Bim Afolami: The politics of Net Zero are more perilous than we think

14 Jun

Bim Afolami is MP for Hitchen & Harpenden.

I was in the chamber of the House of Commons when Theresa May’s government legislated for a legally binding target for the UK to reach Net Zero by 2050.

It felt momentous at the time, and it was a big moment. Strangely, though, during the debate in the chamber, the remarks were uniformly positive, from all sides.

Now let me be clear: I strongly support the Net Zero target and did at that time – it is the right thing to do. But in politics when you see something as momentous as this go through without a dissenting voice, an alarm bell should ring that says: “have we thought through all the implications of this?”

There are two areas where we may be politically vulnerable in the coming years on the environment, and on reaching Net Zero by 2050 in particular.

First, the need to significantly limit, and preferably nullify, any direct economic cost on working people, or else risk a considerable political backlash. With the threat of inflation rising, the cost of living agenda is likely to return to the front and centre of British politics very soon. This will be politically resonant for the sort of middle income, Red Wall voters who have been increasingly supporting the Conservatives in recent elections.

Second, there is the twin threat from the other side of our political coalition. For many liberal-minded, Remain-leaning Tory voters in the south, our strong support for the environment is one of the key reasons for their support. If there is any hint that we are rowing back, their loyalty will be severely tested – especially if Labour and other opposition parties can effectively make the case that we are failing to reach our own carbon emission targets.

Our record on reducing UK carbon emissions whilst growing our economy is the best in the G7, and one of the best in Europe. Yet the vast majority of actions we have taken are about decarbonising power generation. Aggressively moving towards renewable energy since 2010 has been remarkably successful, but we have barely begun to tackle many of the aspects that affect people’s day to day lives – for example, the need to retrofit homes in order to make them more fuel efficient, ensuring traditional boilers are replaced, or ensuring electric vehicles are affordable to the ordinary family.

To be frank, these actions will require a lot of money, up front, from the Treasury. We cannot think it will be sufficient to cover the costs just for the lowest income voters – most voters will need environmentally sustainable options to be heavily subsided and affordable. Most middle income or even wealthier voters are not remotely prepared or willing to pay significantly more tax on fuel, or on flights, or to rip out their existing heating systems, or many other invasive things that academics and policy experts suggest will soon be required to reach Net Zero.

The Committee on Climate Change envisage phasing out oil and coal heating by 2028, gas boilers in homes by 2033 at latest, and by 2030 in public buildings. Lots of change is coming. The new upcoming Heat and Buildings Strategy and broader Net Zero strategy (both expected this summer) will be scrutinised heavily on the twin axes of both policy effectiveness and additional costs.

The cost of living used to be a major issue in our politics. It was a dominant issue during the 1960s, 1970s, and 1980s. The 1990s and 2000s saw benign economic circumstances until the financial crisis.

After it, something strange happened to our economic debates. We stopped talking about economic policy in relation to ordinary people – real incomes, prices of goods and taxes, and focused our political capital on getting public support for measures to reduce the deficit. Although May’s government started to home in on cost of living as a potential issue for the “JAMs” (voters “just about managing”), this issue was soon subsumed within the Brexit fog.

I believe that that the politics of cost of living is about to return, and it presents a real political danger for the Government and the Conservative Party.

Andy Haldane, the hugely respected former Chief Economist of the Bank of England, has openly talked about the “tiger” of inflation stalking the land. The economy is recovering quickly, and the immediate consequence is that too much money (from extremely cheap debt and accumulated savings built up over Covid) is chasing too few goods and services.

There are also labour shortages and supply chain difficulties in many sectors, which is constraining supply. A resurgence of inflation is the central scenario for growing numbers of businesses he says. By way of comparison, inflation in the USA is already at 4.7 per cent, up from 4.2 per cent for April, reflecting the overheating US economy. And the recovery, in both the USA or the UK, is nowhere near complete.

You can see where I’m going with this. Increased costs from Net Zero policy, combined with general inflationary pressures, looks like significant cost of living increases for ordinary people. Even with a growing economy, that will present real challenges to our well-earned reputation for economic management.

From a Net Zero perspective, then, how do we do the right thing and insulate ourselves against political attack at the same time? There should be three principles underlying our approach.

First, we need aggressively to embrace the long-term economic opportunities of getting to Net Zero by 2050, and we need to communicate that clearly so that people understand what this means for their day to day lives. Households living in energy poverty typically spend a higher proportion of their income on their energy bills. Improving the energy efficiency of dwellings by installing insulation, more efficient heating and cooling systems and more efficient building fabrics can decrease energy costs, and enable higher levels of disposable income.

Energy poverty also has a negative impact on the NHS, with more avoidable hospital admissions and use of non-primary health care services. Living in energy poverty increases the risk of acute respiratory, cardiovascular, and musculoskeletal problems, which often result in lengthy hospital admissions, particularly in winter. The Treasury is going to have to be brave and invest a lot of money up front.

Second, the cost impacts on the vast majority of voters must be minimal. If we try and force voters to retrofit their homes with new insulation, or install new low carbon boilers, at the personal cost of thousands of pounds, this will be a political disaster. Even for the voters who can afford significant expenditures, this will be seen as unfair and heavy-handed, and large numbers of them will either refuse (or be unable) to comply.

The third principle is this. We need to face down those who are starting to say that the costs of Net Zero are too much, or it is too difficult. In a world where countries are becoming more and not less committed to the need to limit global temperature rises, the UK cannot afford to hold back. The macro economic opportunities for reindustrialising huge parts of the North and Midlands – creating hundreds of thousands of jobs, whilst using the traditional strengths of the service economy in the South – is too great to ignore. We can not only be international leaders, but help the domestic economy go through a job rich transformation.

The debate how we reach Net Zero by 2050  will define our politics over the coming decades. We must ensure that we have an ambitious, world-leading approach that builds on our strengths. But we must also ensure that we don’t alienate voters along the way.

Ryan Bourne: School catch-up for the disadvantaged? Of course. But do all pupils need it? Not really. The Treasury has a point.

8 Jun

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

There are plenty of economic known unknowns when it comes to the pandemic’s legacy. How will the geographic and industrial composition of the economy change as businesses and workers re-evaluate work arrangements and their desired careers? Will entrepreneurs in service industries become more risk-averse about certain investments? How many of the one-off, “emergency” programmes will become suggested parts of the policy firmament for fighting “normal” recessions?

Of all these many uncertainties, though, the magnitude of the lasting economic impact of school disruption on children is perhaps most unclear. Not that you’d know it from the public debate.

Nobody doubts the likely direction of the effect. School closures and the inadequacies for many of the remote learning substitute has left plenty of kids behind where they’d usually be expected to be. Department of Education-funded research last year found that primary and secondary kids were up to two months behind on reading and three months on maths, on average. More recent research confirms these sorts of magnitudes. Outcomes are particularly bad for disadvantaged children.

These deficiencies can compound, as Sir Kevan Collins rightly warns. Fail to adequately learn to read and write at a young age, and you can’t accumulate other knowledge or skills. Evidence from the legacy of school disruptions from a Pakistan earthquake and Hurricane Katrina suggests some kids’ development can be severely retarded, even with modest lost classroom time. So the case for precautionary remedial action, targeted especially at young and disadvantaged kids and for basic skills, is reasonably strong, even if you think much other state education is a waste of time.

That said, the attempt to bounce the Treasury into a massive much broader investment of £15 billion or even £30 billion over three years has been predicated on some pretty wildly speculative predictions of the economic benefits. The Institute for Fiscal Studies, for example, claimed last week that the 8.7 million kids affected by the pandemic could face lost lifetime earnings of something like £350 billion without remedial action. One academic at Bristol puts the total economic costs of lost learning at £2.15 trillion. Spending big to deliver catch-up and prevent these losses is therefore said to be a prudent “investment” that would supposedly “pay for itself.”

If you really believe these extreme numbers, you probably should have opposed school closures through the pandemic. That aside, the IFS explanation highlights where these questionable figures come from: the idea that schools are human capital factories.

Kids are assumed to learn knowledge and skills at school that make them more productive at work. The IFS illustration then takes the average estimated private earnings return to an extra year of education from around the world of eight per cent per year, adjusts it down for school days lost here, and, voila, it has £350 billion. No wonder Collins and others are angry that the Government is unwilling to spend just £15 billion to institute longer school days and the private tuition required to catch up.

Such simplistic calculations, however, are clearly fraught with danger. Yes, schools impart some skills and knowledge. The ability to read is an important prerequisite for most work, and so remediation to counter this and loss of maths skills has significant value, if such efforts work.

But the average historic private returns to an extra year of education worldwide seems a bizarre number to use symmetrically to assess the impacts of school closures. Remote learning did occur for many. In this instance, all kids worldwide were affected to a lesser or greater extent by the pandemic. And, crucially, not all this private earning premium from school is due to honing skills or acquiring knowledge.

Indeed, although some of the “premium” no doubt arises from enhanced human capital, the private returns to extra years in education also incorporate credential effects: the wage uplift from students undertaking subjects and obtaining qualifications to prove they have certain attributes, but for which the specific knowledge or skills honed wouldn’t affect their work abilities.

For these aspects of schooling, as well as things such as sports time, there’s arguably a negative social rate of return for remedial education, because the signalling component is socially wasteful. For many secondary students, their cognitive abilities and earnings by, say, aged 25 are likely to be unchanged, despite the pandemic. Even the fears of potential loss of earnings from, say, a poorer grade are likely to be mitigated as employers and universities will no doubt judge these years with an asterisk.

While there’s a strong economic case for targeted remediation at the disadvantaged, young, and obviously struggling, then, there’s not one for attempting “full catch-up”. Tutoring and reorienting within-school activity should deliver the high return spending, without requiring drastic measures such as school day extensions for everyone or kids repeating whole years (indeed, reducing the years in work by one year for, say, a current sixth former, would negatively affect lifetime earnings for many).

Now, I’m not well placed to say whether the £1.5 billion announced is sufficient to ameliorate the worst consequences of the pandemic. What I do know though is that the extra £15 billion deemed the alternative seems an arbitrary “nice” number and that in three years’ time, any plans to let this “emergency spending” fall away will be dubbed “savage cuts” to education by Labour, schools, and a host of “progressive” Tories.

Spending today simply becomes tomorrow’s baseline. We don’t need theories to presume this. Look at how the debate over the level of universal credit payments or free school meals is shaping up. Or indeed the political reaction to Conservatives cutting planned “emergency stimulus” by Gordon Brown from 2010 onwards.

To be clear: nobody is questioning that targeted tutoring or more instruction time can improve outcomes for kids. The point is that good economics happens at the margin. That schooling can improve earning potential doesn’t mean that ever-more schooling is good for all kids in the aftermath of a pandemic. We should be looking to isolate where remediation actually has benefits, as opposed to just trying to “make up for” the past year.

At a time when the zeitgeist set by Joe Biden is just to throw money at pandemic-related problems and pick up the pieces later, we should be grateful for the Treasury’s apparent sceptical eye. Taxpayer funding (we can dream) should always be justified according to firm evidence it will bring net benefits. We should not just presume so based on some global historical assessments of education in very different conditions. Nor should governments get into the game of making wild spending commitments to “show they value” something.

Sorry, Matthew, but there’s a Centre Party already – Johnson’s Conservatives

3 May

It’s easier to define what the centre ground of politics isn’t than what it is.  So here goes.

It’s not the same territory in one generation as in the next: political landscapes change – sometimes because of a volcanic eruption, like the financial crash; sometimes more slowly, because of eroding attitudes (on eugenics, say, or over women).

Nor is it found by picking some point halfway between that held by the two main parties.  Most voters aren’t engaged with them in the first place, or with politics at all.

Polling will help you to find it, but the map it provides is confusing – at least to political afficiandos.  For example, most voters are broadly pro-NHS but anti-immigration.  Does that make them Left or Right?

Those two examples help to find the answer – as close to one as we can get, anyway.  Voters lean Left on economics and Right on culture. To their being anti-migration (though less than they were) and pro-health service, we add the following.

English voters are also: patriotic, pro-lockdown, anti-racist, pro-armed forces and supportive of public spending over tax cuts (if forced to choose).

They are somewhat isolationist, pro-Joe Biden rather than Donald Trump, unsupportive of the aid budget when push comes to shove, punitive on crime, and paralysed over housing, where the interests of different generations net out.

Centrist voters, like a lot of others, are also closer to teachers than Ministers, at least if they have children of school age – a headache for reforming Ministers of all parties.

They are pro-environment, but in a certain way: our columnist James Frayne has suggested that there is a consensus for improving food safety, animal welfare, protecting areas of natural beauty and reducing the use of plastic.

(Welsh voters are broadly the same; Scottish ones are divided over patriotism and, as the inter-SNP dispute over trans has demonstrated, probably a bit more to the Right on culture, as well as rather more to the Left on economics.)

James himself, whose fortnightly column on this site we call “Far from Notting Hill”, isn’t himself a million miles away from where this centre currently is.

If you wanted to pick out some issues that give the flavour of it, you could do worse than the following: hospital parking charges, pet kidnappings, the proposed Football Superleague, and the decline of high streets (which doesn’t stop those who complain using Amazon).

This ground was getting bigger, like a widening land enclosure, before Brexit; and leaving the EU has allowed it to become even bigger.  You can see where all this is going.

Theresa May, under the guidance of Nick Timothy and Fiona Hill, had first dibs at occupying this territory – or, if you distrust the metaphor of ground, winning the support of these voters – remember “citizens of nowhere”, and all that.

She made a botch of the job, and Boris Johnson had a second go.  Do you want to go Left on economics?  If so, you’ll welcome his government’s proposed Corporation Tax rises, the record borrowing, the superdeduction for manufacturing, the net zero commitments.

Do you want to go Right on culture?  There’s less for you here, given the quiet shift to a more permissive migration policy.  Even so, you can rely on Johnson not to “take a knee”, unlike Keir Starmer; and to commission the Sewell Report; and to protect statues.

We are over five hundred words into this article, and haven’t yet deployed those two reverberating words: “Red Wall”.  But now we have, that the Conservatives hold, say, Burnley, Redcar and West Bromwich East says something about this new centre and who lives in it.

Whatever this week’s local, Mayoral, Scottish and Wesh elections may bring, these voters are Johnson’s to lose – if Starmer can’t grab enough of them: he has done nothing to date to suggest that he can.

If you want to know why this is so, consider the three most coherent alternatives to today’s Johnsonian centre party.  First, one that begins by being to the right of it on economics.

It would be for a smaller state, free markets, lower taxes and personal freedom.  This outlook is likely to drag it to left on culture: for example, it would not be uncomfortable with the present immigration policy, and not always exercised by “woke”.

It members might include: Liz Truss, Kwasi Kwarteng, Matt Ridley, Steve Baker, Lee Rowley, Sam Bowman, Crispin Blunt and our columnists Ryan Bourne, Emily Carver and Dan Hannan.

We see no reason why it shouldn’t include economically liberal former Remainers other than Truss – such as, talking of this site columnists, David Gauke.  Or, if you really want to put the cat among the pigeons, George Osborne.

Next up, a party that starts by being to the left on culture.  This already exists.  It’s called the Labour Party.  It’s Dawn Butler going on about “racial gatekeepers” and Nadia Whittome refusing to condemn the Bristol rioters.

It’s Angela Rayner claiming that the former husband of the Conservative candidate in Hartlepool was once a banker in the Cayman Islands.  (He was a barrister and the head of banking supervision at the islands’ Monetary Authority.)

It’s Zarah Sultana calling on prisoners to be prioritised for Covid vaccinations, and Labour voting against the Crime and Policing Bill.  It’s Starmer himself taking a knee in his office rather than in public – so seeking both to placate his party’s left while also hoping no-one else notices.

Finally, we turn to a party that begins by being to the right on culture: a successor to the Brexit Party.  The Conservatives may be leaving a gap for it here with their new immigration policy.

Which means that it would be likely to pick up more voters outside London and the Greater South-East, which in turn would drag it leftwards on economics.

This is the ground that Nigel Farage occupied, that his Reform UK party is now trying to recover under Richard Tice, and that a mass of others are sniffing around: Reclaim (that bloke from Question Time), the Heritage Party, the SDP (no relation; not really).

In electoral terms, this new Labour Party would be best off junking its efforts in provincial working-class seats altogether, and competing with the Greens and Liberal Democrats for the urban, university-educated and ethnic minority vote. Think Bristol West.

Our new economically liberal party could begin by diving into the blue heartlands from which city workers commute into the capital.  Think St Albans.

And the various revamp parties would try to paint the Red Wall purple, where voters may have backed one of the two main ones, but have no love for either of them. Think, say…well, anywhere within it.

We apologise for coming so late to the cause of this article: Matthew Parris’ column in last Saturday’s Times, where he yearned for a “sober, moderate, intelligent and morally reputable centre party”, and asked “where is it”?

He’s right that the Conservatives’ grip on the centre will weaken sooner or later: because another volcanic eruption blows it apart, or it sinks below the sea…or Johnson blows himself up or sinks instead.

But he’s mistaken about what the centre is.  Or, more precisely, he identifies it with himself.  But many sober, moderate, intelligent and reputable voters backed the Tories in 2019, if only for want of anything else – and still do, it seems.

The real centre isn’t where Matthew or ConservativeHome or anyone else wants it to be.  It’s where it is, as cited above.  Johnson’s bottom squats on it, and he’s no intention of moving.

John Redwood: Why now that we have left the EU are we still yoked to Maastrict austerity?

26 Apr

Sir John Redwood is MP for Wokingham, and is a former Secretary of State for Wales.

The UK economy is currently being run on the Maastricht rules as if we had not left the EU. The Office for Budget Responsibility made clear in its March report that whilst it awaits the Government’s conclusions on a new fiscal framework, the economy will be guided by the two familiar requirements that we get the running deficit down below three per cent of GDP, and that state debt as a percentage of GDP is declining all the time it is above the 60 per cent level.

It is clear that the whole five year budget in question is dominated by the perceived need to get state debt falling as a percentage of the economy by the end of the forecast period. This has led to a range of measures to increase the tax take, with a large increase in the Corporation Tax rate, and a big increase in the numbers of people paying higher rate income tax through freezing allowances.

My critics will argue that because we were outside the Euro we never had to follow the Maastricht rules. The truth is we did. We still do because we have never changed the rules, even though now we are free to do so.

We faithfully reported each year on progress with hitting the debt rules, and made clear that policy was primarily steered by the need to control debt. That was the central driver of George Osborne’s so-called austerity economics. The latest Government figures after Brexit continue to report our progress against these EU rules. This quote from the OBR’s March Report shows nothing has yet changed:

“The Chancellor has not set new fiscal targets in this Budget (despite two of the existing ones expiring this month) and is instead proceeding with the review of the fiscal framework proposed in last year’s Budget. But the absence of formal fiscal targets does not mean that the Chancellor has not been guided by particular metrics when selecting his medium-term Budget policies. The tax rises and spending cuts he has announced are sufficient to eliminate all but a £0.9 billion current budget deficit in 2025-26, while they are just enough to see underlying public sector net debt as a share of GDP fall by a similarly small margin of £0.7 billion in 2024-25 and £4.1 billion in 2025-26.”

I rest my case.

Requiring states to keep their overall state borrowing low makes a lot of sense in a single currency area where different governments have the right to borrow in a common currency. They need to avoid the free rider problem, whereby some states run up excessive debts, taking advantage of a low interest rate facilitated by the prudence of others.

The UK has no such problem. The UK as a single state with its own currency and central bank cannot take advantage of others. It does of course have to decide how much to borrow with affordability in mind. Borrow too much, and the interest bill could become unaffordable. Borrow excessively, and lenders could start demanding penal terms.

This means the best type of control over debt build-up for the UK should be a control over the size and growth of the interest burden. The UK has a tradition of borrowing long, and can do so in current markets. This protects taxpayers against sudden rises in rates, and reduces any strain from refinancing the debt. The Government has used debt interest targets, and should draw up a new realistic one. Given the way debt interest has fallen despite the increase in debt, this should not prove difficult.

The idea that we should carry on controlling the economy by state debt as a percentage of GDP is particularly silly given the great monetary experiment the UK along with the USA, the ECB and the Bank of Japan is carrying out.

The state-owned Central Bank is buying up large quantities of the state debt. Claiming that the gross debt is still a real debt is therefore wrong. The Treasury pays interest on nearly £975 billion of the debt to the Bank which it owns. If I had bought in my own mortgage but still kept paying the interest, I would not regard it as a real debt in the way I did before I bought in the loan, since I would be paying myself. Despite this obvious anomaly, the Budget is constructed on the basis that we need to get gross debt down, not the debt net of that owned by the state itself.

So what should we use as guides for economic policy? To a control on state interest payments to others, we should add a growth target and we should keep the important two per cent inflation target as a restraint on excessive credit and money expansion. The growth target should encompass aims to increase employment and productivity. What we need is to promote a higher wage, higher productivity economy. Our economic targets should reflect those aims.

The current state debt target is acting a constraint on faster growth. Offering tax rises and threats of tax rises for the years ahead damages confidence and deters new job creation and new investment. The UK’s productive capacity has been damaged by years in the single market where we lost out in many areas from steel to consumer electronics and from temperate food production to electricity generation.

We now need a favourable tax regime on self employment, investment, enterprise and individual incomes to promote a substantial increase in our productive capacity. The state debt control implies more of the same old policies which we had to follow in the later single market years which did not do enough to boost high paid jobs through industrial investment and higher productivity.

Richard Sloggett: There will be no levelling up for Britain if there’s no levelling up for health. Here’s a plan to deliver it.

14 Apr

Richard Sloggett is a former Special Advisor to the Secretary of State for Health and Social Care. He is the Founder and Programme Director of the Future Health Research Centre.

Covid-19 has had a devastating impact on the health and economy of our country, exposing our nation’s poor health and health inequalities, socially and geographically. The most deprived places have had double the Covid mortality rate of the least deprived.

Levelling up Health, a report for the All Party Parliamentary Group for Longevity projects, of which I’m a co-author, finds that there would have been 40,000 fewer deaths recorded if the national mortality rate had been as low as the least deprived places.

Poor health weakens our economic growth, nationally and locally. 1.2 million people aged between 50 and 64 are not working for health reasons. Health inequality between North and South costs £13bn a year in lost productivity.

In ‘building back better’ the Government rightly wants to promote economic growth.  But it is not credible to think you can ‘level up’ economically without improving health locally.

Before Covid arrived, we knew that health outcomes were subject to wild and unjust variations. People who live in the most deprived places in England get ill 19 years earlier on average than in the least deprived places. In the UK the lowest socio-economic group has 24 per cent fewer people in good health than in the richest. In New Zealand, Greece and France, the gap is only five to ten per cent between the lowest and highest socioeconomic groups.

Public health policy measures to tackle such problems are regularly pitched as divisive. Between those who dismiss any level of intervention as needless ‘nannying’; and those who want to completely transform the whole of society into a socialist state. It is the easiest type of media row to generate. It doesn’t help tackle the problem.

And the data shows we do have a problem. Life expectancy has stalled in the last decade, and Covid has set it back even further. Healthy life expectancy is also stuck. Analysis last year showed that it would take Government until after 2050 to deliver the improvement within the Conservative manifesto of five additional years of healthy life.

Leaving this to the state or individuals alone will not solve it.

The case for a new consensus

We need to now move on from this division. The All Parliamentary Party Group on Longevity is a cross party group of parliamentarians seeking to build a new consensus on this issue for action. This is not the first time this has been tried.

The New Labour Government published a White Paper in 1999, Saving Lives: Our Healthier Nation. The model pioneered a “new, modern approach to public health – an approach which refuses to accept that there is no role for anything other than individual improvement, or that only Government can do something.”

The results of this and subsequent interventions were seen in increases in the rate of life expectancy for both males and females until 2010. Such rises have gone into reverse since. The Coalition and subsequent Conservative Governments have failed to tackle the issue. The last major public health strategy was in 2010 and focused on a responsibility deal with business that was voluntary, full of holes and failed to deliver. The 2019 Prevention Green Paper still awaits a response.

It is time for Conservatives to accept that doing nothing, on grounds of personal freedom or choice or responsibility, is not an option.

All three Conservative Prime Ministers have gone on their own journey to realise this. All started out as sceptics of action on obesity, but switched to becoming converts. David Cameron created the sugar levy, Theresa May’s pushed ahead with a second chapter of measures, many of which still await implementation. Boris Johnson has had his own conversion to obesity action following his illness with Covid.

The opportunity of reform

The approach that will deliver post Covid will be one that uses both state measures and the work of communities, places, peoples and individuals.

As others in this series of articles have noted, the Government is looking to build a new public health system on the back of Covid 19. The decision to abolish Public Health England will see Ministers taking greater direct accountability for public health and working across Whitehall to embed health more in policy decision making.

Our APPG report ‘Levelling up Health’ calls for an ambitious plan to improve our nation’s health over the next decade. It includes action at four levels: central government, setting the goal, the plan, funding, regulation, and committing to action on high priority public health issues; regional and local action, by harnessing the power of communities, the NHS and local and regional government; the individual, by empowering and supporting people to lead healthier lives; and action by business to support healthy lifestyles and restrict harmful marketing practices.

Our report also calls for the establishment of a much needed health improvement fund.

The Fund would enable 60 places with the poorest health and the highest Covid death rates to access additional funding to support health improvement. The fund (which would sit alongside the existing public health grant) should be set for five years, worth an average of £10 million a year for each place, costing up to £600 million per year nationally. Access to continuing funds would be based on performance against agreed annual outcome targets and deliverables.

This framework across different layers of Government and society will be the basis for starting to level up our health.

Health is wealth

Despite its size and importance, the NHS only contributes some 20 per cent to people’s healthcare outcomes. But it dominates discussion on how to organise our healthcare policy; usually through ever greater demands for more resources. In adopting a longer term, population and public health view after the pandemic, we can start to change how we see healthcare and the roles and responsibilities of all of those involved with delivering it.

The pandemic has regularly pitched the economy and health on different sides of the policy response. This is a false choice. Improving health can support the economy, which in turn can deliver improvements in health and wellbeing. The UK’s healthcare sector is often overlooked as a large, regionally based employer with high growth potential, and there are some superb centres of research excellence across the regions from Newcastle, to Manchester, Leeds to Liverpool.

With our science, data and technology capability in the UK – as evidenced through the vaccine development process – now is the time for an ambitious programme for delivering health improvement that supports our economic and global leadership ambitions. Levelling up health should be a pandemic legacy for this Conservative Government.

Richard Holden: This spring’s local elections. For levelling-up to work, we need local councils and leaders who back it.

29 Mar

Richard Holden is MP for North West Durham.

Constituency Office of Richard Holden MP, Medomsley Rd, Consett

The leaflets are landing on doorsteps. The Risograph is working overtime. Walk routes are being updated. First-time council candidates – a heady combination of apprehensive and excited – are getting to know each other on WhatsApp as they make friends with people in other wards. Experienced candidates impart nuggets of wisdom, ‘war stories’ and experience on our zoom calls. Labour’s keyboard warriors fight on , but there is very little sign of life in the party of Jeremy Corbyn and Keir Starmer on the ground.

These elections are taking place in a way that is like nothing I’ve known in two decades of campaigning – after over a year of gruelling Covid-19 restrictions and under the shadow of a virus whose lingering presence, even as Britain’s phenomenal vaccine programme knocks case numbers and deaths down, is still a real concern for many. It’s not been a normal year, and it’s not going to be a normal election.

As a new MP, I can barely remember a time that I wasn’t having to try and help those struggling with Covid-19 or the impact of measures to control it. The long tail of Coronavirus will continue in various guises. Many months of delayed operations and stifled economic growth need to take place. The impact on the education of children will last for years, especially for the poorest, even with the welcome efforts of the Government at top-up tuition. The Government debt taken on to support the people, jobs and businesses through the pandemic will stay for decades.

It is in that context that Rishi Sunak came up with a big offer to business: unprecedented tax relief to try and drive investment and help to deliver knock-on productivity gains. The Treasury and Department of Trade moves to Teesside and the new freeport are massive economic boons, too, for the North East. These moves are not just about the jobs – though that’s the main part. It’s about showing that we both care and want to do something about the problems faced by our new voters in the ‘Blue Wall’.

It’s clear that both the First Lord of the Treasury and the Second Lord of the Treasury “get it”. Short term, the plan is about recovery from Covid-19: getting jobs back and the economy moving again – which they’ve also got a plan for with Kickstarter and support for apprenticeships double.

And for the longer term, jobs in the next industrial revolution are coming down the track: batteries for our car industry and wind power for our transport and electricity. This big push to drive private enterprise to invest now is crucial, because we all know that only productivity gains can lead to real wage increases and the much talked about ‘levelling up’.

As we escape the shadow of Covid-19 we can see that much has changed but some things have stubbornly remained. In many parts of the North, moving back to the status quo ante – pronto – seems to be the order of the day from Labour. The debate over the coal mine on the West Coast of Cumbria brought this home in recent weeks.

To give you a bit of necessary background, Cumbria is a joint Labour/Lib Dem administration. Labour lost overall control in 2017 and formed a coalition (despite the Conservatives being by far the largest party). Labour retained control with their three tribes of Corbynites, Brownites and few Blairites, in what is a perpetual internal struggle.

To the mine itself. Robert Jenrick, the Housing, Communities and Local Government Secretary, has taken a lot of heat, but it’s clear that what’s really behind the palaver is vacillation among the Labour/LibDems who are running the council. Cumbria County Council has now put forward the proposal only then to decide to re-consider it no fewer than four times. Jenrick has done everything he can to let the council decide, but in the end its vacillation created a national controversy. A dangerous precedent.

Labour weakness and division doesn’t just stop at doing everything possible not to make a decision on bringing 500 really well-paid jobs in Cumbria. Look across the other side of the country and you see it caught up in another culture war with itself in Leeds.

West Yorkshire wants to rival Greater Manchester as the engine room of the North of England. Leeds is back in the premiership, and everyone’s longing for the old rivalry on the pitch and, more generally, some healthy competition across the Pennines.

But Labour politicians locally can’t even agree on whether to expand Leeds Bradford Airport. The Labour-run Council has, eventually, passed a proposal, but the local Labour MPs (more concerned about their own membership than their voters) have gone against it. Hilary Benn and Alex Sobel, amongst others, literally asked the Secretary of State to call in a decision by the local Labour council.

Scratch the surface anywhere in the North and you’ll find Labour in mini-civil wars everywhere. What does this mean for other big projects? The A1(M) upgrade? New train lines? The A66/68/69/74? Are we going to allow vacuous, vacillating, virtue-signalling Labour Councils to kibosh our levelling-up agenda?

Contrast Labour’s approach to Ben Houchen’s in Teesside or Andy Street’s in the West Midlands; pro-enterprise, and willing to work with the Government. Interestingly, Andy Burnham seemed to be too, during his early days of wanting to get stuff done but his rivalry with Sadiq Khan over who will be the next Labour leader has seen him go from pragmatic local leader to disingenuous leadership contender, in lock step with Starmer’s personal poll rating.

What I’m driving at is that for levelling-up to work, we’re going to need to see local authorities and local authority leaders who want it to work.   The sad truth is that many local Labour councils and local bureaucracies don’t want it: they’re scared of it. In County Durham, it would create further upheaval in the system of sinecures that, sadly, local council positions have been for 102 years. They don’t want to risk ‘levelling up’ – they’re happy with a lazy the politics of grievance. After all, it’s served them well for decades.

Meanwhile, when faced with big political calls, the Prime Minister tends to make the right ones. On running for Mayor. On Brexit. On standing for the Conservative leadership in 2019, doing what many said was impossible, and getting Tory MPs to back him. (I remember this ,because when I joined his campaign you could get six to one on him to make the ballot.) On the general election. On the vaccine.

He’s making a big call on the economy now – the big push to level up. This is his big bet on Britain.  To deliver it though we need strong aligned local leadership. Mid-term elections always hammer the party in power, and we’re coming from the 2017 local election high point and a year of Covid. Getting Conservative 2019 voters to come out again is the challenge on which the ability to deliver the agenda now rests. We’ve fifty days to show them it does.

Neil O’Brien: The view that manufacturing is a relic of the past is itself a relic of the past

22 Mar

Neil O’Brien is co-Chairman of the Conservative Party’s Policy Board, and is MP for Harborough.

“Nothing so much contributes to promote the public well-being as the exportation of manufactured goods”. From the King’s Speech at the opening of Parliament, 1721 (drafted by Robert Walpole).

Here’s a funny thing.  Wages and productivity in manufacturing are higher than the average across the whole economy. Productivity has also grown more quickly in manufacturing. But places where manufacturing is a larger share of the economy have, on average, lower wages and productivity.

The answer to this seeming paradox is that manufacturing provides an outsized proportion of the better paid jobs in poorer areas. And that they typically started with even more manufacturing, and lost more from deindustrialisation. Might manufacturing now have a particular role in levelling up poorer places and getting private sector growth going there?

Put simply, if manufacturing is a bigger chunk of the economy in less affluent places, and if you could do some things that caused manufacturing to grow faster then, other things equal, that would tend to particularly help worse-off places.

That’s not to say government shouldn’t also work hard to grow other sectors – just that manufacturing might be particularly helpful in levelling up.

Between 1978 and 2019, output per job grew an average of 0.36 per cent a quarter across the economy as a whole, but not far off twice as much (0.64 per cent) in manufacturing.  It’s not just the UK: looking at 26 OECD countries since 1996, all but one saw faster productivity growth in manufacturing.

Why? Much of the economy consists of people-intensive local services.  While there’s productivity growth in cafes, pubs, gyms, leisure and so on, it’s harder to achieve. A café is quite like it was 50 years ago.

Your smartphone really isn’t. There is no theoretical upper limit to how atoms can be arranged in new and more productive ways. Physical goods can also be exported in a way that haircuts can’t: so they can be traded in a more dynamic global market with stronger competition and more transmission of knowledge. That’s why manufacturing accounts for 42 per cent of our exports and two thirds of business investment in R&D.

But manufacturing is particularly relevant for levelling up because that higher productivity in manufacturing is particularly marked in less prosperous areas.  For the UK outside London, output per hour is 20 per cent higher in manufacturing than the economy as a whole.

Reflecting this, wages are also higher.  For example, in the North East the median wage in manufacturing was 22 per cent higher than average, in Wales 16 per cent it was higher and so on.  This earnings premium applies across qualification levels too: it’s not just more workers in manufacturing having higher qualifications, they’re earning more than similarly qualified people.

You might say, that’s all very well, but isn’t UK manufacturing doomed to shrink? Isn’t manufacturing too small to drive the wider growth of the economy much?

Having declined relentlessly as a share of the economy between the 1970s and 2010, manufacturing’s share has actually held pretty steady since then.

While it is now a relatively smaller share of employment (nine per cent of hours worked), manufacturing accounts for a larger share of output and a much larger share of productivity growth in poorer regions of the UK – accounting for more than 40 per cent of productivity growth between 1997 and 2017 in places like the West Midlands, Wales and the North West, creating a big multiplier effect on incomes and jobs in their local area.

Growth in manufacturing might particularly help places outside our large cities. As the UK economy has deindustrialised, higher productivity jobs have tended to be in professional services, typically located in large city centres. Across Europe, capital cities have grown faster than their countries.

The rise and then fall in manufacturing as a share of the economy since the Second World War was mirrored by a fall and then rise in differences in productivity: the shift to services has caused the richest region, London, to forge ahead, while deindustrialisation has seen poorer regions fall back.

The same effects are underway in smaller cities.  Between 2002 and 2018 productivity grew 76 per cent in Glasgow and Edinburgh and 62 per cent in the rest of Scotland. In Cardiff and Swansea it grew 59 per cent compared to 47 per cent in the rest of Wales. And in Belfast it grew 72 per cent compared to 49 per cent in the rest of Northern Ireland. Productivity grew 54 per cent in England’s large cities and 49 per cent in the rest of England outside London – even including the relatively prosperous south east.

It’s great to see our cities revive, powered by services growth. But we need to make sure places outside city centres grow faster too. Manufacturing is space-intensive, so more likely to locate outside the centres of the largest cities. It’s one high productivity activity in which less urban areas may have a natural advantage.

And those are just the sort of places our new majority is built on.  Nationally about one in twelve jobs are in manufacturing – but in the seats we gained in 2019 it’s higher: one in eight jobs.

Some say deindustrialisation is inevitable for all rich countries, so emphasising manufacturing is pointless.

While many richer countries have deindustrialised, almost none did so as much as the UK.  In 1970, the UK had the sixth largest share of manufacturing in the economy in the G20. Today, it is second from bottom.

Countries as diverse as South Korea and Ireland have caught up or overtaken our living standards while growing the share of manufacturing in their economy. Rising countries like India and China have seen manufacturing growing as a share of the economy share.

And many other rich countries have deindustrialised far less: manufacturing is about 10 per cent of GDP here, about 22.5 per cent in Germany.  In the Blair years this was actually seen as a UK strength. But post financial crisis it doesn’t look so smart, as productivity there has grown faster.

Another objection might be of principle. What would Margaret Thatcher think of all this?

Well, while Mrs T (rightly) let go lossmaking industries, it’s worth remembering she also worked hard to replace them. She used taxbreaks, factory start up costs (and lots of her time) to woo Japanese carmakers here.

She backed life sciences, founding a government-backed biotech company (Celltech) and using pharmaceutical pricing to lure pharma businesses to the UK.  In telecoms, Thatcher drove the adoption of the GSM standard at an EEC summit in 1986 to help create a huge market for equipment makers, and then let UK companies like Vodaphone charge yuppies a fortune for calls, meaning tha they had pots of cash to buy up more heavily regulated rivals overseas.

In 1981, she appointed the world first minister for IT (Ken Baker) and funded the “micros in schools” programme.  That put rocket boosters under the company that won the government contract to manufacture the computers, (Acorn), enabling it to create ARM, now one of the UK’s largest tech firms.

In aerospace Thatcher moved heaven and earth to sell British Aerospace products overseas, flying to Saudi Arabia to secure their biggest ever order. Visiting the factory, she said she would love to have flown a harrier.

Today, there are still massive security arguments for keeping the capacity to make things, underlined by EU threats over vaccine supply. But even without those arguments, the 1990s/2000s view that it would be fine if British manufacturing became a thing of the past now seems like… well – a thing of the past. The truth is that in many parts of the UK, making things goes hand in hand with making a decent living.

Ryan Bourne: Are fears of a return of inflation overblown?

16 Mar

Ryan Bourne occupies the R Evan Scharf Chair for the Public Understanding of Economics at Cato, and is the author of Economics In One Virus.

“Inflation is coming” has been the perennial warning of conservative commentators over this past decade. After the financial crisis, it was feared that quantative easing would generate a sharply rising price level. Now, Rishi Sunak is kept up at night by the prospect of an inflation spike. Columns forewarning of one are increasingly common. Even some of the high priests of macroeconomic dovishness, such as Larry Summers and Olivier Blanchard, are sounding the alarm.

s this time different? And how worried should we in the UK be? When thinking through the economics we must unpack three related but different issues: Covid-19 price changes, the overall level of prices, and ongoing “inflation.”

Covid-19 price changes

As the economy reopens, certain sectors will see pent-up demand meet constrained supply. A lot of entertainment venues have gone out of business following a year without activity, for example. A freshly vaccinated public may suddenly be keen to go out and spend after June, despite less capacity in the sector than pre-crisis.

The flexible prices in such industries could therefore see sharp upward price volatility, with new entry taking time to reverse these relative price spikes. The scale will depend on whether demand peaks in a “big bang,” or if there is a gradual transition to whatever “normal” now is. But for a returning public, this will feel very much like a substantial cost-of-living increase.

The Price Level

“Inflation,” though, is “an ongoing rise in the general level of prices.” It is, as Milton Friedman famously said, a “monetary phenomenon,” seen when the money supply increases more quickly than the supply of goods and services. Here, the risks do look different to after 2008.

During the global financial crisis, the money base increased more than four-fold, but broader money supply measures (e.g. M2) barely changed.

Since the beginning of the Covid-19 pandemic, however, not only has the money base increased dramatically, but M2 has increased by over 25 per cent. This hasn’t “stimulated” higher overall nominal spending, since people have been unwilling or unable to engage in certain activities, leading to a sharp fall in money’s “velocity.” As velocity rebounds, extra funds circulating again will likely raise the price level as activity begins (i.e: we will see a “one-off” increase in prices, feeding through over a number of years).

This could see inflation temporarily running above the Bank of England’s two per cent annual target. Indeed, despite current CPI inflation at just 0.7 pe rcent, British macroeconomists believe the forecasts tilt upwards.

Asked which scenario was more likely to hold “on average” for the next decade, 37 per cent of Centre for Macroeconomics economists surveyed said inflation would be on target. But 41 percent said that the Bank of England would either “allow” or “wouldn’t be able to avoid” inflation exceeding its target (just 15 per cent thought inflation would be “allowed” or would inevitably remain below two per cent).

Whether inflation exceeding that two per cent target is considered a “bad thing” really depends on two individual judgments:

  • Whether “inflation targeting” is really the appropriate goal for monetary policy, or instead whether a level target for prices or nominal GDP is preferable, and;
  • Whether a period of significant inflationary pressure could or would be swiftly eliminated by the Bank of England afterwards without negative consequences.

The UK experienced a very dramatic collapse in nominal GDP last year, including a fall in inflation below the Bank’s inflation target. If one believes optimal policy maintains steady increases in the price level or in the level of nominal GDP over time, then a post-crisis overshoot of the inflation target in the service of returning to trend may be desirable. The Bank wouldn’t therefore need to drastically adjust policy, but could “look through” this price level uplift, aiming for the two per cent inflation target in the longer term.

Longer-term inflation

What would obviously be problematic is were the broader money stock to continue growing faster than trends in nominal GDP or desired inflation, generating sustained higher inflation. Few doubt the Bank of England would have the tools to choke this off.

So the questions that arise from this possibility really are,

  • How much damage would be done if above-target inflation altered inflation expectations in the interim? an
  • Would the Bank of England be willing to bring inflation back to target even if it meant the government’s debt service costs spiking?

Economists such as Summers, scarred by the 1970s and early 1980s, believe it “naïve” to think the alternative to a low inflation world is a modest inflation world with the promise of future low inflation.

Playing with significantly above-target inflation for a time can instead help create a high and variable inflation world. If people feel and so come to expect higher inflation, they start shortening contracts, demand cost-of-living adjustments, alter the balance of their portfolios away from non-interest bearing assets, and delay certain investments. This can make the economy less efficient, and entrench the combination of slow growth and high inflation.

It previously took painful efforts to “re-anchor” inflation expectations and cement central banks’ monetary credibility. So is this credibility at risk again?

There have been some recent jitters, but as yet little sign of widespread concern here. Inflation expectations jumped swiftly to 3.8 pe rcent in December, but have since fallen back to normal levels. Expectations implied by inflation-protected gilts predict inflation will exceed its target over the coming decade, but again are not historically abnormal. Recent increases in gilt yields are more likely to reflect the expectation of a more robust recovery than large inflation concerns.

Obviously, we should be cognisant of fears of how high government debts, or political pressures to change central bank mandates, can corrupt price stability. Certain historic episodes have led to “fiscal dominance,” with central banks prioritising keeping governments’ debt servicing costs low over price stability. The U.S. has officially changed its mandate with an asymmetric bias towards lower unemployment. Any change to the Bank of England’s official mandate, or even just prolonged above-target inflation, could risk fears of monetary policy here being driven by fiscal concerns about debt servicing costs or 1970s-style desires to try to push unemployment lower too.

But as yet, again, should the UK doubt its institutions? Andrew Bailey hasn’t said anything suggesting that the Bank would ignore sustained inflation. The Chancellor, if anything, is too eager to close the deficit through damaging business tax hikes because he fears the inflation risk—something that paradoxically could worsen near-term price level pressures by choking off investment in productive capacity as spending rebounds.

All this means that I think the current fears are overblown. But, yes, the broader context requires longer-term vigilance – the balance of risks on inflation, driven by economic and political trends, has definitely shifted.

Looking back at the Budget a week on, its plan for growth is not convincing

12 Mar

The only worse judgement about a Budget than a snap article is an opinion poll – and we write that regardless of the reception that polls gave last week’s.

For just as a snap view can be based on less than the full picture (a particular feature of Gordon Brown’s), so a polling one tells one nothing about whether a Budget will work, or indeed will be as popular a month after its release rather than a day after.

Our own snap take was largely restricted to asking whether the tax rises announced for future years will really happen at all – or whether Boris Johnson will be able to take advantages of higher revenues to cancel them, and then seek a quick general election.

The end of the week after the Budget may be a better time to take a fuller view.  It would start by trying to understand the position that Rishi Sunak is in.

The post-Budget piece on this site by his Treasury colleague, John Glen, set out the scene as the Chancellor sees it in the latter’s first presentation since Brexit was done in full, and vaccines gave us hope that the pandemic will end.

The economy has shrunk by 10 per cent, the largest fall in over 300 years.  And our borrowing is the highest it has been outside of wartime.

That suggests going for growth in the short-term, as this site has recommended, with fiscal consolidation taking place later, as it will have to do in spades if the growth doesn’t come.  The timing of Rishi Sunak’s measures suggest that he agrees.

We believe that tax rises inevitably have to play some part in that consolidation along with spending cuts, and recognise that the run-up to an election is a difficult time to do either: the Chancellor is cursed by the economic and electoral cycles being out of kilter.

Certainly, government will always have to tax something to pay for public services, and the sensible view is that that something should be spending rather than income (or business).

Which explains why early Thatcher and Osborne budgets alike put up VAT, and why the latter wanted two new council tax bands on more expensive properties – as he confirmed to ConHome last year.

However, Sunak is boxed in on VAT.  The final headline pledge of the last Conservative Manifesto was “we will not raise the rate of income tax, VAT or National Insurance”.

We may know more about his plans for property taxes if any on tax day, March 23rd.  There is a plan on the table to replace council tax (and stamp duty) with a new property tax, but it is revenue neutral.

Since it would already create losers in more expensive properties in London, Sunak is unlikely to adapt it to create even more of them there and elsewhere.

Business rates were a dog that didn’t bark during the Budget, and any eventual reduction to them looks to come largely from a digital sales tax, not a residential property tax.  Some who would pay it belong to an interest group with little direct leverage: foreign companies.

But unable to turn to VAT and unwilling to turn to property – or so it appears – Sunak targeted income tax allowances and business in his Budget, via corporation tax (assuming, as we say, that these hikes ever happen at all).

On the first, the Office for Budget Responsibility says that the allowances freeze will haul a million more people into the higher rate band.  Fiscal drag is scarcely new – as the Institute for Fiscal Studies noted two years ago – but the move will do nothing to improve incentives.

On the second, there are some detailed arguments for the increase, as set out by Anthony Browne on ConservativeHome recently, but a general one against, which is based on certainty.

In essence, lower rates of corporation tax have been a feature of Conservative policy from Thatcher through to Osborne and beyond – together with an emphasis on lower income tax rates, supply side reform and a smaller state.

If these higher ones ever come in, the Chancellor will essentially be trading off higher corporation tax from some companies for the new super deduction for some companies.

That would mean a shift from a relatively simple and neutral system to a more complex and partial one, which would be more likely to help firms in the Midlands and North, according to sources that this site has spoken to.

We are not convinced that such a switch, if it ever happens, is a net plus for Britain.  But now that Sunak has turned on the super deduction it would be best for him, in order to help provide that certainty, not to turn it off in two years.

Elsewhere, those Thatcher-to-Osborne orthodoxies are also in flux.  They were first challenged in recent times not by Johnson, but by Theresa May, with her mantra of “the good that government can do”.

The Industrial Strategy was a product of her approach.  We are all for one in principle if it has a clear aim, namely turning pure research into translational research.

As Greg Clark, who had charge of it under May, conceded yesterday on this site: “it may have tried to do too much in one White Paper”.  His successor, in his swashbuckling way, dismissed in the Commons this week as “a pudding with no theme”.

That directness is a part of what makes Kwasi Kwarteng such an engaging politician, and it may be that he plans a slimming down of the strategy that will deliver results.

But one source close to the process worries that “individual policies will continue anyway but without consistency, ownership or scrutiny”.  And Clark has a point when he says that any strategy must be linked to place as well as sector – in other words, to levelling up.

We’re concerned that the Government has come to see such levelling up as incompatible with supply side reform and institutional change.  We can’t see much of the former in Build Back Better – the Government’s “plan for growth”.

It’s big on intrastructure and net zero; smaller on skills and innovation: as May said in the Commons this week, there’s a limit to how many times Ministers can review research and development tax credits.

If it really wants to go for sustainable and more even growth, the Government will need to devolve more power.  As a former senior Minister put it to ConHome recently: “we can’t deliver levelling up, a skills revolution, an industrial strategy and zero carbon from the centre”

“The new mayors have a convening power: they can get local businesses, the Chief Constable, the NHS bigwigs, the university vice-chancellors, the local enteprise partnerships round the table, and come up with a plan.”

On supply side reform, we understand why Kwarteng killed a planned review of workers’ rights.  But what is the plan to ease supply elsewhere – especially on housing?

On institutional change, there are commitments to reform the civil service and the courts, but almost none that apply to the major public services, especially health.

To date, tax rises are taking the strain of future consolidation, and the danger for the Chancellor is that he finds himself boxed into that position permanently – with Downing Street spooked by the consequences of a proper spending review for Tory red wall seats.

The Budget promises infrastructure spending, possible tax rises, pots of money from the centre for those provincial seats, limited localism, plus some levelling-up but little reform.  That’s a mix of pluses and minuses, but not a plan for growth.

Andrew Gimson’s Budget sketch: The Chancellor quotes Tennyson and delivers a lesson in levelling up

3 Mar

“That which we are we are,” the Chancellor declared as he reached the end of his Budget Statement.

Could heavens! Could this prosaic figure be about to raise our spirits by launching forth into the final lines of Tennyson’s Ulysses?

There can be little doubt those words were in the mind of whoever drafted Rishi Sunak’s peroration:

…that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.

Sunak has the benefit of a traditional English education, and will surely have spotted the reference.

But Tennyson’s ending was presumably felt to be at once too lyrical and too modest. For although the Chancellor admitted the economy has suffered its largest fall “in over 300 years”, he had no desire to suggest we have been “made weak by time and fate”.

He adopted instead the manner of a teacher addressing a mixed ability class whom he intends to “level up”, as he put it, even though most of us are not much good at maths, and economics is dismal science we do our best to avoid.

So Sunak had to be slow, and lucid, and conceded that if we would rather leave the economics to him, that would be fine.

“I do want to be honest about what I mean by sustainable public finances,” he assured us, and then, a moment or two later, “I have and always will be honest with the country about the challenges we face.”

Not long afterwards, he said of the changes to corporation tax, “I recognise that they might not be popular but they are honest,” and announced that he wants to be “honest about the challenges facing our public finances”.

Even the dimmer members of the class were starting by now to get the message that the Chancellor wishes us to accept that he is honest, but not all of us were sure we fully understood what he meant by “challenges”, a term other politicians often use when they mean “insurmountable difficulties”.

The Chancellor proceeded to give us a geography lesson. He said that a Treasury which acts for the whole United Kingdom “demands a different economic geography”. In this way, he explained in a level tone, we shall achieve “the levelling up” which we require.

There followed the grand recitation of the eight new freeports in England, stretching from Plymouth to Teesside, after which we hoped to get Tennyson, but were disappointed. Perhaps the speechwriter just had a bet with a friend that he could get a line of the poet into the speech without anyone noticing.

Boris Johnson will certainly have noticed, for his head is full of poetry. He sat listening in a supportive way, emitting audible “hear hears” from behind his mask, but jiggling his right knee up and down in a manner suggestive of unbearable mental tension.

Sir Keir Starmer rose to reply, and was rather good: in a different league to Jeremy Corbyn. Insofar as it is possible to hold an almost empty Chamber, he held it.

But if he is to be Prime Minister, he needs this Government to fail, and Sunak spoke with the self-confidence of a man who has not yet failed at anything.