Neil O’Brien: No, more economic prosperity doesn’t depend on more social liberalism

13 Jul

Neil O’Brien is MP for Harborough.

Danny Finkelstein took issue with Boris Johnson’s idea of “levelling up” in the Times the other day. He reviewed the work of Richard Florida, a thinker dubbed the “patron saint of avocado toast” for highlighting the role of bohemian urbanites in driving economic regeneration.

Danny concludes from his work that, “Social liberalism and economic prosperity go together.” He argues that: “in order to match the success and power of metropolitan areas, non-metropolitan places need to become more… metropolitan.  The problem with the metropolitan “elite” isn’t that there is too much of it. It’s that there aren’t enough members of it, drawn from a wide enough background and living in enough places.”

I hesitate to disagree with one of the smartest columnists on the planet. But economic growth and social liberalism don’t always go together.

What about the Victorians, combining breakneck growth with a religious revival and tightened public morals? What about Japan during their postwar decades of blistering growth and conservative “salaryman” culture? Over the last 70 years, Britain has become more socially liberal as our growth rate has slowed.

Even in Britain today, it’s highly questionable. London is the richest and fastest growing part of the UK.  But where is opposition to homosexuality and pre-marital sex strongest? London. Where is support for censoring offensive speech highest? London.  The capital mixes liberal metropolitan graduates with religious immigrants. Its success is shaped by both.

Danny’s other argument has more important implications. Is it really the case other places must emulate London to succeed? Like other capital cities across Europe, London has grown faster than the rest of the country since the 1980s. The shift to an economy based on “office jobs” over has favoured the centres of larger cities.

But we shouldn’t get too carried away by the idea that hipster-powered megacities are sweeping all before them. For starters, there are successes elsewhere. Cheshire has high tech in a rural setting, with productivity and wages above the national average.  Milton Keynes likewise, because it’s easy to build there. Productivity in Preston has grown faster than average because it’s a transport hub with advanced manufacturing.

On the surface, large cities outside London have done well.  Since 1997, our 16 largest cities grew their GDP faster than their surrounding areas: Leeds grew faster than West Yorkshire, Manchester faster than Greater Manchester, and so on.

But on average, those cities saw also slower growth in income per head than their surrounding areas. In other words, people became more likely to work in city centres, but that growth was fuelled by people commuting in from smaller places around them. Their growth has been powered more by smalltown commuters than flat-cap wearing uber-boheminans.

It’s right that there are cities outside London that have things in common with it, and might benefit from similar investments. Lawyers in London will soon get Crossrail. So why have lawyers in Leeds waited 20 years for a tram?

But too often Richard Florida’s work leads politicians to focus on shiny cultural facilities. A cool art gallery in West Brom.  A national museum of pop music in Sheffield. It’s not just that these projects flop and close. It’s that they distract from two bigger issues.

First, most people aren’t graduates – so we need a plan to raise their productivity and wages too.

Second, places outside urban centres are perfectly capable of attracting high-skill, high income people – with the right policies.

Britain’s economy is unusually unbalanced compared to other countries.  Pre-tax incomes in Greater London are nearly 60 per cent higher than the national average, but more than 20 per cent below average in Yorkshire, the North East, Wales and Northern Ireland.  These imbalances mean our economy is overheating in some places and freezing cold in others, slowing growth overall. There are no major economies that are richer per head than Britain which have a more unbalanced economy.

But these imbalances don’t represent pure free market outcomes. It’s true that low-skill, low wages places can get stuck in a vicious circle. True that some places on the periphery have very deep problems. Nonetheless, the British state doesn’t do much to stop that – in fact it does a lot to unbalance growth.

Consider how we spend money. Capital spending on transport infrastructure in London is nearly three times the national average. Research funding per head is nearly twice the national average. Nearly half the core R&D budget is spent in Oxford, Cambridge and London. Spending on housing and culture per head in London is five times the national average. We’re “levelling up” the richest places.

We’ve rehearsed these problems for years, but not fixed them. Instead of chasing flat white drinkers, we need to find a cool £4 billion a year to level up R&D spending in other places to the levels London enjoys. Fancy coffee can come later.

Consider our tax system. Overall, the tax rate on business in the UK is about average.  But we combine the lowest headline rate in the G20 with the lowest capital allowances. The combined effect of this is a huge bias against capital intensive sectors, particularly manufacturing.

That in turn has a regional impact, hurting places more dependent on making things: manufacturing accounted for only five per cent of London’s productivity growth since 1997, but nearly 50 per cent in the north west. A hostile tax system is one reason Britain has deindustrialised more than any other G20 country since 1990, and why manufacturing’s share of the economy is half that in Germany or Japan.

Manufacturing should be a key part of levelling up outside cities: it needs space, not city centre locations. In English regions outside London, wages in manufacturing are about nine per cent higher than in services, and manufacturing productivity grows faster than the economy as a whole.  But Britain’s excessive focus on professional services makes it harder to grow high-wage employment in non city-centre locations.

Consider where we put our key institutions. In Germany the political capital was Bonn, and is now Berlin. The financial capital is Frankfurt. The Supreme Court is in Karlsruhe. The richest place is Wolfsburg, home of Volkswagen. There are major corporate HQs spread across the country. TV production is dispersed because central government is banned from running it.

In Britain, all these things happen in just one city. We’ve talked about this for years, but made little progress.  In recent years, we managed to move one chunk of Channel 4 to Leeds, and a bit of the BBC to Manchester. But that’s about it. Whitehall only wants to move low-end jobs.

The debate on levelling up is frustrating, because we know some things work, but we don’t do them. “Regional Selective Assistance” boosted investment in poor places with tax breaks and subsidies.  Thanks to evidence from natural experiments, we know it boosted growth. Yet it was allowed to wither.

I don’t want us to be just another government promising the world, then not delivering. Politically, it’s vital we deliver. Lots of people who haven’t voted Conservative before put their trust in us last year. It’s telling that the centre point of the seats we won is just outside Sheffield.

We won on a manifesto combining centrist economics, (50,000 more nurses) mild social conservatism, (ending auto early release) and national self-confidence (Getting Brexit Done).  Levelling up is central to all this. We promised voters steak and chips.  We could serve up avocado toast instead, but we shouldn’t be surprised if the voters don’t thank us.

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

9 Jul

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

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

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

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

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

How much will it cost?

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

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

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

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

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

What do economic measures look like elsewhere?

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

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

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

Ryan Bourne: Sunak should not and cannot try today to restore pre-virus Britain. It’s gone – and we must now adapt.

7 Jul

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

Rishi Sunak earned plaudits for his dealing with the immediate economic fallout from Covid-19. Yet today’s summer statement presents a thornier challenge than playing Emergency Santa, dishing out funds to keep businesses alive. For today requires taking steps to further facilitate the “normalisation” of economic life.

Boris Johnson waded into economics last week, arguing (rather conveniently) that the Coronavirus highlighted the need for his pre-pandemic “leveling-up” agenda. Exactly how Covid-19 proves the need for, say, HS2 is unclear. But underpinning the Prime Minister’s argument was an assumption that, post-lockdowns, we can get back to focusing on pre-virus priorities – in the Government’s case, state-led economic rebalancing.

Similar “back to our future” thinking underpins business representations ahead of this statement. From calls for taxpayer-financed high street spending vouchers, to VAT cuts for hard-hit sectors, the prevailing discourse appears to be “now the virus is less of a threat, let’s incentivise returning to normal activity,” with “normal” meaning “what happened in early March 2020.”

Perhaps it’s because I’m in the U.S. and so have been to this reopening BBQ before, but I bear bad news: while the UK can expect a relatively sharp bounce-back in things such as retail activity, “normalisation” will not and should not mean a return to the economy of March 2020.

Before a vaccine, consumers will go where they feel safe, businesses from restaurants to cinemas will be supply constrained by social distancing, and certain behaviors (from the demand shift from restaurants to supermarkets, to the supply shift to working from home) will partially remain. That will bring major reallocation costs: businesses will close and lay off workers, while other sectors grow.

It was understandable that the Chancellor, not knowing which businesses would be viable after lockdown, set up a furlough scheme to avoid companies and jobs perishing. This helped protect important “job-matching capital” and “firm-specific capital” – i.e. people doing jobs they are good at and firms as important bundles of productive relationships. But one risk was always that businesses would interpret support not as mere lockdown relief, but a commitment to ensure their survival through the whole pandemic.

Some aspects of the campaign for arts subsidies, rumblings by MPs for ongoing aerospace supply-chain support, and the Resolution Foundation’s gimmicky “high street vouchers” idea suggest that some now do believe the Government should support sectors, even after full re-openings, precisely because consumers would otherwise continue to reject them, preferring not to fly as much, attend as many in-person events, or go to fewer restaurants or stores.

This is a very different policy proposition. Attempting to keep the March 2020 economy preserved as some eternal truth would mean workers and funds not being where businesses and consumers actually value them given today’s circumstances, bringing large economic costs beyond the fiscal.

For example, if more professionals now work from home semi-permanently, then tastes will shift from buying lunches within cities to local delis, online, or at supermarkets. Hence why Pret is laying off workers.

But as Julian Jessop has said, the purpose of economic policy should not be to protect Pret jobs. What normalisation should instead mean is the return to a functioning market economy where the rise and fall of businesses depends on their ability to meet our wants and needs in today’s circumstances. Sunak’s aim, in other words, should now be “market-led adaptation to the virus.”

We want businesses to figure out how to serve us in safe, cost-effective ways. The alternative – having the government tilt activity towards our early 2020 preferences – would not only encourage activity worse from a public health risk perspective, but also inevitably subsidise much that would take place anyway.

So Sunak should today reject “painting by numbers Keynesianism” that sees industry spending collapses as holes taxpayers should help fill in. He should snub VAT cuts or vouchers. If, with the virus still around, people would rather spend money on food to cook at home, Netflix subscriptions, and a hot tub for the back garden over restaurants, cinemas, and trips to the Lake District, workers and capital should flow accordingly. Economic activity serves consumers, not vice versa.

That’s not to say government cannot make this process less painful. But we need to be clear about the challenge we face: a supply-side shock we hid with relief. New realities mean workers in the wrong jobs, businesses serving customers in the wrong ways, and capital in the wrong places. Government policy should focus on removing barriers that gum up businesses, landlords, workers and entrepreneurs adjusting.

Sunak appears to get this on the worker side. He is tapering the furlough scheme gradually to give businesses breathing room, but inevitably those with newly uneconomic business models will make some permanent layoffs.

It’s crucial to try to get workers reallocated into new roles quickly to avoid the scarring effects of unemployment. Direct financial incentives for new hiring, even beyond subsidies for traineeships trailed in the papers, would encourage this. The reported plans for expansions of jobcentre capabilities are important too to try to speed up the matching process of unemployed workers to new roles, as would re-training efforts be. Some U.S. states are rolling back licensing restrictions on people shifting to different jobs too. With child-care difficult to come by, now would be a good time to review the UK’s oppressive childcare regulations, for example.

Yet the Conservatives should do more to facilitate the adaptation of businesses as well. Repurposing premises to earn consumers’ confidence often requires upfront investments that the Chancellor should write-off entirely for the basis of tax, through full expensing of investment. The planning law reforms should have an eye to business activities too – if more out-of-town activity is demanded, let it bloom.

The case for allowing existing businesses and property owners more flexibility – on how they operate, opening hours, what premises can be used for etc– is overwhelming as well. With apologies to my Editor, when we are seriously discussing throwing billions at retailers such as John Lewis or Topshop through vouchers, it seems daft to consider it beyond the pale that such retailers open beyond 6pm on a Sunday. Give freedom to businesses to adjust to what customers want: what barriers exist to entrepreneurs developing drive-through cinemas, for example? These are the sorts of supply-side questions that should animate government.

As always with fiscal events, any financial support to industries will be heralded as ‘good news’  and absence of it denounced as throwing sectors to the wolves. But it’s time for Sunak to be bold and honest: his task is not to “normalise” activity by resuscitating the composition of the March 2020 economy, but to “normalise” the market-led economy that makes us rich by meeting our demands.

Hugo de Burgh: We owe it to future generations of Brits to work with China

6 Jul

Professor Hugo de Burgh is Director of the China Media Centre. He is the author of China’s Media in the Emerging World Order, has held office in three Conservative associations, and stood in unwinnable seats several times.

China is our third largest market and the one with the greatest potential. China is the country with which we must work if we are to have any impact on the resolution of global problems from environment to nuclear proliferation. China can accelerate the development of African and Central Asian economies, mitigating the risks to Europe that come from population explosion there without adequate economic growth. China is the largest economy in the world and already influential in a majority of countries.

For all these reasons, it is patriotic and reasonable for British leaders to find a way to work with China, which they will only do if they understand China as it is. Among other eminent Brits who started with a morbid suspicion of China, I have accompanied Boris Johnson and Jeremy Paxman on extended visits, and watched the scales fall from their eyes as they understood the enormity of the challenges facing Chinese government and the absurdity of imagining that its leaders wasted a moment thinking about conquering the world.

The reverse is the case. They are determined not to be conquered by the world. In the past, China built a Great Wall to keep out foreigners; today China is initiating the Belt and Road initiative to secure their back as they restore their civilisation, threatened from the east.

Fantasising about regime change in China, some US politicians make outlandish accusations. Had they talked to a few Chinese punters, followed social media or watched chat shows on TV, they could not possibly claim that China is a totalitarian country. Had they read Pew’s surveys of public opinion they would realise that the Chinese are, overall, more satisfied with their governance than European citizens, to say nothing of the USA. And are you surprised? While Europe and the USA are beset by economic and political troubles, Chinese people see ahead of them only more wealth, health and social mobility.

We need to recognise that demonisation of China is a weapon with which some US politicians deflect attention from their own failings and reflect their commercial jealousy. Both our National Cyber Security Centre and GCHQ have maintained until now that Huawei’s involvement in the UK poses no security risk that cannot be managed. Otherwise why would the US trade Department last week reauthorize US companies to work with Huawei, even as Donald Trump bullies other countries not to?

Robert Zoellick, a US former Deputy Secretary of State, is among the calmer heads to remind us just how positive a collaborator China is: that it recognises climate change issues, is in the forefront of environment innovation and has worked hard on endangered species; cooperates with the IMF over stimulation; provides more UN peacekeepers than the other members of the Security Council combined.

He points out that between 2000 and 2018 China supported 182 of the 190 Security Council resolutions imposing sanctions on nations which violated international rules or norms; China collaborated on the Iran and North Korea proliferation treaties.

Zoellick is not given to dire warnings about how dysfunctional it will be if the West really manages to ‘cut China off’, but they are implied in his general remarks about China, restated at a recent Henry Jackson webinar. China, he reminds us, is the biggest contributor to global growth; the fastest growing market for United States products; no longer manipulates the exchange rate; and, in response to our pleas, has improved its legal system. All in all, Zoellick tells us that cooperation with China “does produce results” but we should not take China’s cooperation for granted, “it could be very different”.

At home in Blighty, those calling for “a reckoning with China”, demanding a COBRA-like committee to mull over retaliation, wanting to “hold China to account” should ask themselves whether our businesses, for many of whom China is their most important market, want matters to become “very different”.

As to Hong Kong, the whole world must be astounded at the descendants of nineteenth century imperialists sending out paper gunboats commanding that China order its affairs according to our desires. A long time ago as a student, I demonstrated against colonial rule and police corruption in Hong Kong, and can still feel the truncheon on my back. In the face of much more vicious violence than anything we democracy activists attempted, Beijing has been restrained. In Northern Ireland, when security deteriorated, the UK imposed direct rule and fiercely rejected US interference on the IRA side. Over Hong Kong, we should try to see how interfering former imperialists look to most Asians, let alone to Chinese.

There are aspects of Chinese policies that we do not like, just as there are aspects of US policies that we abhor. The China Research Group is right to be concerned about cyber security and human rights. The way forward is to deal with China as a partner in the solution of common issues, such as terrorism in Xinjiang and Afghanistan. We have always worked with regimes with different standards when it suits our national interest. And respecting and being respected by China is in our national interest.

In the words of Kevin Rudd, the former Australian Prime Minister: Over 30 years China has pulled off the ‘the English industrial revolution and the global information revolution combusting simultaneously and compressed into not 300 years but 30’. There is a lot to learn and if we are to develop and prosper in the world ahead, we must be part of this. We should also celebrate that China’s rise is bringing better nourishment, greater life expectancy, education and security to hundreds of millions around the world.

Fulminating at China’s internal affairs and rejecting Chinese investment in order to please its commercial rivals will have no effect beyond signalling our impotence and arrogance; they are of no benefit to Britain and have no place in a long-term plan for Britain to prosper in the Asian century. Our government must develop a strategic approach to China. We owe it to future generations of Brits to work with China.

John Slaughter: How housing for older people can support the recovery effort

6 Jul

John Slaughter is the Director of External Affairs at the Home Builders Federation and Chair of the HBF’s Retirement Housebuilders Group

It is widely acknowledged that housebuilding will be vital to kickstarting growth and helping the country recover from the impact of coronavirus. But as we all adjust to the new normal, Minsters should resist taking a business-as-usual approach to building the homes we need. Instead, when he unveils his fiscal package next month, the Chancellor should put specialist retirement housing at the heart of the effort to get the housing market restarted.

The more you examine the evidence, the stronger the case gets for helping more older people access specialist retirement housing in the wake of Covid-19. During the pandemic, older residents in these developments have been much safer than in wider society. More specialist retirement properties would therefore help ensure that vulnerable people are better protected against future pandemics.

Crucially, increasing provision of specialist retirement housing would also stimulate transactions throughout the housing market. Analysis by a former Treasury economist suggests that encouraging more older people to downsize would free up housing for young families looking for a family-sized home with a garden. And, through the chain effect running through the housing market, every specialist retirement property sold results in another two to three further transactions in the chain.

More specialist retirement housing would also assist with attempts to fix the social care crisis once and for all. As people in these properties are less likely to be admitted to hospital and require further care than people in mainstream housing, this type of accommodation can generate fiscal savings to the NHS and social care services of approximately £3,500 per person per year.

Demand for these properties is estimated to be at 30,000 dwellings a year, up from around 8,000 currently. If we could build this number every year for the next 10 years, it would generate additional fiscal savings across the NHS and social services of £1.4bn per year within a decade. On top of this, it could support the levelling up agenda, creating local jobs and boosting high streets through the spending power of the ‘grey pound’.

The shortage of suitable housing for older people is contributing towards a bottleneck at the top of the housing market. Millions of older people want to downsize but struggle to find suitable accommodation. Other older people are put off from making the move due to a range of financial, sentimental, and practical concerns.

The Chancellor could begin to tackle this bottleneck by making buyers of retirement properties exempt from stamp duty in order to encourage downsizing. Such an approach would recognise the benefits that result further down the chain, helping older people, young families, and first-time buyers. Going further, the Government should set a national target of making 10 per cent of all new housing specifically for older people. With Government targets currently set at delivering 300,000 homes a year by the middle of the next decade, this would mean delivering the objective of 30,000 retirement properties per year.

There are other policy solutions available to exploit the full potential of specialist retirement housing and, with the number of older people in England growing significantly, the time to act is now. Across the UK, older households are becoming increasingly common. Looking over the available data, it is immediately evident that the fastest growing household demographic is amongst those over 80, closely followed by the 65-79 group. Meanwhile, the younger household demographic is growing slowest.

Despite this, we currently have a housing supply policy geared towards encouraging the building of first-time buyer homes. Given the issues that young people face around the high cost of housing, this focus is entirely understandable. But the expected dramatic increase in the number of older households, combined with the benefits outlined, above should give the Chancellor and all politicians pause for thought.

In a speech earlier his year, Chris Pincher, the Housing Minister, acknowledged that “we need more housing for older people”. Six weeks ago, the Government gave the housing market the green light to get moving again. When he delivers his fiscal package, the Chancellor should take the opportunity to shift gear in the direction that the Housing Minister has suggested.

 

 

Alan Mak: A new tech scrappage scheme will boost productivity

2 Jul

Alan Mak is MP for Havant and Founder of the APPG on the Fourth Industrial Revolution.

In the aftermath of the 2008 financial crash, governments around the world including those of Japan, Germany and the US responded to calls to help struggling car manufacturers by introducing popular scrappage schemes. After new car registrations declined by 30 per cent in the UK in the first quarter of 2009, the schemes saw demand bounce back, while dirty, polluting old cars were consigned to the scrapheap.

Now there is media speculation about a new car scrappage scheme – drivers will be given up to £6,000 to swap their petrol or diesel cars for electric ones – designed to provide a shot in the arm for the UK electric car manufacturing sector in the wake of Coronavirus.

Yet focus should also be given to how the Government could launch a similar scheme to help factories and businesses investing in the latest technology. We must use this period of recovery to press the fast-forward button on helping our businesses to improve their performance by adopting new technologies quickly, accelerating processes that would have otherwise taken many years into a much shorter period.

Just as the Government ushered a brand-new fleet of cars onto our roads a decade ago, a new scrappage scheme should be introduced for old and obsolete IT, tech and machinery. By particularly focusing on the adoption of robotics, it would achieve the dual ambitions of boosting productivity, and giving our businesses the cutting edge in international markets post-Brexit.

More British firms need to follow in the footsteps of innovators such as Ocado, who have created one of the most advanced automated warehouses in the world. Ocado’s newest fulfilment centre uses automation to pick 200 items per hour of labour time using its hive system – far outstripping traditional supermarket competitors.

As the Fourth Industrial Revolution accelerates, for British manufacturers and suppliers to keep up with international competitors, they must upgrade the machinery and software that is powering the workplace.

Yet automation and the adoption of new technology is an area where the UK needs to improve if we are to boost the nation’s productivity and economic growth after Coronavirus. Research published by the International Federation of Robotics shows that the UK has a robot density of 71 units per 10,000 employees – below the world average of 74 units – ranking us 22nd globally. Europe’s most automated country, Germany, has more than 300 units per 10,000 employees.

Whilst the critics will always fear job losses from automation, as we recover from Coronavirus, we can create high-wage employment through robotics. I’ve visited factories, such as Harwin’s manufacturing site near my own constituency of Havant, that have successful re-trained factory workers as high-skilled robot operators. We must rebut trade union leaders and others holding back change and hindering the adoption of new technology.

Just as a car scrappage scheme was brought in to safeguard the car manufacturing industry and protect demand in its vast supply chain, a tech scrappage scheme also has the potential to boost the fast-growing UK tech and robotics sector. Businesses that could benefit include Tharsus, the Blyth-based robotics company that supplies Ocado’s automated warehouse, which is now one of Europe’s fastest growing technology firms.

While individual businesses know the products that are right for them, a tech scrappage scheme can and should promote world class British engineering and high-end manufacturing by creating more demand.

Every UK business could benefit from upgrading technology and IT, but key to the success of the car scrappage scheme was incentivising people into the new car market by making them more affordable. To be eligible, the car had to be at least ten years old and many of those taking part in the scheme would never before have bought a new car. The same must be implemented for a tech scrappage scheme. The Government needs to target the least productive SMEs that have never before invested substantially into the latest robotics, software, automation or information technology.

Research published last year based on a survey of 2000 business owners showed that 46 per cent of small business owners believe technology is more important to their business than people. Just as we incentivised car owners into the market, a new scrappage scheme will give SMEs the confidence to make the tech upgrades their businesses need.

There would be environmental gains too. Just as polluting cars were taken off the road through scrappage, businesses would have the opportunity to replace diesel-fuelled machinery with cleaner and more energy efficient alternatives.

As our country bounces back from Coronavirus, and the focus shifts from health emergency to economic recovery, the Government must continue to focus on not only supporting businesses in the short term but arming our businesses to be ready for the long term impact of the Fourth Industrial Revolution.

Our economic recovery must be both green and digital – a scrappage scheme for IT, tech and machinery achieves both goals.

This is the third in a three-part series on how to boost our economy after Coronavirus.

Peter Lampl: To build social justice and get the economy working, schools must open fully in September

1 Jul

Sir Peter Lampl is founder and Chairman of the Sutton Trust and Chairman of the Education Endowment Foundation.

Pubs, pubs, pubs. If you were to believe most of the ministerial and media rhetoric during these last few weeks, you would conclude that getting them open was the biggest priority to revive this country post-Coronavirus.

While no doubt there are many out there thirsty for a pint, this is a huge distraction. The fact is that the single best way to both kickstart the economy, and to fix the damage that has been done to our social fabric, is to guarantee that schools open in full this September.

There can be no ifs and buts. The damage that was done by the (quite understandable) decision to close down our education system is so wide-ranging it is almost inconceivable. The cost to both GDP and the life prospects of our children will take an age to recover.

And so we must be absolutely clear that, as ministerial focus pivots from the immediate emergency, the threat to the NHS and saving many thousands of lives, on to the economic crisis opening up before us, the education system must share equal top billing.

The damage done to educational outcomes and to social mobility is frightening. The Education Endowment Foundation (EEF) – which I chair – has estimated that some ten years of progress closing the attainment gap between our most deprived young people and their wealthier classmates has been reversed by closing schools for three months.

The efforts of most heads and teachers has been heroic, but the provision of online teaching has been patchy, and the ability of school staff to reach those children most in need of their help has been stretched at best. A University College London study found that 20 per cent of pupils (two million) still do less than one hour of schoolwork a day at home, or none at all, while many private school students are doing six hours.

Research from the Sutton Trust, which I also chair, showed that of the work that is received back from pupils, 50 per cent of teachers in independent schools report they’re receiving more than three quarters of it.   This compares with only eight per cent in the least advantaged state schools.

And during this crisis, there have been too many people playing politics. The Government has said one thing, heads another, unions another, councils another. Parents have been left in the middle baffled – while their kids lose out to a frankly terrifying degree. Messages have been mixed and this has undermined confidence in the system.

No more.

The Department for Education, the Treasury and Downing Street must speak with one voice on this. The economic revival they so desperately seek goes hand in hand with nurseries, primaries, secondaries, colleges and universities reopening to the greatest degree possible.

We can’t get parents back to work without their kids being looked after in primary or nursery schools. And we can’t hope to achieve growth unless schools and colleges and universities are producing people ready to work. In the longer term, the cost of the damage to the country’s wider prospects of the education system misfiring will be in the billions.

The building blocks are starting to be put in place. The announcement last week of £1 billion to spend on tutoring, and on catch up support throughout the summer and into next year, is really welcome. Both the EEF and the Sutton Trust are excited to be working with the Government to make sure this money has the greatest possible impact.

And the announcement of a change in social distancing from two metres to one metre – although again, framed to allow pub, restaurants and hotels to open – creates a great opportunity for schools. No longer will heads be restricted to 15 kids in a classroom. At one metre social distancing – and recognising that, especially in primary schools, the risks are very low indeed – we can, and must, move towards having all or almost all children safely back into schools.

No-one – principals, lecturers, heads, teachers, students, parents – can be left in any doubt that the Government will be laser-like in its focus on this. The promise of support, funding, and clear, timely advice to all parties must be forthcoming.

Ministers must also be clear about the extent of their ambition: this must not be a half-way house. All schools must be open, all lessons taught by teachers, exams must be sat, sports fixtures played, uniforms worn, and extra-curricular activities enjoyed.

It is to be welcomed that we are going to have a detailed plan at the end of this week to achieve this ambition. We hear that the Prime Minister is “deeply frustrated” that we haven’t had as many kids back in yet. But government rhetoric must be matched by action, and steadiness of nerve.

There is a long time to go between now and September. The Government will experience many huge problems in the coming months. It will find itself fighting many economic and healthcare crises, and it will be forced to publish many more no doubt horrifying financial figures. There will continue to be vested interests arguing that we must remain on pause, or that we should focus on other areas instead.

The DfE must ensure that education does not get lost in all this noise. Where efforts are required across government, this must happen. Ministers and senior civil servants must fight for the attention of Downing Street and the Treasury. No one can be allowed to forget how much rides on getting school gates open at the end of the summer holidays.

I’ve spent the past 20 years working to improve social mobility and on transforming the life chances for young people. We cannot allow this virus to deflect us from this most important agenda. There is no time to waste: schools and their students need certainty about September now.

Alan Mak: Britain should champion a new Five Eyes critical minerals reserve system

30 Jun

Alan Mak is MP for Havant and Founder of the APPG on the Fourth Industrial Revolution.

The on-going trade dispute between the US and China has put the spotlight on so-called “critical minerals”. We in Britain cannot afford to be passive observers. Instead, we should take an active interest in this key strategic and economic issue, and play a leading role in safeguarding access to critical minerals, both for ourselves and our Five Eyes allies. Ensuring our scientists, manufacturers and technology businesses have a secure and reliable supply of critical minerals is vital for Britain’s leadership of the Fourth Industrial Revolution.

Critical minerals consist of the 17 Rare Earth Elements (REE) recognised by the International Union of Pure and Applied Chemistry, with names such as promethium and scandium, plus other economically valuable but relatively rare minerals such as lithium and cobalt (used in batteries), tungsten (used in defence products including missiles), bauxite (the source of aluminium) and graphite (key to battery production).

The REEs have unique magnetic, heat-resistant, and phosphorescent properties that no other elements have, which means they are often non-substitutable. Whilst used only in small quantities, they are key components in a wide range of consumer products from mobile phones, laptops and TVs, and have widespread defence applications in jet engines, satellites, lasers and missiles.

Although they are more abundant than their name implies, REEs and critical minerals are difficult and costly to mine and process. Converting critical minerals embedded in rocks from under the Earth’s crust to separated elements is a complex and costly process which often involves the use of highly concentrated acids and radiation.

China hosts most of the world’s processing capacity and supplied 80 percentemploy of the REEs imported by the US from 2014 to 2017. On average, China has accounted for more than 90 pe cent of the global production and supply of rare earths during the past decade, according to the US Geological Survey.

By contrast, the US has only one rare earth mining facility, and currently ships its mined tonnage to China for processing. Lynas Corporation, based in Australia, is the world’s only significant rare earths producer outside China. Other critical minerals are similarly concentrated in a small number of producer nations. For example, the Democratic Republic of the Congo was responsible for around 90 per cent of the world’s cobalt production in 2018, whilst Guinea dominates bauxite, with around 35 per cent of the world’s reserves.

As globalisation and industrialisation accelerate around the world, critical minerals have become a highly sought-after resource for the high-technology, low-carbon and defence industries. They will play a vital role in Britain’s future plans for economic growth, innovation and green industrialisation, especially as we renew and expand our manufacturing base in the wake of Coronavirus.

Given the national strategic and economic importance of critical minerals, the UK needs to act now and lead efforts to protect our national supply for the future. Neither we nor our Five Eyes allies can remain reliant on one producer for anything, including critical minerals. Here are four steps we should take:

Establish a New Five Eyes critical minerals reserve stockpile

The Five Eyes intelligence sharing partnership between Australia, Canada, New Zealand, the USA and the UK has been in existence since 1941 and provides the perfect foundation on which we should develop a new critical minerals reserve that would end our collective vulnerability of supply.

The reserve would consist of inter-connected physical national stockpiles of critical minerals, and then extend to become a processing chain that all partners could draw on. The US already maintains stockpiles, and creating others including in Britain would lead to new jobs. The UK is never going to become resource independent, but through international co-operation we can diversify supply and refine, through innovation, the processing of these elements.

Use our international aid budget to secure critical minerals supplies

As the Foreign Office and DFID merge, the UK can align its development goals alongside diplomatic priorities. We should deploy our international aid to unleash the untapped supply of critical minerals in developing countries, effectively funding the start-up of new critical mineral mines and processing plants. This would enhance our supply of these elements and create jobs, transforming communities around the globe through trade, not just aid. China has already implemented a similar strategy in Africa, for example providing Guinea with a $20 billion loan to develop the country’s mining sector.

Create a new National Critical Minerals Council

The Government should establish a new National Council composed of metallurgists, scientists and foreign policy experts to monitor global trends in critical minerals, and advise the Government on rare earths and its strategic stockpile. Given the national security and defence procurement implications, the National Council’s establishment would help to keep this issue at the forefront of future policymaking.

Become the world’s greenest stockpiler by incentivising private sector involvement in critical minerals processing

The Government should provide funding for greater research into how we can improve the processing chain of critical minerals with a focus on how we can tighten environmental controls in this sector internationally.

The UK should establish itself as the world’s “greenest stockpiler” of critical minerals by offering incentives that encourage private sector investment in recycling processes and reward companies that contribute to the UK stockpile. We need more facilities like the University of Birmingham’s Recycling Plant at Tyseley Energy Park, which is pioneering new techniques that are transforming the recycling of critical minerals such as neodymium, which is commonly found in hard disk drives.

The Coronavirus pandemic has taught us the importance of supply chain security, whether for PPE or critical minerals. With our reputation for scientific excellence, global alliances and diplomatic networks, we can help ourselves and our allies strengthen our access to the key minerals that will power our economic growth and innovation potential for decades to come.

This is the first in a three-part series on how to boost our economy after Coronavirus.

Andy Street: Our blueprint setting out the economic ambitions of the West Midlands

30 Jun

Andy Street is Mayor of the West Midlands, and is a former Managing Director of John Lewis.

Last week saw the launch of a blueprint setting out the post-Coronavirus economic ambitions of the West Midlands. As a manufacturing heartland, where draftsmen drew up plans for everything from steam engines to Spitfires, blueprints are in our blood. They illuminate our history. This intentionally ambitious £3.2 billion business case draws a clear trajectory to our region’s future.

As Mayor of the West Midlands, it’s my job to attract as much investment as possible. Rishi Sunak’s bold and decisive actions – notably through the furlough scheme – have provided unprecedented economic support for jobs during lockdown. Now, demands on the public purse are high. All investment must be fully justified, diligently used and – crucially – deliver real results. Every penny counts.

Our region was the UK’s fastest growing outside the capital until Covid-19 struck, and as a hotbed of export, manufacturing, construction and professional services, we play a key role in the UK’s economic success. This new blueprint lays out a powerful business case for how continued investment can spark rapid and sustained recovery, not only for us here but for UK PLC.

Our ambition is deliberate because the stakes are high. Research suggests we could be hit harder than most by the lockdown. When coronavirus struck, the West Midlands was in a strong economic position, with record employment figures and productivity growth well ahead of the national rate. However, our economic mix – dependence on manufacturing and business tourism, as well as a significant contribution from universities – leaves us vulnerable.

By following the blueprint we have drawn up, the Government can demonstrate its commitment to ‘levelling-up’ by backing the people of the West Midlands to deliver.

We need to do everything we can to get back on our feet quickly and return to the levels of success we were enjoying before the outbreak hit. That means driving a rapid economic recovery, safeguarding more than 135,000 jobs while building thousands of new homes. It also means learning the lessons of the financial crash of 2008/09, and listening to business.

Investment is crucial. However, while we need significant investment from the Government – £3.2 billion over the next three years – this is broadly in line with the £2.7 billion investment we have secured since 2017, which supported strong economic success here.

Our business plan is to build on our success and on the investment we have already attracted from Government, while leveraging much more private and public sector investment locally, including from our universities.

The blueprint sets out a business case for investments, while outlining the economic benefits they would deliver. For example, it directly supports our automotive sector by harnessing clean technology and electrification. A major investment package, including £250 million towards a Gigafactory producing state-of-the-art batteries, will unlock 51,700 green jobs.

The building of HS2, next year’s Coventry City of Culture festivities and the Birmingham 2022 Commonwealth Games present opportunities to create jobs for local people. By accelerating major infrastructure investment and supporting the recovery of the tourism and cultural sector we can unlock 33,000 jobs.

Then there is the West Midlands’ growing reputation as a hotbed for health research. By investing in healthcare innovation we can protect 3,200 jobs, while improving the health of our population.

Improving transport, housing and digital infrastructure will play a key part in a rapid recovery, while laying the foundations for future economic strength. We can build better transport and digital links to drive productivity and create thousands of jobs in construction. Schemes include extending rail, metro and bus routes, with cash for enhanced digital connectivity and to accelerate fibre connectivity in deprived areas. Reopening long-closed railway stations will better connect people to employment opportunities, attract investment into once-isolated areas and improve productivity.

The West Midlands has pioneered the regeneration of brownfield sites to tackle the housing crisis, while protecting the environment. We even have our own regional definition of ‘affordable housing’ applied at planning level by the West Midlands Combined Authority. We want to build 35,000 new homes – 15,000 of which will be affordable – with a focus on housing key workers. Plans include using a £200m investment package to regenerate derelict eyesores and £24 million for a new National Brownfield Institute in Wolverhampton, which will be a centre of excellence for land reclamation.

Investment to equip people with the skills needed for the future aims to help get them back into work. This includes helping 38,400 young people obtain apprenticeships and work experience, retraining 20,000 workers for in-demand sectors such as health and social care, logistics and business services, and upskilling 24,000 for jobs for the future.

Finally, we want to back the region’s businesses with support schemes – including helping them navigate their way through the post-lockdown world – creating or safeguarding 43,900 jobs.

This ambitious business case is based on our region’s experiences not only of recovering from the last downturn, but on the successes of the last three years. The blueprint has been developed as a team effort between the region’s local enterprise partnerships, universities, business groups and local authorities.  Crucially, some of our biggest employers have also shared their insights about how the region can play its part in securing a strong national recovery, putting central investment to good use.

For the UK to fully recover, all of its regions must recover too – creating a stronger country with a more robust, balanced economy.

Victory for Conservative Home! Al fresco dining restrictions lifted.

25 Jun

The Daily Mail reports:

“England is set to go al fresco to combat coronavirus as ministers unveil plans to turn streets into outdoor markets and allow pubs to use car parks as beer gardens today.

New laws being published today will loosen restrictions on drinking, dining and shopping outdoors – where the risk of transmission is regarded as much lower.

The Business and Planning Bill, which should be fast-tracked through Parliament in time for lockdown easing on July 4, will make it easier for local authorities to pedestrianise streets to help struggling businesses.”

It adds:

“The focus of the legislation, which will allow outdoor trading without the need for planning permission, is on creating a much more permissive business environment outdoors, where scientists believe the virus spreads much less easily.

Temporary changes to licensing laws will allow many more licensed premises, such as pubs and restaurants, to sell alcohol for consumption off the premises.

Pubs and restaurants will be able to convert outside space such as car parks and terraces into seated areas as well.”

What is not mentioned is the inspiration behind these reforms. Step forward, Nicholas Boys Smith, the Director of Create Streets. Last month he wrote for this site proposing to “allow eating out to mean eating out.”

“Let’s make it far, far easier for shops, restaurants and cafés to trade on the pavements outside their premises. This is possible now – but it’s a bit of schlep. At present, shops or restaurants wishing to make use of the pavement need to apply to their local authority under Section 115E of the 1980 Highways Act. Each applicant must ensure that pedestrians’ rights are not affected, and councils need to consider the width of the pavement, if it is a street where street trading is specifically prohibited, sight lines and whether the pavement is on a public highway or not.”

He concluded:

“The twentieth century killed that richness of street life, and sacrificed our daily freedom of movement. If, climbing collectively out of this crisis, if helping tempt those too nervous to squeeze into cramped restaurants we helped town centres rediscover their true purpose as a place for people profitably to congregate for business and pleasure then that would be a modest silver lining to these strange times.”

So while Boys Smith is to be commended for his proposal being adopted, with all due modesty we also note our own role in ensuring that this came to the attention of the relevant decision makers. It would not have been much use as an idea if it had not been noticed. If a tree falls in a forest and no one is around to hear it, does it make a sound? But as it is, the words passed from Boys Smith’s laptop, to this site, and thence on to the statute book all within a few weeks. It means we have every chance that the streets and squares of our villages, towns, and cities will not feel dead this summer but more alive than ever before.

As you embrace cafe society, remember that it is this website that won you your new found freedom. You will have a greater chance to sit at a table outside a favourite local restaurant and enjoy the sun and fresh air, basking in the low risk of transmission and nodding at passing aquaintances. So raise a glass of Chianti or San Miguel to Boys Smith – and to us.