Emma Revell: Young people socialising made Sturgeon “want to cry”. If only she got as upset over their debt burden.

4 Aug

Emma Revell is Head of Communications at the IEA

It’s not often some millennials gathering on a beach on a blazing hot weekend is enough to move someone to tears but that was the case for Nicola Sturgeon this week. The Scottish First Minister told a press conference that the crowds of young people gathered, apparently without physical distancing, made her “want to cry”.

I understand the frustration governments might be feeling at people pushing the boundaries of social distancing recommendations but to be driven to tears? Not at the untold damage being wrought on young people’s careers, not for the unfathomable debt they have been saddled with for the rest of their lives and probably those of their children, not for the unsuitable conditions many have been forced to work in for the last five months – those who were lucky enough to have jobs which can be done from home at least. But the simple act of meeting one’s friends outside is enough for a national leader to condemn a generation.

How can this be allowed to stand? The chance of dying from Coronavirus for 15-24 year olds is 0.5 for every 100,00 people. For 25-44 year olds it is 2.9 for every 100,000. So even accounting for a very generous definition of what Nicola Sturgeon meant by young – stretching it to the second category to include myself at a mere 28 years old – the chances of dying from Coronavirus, assuming you did contract the disease, are vanishingly small. The burden of the measures introduced to combat the disease however will fall squarely on the shoulders of the young.

The UK’s debt as a percentage of GDP exceeded 100 per cent for the first time since 1963 in June and that is only likely to increase with unemployment likely to reach record highs.

Whether or not you consider a pivot to homeworking a joy or a disaster is likely to depend on your age. While upper management in their 50s and beyond have enjoyed the chance to skip the commute and take a leisurely lunchtime walk as a break from their kitted-out home office, young people are much more likely to have struggled to share the kitchen table with multiple housemates in private rented accommodation without the luxury of a decade chair, never mind a home office.

New research from the LSE found that young Londoners living in shared accommodation throughout lockdown had just 9.3sqm of private personal space and that 37 per cent of those were sleeping and working in their bedrooms. Nearly half of those surveyed reporting having no suitable place to work at all.

That is those young people who can work from home in the first place. A total of 22 per cent of workers between 22 and 25 in their first full-time job were in low-paying occupations in the hardest hit sectors: retail and hospitality.

For those lucky enough to hang on to work, long-term home working will severely damage the chances of progression and team cohesion in sectors where so much relies on making connections with colleagues and getting to know the rest of the team.

A Zoom pub quiz on a Thursday night organised by a frazzled HR manager will only get you so far. Reduced job opportunities will limit the chances of progression into higher paid positions even further.

And it is not all about money. What about our social lives, or our love lives? If you are in your late 20s like I am, the tick tock of the biological clock begins to edge ever closer. Lockdown has damaged countless relationships, ending many either through enforced separation or proximity. How long are we expected to put our social lives on hold?

Where are our champions? During the EU referendum both sides of the campaign played up the benefits of their side’s victory for young people. Remainers argued that membership of the EU was essential for safeguarding the rights of young people to live and work across the continent, while Leavers wanted the next generation to grow up in full control of the laws of the land. Where are those campaigners now?

It is, of course, the elderly and those with underlying health conditions who are suffering the worst health outcomes from the pandemic. If rumours from Whitehall are to be believed, over 50s are at risk of losing essential liberties if a second wave of the virus hits Britain and of course maybe in middle age have been balancing the twin burdens of childcare and home-schooling with supporting older relatives who have been told to shield themselves.

No generation has escaped Coronavirus’ effect, but the young are uniquely positioned to bare almost no health risk yet will be living with the impact on careers, bank balances, romances, and mental health for the rest of their lives. It is time for politicians to remember that.

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.

Alan Mak: Reform capital allowances and R&D tax credits to fire up investment and create jobs

1 Jul

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

Improving Britain’s productivity is key to both our economic recovery after Coronavirus and enhancing our global competitiveness post-Brexit. The best lever for firing up Britain’s productivity is incentivising more investment in the latest IT and software, new plant and advanced machinery – all proven catalysts of growth and efficiency. Failure to direct billions of pounds into these fundamental building blocks of our economy will hold back our recovery.

The State cannot be expected to do all the heavy lifting, especially given the Government’s substantial spending commitments to help the country through the lockdown and beyond. Instead, it must be businesses that take the lead, especially SMEs who have traditionally made up the “long tail” of unproductive companies.

Rather than a safety-first approach of hoarding cash, postponing investment and hunkering down, businesses must be incentivised to invest more in the coming months. This must be an economic recovery powered by bold investment decisions that create jobs, upgrade technology and boost productivity.

The dampening effect on capital expenditure (capex) and investment caused by Coronavirus is already large and destructive. One investment bank estimates that £23 billion has been slashed from this year’s capex budgets already, whilst the Bank of England predicts a 26 per cent drop in business investment for 2020. In 2009, as the financial crisis erupted, the fall was 16 per cent by comparison. Some of the country’s biggest employers such as BP and HSBC have already started cutting investment.

In practice this means IT systems and software – now at the heart of every business – being used for longer. Machines normally replaced every decade will have their life extended. Trucks and vans will be allowed to age. Outdated buildings that offer no room for new employees will be kept on. Research and development (R&D) could stall.

Reductions in investment not only have negative consequences for our country’s GDP, jobs and productivity, it also damages our capacity for R&D and our reputation as a nation that innovates for the future – key to our leadership of the Fourth Industrial Revolution.

Reforming and adapting two existing incentive schemes – the Annual Investment Allowance and the R&D Tax Credit – would have a major impact in reversing this decline in business investment and productivity.

Introduce a new Annual Investment Allowance ceiling for green or digital investments

Capital allowances enable a business to deduct the cost of qualifying items from their profits, lowering their corporation tax bill. This incentivises investment in key productive goods from machines to laptops.

The Annual Investment Allowance (AIA) is the annual cap on such deductions and its level has varied dramatically in recent years from £25,000 in 2012 to £500,000 in 2015. Until December 2018, the AIA was £200,000 but it was raised to its current £1M level from January 2019. The £1 million level is due to expire this December.

To encourage a green recovery and investments that focus on digitisation, the AIA could be allowed to fall back to the previous £200,000 ceiling, except for certain types of capital expenditure that achieve environmental or digital goals which would still benefit from the £1 million special ceiling. Replacing a diesel-powered machine on the factory floor with one powered by electricity, or digitising a production line by adding new software powered by artificial intelligence (AI), could be examples of investment that would be rewarded by the new special AIA ceiling.

Alongside the introduction of a special £1 million ceiling, the scope of what can be claimed through capital allowances should also be expanded to take account of the growing digital dimensions of every business. For example, digital tools purchased on a subscription basis (such as monthly website hosting costs) should benefit from relief not just one-off investments in physical goods (such as buying a new machine).

Increase R&D tax relief rates for SMEs and widen the scope of the reliefs

R&D tax reliefs support companies that work on innovative projects in science and technology, and enables the cost of qualifying projects to be reclaimed from HMRC. They’re especially effective for digital start-ups, who get a tax break and much needed cashflow back for critical work.

From April this year the relief rate is 13 per cent, but the lion’s share of R&D tax relief is claimed by large, research-intensive businesses. SMEs can currently claim up to 14.5 per cent in certain circumstances, but incremental increases such as this do not have a dramatic effect on investment appetite.

Often the most cutting-edge innovation, especially in the digital sphere, is carried out by small teams and growing start-ups – not just multinationals. To encourage more micro businesses and SMEs to pursue more R&D, new and much higher rates of relief should be introduced. For example, a rate of 25 per cent for SMEs with fewer than 150 employees, and 35 per cent for SMEs with fewer than 50 employees.

What qualifies for relief must also be broadened to include more of the digital tools that software developers use, including software testing tools and data analytics software. In addition, cloud storage fees, user experience development work and the cost of buying data sets needed to train algorithms for AI-driven start-ups should also be tax deductible.

Britain is currently 19th out of the 37 industrialised nations in the OECD when it comes to R&D investment, spending 1.7 per cent of GDP against the OECD average of 2.4 per cent. To match world leaders including Germany and Japan, who invest over three per cent, we must urgently update and expand our R&D tax relief regime.

This is the second 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.

Neil Shastri-Hurst: Turkey and Hungary cannot be allowed to continue to contravene the principles of NATO

26 Jun

Dr Neil Shastri-Hurst is a former British Army Officer, surgeon, barrister, and senior member of the Voluntary Conservative Party in the West Midlands.

Determined, bold, and ambitious. All adjectives that could be used to describe the vision NATO’s Secretary General, Jens Stoltenberg, put forward in a speech at the beginning of June. And yet, barely a mention in the newspapers. But whilst Covid-19 continues to dominate the news agenda, Stoltenberg’s speech should not be dismissed. It has the potential to significantly alter the position from which NATO seeks to operate.

NATO has been a powerful military alliance since its inception. National and international threats have not diminished over the last 70 years or so; rather they have grown. The current pandemic should not lure us into a false sense of security. The importance of a strong and effective military alliance, through the auspices of NATO, is fundamental to upholding the democratic principles we hold so dear.

However, in setting out a roadmap for the organisation for the decade ahead, its Secretary General has fixed his sights beyond that. He aspires to something much more ambitious. A shift to focus upon diplomatic and economic levers. A shift to operating more globally; beyond its current North Atlantic milieu. In essence, a shift to operating more politically.

Stoltenberg’s words will have been warmly heard in Washington. It was precisely this type of refocusing that the United States’ administration was pressing for when the alliance leaders met for the 70th anniversary summit on the 4th December 2019. It clearly acknowledges the growing threat that China plays in the wider global security challenges. That said, achieving this ambition will prove much harder than articulating it.

Whilst the focus of the Secretary General’s speech concentrated on the construct of a more political NATO – a NATO “using a broader range of tools”; both military and non-military – this ambitious vision can only be looked at in conjunction with the broader challenges facing the Alliance. Such a paradigm shift would necessitate a change in mindset from its member states.

NATO’s burgeoning inbox is frequently inundated with concerns posed by Vladimir Putin and Russian adventurism. This threat has not retreated. Putin’s posturing and strongman rhetoric continues to present a substantial risk to the Alliance. However, in recent years, there has been the development of a fresh danger. A danger posed by member states themselves. From Viktor Orbán in Hungary to Recep Tayyip Erdoğan in Turkey, there has been the emergence of a cohort of leaders who style themselves in the Putin mould.

The bedrock of NATO has always been its shared values. The alliance has been bound through a pledge of collective defence: each member state, a democracy that upholds the virtues of individual human rights. For the majority of the 29, this remains the case. However, a small, but vocal, minority within the alliance has strayed from this path. The principle of collective defence has diminished in importance for these nations.

The schism created by Erdoğan and his ever closer relationship with Russia are well documented. But Erdoğan is not the only leader who has chosen to pursue a more nationalistic political path. Casting one’s gaze to Hungary, we see a country that was once an exemplar of post-Cold War success; a former Communist regime that had succeeded in achieving a strong democracy.

But times have changed. Orbán has adopted an increasingly authoritarian domestic policy platform. However, from NATO’s perspective, it is Orbán’s adoption of a fragrantly pro-Russian foreign policy agenda that is even more worrying: one only has to consider Hungary’s attempts to progressively block and disrupt the cooperation between NATO and Ukraine in order to illustrate this. Whereas the sage heads sitting at the NATO top table recognise the malign influence of a Putin led Russia, Orbán and Erdoğan are amongst a powerful subset that willingly fail to do so.

It would be misleading to suggest that NATO, and its members, have always upheld its founding principles to the letter. Historically, member states have not always been governed under truly democratic principles. That said, the internal menace posed by the pro-Russian, authoritarian rule of some of its own members arguably presents the greatest threat to NATO’s integrity that it has suffered to date.

The importance of NATO cannot be underestimated. As recently as 2016, the Alliance set out its central mission: “to ensure that the Alliance remains an unparalleled community of freedom, peace, security, and shared values, including individual liberty, human rights, democracy, and rule of law”. However, such a shared set of values operates on trust.

This brings me back to Stoltenberg’s vision for NATO 2030. An ambitious vision must be coupled with a compelling argument that member states’ defence and procurement strategies must be centred upon NATO’s intended direction. In a post-pandemic world, with the global economy having taken a battering, putting forward a persuasive case may be all the harder. Maintaining the two per cent minimum of GDP contribution has historically been challenging for many members. The reality is that, with competing demands upon treasury departments, a not insignificant contingent will formally rescind upon their commitment.

But that may be the least of NATO’s problems. The majority need to stand up to the minority and challenge its offending behaviour. Nation states such as Turkey and Hungary cannot be allowed to continue to operate in contravention of the principles of the Alliance. The Washington Treaty contains no provision to suspend members who do not act within the democratic ideals of NATO. However, that should not deter action against those states that fail to adhere to these; political and economic sanctions, for example, may well have the desired effect in the long-term, if not short-term.

And so, I end where I started. This is a determined, bold, and ambitious vision of NATO in 2030. It will however require an even more determined, a bolder, a more ambitious argument to be put forward in order for it to succeed. To have any chance of success, NATO itself will need to reform. It will need to assure member states that the collective Alliance remains true to its founding principles. It must convince its members to stand up against those who show a disregard for human rights or seek to pursue a pro-Russian agenda.

There is a Russian bear sitting behind the desk of the Kremlin; for the survival of NATO we must not let its cubs play in our midst.