Neil O’Brien: Introducing the new Levelling Up Taskforce – and its first report on how we can measure progress

7 Sep

Neil O’Brien is MP for Harborough.

Were you still up for Penistone? One of joys of election night last December was winning so many seats we’ve not held for decades.

The constituencies we won over in 2019 are quite different from the party’s traditional base, in the deep red bits of the map above. Seats we gained last year don’t just have lower earnings than the seats we held, but earnings five per cent lower than Labour seats. Of the bottom quarter of seats in Great Britain with the lowest earnings, more are now held by us than Labour. Compared to seats we gained, homes in Labour constituencies are a third more expensive.

Many of the places we won have felt neglected for a long time. And led from the front by the Prime Minister, the new Government has committed to “levelling up” poorer places. But what does that really mean? How can we measure if we are succeeding? How can we get the private sector growing faster in these places, making the country stronger overall?

To help the Government answer these questions, I and 40 other Conservative MPs have formed a new Levelling Up Taskforce.

Our first report is out today, looking at how we can measure progress. It also examines what’s been happening in different parts of the UK economy over recent decades.

Income per person in London (before paying taxes and receiving benefits) grew two thirds faster than the rest of the country between 1997 and 2018: it’s now 70 per cent higher in London than the rest of the country, up from 30 per cent higher in 1997.

While the divergence seen since the 90s has been a story of London pulling away from all of the rest of the country, it follows decades in which former industrial areas in the north, midlands, Scotland and Wales fell behind. Between 1977 and 1995 South Yorkshire, Teesside and Merseyside saw GDP per person fall by 20 per cent compared to the national average, and most such areas haven’t caught up that lost ground.

Why does this matter?

It matters, first, because opportunity is linked to the economy. There are fewer opportunities to climb the ladder in poorer places. Not just fewer good jobs, but less opportunity in other ways.

In London, over 45 per cent of poorer pupils who were eligible for free school meals progressed to higher education in 2018/19. Outside London there were 80 local authorities where richer pupils who were not on free school meals were less likely than this to go to university. Overall, more than 60 per cent go to university in places like Kensington and Chelsea and Westminster. But less than a third go places like in Knowsley, Barnsley, Hull, and Thurrock.

It also matters because more balanced economies are stronger overall. In an unbalanced economy, resources like land and infrastructure are overloaded in some places, even while they are underused elsewhere. This might be particularly true where cities have seen population shrinkage, and have surplus infrastructure and land. If there are greater distances between workers and good job opportunities that makes it harder for people to get on: not everyone can (or wants) to move away from family to find a better job.

More balanced is stronger overall, but on a wide range of measures the UK is one of the most geographically unbalanced economies. In Germany 12 per cent of people live in areas where the average income is 10 per cent below the national average, while in the UK 35 per cent do. It is very striking that there is no industrialised country that has a more unbalanced economy than the UK and also a higher income, while all the countries that have a higher income have a more balanced economy.

What are we going to do about it? Well, that’s the question our new group will try to answer.

The answer isn’t any of the traditional Labour ones: pumping public sector jobs into places, or subsidising low wage employment, or trying to hold back successful places: we’re interested in levelling up, not levelling down.

Different things will work in different places.

For example, transport improvements might make a bigger difference for remote areas. The ONS defines certain places as “sparse”: the north of Devon and Cornwall, most of central Wales, Shropshire and Herefordshire, most of Cumbria and the rural north east, along with large parts of North Yorkshire, Lincolnshire and North Norfolk. In these places income levels are 17-18 per cent lower. Even controlling for the qualifications and age of people living there, these sparse areas have income levels between £600-£1,300 a year lower, likely driven by poor connectivity.

In other places, the answers are different. I’ve written before about how the way we spend money on things like R&D, transport and housing is skewed towards already-successful areas, creating a vicious circle. We should change that.

But tax cuts could also play a bigger role in helping poorer areas. There’s actually been convergence between regions at the bottom end of the earnings distribution, driven by things like the National Living Wage, tax cuts for low income workers, and things like Universal Credit, which have reduced the differences between places by levelling up the poorer areas more. In poorer places, more people benefit from these policies.

The reason there are growing gaps between areas overall is divergence higher up the income scale.
Looking at the gap between earnings for full-time workers in London and the North East, the pay gap shrank for the bottom 30 per cent of workers, but grew for those higher up. For those at the 10th percentile the pay gap between the two places shrank from 32 per cent to 20 per cent. But for richer folks at the 90th percentile, it grew from 62 per cent to 88 per cent.

So how do we get more good, high-paying jobs into poorer areas? There are a million different specific opportunities, but one that’s relevant in a lot of Red Wall seats is advanced manufacturing.

Over recent decades, Chancellors have tended to cut capital allowances (a tax break for investment) in order to lower the headline rate of corporation tax. I’m not sure that was a good idea: Britain has a lower rate of fixed capital investment than competitors and our tax treatment of investment is stingy. But either way, this change has had a pronounced regional impact: it favours services over manufacturing, so helps some areas more than others.

One way to blast our way through the current economic turmoil would be to get businesses investing again by turning capital allowances right up (“full expensing” in the jargon). That would be particularly likely to help poorer areas. Indeed, when we have tried this in a targeted way before it worked.

Government should think more about how tax and spending decisions can help us level up. It should produce geographical analysis of all budgets and fiscal events, setting out the different impact that tax and spending changes will have on different areas. The Treasury’s Labour Markets and Distributional Analysis unit should have geographical analysis added to its remit.

This whole agenda is exciting. But a lot of people are cynical, because they heard New Labour talk the talk – but not deliver. We’ve got to deliver. So let’s hold ourselves to account, and set ourselves some ambitious goals.

Let’s get earnings growing faster than before in poorer areas. Let’s get unemployment down in the places it’s worst. They say that “what gets measured gets managed.” So let’s “measure up” our progress on levelling up.

Ryan Bourne: A message for Johnson and Sunak on tax rises. Not now. And not these.

2 Sep

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

How’s this for a false dichotomy? Last Saturday, Prospect asked: “Post-Covid, are taxes hikes essential to fund the future? Or should we abandon “deficit fetishism” and spend our way to prosperity?” [i.e. through borrowing]. I shouldn’t need to tell ConservativeHome readers that “spend to grow” and “spend to grow”—the only difference being how to finance it—are not an exhaustive set of fiscal policy options post-pandemic.

But that tweet, sadly, reflects conventional wisdom. You should take the pre-Budget briefing in the Sunday papers about Treasury desires for £20-30 billion in tax hikes through capital gains tax, corporation tax, fuel duty, an online sales tax and restrictions on pensions tax relief with a pinch of salt. Before every recent budget such stories have emerged, perhaps due to kite-flying or overexcited journalistic coverage of illustrative exercises in how one could raise revenues. One suspects the briefings may even be a political ploy—raising fears in the Tory base before Number Ten saves the day.

Yet there’s undoubtedly an unnerving regularity to them. Alongside a steady drumbeat from “One Nation” Tories and such organisations as the Resolution Foundation, the idea that large tax hikes will be desirable and necessary is taking hold, with Covid-19 apparently making this agenda more urgent.

We are told, as the kitchen sink of argumentation is thrown, that the pandemic itself proves the false economy of a “hollowed out” state after a decade of austerity. Or that the “levelling up” and the “inevitable” higher spending we will now want on health, welfare benefits, and higher public sector pay means tax hikes are needed. Or that the crisis necessitates urgent repair to the public finances, and that there’s simply nowhere left to cut spending.

None of these arguments, however, stand the test of reason. Countries that have dealt with the Coronavirus better include those (South Korea, Taiwan, Australia) with much lower tax-to-GDP ratios than the UK and much lower health spending too. Many with higher tax-to-GDP ratios (France, Belgium, Italy) have seen similarly shocking death tolls to us.

At best, any failure to deliver resources where needed reflects bad state priorities, not an impoverished public realm. Indeed, the story of a hollowed-out state at a time of the highest tax burden since the early 1980s, coupled with this international evidence, suggests ascribing blame to austerity for poor performance is both ahistorical and parochial.

The wisdom or otherwise of  the “levelling up” agenda, and how best to pay for it, is largely unrelated to the pandemic too. Actually, to the extent that Covid-19 affects the desirability of infrastructure and public service spending in the regions, it throws substantial doubt on the benefits of projects such as HS2 and other city and town revival plans.

Who knows what lasting impact the crisis will have on remote working, the location of activity, and favoured transport modes? One Nationers arguing that the virus proves the need to level up would have us believe that the pandemic’s effects are significant enough for a tax revolution, but insignificant enough to alter the desirability of any of their proposed spending. One might almost suggest motivated reasoning here.

In macroeconomic terms, the case for significant tax rises now is weaker still. The point of bridging support through furlough was to shelter businesses and workers from this unexpected shock. To pass the bill to the private sector now as it struggles back to life would strangle the recovery. And for what? Borrowing costs are low, and we have no idea yet whether and how much this crisis will leave a permanent budget hole once emergency spending stops and private sector activity revives. In fact, even borrowing to date has not been as high as initially feared.

Of course, the extra debt to deal with the crisis has to be paid somehow, eventually. But, as I argued here before, unusual shocks such as pandemics and wars primarily result in step-level debt-to-GDP increases rather than ongoing budget holes, because you stop spending on the immediate threat afterwards.

The implication is that modest consolidation over decades is optimal to account for the extra incurred debt, rather than adopting large tax increases to compensate over a Parliament. Economists call it “tax smoothing”—debt provides a safety valve to allow us to only modestly change spending or taxation over long periods to maintain incentives. Of course, if the Government thinks that, for political reasons, it must expand welfare benefits or health spending permanently, this would be a normative choice: there is nothing inevitable about sharp tax hikes.

Even if you think permanent scarring will occur, those taxes suggested to raise revenue seem bizarre choices today. The Government presumably wants us to be Covid-cautious still. Two ways of reducing risks would be to drive more rather than use public transport and to shop more online.

Aside from all the other downsides of raising fuel duty and introducing an online sales tax, to use the tax system to incentivise worsening virus transmission right now by making driving and online shopping more expensive seems bizarre.

Raising top capital gains tax rates to 40 or 45 per cent would simply be self-defeating from a revenue-raising perspective. Capital Gains Tax on many investments represents a double tax. The justification for having it at all is to deter people hiding income as capital gains.

But there’s a revenue-maximizing balance between this effect and deterring people from selling assets. The Coalition government introduced a top 28 per cent CGT rate precisely because HMRC research suggested this raised most revenue. Though it was then lowered to 20 per cent under George Osborne, raising it to 40 per cent plus would reduce revenue relative to a lower rate. We’d get less investment and entrepreneurship when we need it most too.

And then there’s the mooted corporation tax rise from 19 back to 24 per cent. Taxes on mobile capital will deter foreign investment just as Brexit is set to happen, as well as reducing the after-tax return on new domestic projects. Who will bear the costs? Not just “the wealthy,” as commonly asserted, but workers too: evidence suggests that they bear between 30 and 70 percent of the burden of taxes on corporations.

Not only is the tax rise call premature then, but the specific proposals don’t conform to the pandemic’s needs or Boris’s Johnson’s ambitions to create a high-wage economy. Covid-19 may permanently scar the public finances, sure. But as yet its full effects are unknown and there’s little cost to pausing to see. Anything else at this stage is using the crisis as a pretext for raising funds for hobby horses.

If the Prime Minister truly objects to this rationale as reported and understands the threat to the nascent recovery of sharp tax rises today, he should take this message to his Chancellor: on tax rises, not now and not these.

Ryan Bourne: A message for Johnson and Sunak on tax rises. Not now. And not these.

2 Sep

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

How’s this for a false dichotomy? Last Saturday, Prospect asked: “Post-Covid, are taxes hikes essential to fund the future? Or should we abandon “deficit fetishism” and spend our way to prosperity?” [i.e. through borrowing]. I shouldn’t need to tell ConservativeHome readers that “spend to grow” and “spend to grow”—the only difference being how to finance it—are not an exhaustive set of fiscal policy options post-pandemic.

But that tweet, sadly, reflects conventional wisdom. You should take the pre-Budget briefing in the Sunday papers about Treasury desires for £20-30 billion in tax hikes through capital gains tax, corporation tax, fuel duty, an online sales tax and restrictions on pensions tax relief with a pinch of salt. Before every recent budget such stories have emerged, perhaps due to kite-flying or overexcited journalistic coverage of illustrative exercises in how one could raise revenues. One suspects the briefings may even be a political ploy—raising fears in the Tory base before Number Ten saves the day.

Yet there’s undoubtedly an unnerving regularity to them. Alongside a steady drumbeat from “One Nation” Tories and such organisations as the Resolution Foundation, the idea that large tax hikes will be desirable and necessary is taking hold, with Covid-19 apparently making this agenda more urgent.

We are told, as the kitchen sink of argumentation is thrown, that the pandemic itself proves the false economy of a “hollowed out” state after a decade of austerity. Or that the “levelling up” and the “inevitable” higher spending we will now want on health, welfare benefits, and higher public sector pay means tax hikes are needed. Or that the crisis necessitates urgent repair to the public finances, and that there’s simply nowhere left to cut spending.

None of these arguments, however, stand the test of reason. Countries that have dealt with the Coronavirus better include those (South Korea, Taiwan, Australia) with much lower tax-to-GDP ratios than the UK and much lower health spending too. Many with higher tax-to-GDP ratios (France, Belgium, Italy) have seen similarly shocking death tolls to us.

At best, any failure to deliver resources where needed reflects bad state priorities, not an impoverished public realm. Indeed, the story of a hollowed-out state at a time of the highest tax burden since the early 1980s, coupled with this international evidence, suggests ascribing blame to austerity for poor performance is both ahistorical and parochial.

The wisdom or otherwise of  the “levelling up” agenda, and how best to pay for it, is largely unrelated to the pandemic too. Actually, to the extent that Covid-19 affects the desirability of infrastructure and public service spending in the regions, it throws substantial doubt on the benefits of projects such as HS2 and other city and town revival plans.

Who knows what lasting impact the crisis will have on remote working, the location of activity, and favoured transport modes? One Nationers arguing that the virus proves the need to level up would have us believe that the pandemic’s effects are significant enough for a tax revolution, but insignificant enough to alter the desirability of any of their proposed spending. One might almost suggest motivated reasoning here.

In macroeconomic terms, the case for significant tax rises now is weaker still. The point of bridging support through furlough was to shelter businesses and workers from this unexpected shock. To pass the bill to the private sector now as it struggles back to life would strangle the recovery. And for what? Borrowing costs are low, and we have no idea yet whether and how much this crisis will leave a permanent budget hole once emergency spending stops and private sector activity revives. In fact, even borrowing to date has not been as high as initially feared.

Of course, the extra debt to deal with the crisis has to be paid somehow, eventually. But, as I argued here before, unusual shocks such as pandemics and wars primarily result in step-level debt-to-GDP increases rather than ongoing budget holes, because you stop spending on the immediate threat afterwards.

The implication is that modest consolidation over decades is optimal to account for the extra incurred debt, rather than adopting large tax increases to compensate over a Parliament. Economists call it “tax smoothing”—debt provides a safety valve to allow us to only modestly change spending or taxation over long periods to maintain incentives. Of course, if the Government thinks that, for political reasons, it must expand welfare benefits or health spending permanently, this would be a normative choice: there is nothing inevitable about sharp tax hikes.

Even if you think permanent scarring will occur, those taxes suggested to raise revenue seem bizarre choices today. The Government presumably wants us to be Covid-cautious still. Two ways of reducing risks would be to drive more rather than use public transport and to shop more online.

Aside from all the other downsides of raising fuel duty and introducing an online sales tax, to use the tax system to incentivise worsening virus transmission right now by making driving and online shopping more expensive seems bizarre.

Raising top capital gains tax rates to 40 or 45 per cent would simply be self-defeating from a revenue-raising perspective. Capital Gains Tax on many investments represents a double tax. The justification for having it at all is to deter people hiding income as capital gains.

But there’s a revenue-maximizing balance between this effect and deterring people from selling assets. The Coalition government introduced a top 28 per cent CGT rate precisely because HMRC research suggested this raised most revenue. Though it was then lowered to 20 per cent under George Osborne, raising it to 40 per cent plus would reduce revenue relative to a lower rate. We’d get less investment and entrepreneurship when we need it most too.

And then there’s the mooted corporation tax rise from 19 back to 24 per cent. Taxes on mobile capital will deter foreign investment just as Brexit is set to happen, as well as reducing the after-tax return on new domestic projects. Who will bear the costs? Not just “the wealthy,” as commonly asserted, but workers too: evidence suggests that they bear between 30 and 70 percent of the burden of taxes on corporations.

Not only is the tax rise call premature then, but the specific proposals don’t conform to the pandemic’s needs or Boris’s Johnson’s ambitions to create a high-wage economy. Covid-19 may permanently scar the public finances, sure. But as yet its full effects are unknown and there’s little cost to pausing to see. Anything else at this stage is using the crisis as a pretext for raising funds for hobby horses.

If the Prime Minister truly objects to this rationale as reported and understands the threat to the nascent recovery of sharp tax rises today, he should take this message to his Chancellor: on tax rises, not now and not these.

Ryan Bourne: A message for Johnson and Sunak on tax rises. Not now. And not these.

2 Sep

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

How’s this for a false dichotomy? Last Saturday, Prospect asked: “Post-Covid, are taxes hikes essential to fund the future? Or should we abandon “deficit fetishism” and spend our way to prosperity?” [i.e. through borrowing]. I shouldn’t need to tell ConservativeHome readers that “spend to grow” and “spend to grow”—the only difference being how to finance it—are not an exhaustive set of fiscal policy options post-pandemic.

But that tweet, sadly, reflects conventional wisdom. You should take the pre-Budget briefing in the Sunday papers about Treasury desires for £20-30 billion in tax hikes through capital gains tax, corporation tax, fuel duty, an online sales tax and restrictions on pensions tax relief with a pinch of salt. Before every recent budget such stories have emerged, perhaps due to kite-flying or overexcited journalistic coverage of illustrative exercises in how one could raise revenues. One suspects the briefings may even be a political ploy—raising fears in the Tory base before Number Ten saves the day.

Yet there’s undoubtedly an unnerving regularity to them. Alongside a steady drumbeat from “One Nation” Tories and such organisations as the Resolution Foundation, the idea that large tax hikes will be desirable and necessary is taking hold, with Covid-19 apparently making this agenda more urgent.

We are told, as the kitchen sink of argumentation is thrown, that the pandemic itself proves the false economy of a “hollowed out” state after a decade of austerity. Or that the “levelling up” and the “inevitable” higher spending we will now want on health, welfare benefits, and higher public sector pay means tax hikes are needed. Or that the crisis necessitates urgent repair to the public finances, and that there’s simply nowhere left to cut spending.

None of these arguments, however, stand the test of reason. Countries that have dealt with the Coronavirus better include those (South Korea, Taiwan, Australia) with much lower tax-to-GDP ratios than the UK and much lower health spending too. Many with higher tax-to-GDP ratios (France, Belgium, Italy) have seen similarly shocking death tolls to us.

At best, any failure to deliver resources where needed reflects bad state priorities, not an impoverished public realm. Indeed, the story of a hollowed-out state at a time of the highest tax burden since the early 1980s, coupled with this international evidence, suggests ascribing blame to austerity for poor performance is both ahistorical and parochial.

The wisdom or otherwise of  the “levelling up” agenda, and how best to pay for it, is largely unrelated to the pandemic too. Actually, to the extent that Covid-19 affects the desirability of infrastructure and public service spending in the regions, it throws substantial doubt on the benefits of projects such as HS2 and other city and town revival plans.

Who knows what lasting impact the crisis will have on remote working, the location of activity, and favoured transport modes? One Nationers arguing that the virus proves the need to level up would have us believe that the pandemic’s effects are significant enough for a tax revolution, but insignificant enough to alter the desirability of any of their proposed spending. One might almost suggest motivated reasoning here.

In macroeconomic terms, the case for significant tax rises now is weaker still. The point of bridging support through furlough was to shelter businesses and workers from this unexpected shock. To pass the bill to the private sector now as it struggles back to life would strangle the recovery. And for what? Borrowing costs are low, and we have no idea yet whether and how much this crisis will leave a permanent budget hole once emergency spending stops and private sector activity revives. In fact, even borrowing to date has not been as high as initially feared.

Of course, the extra debt to deal with the crisis has to be paid somehow, eventually. But, as I argued here before, unusual shocks such as pandemics and wars primarily result in step-level debt-to-GDP increases rather than ongoing budget holes, because you stop spending on the immediate threat afterwards.

The implication is that modest consolidation over decades is optimal to account for the extra incurred debt, rather than adopting large tax increases to compensate over a Parliament. Economists call it “tax smoothing”—debt provides a safety valve to allow us to only modestly change spending or taxation over long periods to maintain incentives. Of course, if the Government thinks that, for political reasons, it must expand welfare benefits or health spending permanently, this would be a normative choice: there is nothing inevitable about sharp tax hikes.

Even if you think permanent scarring will occur, those taxes suggested to raise revenue seem bizarre choices today. The Government presumably wants us to be Covid-cautious still. Two ways of reducing risks would be to drive more rather than use public transport and to shop more online.

Aside from all the other downsides of raising fuel duty and introducing an online sales tax, to use the tax system to incentivise worsening virus transmission right now by making driving and online shopping more expensive seems bizarre.

Raising top capital gains tax rates to 40 or 45 per cent would simply be self-defeating from a revenue-raising perspective. Capital Gains Tax on many investments represents a double tax. The justification for having it at all is to deter people hiding income as capital gains.

But there’s a revenue-maximizing balance between this effect and deterring people from selling assets. The Coalition government introduced a top 28 per cent CGT rate precisely because HMRC research suggested this raised most revenue. Though it was then lowered to 20 per cent under George Osborne, raising it to 40 per cent plus would reduce revenue relative to a lower rate. We’d get less investment and entrepreneurship when we need it most too.

And then there’s the mooted corporation tax rise from 19 back to 24 per cent. Taxes on mobile capital will deter foreign investment just as Brexit is set to happen, as well as reducing the after-tax return on new domestic projects. Who will bear the costs? Not just “the wealthy,” as commonly asserted, but workers too: evidence suggests that they bear between 30 and 70 percent of the burden of taxes on corporations.

Not only is the tax rise call premature then, but the specific proposals don’t conform to the pandemic’s needs or Boris’s Johnson’s ambitions to create a high-wage economy. Covid-19 may permanently scar the public finances, sure. But as yet its full effects are unknown and there’s little cost to pausing to see. Anything else at this stage is using the crisis as a pretext for raising funds for hobby horses.

If the Prime Minister truly objects to this rationale as reported and understands the threat to the nascent recovery of sharp tax rises today, he should take this message to his Chancellor: on tax rises, not now and not these.

James Frayne: Big tax rises would make Tory campaigning impossible – in Red Wall seats as well as traditionally blue ones

1 Sep

James Frayne is Director of Public First and author of Meet the People, a guide to moving public opinion.

In my last column, I suggested that the best hope for the Conservatives in building an effective campaign infrastructure in newly-won Northern and Midlands seats was by developing a new business-led coalition in these places.

Many of these towns and small cities have no activist networks of any description, and new voters come from families that openly despised the Tories a generation ago. Practically the only truly culturally Conservative people here – in the North East, the far North West and South Yorkshire – are businesspeople. Businesspeople are relatively large in number and are trusted by their local communities; they would be a perfect launchpad for a new Conservative Party.

It’s early days, of course, and details are yet to emerge, but news of a major assault on British businesses via higher taxes would make such a campaign totally impossible to run. It would be a massive set back to Conservative plans to become a regional party.

If reports are to be believed, amongst other things, the Treasury is considering significantly raising Corporation Tax, as well as Capital Gains Tax (CGT) and taxes on pension payments.

“Corporation Tax” is badly named; it’s a tax on pretty much any significant business, not on “corporations” – but, while larger businesses have both the resources and the endless budget lines to be able to minimise profit and keep corporation tax bills down, SMEs just have to lump it.

And increases in CGT and pension payments will put fear into small businesses, because they ultimately allow business owners to take a lower income now in the hope and expectation of being able to enjoy pay-offs in the future – with their currently lower income supporting their ability to employ others.

All of this would be a bad idea politically at the best of times. But doing it now, just when businesses have been struggling very badly, would be unbelievably risky. It’s not just high street retailers that have bit badly hit; vast numbers of firms have been hit either directly by the logistical difficulties of running a business while social distancing is required, or by a collapse in the confidence of their customers, or both.

New, higher taxes would make it harder for businesses to earn a living, and they would also make redundancies more likely and the scrapping of recruitment plans much more likely. Many businesses will be looking to develop a decent financial cushion over the next year or two – with at least six months’ operating costs in the bank – having been scarred by how close they came during lockdown to oblivion.

They would not be able to generate such a cushion with higher taxes on their profits. (Some businesses are also complaining that this comes on top of Brexit – something else that they would sooner not manage).

Aren’t these businesspeople effectively locked-in to the Conservative Party? Where would businesses go to vote? It’s true to say there are many, many businesspeople across the Midlands and North that would be very unlikely to vote Labour – on the basis the Conservatives would pretty much always be better for them.

But we’re not talking about simply securing their votes for future elections; we’re talking about trying to energise businesses so that they became local recruiters, fundraisers and campaigners for the Party in places where there are no activists. They simply won’t do this if the Conservatives turn them over. Again, if the businesspeople of Rotherham, Doncaster, Barrow, Workington, Bishop Auckland and so on aren’t going to create a new Conservative campaign network, who on earth is going to do it?

While major tax rises on business would make the growth of new regional Conservative Party much more difficult, I strongly doubt it would retain any medium-term popularity with the public either. Public opinion polls always lag behind business polls – and these are showing extreme concern about the state of the economy.

The public would catch up when reality bit and growth slowed and redundancies rose; at that point, the public would see that raising taxes on employers doesn’t help anyone. So where should the Treasury look? There are already suggestions they are being strongly encouraged to look at spending cuts first; only when they have exhausted what’s reasonable morally, economically and politically should they turn towards tax rises.

Jude D’Alesio: The Budget must be centred on young people

30 Aug

Jude D’Alesio, aged 19, is one of the youngest school governors in Britain, and is a Law student at the University of Bristol.

When I listen to my grandparents complain relentlessly about the lockdown, I cannot help but feel slightly frustrated. Frustrated, because I have sacrificed a term at university to go into lockdown to save them from this virus!

The government’s imposition of a lockdown in the UK was aimed at protecting those most vulnerable to contracting coronavirus, principally the elderly. There is no doubt that this was the correct decision, and Prof Neil Ferguson stated that lockdown should have been imposed earlier.

Over 95 per cent of coronavirus deaths have occurred in those older than 60, and 50 per cent of all deaths have occurred in those over 80 according to the WHO. It is only right, therefore, that we seek to protect the elderly, the most vulnerable in our society, from the disease, and the country is certainly united in this goal.

It is undeniable, however, that lockdown has taken a significant toll on the younger generation, of which I am a part. In higher education, lectures have gone digital, and some teaching missed altogether. This especially disadvantages final year students, many of whom will be embarking on their careers with significant gaps in their knowledge, particularly critical in professions like medicine.

There is also the immense damage caused to secondary and further education by the lockdown. At least a whole term of work missed will prove acute in those at crucial points in their education, namely GCSE’s and A levels.

Being robbed of the chance to outperform your predicted grades after months of hard work will deny many the chance to attend the best universities. This can only be negative, as we want our younger generations to receive the best education possible to enable them to pursue their ambitions.

Families with the lowest incomes will be hit hardest by the effects of distance learning; not being able to effectively participate in online classes due to a lack of technology will inevitably create skills gaps among the poorest in our society.

For all these reasons, the next Budget should be focused on, and most beneficial for, young people: their education, their skills, their opportunities.

In many ways, the pandemic has breathed fresh unity into our country as we are united in fighting the virus. It seems fair, therefore, that everyone should in some way bear the cost of the current recession. However, as the lockdown came at the cost of young people, there are undoubtedly changes benefiting young people which can be implemented in the next Budget.

Scrapping the triple lock is a great start. The triple lock, implemented by the Cameron government, increases pensions in accordance with the Retail Price Index, average earnings or 2.5per cent, whichever proves highest. This could enable savings of £8bn a year, according to a leaked Treasury document.

The current main rate of corporation tax, sitting at 19 per cent, has been stagnant since 2017. Such desperate times surely call for a cut in the rate, in line with the government’s aim to make us more competitive post-Brexit. Additionally, the government’s plan to merge the Foreign Office with DFID, whether the correct decision or not, will undoubtedly produce savings.

The proceeds of growth, merely the beginning of a range of reforms, should be reinvested heavily in young people’s education and opportunities to redress the balance caused by coronavirus. This must include the £1bn ‘catch-up’ plan to enable school children to bridge the gap left by lost teaching. However, amounting to only £80 per student (IFS), further funding once coronavirus passes should be on the cards.

This is, of course, only a starting point, and many more steps must be taken to alleviate the portentous educational, financial and social burdens which have overwhelmed my generation. But, there have been clear losers during this pandemic and the next Budget should recognise as such.

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

6 Jul

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

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

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

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

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

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

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

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

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

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

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

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

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