Warwick Lightfoot: Today’s Budget. Conservatives should not be afraid of public borrowing to ensure a rapid recovery.

3 Mar

Warwick Lightfoot is Head of Economics at Policy Exchange.

What sort of Budget should the Chancellor present? Britain needs a confident and audacious economic policy to respond to the Covid shock and the economic stagnation of the last decade following the banking crisis and Great Recession. It needs to be based on realism about the constraints that limit effective policy and the opportunities for action.

It should recognise that both arms of macro-economic policy – fiscal and monetary policy – need to be used and the roles assigned to them need to reflect contemporary circumstances, in particular low interest rates. A Conservative economic agenda should encompass three arrows: an active fiscal policy to stimulate the recovery, a realistic monetary policy, and an ambitious supply-side agenda of tax reform and changes to regulation to improve incentives and the functioning of the economy.

As Policy Exchange has set out in a new report, What is to be done with the British economy?, we should not be afraid of allowing public borrowing to take the strain. The big question in public finance is how much is spent, not how it is financed. We are right to ditch the artificial fiscal rules that have been used since Gordon Brown that were at best economically irrelevant.

We should take advantage of three things: exceptionally low nominal and real interest rates, which remove the constraint of debt service charges on the use of fiscal policy as a stimulus; that in modern internationally-integrated global capital markets, government borrowing does not have the sort of crowding out effects it used to have; and that the UK is exceptionally well placed to take advantage of cheap long-term debt, and should lengthen the maturity of its debt.

The Government should continue to borrow to ensure a rapid recovery and minimum scarring. Preventing as much long-term damage to the economy as possible now will shore up future revenue from taxation and ensure the long-term health of the Government balance sheet.

As I highlighted to ConservativeHome readers in 2008 in the wake of the financial crisis, fiscal policy must in the current climate be used as a stimulus instead of monetary policy, and conservative economists in America at the time had already recognised this.

The opportunity to borrow coincides with the need for tax reform. One lesson I learned when I advised three Conservative Chancellors in the 1980s and 1990s is that it was a mistake to put so much emphasis on balancing the budget and more should have been done on tax reform.

The tax burden actually increased over this period and, as Lord Lawson recently advised the Chancellor, the Conservative party should not become the party of high taxes. The Chancellor should embark on an agenda of tax reforms to improve incentives by lowering marginal tax rates and creating a more coherent system overall.

In particular, he should end the Manhattan skyline of marginal tax rates across the earnings distribution, which means that some employees face marginal tax rates of around 60 per cent when they are earning between £50,000 and £60,000 and £100,000 and £125,000 due to the withdrawal of child benefits and personal allowances in these income brackets. These changes would create a simpler tax system that improves the incentives to work, save, and invest, for some of the most productive people in the labour market.

There is a risk of inflation given the disruption to supply chains constrained by Covid restrictions and rising oil and commodity prices. Although zero interest rates mean that monetary policy has been ineffective as a stimulus over the last decade, it has actually become stronger as a tool of tightening. The current environment of corporate leverage upwards means that tighter monetary conditions may be a more powerful instrument to curb economic activity than twenty years ago.

Despite the fact that a return to higher interest rates and a more normal bond market yield curve will push up the cost of servicing debt, it will improve the micro-economic functioning of money and credit markets. Looser fiscal conditions offset by tighter monetary conditions is undoubtedly a preferable macro-economic mix to that exercised over the last decade.

Reform of the planning system offers the greatest potential yield in terms of deregulatory reform, with particular benefits to the supply side of the economy and for renters trying to get onto the property ladder. Covid has only accelerated the need for planning reform, as the pandemic appears to have expedited trends in the use of technology, remote working and internet shopping.

This will result in a reallocation of capital and resources, meaning that there is changing demand for the location and nature of homes, business premises, office space and the use of buildings in city centres. Fundamental reform of the planning system will ease these shifts allowing for a more efficient and productive use of land and capital.

Regardless of what happens in the Budget tomorrow, it is vital that policy makers are nimble and responsive to changes in economic circumstances over the next year. Economic data over the course of the Covid crisis has been particularly unreliable, which means we are effectively flying blind.

The yo-yoing falls and rises of GDP are out of the parameters of the models to forecast the economy, the practical work of data collected by statisticians has been hampered, the weights employed in index numbers are distorted by changing behaviour, and Government interventions such as the furlough scheme have distorted our understanding of idle resources in the economy.

This has compounded issues in the collection of key data that was emerging before the crisis, such as the difficulty of measuring the effect of intangible assets on the economy. Economists and policy makers must therefore be particularly flexible in their approach to fiscal and monetary policy over the next year, a time frame in which we can expect to see huge shifts in production and consumption as we come out of the pandemic.

Although we do not know how strong the recovery will be, the Government must do all in its power to ensure we regain the full productive potential of the UK economy pre-Covid and stimulate future growth. While there are questions as to how much consumers will spend their accrued savings, the fact remains that interest rates are almost zero and there is slack in the economy that the public sector balance sheet should take up. Now is not the time to slam on the brakes and cut back on the use of fiscal policy as support.

Dan Boucher: Labour’s stewardship of the NHS in Wales has been disastrous. Come May, it’s time for a Conservative administration.

1 Mar

Dr Dan Boucher, Dan has stood as an Assembly and Parliamentary Candidate in Wales. He lives with his family in Swansea.

During the 2011 Assembly election campaign I well remember a lady telling me that if I hoped she was going to vote Conservative I must have another thing coming to me – given the state of the NHS in Wales. I said that I shared her concerns but thought they provided a very good reason for voting Conservative because the current situation was the result of fourteen years of Labour’s stewardship of the NHS.

The lady looked a little confused and so I explained that since May 1997 Labour had run the NHS in Wales, first, on account of the fact that Labour won the 1997 General Election and then on account of the fact that health had been devolved to the Welsh Government from the very beginning of devolution in 1999 and that throughout, the health minister had always been from the Labour Party.

Its record up to that point had certainly been none too inspiring. Labour inherited five health authorities from the prior Conservative administration but embarked on a radical restructuring programme, exchanging the five health authorities for twenty-two local health boards from April 2003. It argued this would bring health care provision closer to the people!

However, in 2009 the party performed a spectacular u-turn, explaining that the new structure was too bureaucratic and introduced an equally radical reform agenda in diametrically the opposite direction. Replacing the twenty-two local health boards with seven health authorities, it effectively conceded that the previous Conservative formula had been rather better.

Things did not improve thereafter. Between 2011 and 2016 the Welsh Government decided not to increase health spending in Wales proportionately in line with the increases introduced in England, costing the Welsh NHS approximately £800 million. This placed real strain on the system and in 2015 Betsi Cadwaladr Health Authority had to be moved into “special measures” where it remained for five and half years, the longest duration that any health authority has been put in that position anywhere in the UK.

In January 2020 – immediately prior to the outbreak of Covid – five out of our seven health authorities were subject to either “special measures”, “targeted intervention” or “enhanced monitoring.” Moreover, in that month the numbers of patients waiting 12 hours or more in A&E broke a new record, increasing by 1,590 patients compared to January 2019. Over a similar period the numbers waiting more than 36 weeks for hospital treatment almost doubled, increasing from 12,982 in December 2018 to 25,549 in December 2019.

In the last year, of course, the NHS in Wales, like the NHS across the UK, has faced the previously unimaginable Covid challenges which have demonstrated the heroism of our doctors and nurses as never before. In this context, however, Labour’s management has again been the cause of real concern. In March/April last year over 13,000 shielding letters were sent to the wrong addresses and then in August identifying details of 18,105 Welsh residents who had tested positive for the Coronavirus were uploaded onto the Public Health Wales website.

At the same time there has been less willingness to focus on addressing non-Covid health challenges than in England. Between December 2019 and December 2020 there was a tenfold increase in people waiting more than two years for a procedure on the NHS and the Health Minister has now acknowledged that it might take a full parliamentary term to clear the backlog.

Concerns came to a head in January as a result of the First Minister’s statement that rolling out the vaccination programme against Covid “is not a sprint.” Given that the proportion of people vaccinated in Wales at that time was significantly less than in England, and that the sooner people are vaccinated the less chance they will have of contradicting the disease, this generated huge public pressure for a change of approach.

In assessing the significance of Labour’s stewardship of the NHS in Wales as we approach the upcoming Welsh Parliament elections on May 6, it is important to appreciate just how central health is to Welsh devolution. Nearly 50 per cent of the Welsh Government’s budget, over £9 billion, is absorbed by health. While health might be only one of nine cabinet positions, therefore, the truth is that in monetary terms it is nearly half of devolution.

Moreover, what was true in May 2011 has continued to be true, namely that while in coalition, some ministerial posts have been held by the Lib Dems or Plaid, the Minister of Health position (along with that of First Minister and a majority of ministerial positions at any one time) has always been held by Labour.

In this context the question facing the Welsh electorate in May (or whenever the election takes place) is, in an important sense, more a question of health than anything else and in seeking to answer it the people of Wales must ask whether Labour’s record justifies another five years? Would Wales benefit from twenty-six years of Labour running the Welsh NHS, and indeed the wider Welsh Government? Now is surely the time for a Conservative administration in Cardiff Bay.

Howard Flight: We should be optimistic about the UK’s 2021/22 economic recovery

1 Mar

Lord Flight is Chairman of Flight & Partners Recovery Fund, and is a former Shadow Chief Secretary to the Treasury.

It looks to me as if the UK economy is going to perform markedly better than currently, generally forecast – provided, that is, there are not further unwanted lockdowns.

The IMF forecast is also positive, forecasting an upturn from a 3.5 per cent contraction for Global GDP last year to a 5.5 per cent expansion this year. Again, this does of course hang on a successful Pan EU, vaccine rollout. With the 2020 downturn twice as deep as that which followed the Lehman collapse, so the 2021/22 recovery should be all the greater.

The strongest growth forecast remains the US at 5.1 per cent growth, reflecting particular massive stimulus support from government. Japan’s growth forecast increased marginally to 3.1 per cent with 8.1 per cent and 11.5 per cent, respectively, for China and India. The relatively smaller but faster growing Asian economies – Indonesia and Malaysia – will grow at 8.3 per cent – with the Asian economies now representing a third of the world economy.

In the case of the UK, however, the IMF forecast continues to understate. The IMF is the global lender of last resort and the single most influential institute of economic governments. Last year the IMF forecast the UK economy contracting by 10 per cent – the biggest fall of the G7 countries.

It is correct the UK was particularly susceptible to the Coronavirus pandemic, reflecting the international nature and population density of London. But the key factor responsible for the misleading figures is that the UK public sector includes in its GDP growth data, in a way relating not to spending, as with other nations, but to outcomes.

This means that when schools are closed and NHS operations are down, as during the lockdown, government consumption expenditure – a huge chunk of any advanced economy – drops off a cliff for GDP measurement purposes – even though State spending as a whole is growing fast.

As a result, the irony is that this is why the UK public sector registered a double-digit percentage contraction in our 2020 GDP numbers, while growing fast across the Eurozone.

For purposes of comparison, an expansion of 10 per cent should have been allowed for. The outlook for the real economy for the coming year should therefore be substantially positive. The IMF forecast of 4.5 per cent, and not adjusted for the public sector distortions is only marginally ahead of the Eurozone at 4.2 per cent. The actual, comparable rate allowing for these distortions looks to be of the order of 10 per cent – reflecting the vast vaccine rollout occurring and the fulfilment of massive pent up demand.

The IMF numbers do not acknowledge this conceptual wrinkle stemming from Britain implementing internationally agreed methodological changes before other major economies: and if they did the UK’s 2020 GDP contraction would be near the middle of the G7 pack. The IMF estimate is that the UK economy will expand by 4.5 per cent this year, only slightly faster than the Eurozone. With lockdown continuing into 2021 the same statistical anomaly relating to GDP, when school and health services were disrupted is impacting on current growth numbers as viewed by the IMF.

Of particular importance in accommodating economic recovery is that the G7 can now apparently live with much higher levels of public sector debt, post the Coronavirus crisis. Fiscal rules clearly need some rethinking. But for the next two years, measured meaningfully, the UK should be the fasted growing of the G7 economies. Also, the world will realise that Brexit is no disaster but rather a big positive which could harness growth.

It is forecast that an early end to Covid rules would lift the economy by £26 billion on top of the stimulus from the UK’s advanced vaccination programme.

Iain Dale: Teaching unions are loud but wrong on vaccines. Besides, what about those without powerful public advocates?

26 Feb

Iain Dale presents the evening show on LBC Radio and the For the Many podcast with Jacqui Smith.

The Coronavirus pandemic has shown how true the maxim is that those who shout the loudest get the most attention.

Take teachers, for example.

And before I go on, I should say that originally I was going to be a teacher (of German, since you ask) and I have the highest regard for the teaching profession.

However, the very thought that teachers should be vaccinated ahead of other groups is for the birds.

There is no evidence that teachers are more likely to either contract or die of Coronavirus than anyone else.

Indeed, the league table of occupations with the most Coronavirus deaths put teachers almost at the bottom.

But the teachers unions have a very loud voice and they used it to persuade the Labour Party to press the Government to put teachers at the top of the next round of vaccinations.

It would have been easy to give in, but they didn’t. And quite right too.

This week the Joint Committee for Vaccination and Immunisation (JCVI) declared that teachers were no more at risk than other people.

What about those who don’t have powerful public advocates – refuse collectors, people who work in funeral parlours, taxi drivers (who top the death list), bus drivers? I could go on.

The JCVI is absolutely right to say that once the 1-9 groups are complete, the rollout should continue to be largely based on age bands.

– – – – – – – – –

Clickbait headline of the week has to go to Pink News, which came up with this gem: “Horny thief steals £600 of sex toys – including a vegan bondage kit”.

The mind boggles. I mean, a leather gimp mask made out of Quorn? Whatever next.

I’m afraid clickbait headlines are not just the province of tabloids. I’ve noticed even The Times has started to get down dirty in the hope of attracting more hits.

This week a headline tried to persuade us that prisoners (at least they didn’t call them “lags”) were going to queue jump and get the vaccine ahead of teachers and police officers.

What a shame the words underneath the headline said nothing of the sort.

Headline writers have a job to do, but that job is not to exaggerate the truth or reality.

– – – – – – – – –

All attention is now turning towards Rishi Sunak’s budget on Wednesday.

In some ways this could be seen as the most important budget for a generation.

It will set the tone for the next decade of rebuilding our economy.

It cannot be business as usual and has to show a huge degree of imagination and understanding of what is needed to recreate an enterprise economy.

Everything must be geared to encouraging economic activity and new business startups. Tinkering with the odd tax rate here and there won’t be enough.

It is also an important day for the Chancellor personally. His popularity ratings are rightfully very high, but this budget will define him for a lot of us.

Has he got what it takes, or will this it all be a bit of a damp squib with decisions delayed and a sense of “meh-ness” pervading the country?

We all accept that debts have to be repaid. But now is not the time to start putting up taxes.

It is rumoured he is thinking of increasing corporation tax.

For a party which traditionally can’t see a tax without wanting to put it up, it is supremely ironic that Labour has declared it would be against a rise, however minimal, in corporation tax.

But it’s a good bit of opposition politics, however opportunistic it is.

To put up corporation or any business tax at the moment would be a complete slap in the face for those businesses who, just as they see a degree of normality (and hopefully profitability) to return, they are told the first thing they will have to do is pay more tax.

There are plenty of people who have done well out of the pandemic, the most obvious being Amazon. It’s fair enough to think of ways of finding new ways of taxing them, but however that is done, it’s important to ensure that it’s not the paying consumer who is hit.

I’d like to see a national insurance holiday for a year for any new business startup. As I said last week, I’d like to see IR35 and the loan charge abolished. This war against the self employed has to stop.

But most of all I want to see a truly radical budget speech.

We are about to find out of what metal Sunak is made.

– – – – – – – – –

I hope you’ve all got your popcorn ready for Alex Salmond’s appearance before a committee of the Scottish Parliament this lunchtime.

It promises to be quite an event.

I don’t profess to be an expert on the internal affairs of the SNP, but I have a feeling that an implosion is imminent.

And at last the English media has woken up to what could well become one of the biggest political stories of the year.

If the worst were to happen (for the SNP, I mean) and Nicola Sturgeon was to be forced out of office, it’s difficult to see who the ready replacement is.

Succession planning was something Salmond did well. He groomed Sturgeon for the job, and few could say with a straight face that she has made a hash of it (although if you work in Scottish education, or parts of the Scottish NHS you might contest that assertion).

She, however, has failed to do that. There is no natural successor.

And that’s a real concern, both for the SNP and for Scotland more generally.

Ben Houchen: The Budget. On Wednesday, Sunak must hear the voice of the North – and kickstart a new era of job creation.

26 Feb

Ben Houchen is the Mayor of the Tees Valley.

With spirits buoyed by the Prime Minister’s roadmap out of pandemic restrictions, and the light at the end of the Covid tunnel finally in sight, all eyes now turn to the Budget on March 3.

This could be one of the most influential Budgets, both for our nation and for the region I represent, in a generation. Crucial decisions need to be weighed and judged by the Chancellor to ensure that our comeback from Covid is powerful and that the light at the end of that tunnel proves to shine on a better future.

There is no doubt in my mind that the top priority for Rishi Sunak is jobs and rebuilding the economy – an economy battered by the necessary restrictions on lives and livelihoods. I know from talking to local businesses how many are fighting on the edge, and it’s to the Government’s credit that the furlough scheme and other financial support have kept so many businesses alive and people in employment.

The “Red Wall” communities in my area overwhelmingly backed Boris Johnson in the last election, and it’s essential that the faith they put in him is returned. The Prime Minister promised a new kind of government, free of Brussels blinkers and Whitehall hand-wringing, which would address ordinary people’s concerns.

The best way to prevent low incomes and low opportunities from blighting the lives and hopes of adults and children, especially in the UK’s left-behind communities, is to do all we can to create new, good quality, well-paid jobs, on an unprecedented scale.

However, for a jobs agenda to be effective, it needs to be directed with strategy and precision. This can’t be an illusory statistical employment growth driven by foreign workers on contracts in the south. At the last election, the country was promised better policymaking for towns, villages and rural areas, and a transformative levelling up programme which would see growth, prosperity, and potential finally realised in communities across the nation.

This is the moment for a step-change in that levelling up agenda, to drive a jobs revolution in areas like Teesside, Darlington, and Hartlepool. Only by marrying the levelling up agenda to the jobs agenda will we ensure that new growth is serious, sustained, and benefits everyone.

There are two key ways in which the Chancellor can kick-start the recovery, levelling up, and the creation of good quality, well-paid jobs in my area. I and my team have done the groundwork, and the question is: will the Government grasp these golden opportunities?

The first, and most essential, step needed is for the Chancellor to give the green light to my plans for the Teesside Freeport. With thousands of acres of developable land, the largest deep-water port on the east coast, a nation-leading focus on delivering net zero technology and clean growth, and a pathway to pioneering innovations to support the whole UK freeport ecosystem, I passionately believe that a Teesside Freeport can be a jobs dynamo, a roaring engine of economic growth, and a flag-bearing project for Global Britain.

There are huge opportunities for job creation here. The wide package of tax reliefs, simplified customs procedures and streamlined planning processes freeports will benefit from can bring in the investment needed to unlock Teesside’s latent economic power.

Sunak was an early supporter of freeports himself, so I know that he understands the enormous potential we have here. The Teesside Freeport could create more than 18,000 skilled, good-quality, well paid jobs over the next five years and boost the local economy by £3.2billion. It would also increase inward investment into Teesside, Darlington and Hartlepool by over £1.4 billion.

Now the Chancellor needs to have the courage to overrule any official arguing to delay pressing ahead with this game-changing jobs catalyst. As soon as Sunak gives us the green light, I’ll be driving this forward, unleashing the potential of Teesside, Darlington and Hartlepool.

The second action I’m looking for from the Chancellor is another where I know he understands the opportunity, but where again he needs to cut down the unimaginative Sir Humphreys within his department.

The Government’s plan to relocate 22,000 senior Whitehall civil servants out of London by 2030 will see 800 civil servants moved from Sunak’s own department to a new northern economic campus, dubbed “Treasury North”.

The vast majority of people don’t live in metropolitan cities, they live in our towns, our villages, in the countryside and on the coast. By moving out of London these civil servants will be able to develop a greater understanding of the issues and opportunities people are confronted with on a daily basis and, ultimately, develop better policy that is anchored in real knowledge gained by living in the communities it will impact the most.

For decades, talented local people in my area, graduates of fantastic northern universities and people who should have played an important part in our communities, have been sucked away by over-centralised bureaucracy. Now this self-perpetuating cycle can be broken. More than 100 local business leaders, both Teesside and Durham Universities, and political leaders from across the political spectrum have backed my proposal to bring Treasury North to Teesside.

It would be tragic if the prospect of opportunity and in-tune government was dissolved into a cluster of London civil servants being flown to Manchester, Leeds, or Newcastle. Such an outcome would fail to deliver better policymaking for towns like Hartlepool or Darlington, villages like Stillington or Skinningrove, or rural areas far and wide, and it would fail to deliver the promised levelling up agenda.

On Wednesday, the Chancellor has the chance to set a defining roadmap for our economic recovery from Covid. As a northern MP himself, I believe that he will hear the voice of the North and kickstart a new era of job creation. The tools are in his hands. The nation is waiting for Sunak to equip us to get to work and create the jobs of tomorrow.

James Somerville-Meikle: Sunak should make supporting families a priority in his Budget

25 Feb

James Somerville-Meikle is Head of Public Affairs at the Catholic Union.

The economic cost of this pandemic is all too clear for many. But personal finances and household budgets are not the only things feeling the strain.

For some people, this past year has pushed relationships to their limits – with more time spent at home, greater stresses and anxieties, and an emotional cost impossible to calculate.

Among the alarming reports and grim statistics of the past year, the increase in people seeking divorce guidance from Citizens Advice and law firms reporting an increase in divorce applications should be some of the most worrying signs of the long-term impact of this virus.

As the Chancellor prepares to deliver his Budget next month, the state of people’s marriages might not be foremost on his mind, but there are good reasons why Rishi Sunak should make supporting families a priority.

In 2016, the Relationships Foundation estimated that the cost of family breakdown to the taxpayer – the various extra costs of supporting single parents and managing the fallout from relationship breakdown – was £48 billion. A figure that is sadly likely to be even higher in the wake of the pandemic.

While money alone cannot and should not be enough to keep a marriage together, a greater focus on how the tax and benefit system can support families is long overdue and is needed now more than ever.

Government spending has tended to focus on picking up the pieces from relationship breakdown, rather than supporting the family unit in the first place. If the Chancellor wants to avoid spiralling welfare spending as a legacy of the pandemic, then the Treasury needs to look more closely at the tax burden faced by families not just individuals.

One of the most pressing questions facing the Chancellor is the future of the £20 per week uplift to Universal Credit and tax credits. The policy has helped millions through the pandemic, but it has cost billions – £6.1 billion according to the Office for Budget Responsibility.

The temporary change has meant that someone on the basic rate of Universal Credit over the past year has received an extra £1,040 than they would have done without the uplift (an increase of 29 per cent on the pre-pandemic rate).

It’s a testament to the extraordinary times we live in that this hike in payments barely made the news when it was announced in March last year, but it is certainly making headlines now that the end of the year-long extension is in sight.

In some ways perhaps this was inevitable. Once something is given – no matter how temporary – it is hard to take away. People who have felt the benefit of the higher rate of payments will also feel the loss if and when they come to an end.

The challenge facing the Chancellor is how to avoid one of the biggest and most generous changes to social security in our history ending up looking like daylight robbery.

The £20 uplift has undoubtedly helped to get more money to some of the people most in need during the pandemic. But the problem with making changes to the basic rate of Universal Credit and tax credits is that everyone is treated the same, regardless of who they are or their circumstances. A working mum with three children gets the same benefit from an extra £20 a week through tax credits as a single man with no children.

If the Chancellor is looking for a way to rebalance welfare spending in the wake of the pandemic, then a more targeted approach, focusing on support for families and those with childcare responsibilities seems like an obvious solution. It would also be a big step towards delivering the manifesto commitment of making Britain the greatest place in the world to start a family.

There are oven-ready policies that the Chancellor could introduce in his Budget that would help families, and arguably be a greater help to children in the long term than the £20 uplift.

Perhaps the most obvious option would be to scrap the two-child cap on the childcare element of Universal Credit and tax credits. The policy was introduced in the Budget in 2015 and meant that from April 2017, support provided to families through Universal Credit or tax credits would be limited to the first two children.

The Child Poverty Action Group estimated in April 2020 that 230,000 families had been affected by the policy, and that an additional 60,000 families could be affected as a result of the pandemic. The policy has been roundly criticised by faith groups, including the Catholic Church, The Muslim Council of Britain, and Board of Deputies of British Jews, on account of its discriminatory approach to larger families.

The justification for the policy was that parents claiming Universal Credit or tax credits should face the same choices about the number of children they can afford as those supporting themselves solely through work. But the economic crisis caused by the pandemic has shown how quickly families can fall into difficulty. Even in normal times, no parent can be sure that their financial security will withstand unpredictable events such as illness, death, or redundancy.

Another possible source of inspiration for the Chancellor could be moving towards fully transferable personal allowances. Currently, 10 per cent of the current personal allowance of £12,500 is transferable between couples. Going further and making personal allowances fully transferable would remove the tax penalty suffered by single earner couples and help families keep more of the money they earn.

A fully transferable personal allowance would not be cheap. David Goodhart estimated in 2016 that the cost to the Treasury would be in the region of £5 billion – a significant amount of money, but still less expensive than the £6 billion cost of maintaining the uplift in Universal Credit and tax credits.

The Chancellor could also look at increasing child benefit, which has been largely frozen since 2010. The Child Poverty Action Group has estimated that increasing child benefit by just £10 per week would reduce child poverty by 450,000 as well as helping to stimulate the economy to recover from the pandemic.

There are options available to the Chancellor for this Budget and the rest of this Parliament to create a tax and benefit system that finally supports the family unit. The pandemic has shown the importance of having strong families alongside a social security system for those who need it.

Helping families keep more of the money they earn will not solve all of their problems, but it would certainly help. Let’s use this moment to build back better for families.

SBF GB&I: The plastic packaging tax must be used to kick-start investment in to the UK’s plastic circular economy

25 Feb

Michelle Norman is Director of External Affairs and Sustainability at SBF GB&I. This is a sponsored post by SBF GB&I.

Businesses have faced many challenges during the Covid-19 pandemic, but as we move towards economic recovery, we have the opportunity to build back better and deliver a green economy. That’s why Suntory Beverage & Food GB&I (SBF GB&I) has this week written to the Chancellor of the Exchequer to urge there are no further delays to the passage of the UK’s Environment Bill through Parliament and request urgent investment into the UK’s recycling infrastructure through the plastic packaging tax.

As part of our company’s “Growing for Good” vision, we are committed to using more sustainable packaging, eliminating unrecyclable and excessive packaging from our supply chain and collaborating with innovative partners to look at new ways to manage plastic waste.

We led the soft drinks industry in creating the first ready-to-drink bottle from 100 per cent recycled plastic for Ribena in 2007. And last year, Ribena went further and became the UK’s largest soft drinks brand to use bottles which are made from 100 per cent recycled material and are 100 per cent bottle-to-bottle recyclable, a model we are seeking to replicate across all our brands. By 2030 we plan to have fully moved away from virgin plastic that is derived from fossil fuels, only using plastic that has come through a recycling process.

To realise our ambitions, we need to invest in innovation, but we also need a rapid increase in the domestic supply of food-grade quality recycled material, one of the reasons why we share Government’s goal of creating a fully circular plastics economy.

Changes to the UK’s collection and recycling infrastructures are desperately needed to help deliver the high-in-demand domestic supply of food-grade quality recycled plastic that UK manufacturers need. That’s why we have always been concerned about the scheduling of the Government’s proposed resources and waste reforms.

The plastic packaging tax is scheduled to come into force in April 2022, at least 12 months before the infrastructure changes delivered through Deposit Return Schemes (DRS) and Extended Producer Responsibility (EPR) reform are currently expected to be introduced. These infrastructure changes are essential in addressing the lack of domestic supply UK manufacturers currently face. Any further delay in the changes further widens this gap. That’s why, ahead of this year’s Budget and forthcoming Finance Bill, we are urging the Chancellor to close the gap between the introduction of this tax and implementation of the DRS and EPR reform.

Our ambition at SBF GB&I is to help realise a sustainable circular economy. Plastic is versatile and lightweight, and it offers convenience for consumers. As a society we have historically used plastic poorly, but we are confident that through the Environment Bill and other measures it’s possible to turn this around and move to a world where plastic is used responsibly. In order to do so, it is vital that bottles are recycled and that the recycled material is then used to manufacture new bottles in turn – a truly circular system.

The plastic packaging tax should, therefore, be used to build a genuine circular economy within the UK, so that we are using our own resources to the fullest. That’s why, whether it is rescheduled or not, we are urging the Chancellor to ringfence the plastic tax’s revenue, in order to kick-start the investment and changes necessary in the UK’s recycling infrastructure to provide the collection and supply of recycled material the market is demanding.

We believe in the principle that manufacturers need to be given a fair chance to include recycled content in their products. That’s why we are also urging an immediate review and changes to food contact material regulations which are preventing food and drink manufacturers from including recycled material in some essential and non-replicable packaging components.

Thanks to the policies proposed in the Environment Bill, the UK has the opportunity to lead the world in its sustainability commitments and ambitions. As a company, we look forward to playing our full part in ensuring we leave our environment in a better state than we found it.

Andrew Gimson’s PMQs sketch: Kindly impale yourself on the sharpened stakes at the bottom of this hole

24 Feb

Sir Keir Starmer arrived in the Commons with a spade, dug a deep hole, placed some sharpened stakes at the bottom of it, and proceeded to invite Boris Johnson to impale himself on them.

There have, Sir Keir remarked, been “people saying the Covid statistics appear to have been manipulated, that Monday’s roadmap is based on dodgy assumptions and false modelling”.

He urged the Prime Minister to agree that such comments were “irresponsible”.

Were Johnson blind, he might have fallen into this trap, but since his eyes work well enough, he walked round the hole which had been dug for him, remarking as he did so that the roadmap has set us “on a cautious but irreversible journey to freedom”, and the data on which it is based were presented on Monday to the House.

Sir Keir now revealed that “all these comments came from his own MPs”. He had been trying to trick Johnson into condemning “the 60 or so members of the Covid Recovery Group”.

One cannot blame the Labour leader for attempting to exploit this division within the Conservative Party, but one has to say that his attempt to do so lacked subtlety.

Johnson was in boisterous mood. He dismissed Starmer’s demands for next week’s Budget as “paltry”, mocked him for weaving “hither and yon like some druidical rocking stone”, and concluded: “He vacillates, Mr Speaker. We vaccinate.”

Nor did anyone else manage to discomfort the PM. It was notable that when replying to Ian Blackford, Commons leader of the Scottish National Party, Johnson did not seek to capitalise on the Nats’ ferocious internal disputes in Edinburgh, but instead concluded: “All they want to do is break up Britain with another referendum.”

It is not good for the Commons for the Prime Minister to win such easy victories. It may not even be good for the PM, who at this rate may become over-confident, and tumble into some trap of his own making.

Johnson holds the initiative. When one considers how tough the last year has been, that is quite an achievement.

Chris Loder: Our rail industry is a sleeping giant when it comes to boosting international trade

24 Feb

Chris Loder is the Conservative MP for West Dorset.

As Brexit negotiations have concluded, the Government is working hard to both protect and expand British industry by creating a future of new opportunity through trade negotiations. When developing a new independent trade policy, it is crucial that we prioritise sectors in which we are global leaders and create the best framework possible to help them remain that way in a post-Brexit world.

Recently, I wrote about the importance of rail in the context of our fight back against Covid-19. Today, I am again banging the drum for the rail industry that I know and love; particularly because of its rather unknown status as a major exporter – but we need to change that.

The rail industry always takes up a lot of column inches in the British media. Debates rage about strikes, fares and leaves on the line. These are all issues that the British public experience directly and so it is no wonder that we all hear so much about them.

However, our rail sector is a major industry in its own right compared to the automotive or aerospace sectors; albeit on the verge of a major reform. Crucially, it is also an international success story, exporting £800 million a year in goods and services. The sector employs around 600,000 people (more than the entire workforce of Birmingham) and fuels jobs in the UK’s industrial heartlands; places like Crewe, Derby, Stockport and Doncaster. And it could do so much more for UK plc.

Key to protecting and enhancing the UK’s role as a major rail exporter is to make our market attractive and open for business. Rail should be included in any free trade deal post-Brexit; and I have already met with Graham Stuart, International Trade Minister. These deals should be signed with the purpose of making it as easy as possible for the UK to continue to export.

A recent survey by the Rail Supply Group showed that the UK rail sector’s priority markets are very much aligned with those of the Government – rail suppliers want to access markets like America, Australia and India, all of which are top priorities for agreeing Free Trade Agreements. The industry is also keen on ensuring reciprocal market access; and we should reject protectionism wherever it rears its head. If we are restricted from accessing another market because of protectionist procurement legalisation, as we have been within the EU, the Government needs to ensure these barriers are broken down for the benefit of all; and that is my mission here at the moment for the railway.

The potential of the rail industry in exporting abroad knows no bounds, and it says something about the growth of the industry that the Rail Sector Deal, agreed between industry and Government, has targeted a doubling of UK rail exports by 2025. This is very much achievable, with lots to play for as the global rail market is due to expand significantly over the coming years; with the recently released UNIFE World Rail Market Study predicting annual market growth of between one and 2.3 per cent until 2025, when an annual volume of approximately ER 240bn pa could be expected.

However, now more than ever, we need to show off what we can sell to our new trading partners. Support from Government, recognition of the exporting potential of the sector and schemes like the Department for International Trade’s Tradeshow Access Programme (TAP) are vital in helping fund small businesses in the rail industry to go to trade shows around the world and bring home contracts. As we leave the EU, it is vital that these sorts of schemes are maintained and supported more because Brexit means the UK becomes less prominent internationally. Now is when our presence on the world stage is needed most.

In September 2019 at the Conservative Party Conference, the rail industry leaders present did not appreciate the opportunities that Brexit offered. Senior executives were not at that time wanting to embrace the future. But we have now left the EU. We have countless trade deals in place and I have been making the case throughout Government to make sure rail features in these deals; and the industry would do well to also make the case.

The Railway Industry Association (RIA), the voice of the UK rail supply community, has made a number of key asks about what the industry needs from future trade deals in order to continue to soar. To summarise these in simple terms: rail needs to be included in trade deals; have tariff-free access to other markets wherever possible; and retain a great, highly skilled workforce with people from around the world able to come here if they fit the bill. If we can achieve this and combine it with a renewed drive to “sell, sell, sell” through our negotiations around the world; there is every opportunity for our rail industry to lead the world in our new, global Britain.