. The primary motivation so far was led by Covid-19 to do an extraordinary thing in unprecedented times, which was to say, “Let’s just get everyone in.” We had everybody getting on the phone to hotels, getting [charities] St Mungo’s, Thames Reach and Look Ahead in London to stand up enough staff to literally in a couple of weeks add to the estate in London by 2,000 beds.

“We were chasing the virus just trying to stay ahead of it. When the inquiry eventually comes saying: “How did you do it? Why did you do it? And what choices did you make?” We just went for it, everybody went for it. We had to get everybody in, we cannot have people dying on the streets. And we cannot have people dying in communal night shelters and that is the prospect that we were facing. We need to be clear that right now we are dealing with this extraordinary situation where 15,000 people have been accommodated at this time.

“I’m not saying that we don’t want to work out how do we not return to the situation that we have seen in the last few years. But our primary purpose so far has been to keep people safe. That will remain our primary purpose, but at the same time we feel that we should see this as an opportunity to think that we can get something extraordinary out of this but that will take an extraordinary effort. The homelessness sector itself and the wider community also needs to think, at this horrific time in our nation’s history, what they can do to help as opposed to what they call on the government to do.”

Jeremy Swain, the Government’s adviser on homelessness, was also interviewed. He said:

“I was involved with Housing First in the 1990s and I’m a big fan, but the problem is there is a slight danger that we think that everybody in those hotels at the moment needs wraparound support and they need it for a long time. What we need to be doing, as well as getting people into housing, is to get people into work. And that is what they are wanting. That’s what they want – when I was at Thames Reach and you put out the questionnaires, 75 per cent of people wanted the services to help them get jobs. Consistently it is bottom of the list for the homelessness sector when for the people themselves it is top of the list.”

That is the tricky part. Amidst Government spending of £850 billion a year, funding an extra 5,000 hostel beds is a footling item. (That’s even before we consider the £10 billion a year we give to charity, often to help the homeless.) Getting those who have taken a wrong turn in life back on the path to proud, independent, and responsible existence is harder. Getting a job would be a pretty obvious ambition. Often that will mean overcoming such afflictions as drug addiction, alcoholism, and mental illness. When I was a councillor in Hammersmith and Fulham I found that very little specialist accommodation was provided – even though the Council had a very substantial Public Health budget which was largely wasted.

Many of those in emergency accommodation have been put up in hotels that would otherwise be empty. It is welcome that hotels are going back to normal business as the economy reopens. That does mean that alternative places to stay are needed – though some hotels are extended their contracts for emergency accommodation. Some universities have made rooms available in their halls of residence – after all college authorities need the money and these rooms would otherwise be empty at present. Some YMCA hostels have single rooms. Then councils have managed to find rooms for some in the private rented sector.

In the long term though, the Government plans new hostel places for 6,000. Much of this will be for specialist housing to cater for particular medical conditions. That will be crucial for these unfortunate souls to have their lives turned around.

“Never let a good crisis go to waste,” declared Winston Churchill. The signs are encouraging with respect to the impact of the pandemic on rough sleeping. A passive response from the authorities to those sleeping in shop doorways and along underpasses is no longer acceptable. Most of those people have already made some reconnection with society and there is every chance that it will not be broken.

Stamp duty cut welcome, but concerns about “tomorrow’s taxpayers”. Centre-right think tanks react to Sunak statement.

8 Jul

Adam Smith Institute –  Matthew Lesh, Head of Research, said:

“Stamp duty is Britain’s worst tax. This temporary cut is the right move at the right time to get Britain moving. Temporary measures to get young people work experience, to build inwork skills, are also welcome in the face of an increased minimum wage.

“Furlough continues for a few more months but reality will hit eventually. In the forthcoming Budget, the Chancellor should cut the cost of hiring by permanently reducing the burden of employers’ national insurance, remove red tape like occupational licenses, and abolish the factory tax to get businesses investing in their futures.

“The stimulus proposals are very questionable. The VAT cut and subsidising restaurants will be expensive and provide limited benefit. People aren’t spending on food, accommodation and attractions because of safety concerns, not lack of demand or cash.”

Centre for Policy Studies – Robert Colvile, Director, said:

“We welcome the focus on jobs and training, which is what the CPS recently called for in our report ‘After the Virus‘, but the challenge will be how to support the economy as we transition to new ways of working in a post-virus economy.

“You can see the Government is trying to strike that balance with this package, but these measures are temporary, and will have to be paid for down the line. This is why we would like to see the sort of long-term structural change that will maximise growth, support businesses and encourage them to create new jobs without placing the burden on the taxpayer.”

TaxPayers’ Alliance – John O’Connell, Chief Executive, said:

“The chancellor announced a ‘plan for jobs’ but it’s tomorrow’s taxpayers who will have to work hard to pay for it all.

“While the jobs retention bonus will help ensure that the furlough scheme isn’t just an expensive pause on mass lay-offs, taxpayers will be concerned about how and when they will pay the bills for ever-more spending promises.

“It is cheering that the chancellor appreciates the economic benefits of cutting taxes and in particular lifting the stamp duty threshold will provide a boon to the housing market.

“That said, while easing the burden on taxpayers is always welcome, we must look at longer-term tax simplification and put a stop to temporary fiddles.”

Institute of Economic Affairs – Professor Syed Kamall, Academic and Research Director, said:

“We are in an unprecedented situation and there remains the issue that many individuals and families are fearful of leaving their homes to resume every day activities. The Chancellor can only do so much in terms of measures introduced to get the economy moving.

“The cut to Stamp Duty is welcome but why isn’t it permanent? It is a destructive, regressive tax that clogs up the housing market and limits labour mobility. Making it permanent would get the property market moving and encourage those who want to downsize as well as those looking for family houses, freeing up homes for first-time buyers.

“It is disappointing more was not announced to encourage private investment in infrastructure – such as reopening old railways or rezoning to allow homes to be built in places being vacated by shops, such as high streets.”

Resolution Foundation – Torsten Bell, Chief Executive, said:

“Today’s Budget in-all-but-name was a £30 billion top up to a pandemic response that is approaching 10 per cent of GDP and will push borrowing to around £350 billion this year.

“The focus on jobs and some, but not all, hard-hit sectors was very welcome. Kickstart jobs for young people represents a tried and tested policy, but the new Job Retention Bonus is poorly targeted at those jobs that are most at risk of being lost.

“The Chancellor is right to focus VAT cuts on food, accommodation and attractions. However, the lack of support for face-to-face retail means significant challenges for Britain’s High Streets. The innovative meal deal voucher scheme is far too small scale to make a significant difference.

 “The Chancellor, having previously announced huge measures to protect household incomes, has now set out much more normal demand support for the next phase of this crisis. That might be sufficient if the UK sees the V-shaped recovery we all hope fora. But given that this economic crisis is likely to be with us until a vaccine is found, he should expect to be returning with further measures to support the economy in the Autumn.”

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.

James Rogers: We’re in the G7 and are members of NATO. But we need a new alliance of democracies – the D10.

8 Jul

James Rogers is Director of the Global Britain Programme at the Henry Jackson Society.

Covid-19 is like a flash of lightning that uncovers a darkened landscape at night. It is, of course, first and foremost a public health emergency; but more deeply, it is a reflection of deep geopolitical change.

It has reconfirmed the Indo-Pacific zone’s growing centrality. It has revealed the authoritarian nature and untrustworthy character of China’s government. It has shown why we cannot afford to be so dependent on China – or any other country – for critical goods. And it has demonstrated why we need to work more with like-minded countries to uphold our principles and secure our objectives and interests.

Although it has been clear for some while that the so-called rules-based international system is increasingly dysfunctional, Covid-19 has confirmed the extent to which authoritarian powers have gained influence in such bodies last the World Health Organisation and the United Nations Human Rights Commission – stuffed as it often is with autocracies and systematic human rights abusers.

The reason for this is that the authoritarian revisionists – such as Russia and China – have grown in power over the past two decades. They want to make the world safe for autocracy; as they gain further in power, and unless they are resisted, they will continue to dismantle or hijack the international order that Britain and its allies have done so much to put in place and undergird.

This is why it makes sense, as Boris Johnson’s government restarts the Integrated Strategic Review, to thoroughly reappraise Britain’s membership of existing alliances and international organisations.

The problem is that most of these were born of a different age; they have grown difficult to reform; many allies fail to pull their weight; and it is proving ever-harder for the United Kingdom, like other democracies – even the United States – to secure its interests through them. It is vital to remember that multilateralism is not important for its own sake; multilateralism is important only if it helps Britain project its principles and secure its interests.

This does not mean, however, that the United Kingdom should descend into a clumsy transactional foreign policy, or facile isolationism.  What it does mean is that the government needs to be more selective about the alliances and international organisations it chooses to buttress and work with. It also means that Britain should be prepared to expand the functions of existing groups or, even, create new frameworks, to reflect new realities.

It is for this reason that reports that Johnson’s government is proposing to form a new coalition of democracies – potentially out of the G7 – should be particularly welcomed.

Notwithstanding Japan’s membership, the G7 is primarily Euro-Atlantic in orientation. It lost much of its rationale during the 2000s, as the centre of economic gravity shifted towards East and South-East Asia. The formalisation of the G20 after the financial crisis of 2007-2008 only confirmed its obsolescence.

Likewise, other organisations, even the North Atlantic Treaty Organisation, have been rendered less relevant today than in the past as geopolitical competition has followed the previous economic shift towards China and the Indo-Pacific.

This is why a new coalition of democracies makes sense, particularly one that reflects new economic and geopolitical realities. Britain is said to be keen to build such a coalition – known as the Democratic 10, or ‘D10’ for short – to include the existing G7 members, alongside India, South Korea and Australia.

Ostensibly as a first step, Donald Trump suggested inviting the three countries to the upcoming G7 summit this autumn, perhaps alongside Russia – a proposal too far, which the British and Canadians, even the Russians themselves, quickly rejected.

It should come as no surprise that the concept of a community of democracies, even the D10, has been mooted in various guises for some time. That Britain is now prepared to push the idea – there will be ample opportunity during the British presidency of the G7 in 2021 – shows not only the fresh thinking Boris Johnson’s government is capable of, but also how much a new democratic coalition is needed.

An organisation like the D10 could help the democracies organise their efforts to resist the authoritarian revisionism of countries like Russia and China. It could provide a forum for technological cooperation at the strategic level, to ensure that an authoritarian power never again becomes the market or technological leader in the way that China has in relation to 5G telecommunications systems.

The D10 could also provide a platform for the democracies to coordinate the reversal of environmental degradation and their broader international development efforts, particularly as China accelerates and expands its vast £770 billion Belt and Road Initiative.

It could gradually expand to include additional democracies – such as Chile – that are able and willing to preserve an international order based on rules.  And, in time, the D10 could even facilitate greater military cooperation between its members, particularly if growing international tensions start to boil over.

Covid-19 has merely reconfirmed the fact that the democracies cannot take their security for granted. Britain’s proposal for the D10 shows that it is capable of putting the concept of ‘Global Britain’ into practice. It throws down the gauntlet to the Europeans, in an attempt to coax them out of their introspectiveness, while showing America, Japan, India and Australia that London takes their concerns seriously, particularly in relation to China. If implemented, it would rev-up multilateralism for a new age by preparing the world’s democracies for the challenges of the twenty-first century. And it proves that Britain is still at the crux of the international order – not a power shuffling away from it.

Sandy Verma: Labour has let Leicester down

8 Jul

Baroness Verma is a businesswoman. She is a former Energy & Climate Change Minister and a former International Development Minister.

The blame behind Leicester’s return to lockdown continues to be thrashed out. Matt Hancock announced last Monday that my city would be pushed backwards whilst the rest of the country enjoys newfound freedoms that the loosening of the lockdown brought over the weekend. Leicester City Council which is supposed to be led by Peter Soulsby continues to deny that the re-lockdown is their fault, despite local knowledge being ignored.

Even though Leicester is one of the most diverse cities in the country, Leicester City Council still refuses to assist with any English classes for non-native speakers; then in the height of a public health crisis they decide to send a leaflet out to every household in the city on Coronavirus and how to stay safe in Leicester – only in English. This left thousands of residents without a clue about the new measures.

An undercover investigation from the Sunday Times has also shined a light on the total exploitation of workers in Leicester, many have foreign backgrounds, and many do not speak English. The workers are paid £3.50 per hour or less in some cases, told to work even though they feel unwell, and work in conditions where appropriate safety measures are impossible to impose.

This is not the first time that factories in Leicester have been exposed in this way. The Financial Times, Radio 4’s Today programme, and Channel 4 have all previously revealed the malpractice of these factories. With Leicester’s local paper, the Leicester Mercury, regularly covering the extended scandal.

A Labour document that has been brought to my attention shows that the Council have been aware of the problems at some of the factories in the city since 2017. Whichever way the Labour Party locally want to spin this, those factories, those poorly paid workers, have been under their noses for a long time.

We, as a local party, contacted the MPs and councillors in the city back in April, shedding light on how some of the workers in the factories were being treated during the lockdown. We wrote:

“We have had a number of people contacting us in fear that factory owners are flouting the law by appearing closed but with employees still working behind shuttered premises.”

‘This is not only dangerous to the workers in the factories but also the families and wider communities at large.’

And continued:

“We want assurances from you as the elected representative that you are ensuring that these occurrences are reported to the police and trading standards and action taken immediately.”

Despite our best efforts all those we contacted declined to pursue or help those who were vulnerable and at high risk of catching COVID. The Mayor who had our letter forwarded also declined to help. Meaning that those who were most defenceless were let down by those elected to preserve their safety

For context, although my city is ethnically very diverse, the political makeup is anything but. The Council Chamber is made up of 51 Labour councillors out of a possible 53 and a directly elected Labour Mayor; there are three Labour Members of Parliament in the city; and a Labour Police and Crime Commissioner.

The Council must answer why calls of concern from alarmed local Conservatives were ignored by the Labour Mayor and his councillors. It appears that they, alongside other agencies, have been caught short on dealing with matters that are the most important within the city.

In a leaked Labour briefing document, the Labour councillors are now being told to blame the Tory government at all costs; they will not take accountability for their actions. These issues are not new; the Labour Party has held power in Leicester for decades; these communities have been kept poor and excluded. The Council in Leicester must start to support community integration, and share knowledge of rights and access to services, which up to now has been a total failure from the Labour Party. The constant carping and blaming the Conservative Party for their mismanagement and their inability to attract investment has been demonstrated time and time again, however, given that up to now they have had no opposition they cannot be allowed to get away with it any longer.

The local Members of Parliament have also been blatantly silent on the ground for months. Jonathan Ashworth and Liz Kendall constantly would rather further their careers than look after their electorate. Whereas Keith Vaz’s replacement, Claudia Webbe, is more interested in her Council constituents in Islington. What a mess my city is in…

Labour put forward a local councillor to defend its lack of action on this scandal on the local radio on Monday morning. Cllr Malik, who is currently under investigation for anti-Semitism, appeared on BBC Radio Leicester. He said:

“It is unfair (the city is in the spotlight over this) because Leicester is known all over the world for its positive diversity and community cohesion.”

When questioned why nothing had changed despite the extensive media coverage into the sweatshops he continued:

“We cannot say nothing has happened, obviously we are aware of all these practices.”

The pandemic has highlighted so many failings that fall at the door of elected Labour members in Leicester. I am calling for a full industry-wide investigation into these allegations and I believe that the investigation should include whether elected officials knew about the practices and chose not to act.

The people of Leicester are quickly losing confidence in the Mayor who himself broke lockdown rules. His hypocritical followers may try and keep him in place for a little longer but it will be a disgrace to Sir Keir Starmer’s Labour leadership if he doesn’t ensure the back of Soulsby very soon. His credibility will diminish if he doesn’t root out the anti-Semitic hate-mongers that blight the harmony of a city like Leicester. His conviction will be questioned if he doesn’t call for a full investigation into the fashion industry and the politicians behind the factory scandal.