As the Treasury digs in on Eat Out to Help Out, its critics are fighting an uphill battle

30 Jan

There are (at least) two overlapping but distinct groups of people gunning for Rishi Sunak: opposition politicians worried that he’s an extremely plausible successor to Boris Johnson, and wonks outraged that the Chancellor is reaping huge political dividends for getting so many big calls, in their view, extremely wrong.

Eat Out to Help Out, as the policy which turned him into ‘Rishi’, is the prime target. Sunak’s critics – including Ryan Bourne of this parish – argue that it was deeply ill-judged.

Not only do they suggest it turned restaurants into a vector for transmitting Covid-19, but that as the lynchpin of a broader push to get things “back to normal” it likely encouraged people to indulge in other, even riskier forms of social behaviour, such as house parties.

Defender of the scheme are no less sure of themselves, and argue that the data actually tells a completely different story. Now the Treasury has backed them up with new evidence which it claims shows that there is no link between areas which had high take-up of Eat Out to Help Out and subsequent spikes in coronavirus cases. The official word is:

“These figures confirm that take-up of Eat Out to Help Out does not correlate with incidence of Covid regionally – and indeed where it does the relationship is negative.”

Will this assuage Sunak’s critics? Probably not. Bourne’s argument actually anticipated the criticism, suggesting that such data is of limited use in assessing the relative damage wrought by individual policies at a time when prevalence of the virus, and thus absolute risk, was relatively low. But one suspects that, when weighed against the enormous political (and, in their view, economic) dividends delivered by the policy that elevated the Chancellor to the rarefied ranks of politicians known to the public by their first names, the Treasury will likely be happy to settle for that.

The proposed foreign aid cut. Many Tories are against it. But Sunak has limited options as he tries to salvage the economy.

18 Nov

Given the Coronavirus crisis is estimated to have cost the UK £210 billion and counting, the Government is under enormous pressure to explain how it will pay its debt back. One of the ways Rishi Sunak is reportedly planning to do this is by cutting foreign aid, which he is expected to announce in a spending review next week.

Currently, the UK spends 0.7 per cent of gross national income on foreign aid, a target that is recommended by the United Nations and was written into law when David Cameron was in office. But the Chancellor apparently wants to bring this down to 0.5 per cent. The Prime Minister’s official spokesman said of the idea: “we are looking at how the aid budget is spent, ensuring it serves the UK’s priorities and represents value for money. It is legitimate to consider where savings can be made when the public finances are under huge strain.” 

Several prominent Conservatives have opposed the move. Tobias Ellwood, Tory chairman of the Commons defence committee, said: “The damage would be we are retreating from the global stage at the very time when we should be doing exactly the opposite.” Jeremy Hunt and Bob Neill are also against it, as is Dominic Raab, the Foreign Secretary, apparently, who previously dismissed reports it would be cut as “tittle tattle”. Cameron’s disapproval has been made known in several newspapers.

One concern is that a reduction would harm international relations. Andrew Mitchell, former international development secretary, said: “It would be an extraordinary decision at the very point at which Britain is about to take over the chairmanship of the G7, with a new administration in the White House which will strongly champion the international system”, and Anthony Mangnall, the Tory MP for Totnes, echoed these concerns.

Others point out the moral case for keeping foreign aid as it is, given that the pandemic is when the world’s poorest people need help the most. Even before the cut was suggested, the Government was due to spend less than its anticipated £15.8 billion this year, due to a contraction in the economy. When Conservatives have spent tremendous sums on the flawed contact tracing app, PPE, and other Covid projects, some might call foreign aid a drop in the ocean.

And yet, others will say the cut is necessary at a time of intense national need. Given the Conservatives won last year’s election with a manifesto based on “levelling up” the UK, by way of domestic investment and infrastructure, the Government no doubt believes voters want this to be reflected when the Chancellor plans the economic recovery.

If there is a cut to 0.5 per cent, it’s also worth remembering that the UK will still be one of the biggest global contributors to foreign aid. In 2019 and 2018, it was one of only five countries to hit the UN’s 0.7 per cent aid target (level with Denmark, but below Luxembourg, Norway and Sweden), and there’s an argument that other countries need to increase their spending. New Zealand, Canada, Japan and the USA have not reached 0.5 per cent, never mind 0.7 per cent. 

Furthermore, it is understood that Boris Johnson wants this to be a time-limited measure, with a return to 0.7 per cent. In the interim, the UK can make a sizeable difference is by helping to facilitate the global supply of vaccines.

Either way, this is just the beginning of Sunak having to make some incredibly unpopular decisions about how to salvage the economy. Having become one of the most popular politicians in a staggeringly short period of time, he is now going to deliver policies that illicit completely the opposite response to Eat Out to Help Out. There is no painless way out of this. The next few months are going to be testing for the Chancellor to say the least.

Ed Vaizey: Ending tax-free shopping for international visitors would be disastrous for the British economy

19 Oct

Lord Vaizey of Didcot is a Conservative Life peer who has sat under this title in the Lords since 10 September 2020. Prior to joining the Lords, he sat in the Commons as an MP, and was first elected in 2005.

I bow to no one in my admiration for Rishi Sunak.  Taking up the toughest of jobs at the toughest of times, he has played a blinder. Job Support Scheme, Bounce Back Loans, Eat Out to Help Out. Even though I’m not an MP any more, I know from talking to my former constituents how much this help has been needed and welcomed.

But with the Government having to make so many decisions so quickly, it’s unlikely everyone will be bang on the money. Even in normal times (remember those?) we occasionally saw unintended consequences.

I’m afraid to say that the Treasury decision to end tax-free shopping for international visitors at the end of December is one of those decisions. At the moment, visitors can reclaim the VAT on stuff they buy here. From January, this will be stopped.

I can see why the Treasury thought it was a clever wheeze. They think it will only affect a small group of very wealthy people. If it hits anywhere, it will hit Bond Street and Bicester village – not exactly marginal vote territory.

But there’s a problem. These wealthy visitors don’t just shop – they eat out, they go to museums and the theatre, stay in hotels. They also travel outside London, visiting places like York and the Lake District.

Also, the posh stuff they buy is often actually made here. Yes folks, those Burberry suits are made in Yorkshire. And those French Chanel jumpers are actually made in Scotland. Which is why we are now in the weird position of the SNP Finance Minister calling out a Tory Chancellor for not backing British business.

The Treasury assumptions, which I have seen, act as if the vast majority of visitors will still come, so the Treasury will make a net gain from them paying VAT. But why should they when we will be the only country in Europe not offering VAT-free shopping?

As a result of this decision, they are likely to go to Paris, Milan or any other European city instead of London. In fact, a recent poll of these visitors showed that if the UK ends tax-free shopping 93 per cent would not buy goods here and 60 per cent wouldn’t even bother visiting post the pandemic. Maybe that’s why the French are giving them a nudge by lowering their VAT free threshold the day after the Treasury took the decision.

It doesn’t take many visitors to change their plans. 13 per cent of all-tax free shoppers account for 44 per cent of all tax-free sales. All it takes is for a small proportion of high-spending international tourists to go elsewhere before the impact is felt. The end result is an increase in job losses.

Retailers, hoteliers and airport chiefs from all over the country have warned that scrapping tax-free shopping for international tourists has put 70,000 jobs in jeopardy. The decision is a big blow to the regions. Tax-free shopping supports 1,800 jobs in Edinburgh and 1,200 jobs in Manchester alone, and the money spent in London stores helps high streets throughout the UK.

Most flights from the UK’s regional airports are to and from Europe. Stores in Birmingham and Manchester had hoped to double sales to EU visitors on the understanding that tax-free shopping would be extended to EU countries once we’d left the bloc. Now the likes of Selfridges and Marks & Spencer are warning the impact it will have on jobs across the country instead. This is not what those workers voted for.

If allowed to go ahead, the decision to end tax-free shopping for international visitors will put Global Britain at a competitive disadvantage and result in thousands of jobs losses. I hope our pragmatic Chancellor will think again.

“This Government stood between the people and the danger and we always will.” Sunak’s Conference speech – full text.

5 Oct

Rishi Sunak MP, Chancellor of the Exchequer, speaking today at Conservative Party Virtual Conference

“Being appointed Chancellor in February this year was an immense honour.

Even though my first conference speech as Chancellor isn’t quite how I expected it to be, it remains a privilege to talk to you today.

And I am here today because of so many different people. My family, whose love sustains me. My colleagues in Government and in Parliament, whose backing has never wavered. My association in Richmond, North Yorkshire, who placed their trust in me, and gave me their loyalty, support and this opportunity to serve. And my party, whose members, councillors and activists worked tirelessly to deliver a Conservative government in December last year.

Politics is a team sport, and there is always a multitude of hardworking people behind any effort. So, I want to thank my ministerial team; Steve, Jessie, John, Kemi, Theo, Claire and James. I also want to thank my predecessors: George, Phillip and Sajid.

It is only because of ten years of sound Conservative management of our economy that this government has been able to act with the pace and scale we have in responding to Coronavirus. And I want to thank the Prime Minister, for entrusting me with this job and whose friendship has been invaluable.

I’ve seen up close the burden the Prime Minister carries. We all know he has an ability to connect with people in a way few politicians manage. It is a special and rare quality. But what the commentators don’t see, the thing I see, is the concern and care he feels, every day, for the wellbeing of the people of our country.

Yes, it’s been difficult, challenges are part of the job, but on the big calls, in the big moments, Boris Johnson has got it right and we need that leadership. Because we are only part way through this crisis.

What began in March as a health emergency has grown and now reaches deep into our economy and society. Not only does it endanger lives, but jobs and education. It separates friends and family.

This government has never been blind to the difficult trade-offs and decisions coronavirus has forced upon on us. If we had, we never would have deployed one of the most comprehensive and generous packages of support in the world. But more than the measures themselves, it is the values behind them that I want to impress upon you.

Conservatives believe in the importance of community and belonging. We believe in personal responsibility and pragmatism. We believe in the nobility of work and free enterprise. And we believe in the unbreakable bond of union that unites the four nations of our United Kingdom.

Our values are old and true and have withstood tests of strife, of terror, and even war. They are timeless because they are a wisdom earned over generations. And they are universal, because they are rooted in the fundamental belief that individual freedom enables both the greatest achievement and the gentlest kindness.

People looked at us last December and saw this Conservative party. They saw a party whose values and priorities were aligned with those of the British people. They saw a party prepared to act at a scale commensurate with the challenges our country faces and they were not wrong.

The SELF-EMPLOYED SUPPORT SCHEME

EAT OUT TO HELP OUT

Our PLAN FOR JOBS

The JOB SUPPORT SCHEME

A VAT cut for the tourism and hospitality sectors

The PAY AS YOU GROW SCHEME

A STAMP DUTY holiday

A £2 billion GREEN HOMES GRANT programme

The £2 billion KICKSTART SCHEME

Nearly 1million BUSINESS GRANTS

A 12-month BUSINESS RATES HOLIDAY

£35bn of BOUNCE BACK LOANS to over 1million small businesses

Over 60,000 CORONAVIRUS BUSINESS INTERRUPTION LOANS

The FUTURE FUND TAX DEFERRALS

Support for our brilliant CHARITIES

Over £8 billion of extra funding to SUPPORT OUR MOST VULNERABLE

A SIX-MONTH MORTGAGE HOLIDAY

And yes, THE FURLOUGH SCHEME, a first of it’s kind intervention in UK political history, delivered at scale, devised in rapid time, that protected millions of British families at the most acute stage of this crisis.

I could go on… all these measures and more… delivered by a Conservative government as part of our plan to support jobs and livelihoods. And whilst we would not have wished for this burden, it has been for many, for the first time in their lives, a moment in which government ceased to be distant and abstract, but became real, and felt, and something of which people could be proud. Action met words.

This Conservative government stood between the people and the danger and we always will.

But we haven’t done it alone. You, the people, have been with us. Wherever I look, I see acts of decency and bravery.

Barbara and Richard Wilson in Cumbria who furloughed the staff from their butchers’ shop but topped up their wages, so they didn’t have any extra worries about bills.

Kevin Butler, who used the self-employed support scheme to help meet the cost of living whilst his partner worked so he could home school their daughter.

John, Norma and Richard King who run the Bull’s Head Inn in Shropshire, who did the right thing when we asked, made their pub Covid compliant, and re-opened using Eat Out to Help Out in August.

Thank you to all those business owners, large and small, who are making the right decisions for workers and customers.

We are now seeing our economy go through changes as a result of coronavirus that can’t be ignored.

I have always said I couldn’t protect every job or every business. No chancellor could. And even though I have said it, the pain of knowing it, only grows with each passing day.

So, I am committing myself to a single priority – to create, support and extend opportunity to as many people as I can. Because even if this moment is more difficult than any you have ever faced, even if it feels like there is no hope, I am telling you that there is, and that the overwhelming might of the British state will be placed at your service.

We will not let talent wither, or waste, we will help all who want it, find new opportunity and develop new skills.

Through more apprenticeships, more training and a lifetime skills guarantee.

Our Kickstart Scheme will help hundreds of thousands of young people into good quality work. And we will help small businesses adapt.

That’s why we have delivered Government backed loans, tax deferrals and tax cuts.

In a free market economy it is the entrepreneur, who is critical. And we will make it easier for those with the ambition and appetite to take risks and be bold, to do what they do best and create jobs and growth. And we will protect the public finances. Over the medium term getting our borrowing and debt back under control.

We have a sacred responsibility to future generations to leave the public finances strong, and through careful management of our economy, this Conservative government will always balance the books.

If instead we argue there is no limit on what we can spend, that we can simply borrow our way out of any hole, what is the point in us?

I have never pretended there is some easy cost-free answer.

Hard choices are everywhere.

I won’t stop trying to find ways to support people and businesses. I will always be pragmatic.

The Winter Economy Plan announced only two weeks ago is but the latest stage of our planned economic response.

I will keep listening, keep striving to be creative in response to the challenges our economy faces, and where I can, I will act. I will not give up, no matter how difficult it is.

The British people and British businesses won’t give up. I know this because of what I said at the beginning.

We share the same values. The Conservative party and the country. And these values are not devoid of meaning to people.

They are about protecting that which is meaningful to them. Their family, their home, their job, their ability to choose for themselves what is best for them and those they love.

To create second chances, to see potential met, and to extend the awesome power of opportunity to all who seek it. To answer questions of character with action not rhetoric. To put the people first, their hopes and their aspirations.

And above all, to be worthy of the great trust they have placed in us.”

Ryan Bourne: It’s time to admit that Eat Out to Help Out was a mistake – because it boosted the resurgence of the virus

30 Sep

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

It will be tougher for many in Westminster to swallow than the subsidised food, but it increasingly looks as if the August Eat Out to Help Out scheme (EOTHO) was a costly economic and public health mistake.

Evidence now suggests that restaurants are important vectors in our current case uptick. More than that, the scheme has entrenched dining behaviours that threaten more transmission today. It is bizarre then that Rishi Sunak has avoided more critical scrutiny of the policy.

The Government’s most recent weekly coronavirus surveillance report says “eating out was the most commonly reported activity in the two to seven days prior to symptom onset” for infected individuals in the contact tracing system.

Figure 23: Events and activities reported by people testing positive, prior to symptom onset (enhanced contact tracing), England, NHS Test and Trace (as at 04:30am on 24 September 2020)

People do a lot of things during a week, so this doesn’t necessarily show where infection occurred. But that “eating out” appears more than “shopping,” “living alone or with family,” “holiday,” “visiting friends or family,” or “travel or commuting” suggests a high relative risk of restaurant dining.

This chimes with evidence from American states and the U.S. Center for Disease Control too. The latter’s recent study found adults testing positive for Covid-19 were twice as likely as those testing negative to have reported dining in a restaurant before becoming ill. Subsidising that activity in a pandemic seems a huge error.

That indicative data won’t convince everyone. When I Tweeted it last week, people demanded firmer evidence that (a) areas with more EOTHO meals had more cases, or (b) cases were actually seeded in August, when EOTHO was running.

But this level of precision may hide more than it reveals. In areas where prevalence of the disease was low in August, the risk of any activities would be low, meaning correlations between cases and meals in the scheme may not be particularly informative (as it happens, there is a correlation between meal numbers and Covid-19 cases by region). What matters is whether restaurants led to more transmission between infected and susceptible people in areas where prevalence was already there.

Accurately thinking through that counterfactual is tough. You have to (1) disentangle the scheme’s impact on dining numbers from any pent up demand returning after restaurants reopened in July; (2) account for the scheme’s longer-term impact of normalising eating out again. Examining August data alone therefore risks understating the scheme’s significance.

Basic network economics suggests activities like indoor dining might “link” more people in riskier circumstances who otherwise wouldn’t cross paths, particularly if packed into, passing through, or queuing on subsidised meal nights. Most restaurants took appropriate precautions to mitigate these risks. But sustained time indoors likely worsens the spread of the virus compared with other activities undertaken absent the subsidies. Case studies from Thailand, China, and Korea show restaurant’s risks. The scheme’s design also encouraged “superspreaders” – infected people visiting many outlets over time to take advantage of discounts.

Figure 22 of the Surveillance report shows that the overwhelming majority of “named contacts” given by infected people are those in their households or household visitors. Many faultily read this, and other information about where most transmission occurs, as showing that restaurants are insignificant vectors compared to domestic settings.

Figure 22: Contacts by exposure/activity setting in week 38, England
(Data source: NHS Test and Trace)

But this is misleading. People don’t know strangers in restaurants to give them as named contacts. And once the disease gets into a household, those most likely to be in contact with it are obviously others living or visiting that household. The problem is that restaurants seem more likely to be a place where a household member might catch the disease and then bring it home than other places they might otherwise spend lunchtimes or evenings. As the chart below shows, as EOTHO went on (Weeks 32 through 35), the share of “Covid-19 incidents” in food outlets or restaurants increased significantly.

Figure 20: Number of COVID-19 incidents by institution from week 27, England

What’s more, the Government didn’t just want to give restaurants a temporary boost in August. They wanted to encourage more economic normality. Data from OpenTable and others suggests they were successful, on this basis.

Diner numbers averaged 28 percent below last year for the week before EOTHO began. By the end of EOTHO, people were eating out excessively relative to previous years – averaging 44 percent per day above last year’s “normal” levels in EOTHO’s final week. Now numbers are back to around last year’s – i.e. dining is back at the good old days pre-Covid days of last year, despite the pandemic. This is in stark contrast to the U.S., where dining levels are still down over 40 percent.

It’s difficult not to conclude that, because of the message the scheme sent out or the habits it entrenched, EOTHO proved far more than a gimmick to give restaurants a temporary fillip. Instead it made people think restaurants were a-ok for people to party like it was 2019. That becomes more problematic now schools are open and more people are back to work too, bringing clear evidence networks of transmission have densified.

Unfortunately, people respond to this as if pointing it out means critics wanted restaurants permanently shuttered until a vaccine was available. But there’s a wide range of options between enforced closure and actively subsidising restaurants, including, well, not subsidising them, or subsidising outdoor dining and takeaways, tax breaks for investments for patios or delivery, and more.

What’s baffling economically is the thought process behind actively subsidising indoor gatherings. Social interactions right now impose negative externalities – risks on others beyond the diners themselves, for which the affected cannot receive compensation. Basic economics, if anything, suggests imposing taxes rather than handouts on these activities, to account for this social cost. Social distancing protocols and regulations seek to proxy for these taxes, of course. But it made no sense to undo this by overcoming people’s voluntarily choices and risk preferences in this world through taxpayer incentives.

Covid-19 debates, sadly, are more defined by culture wars and crude commercialism than economics these days. Many who usually oppose state subsidies backed this scheme loudly, not least because its use generated “buzz” about getting people out and about.

But that’s the problem. During the summer, many deluded themselves that the virus’s threat was deterministically and consistently falling, and we were on a one-way street to economic normalisation. Rather than adapting to live with the virus at the lowest overall cost, people thought that “restoration” should be the aim of government policy.

That was a grave error, of which EOTHO was Exhibit A. And with restaurants now facing restricted hours and a potential lockdown, even those short-term commercial benefits look a pyrrhic victory for the businesses who lauded the Chancellor at the time.

“Relight the economy, return to work and reopen schools”. The message from Sunak that the nation needed to hear.

13 Aug

Yesterday, incredibly troubling figures revealed the extent to which Coronavirus has damaged the UK economy. It has gone into a recession, having suffered its biggest slump on record between April and June. In that quarter, the economy shrank by 20.4 per cent compared with the first three months of the year.

The news, though drastic, should not have come as a huge surprise. Throughout the Coronavirus crisis, there were stark warnings about the economic horrors being stored up – the job losses, the taxes to be paid and the impact on the young, many of whom had already borne the brunt of 2008’s financial crisis.

The trouble was that anyone who relayed concerns about the effects of the measures taken on the economy was liable to be accused of selfishness – “oh, you care about money not lives?”, was very much the verdict delivered on those who spoke out – with lockdown posed as the only moral choice. Overall there seemed to be a mindset of: “We’ll worry about the economy later”. Well, “later” is here.

How do the Conservatives react to the economic news? I rather think Sunak hit the right note when he announced his “three Rs” plan to The Sun. It stands for “relight economy, return to work and re-open schools”. After all, without a vaccine, and the recession here, what else is there to do?

My personal hunch – partly inspired by the large number of pageviews ConserativeHome gets for articles about Sweden – is that this is what the silent majority has been calling for. It wants the Government to be much bolder in speeding up the economic recovery.

Sunak’s “Eat Out to Help Out” scheme has been one welcome initiative. It was used more than 10.5 million times in its first week;. It is a fantastic (albeit expensive) way of helping get things back to some type of normality.

But it’s the public information campaigns that need a rethink, hence why this new one is needed (even if it might not be as catchy). The “stay at home” message was the right one to give in the dark days of the pandemic in this country. With infections, hospitalisations and deaths now all falling, almost the very opposite message, but one equally urgent, should be pressed home.

Some of the messaging needs to be especially targeted at younger generations, many of whom are still scared of this virus, despite themselves being at low risk. This became obvious to me when I went to my gym on Monday night. Even allowing for the steps taken to ensure social distancing, it was almost empty, with about five – at most – exercising.

Before the virus struck, it would have been packed with fit twenty and thirtysomethings, especially on that night. Based on that recent showing, the days of gyms are sadly numbered.

Regulations could be further eased. Some of the measures extended to bars – al fresco dining, for instance – have been great for business. But it has often been remarked that British nightlife is restricted, with closing times being much too early. On a recent trip to Soho I noticed everything closing up while the streets were still full of young people wanting to continue the night. It seemed a waste of economic opportunity.

Lastly, there’s the art sector. Sadler’s Well is one of the greatest venues for dance in the world. This week it sadly announced that around 26 per cent of its staff are facing redundancy. As my mother, a huge fan of Sadler’s Wells, pointed out – what will there be to return to if the pandemic has this effect on great theatres such as this one? Unfortunately the newspapers seem more intent on fearmongering about second waves rather than demanding to know why these venues in this country cannot now reopen as long as sensible precautions are taken.

In saying all this, I do not believe the Government acted incorrectly in March in imposing lockdown. It acted on the information available and the advice given to it. Lockdown seemed the right choice back then. But times and risks change. Granted the Government has eased lockdown, but it should now be even bolder in the steps it takes to get life back to normal, which is why it’s so refreshing to hear Sunak’s message.

However, the first test being the opening of schools. If we cannot resume things for children who are the least at any risk from this virus, what hope is there for the rest of us?

Now that people have the economic reality staring them in the face, they know there are tough choices to be made. And that doesn’t mean deciding whether to prioritise bars or schools in the reopening of the country; it means trying to get much more of society back out again, even if things cannot be risk free. After all, we cannot stay home forever.