Richard Holden: We shouldn’t try to win a spending arms race with Labour in this Budget – which we would lose anyway

1 Mar

Fight Fitness Guru, Consett, Co. Durham

During the last fortnight, the white wasteland of frozen fields has given way to the flora of spring in County Durham.  The thaw in the land of the Prince Bishops is being met with a broader feeling in the towns and villages that spring is on the way.  With 20,000,000 vaccinations done and accelerating, as well as the Prime Minister’s roadmap providing clarity for the future, there is a real feeling that the tide is turning.

This week’s Budget must be another step along that road.  However, with so many competing concerns it will be a difficult balance to strike.  To get it right, it’s going to be essential to zoom out and look to where we want to be in a few years’ time.

Our economy has taken a pounding because of Covid-19.  Three hundred billion pounds in extra spending and support, paying people’s wages through furlough and supporting jobs and businesses has been provided.

Three hundred billion pounds extra: that is wartime levels of additional expenditure. For context, it is more than twice the size of the NHS budget annually. It’s an extra £4,500 for every man woman and child in the UK, or about £12,000 for every income-taxpayer in extra spending: money that’s had to be borrowed.

The support has been colossal and necessary. It has protected businesses and jobs and crucially will enable our economy to bounce back as quickly as it can. But this backing wouldn’t have been possible if the Government hadn’t taken the necessary decisions to keep spending under control during the last few years.

Colloquially, this point is made frequently by my constituents, along the lines of: “I’m glad it was you lot in and not Labour. If they’d been in ,God knows what would have happened.”

Which takes me to the political.  One of the biggest gateways to so-called “Blue Wall” voters switching from Labour to Conservative was Jeremy Corbyn. But this wasn’t just because of the terrorist sympathising and antisemitism. Or Keir Starmer’s policy of betraying democracy over Brexit. It was also because of Labour’s economic credibility.

People stopped listening to Labour’s promises when they became increasingly outlandish.  Remember them? Free broadband for all, give WASPI women £30,000 each, cancel student debt and make university education taxpayer-funded. The list went on – all with no plan to pay for it: it was fantasy economics that lacked basic credibility.

This is where we Conservatives now need to be careful, and why Rishi Sunak needs to tread a fine line. We cannot, nor should we wish to, win an arms race with Labour over who can spend more taxpayers’ cash.

We’ve not spent the long, hard yards of the last decade, undoing the catastrophic position Labour left in 2010, to let that credibility go. The reason we’ve been able to support the country through the global pandemic is because we’d had credible spending plans for the last decade. The reason Labour couldn’t win in 2010 is because Labour believed its own hubris about having ‘abolished boom and bust’ and, to nab a much-loved phrase from George Osborne, “failed to fix the roof while the sun was shining.” And the result was the famous note from Liam Byrne, then Chief Secretary to the Treasury: “there is no money left.”

Given such an analysis of where we are, then: what’s next? The budget must focus on three things:

  • Recovery. Allowing the country, especially our hardest hit sectors to bounce back from Covid – and in doing so avoid a massive spike in unemployment.  This week, I led 68 Conservative backbenchers in writing to the Chancellor about support for pubs (massive employers of young people) via keeping beer duty down. It’s vital that he also allows our high streets breathing space regarding business rates. And for families in constituencies like mine, where for so many a car is essential, fuel duty rises, which Conservatives have found hard against for a decade, need to be avoided.
  • Delivery. Keep building towards our key manifesto commitments on public services: more police, more nurses, crucial infrastructure and deliver on the levelling up promise that was made.
  • Credibility. Long-term economic stability with borrowing under control to allow us to keep our debt – and crucially our debt interest payments – under control.  We can’t just hope that interest rates stay this low forever: they won’t. Only a balanced plan will allow the Government the space to deliver on the first two objectives of recovery and delivery.

It’s a tall order, and the Chancellor needs to be clear, honest, and fair in what he spells out. Those who’ve profited during the pandemic and those with the broadest shoulders should take the lion’s share of slack as we now deal with the consequences of it.

As for Keir “Goldilocks” Starmer – naturally, nothing will be ‘just right’.  But he won’t come up with any other real proposals, either. He’s opposed to anything that will raise revenue, but Labour MPs will doubtless demand more spending.  The party is all over the place, with a front bench hopelessly out of its depth, and a broader one so divided as to the way forward that it’s hardly a surprise Sir Keir is unable to get them to agree on anything but to abstain.

So Labour’s economic credibility will remain in tatters. We need ours to remain strong.

This spring in North West Durham and across the “blue wall”, let’s ensure that the growth we see is built to last. Unsustainable borrowing might be Labour’s answer, but it can’t be ours. Without doubt, at some point, winter will come again.

And when it does, we’ll need to respond to it from a position of strength with flexibility – as we have this time.  The electorate will not forgive us is we don’t ensure long-term credibility. Without it we put both a sustainable recovery from the global Coronavirus pandemic and delivery of our manifesto in jeopardy.

Perhaps the simplest way of putting it on the Budget is: it’s all about economic credibility, stupid. Because come 2024, it certainly will be.

David Gauke: My Budget advice to the Chancellor. Raise income tax, not corporation tax.

27 Feb

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

If there is one tax that the Chancellor is likely to increase when he stands up to deliver his Budget on Wednesday, it is corporation tax. Speculation that the corporation tax rate is going to rise has been running for months and if the Treasury wanted to dispel such speculation it could have done so. In contrast to George Osborne’s time as Chancellor – when reductions from 28 per cent to 17 per cent were announced – Rishi Sunak is expected to announce a Corporation Tax rate in the region of 23 to 25 per cent.

Is this a good idea? My view – as the Minister of Tax throughout the Osborne Chancellorship – is that it is not. But it is worth examining the arguments for and against such an approach.

The first argument that will be made is that we might not need tax rises at all. I wish that this was true but sadly this is unrealistic. It is true to say that we can live with higher levels of debt than was the case in the past. Interest rates are low and likely to remain so. Even if they increase, the long dated maturity of our debt gives us a chance to respond. The markets are happy to lend to us, the risk of a sovereign debt crisis is remote. The Covid crisis is the type of event in which governments should be willing to borrow and the consequences can and should be dealt with over a long period of time. In short, we needn’t be in a hurry to pay off the Covid-19 debt.

Even accepting all of this – that ‘this time is different’ – there is still an issue. Even after we are put the economic consequences of Covid-19 behind us, the OBR forecasts a deficit of £100 billion or 4 per cent of GDP. Our debt to GDP ratio would continue growing. Given these forecasts assume tight control over public spending that will be hard to deliver and the significant demographic challenges that face the country in the 2030s, some kind of fiscal tightening in the form of tax rises will be necessary eventually.

The second argument is that now is not the time. I would agree that now is not the time for a fiscal tightening. The economy is currently shrinking and unemployment is likely to increase substantially in the months ahead. The markets are not jittery so there is less of a pressing need to take action. Nonetheless, the Government could increase some taxes without engaging in a fiscal tightening if long term tax increases are accompanied by short term tax cuts or spending rises. So one can announce and even implement tax rises without engaging in an immediate fiscal tightening.

There is also a political issue. Delaying action on fiscal consolidation might make economic sense but it would push tax increases into the last years of a Parliament. Leave it a year or so and the Chancellor might find that his Parliamentary colleagues – not least the Right Honourable Member for the marginal seat of Uxbridge and South Ruislip – might become rather resistant. Now might be the last chance to take action.

The third unconvincing argument is that cutting corporation tax has not cost us any money and increasing it will not raise you any money. Look at how corporation tax revenues have increased since 2010, the argument goes. Sadly, life is more complicated than that. Yes, rates have fallen and revenue has increased but corporation tax receipts reflects where we are on the economic cycle (in 2010, businesses were not making much by way of profits and if they were they had big losses to offset). Furthermore, the post-2010 reforms were Lawsonian in their approach in broadening the base at the same time as lowering the rate (so these were not simply cuts). In addition, lower corporation tax rates have unintended behavioural changes in that more people pay themselves through companies (diverting tax revenues from income tax and national insurance contributions). To put it another way, increasing corporation tax rates really will bring in more revenue.

So, to summarise, it will be necessary to increase tax revenue, it is reasonable to make a careful start on that process now (albeit in a way that does not tighten fiscal policy in the short term) and that increasing the corporation tax rate will bring in additional revenue. I could also add that, of all the potential revenue-raisers, this is likely to be politically less painful than other options. Even businesses will not squeal much because, for many of them, making a profit appears to be a remote eventuality and paying more tax on those profits would be a relatively nice problem to have.

It would still be a bad idea.

Why? If we are going to raise more in taxes – and we are already at historically high levels – we need to have a debate about which taxes are least damaging to economic growth. Over the long term, corporation tax ranks as being one of the worst.

Corporation tax is a tax on profits. Profits are the return on investment; the higher the tax on profits, the lower the rate of return. All other things being equal, the lower the rate of return on investment, the less investment you get.

There is also a tendency to think that corporation tax is something that is paid by, well, corporations. At one level that is true but – to state the bleeding obvious – all taxes are paid by people in the end. Corporation tax is ultimately paid by shareholders in lower dividends, consumers in higher prices and employees in lower wages. There is plenty of evidence to suggest that in an open economy like the UK, it is the workers who lose out the most. Investment goes elsewhere, productivity does not increase as quickly as it would otherwise do and, in the end, wages and salaries reflect productivity.

It is no coincidence that, in the era of globalisation, corporation tax rates have fallen around the world. I spent much of my time as a Treasury minister trying to persuade international businesses to locate more investment and activity in the UK as a consequence of the competitiveness of our corporate tax system. We were starting to see success but there was always a question as to whether the UK was truly committed to corporation tax competitiveness in the way that, say, the Republic of Ireland was. Given the current speculation, it was a fair question. On top of Brexit, a sharp hike in corporation tax rates will be yet another blow to our international reputation as a place in which to do business.

If we need more tax revenue – and we do – we have to make use of our big, broad-based revenue raisers – income tax, national insurance contributions and VAT. The manifesto pledge made in 2019 not to increase the rates of these taxes was unwise at the time but it was made in good faith. However, much has happened since and the Government would be justified in recognising that. Attempting to fill the fiscal black hole by swingeing increases in corporation tax will reduce business investment and damage our international competitiveness. Not for the first time, the politically expedient choice will come with a painful economic cost.

Julian Brazier: A single allowance rate for Inheritance Tax – and five other proposals for making social care more resilient

23 Jan

Sir Julian Brazier is a former Defence Minister, and was MP for Canterbury from 1987-2017.

A great deal is currently being written about resilience – normally an underrated subject in politics. Building resilience should not just be about considering major national or global crises, but also involve asking questions about the likelihood of – and the solutions to – more frequent and more local crises. These range from NHS winter pressures to power cuts to cyber and terrorist attacks.

At the same time, there is an overwhelming view today that social care needs urgent reform and greater intervention from government. Yet there seems to be little appetite for considering these two great issues together:  the care of the elderly and its implications for national and local resilience.

This article seeks to show that incentives in current provision, for social care, benefits and tax, are reducing resilience. Some of the current proposals for social care ‘reform’ would worsen this.

The largest category of vulnerable people are those elderly people who cannot live without supporting care. Their domestic circumstances can be divided into four broad categories, listed in descending order of independence:

  • Those still in their original homes (whether owned or rented) with visiting carers,
  • the growing category of those in specially adapted sheltered accommodation
  • those living with family, in so called ‘inter-generational’ arrangements and, finally,
  • those in residential care.

How do these categories measure up for resilience?

At first sight, the least resilient group are those people living in their own, unmodified homes; they are reliant on visiting carers, who may not be able – or willing – to come in a crisis. They are also more likely to fall over or have an episode isolated in surroundings which have not been adapted, are most vulnerable in power cuts, for the same reason, and – crucially – they are often difficult to discharge from hospital.

But there are serious problems with the fourth category too. We have seen the problems with care homes in a pandemic. With their communal eating and recreation facilities, such homes have proved principal vectors of disease.

Equally, they have become a major cause of bed blocking, once the dangers of releasing patients to them was recognised. Britain’s higher-than-European-average concentration of people in residential homes has worsened our death rates and increased pressures on the NHS.

As Conservatives, we should also be concerned that residential care is not only the most expensive arrangement (whoever is picking up the bill). It also, for those fit enough to choose, offers the least independence.

This brings us to the two middle categories above.

Dwelling in adapted accommodation and living with younger family members are both comparatively resilient arrangements, and both are much less expensive than residential care.

They also have other features most Conservatives approve of. They offer a degree of independence absent in residential homes. There is also the potential for free childcare in inter-generational arrangements, or where nearby retirement accommodation has been chosen. Both categories offer an antidote to the loneliness of those still stranded with limited mobility in their original homes.

Any new system which aims to promote resilience should direct incentives towards rewarding, rather than penalising, these two middle categories: those who step down to retirement accommodation and those cared for by their descendants. That is how resilience is maximised.

Yet this is far from the case at present. Our commitment to ring-fencing the principal home for tax and benefit calculation purposes is a great policy, but one which has perverse unintended consequences when applied to transfers between generations. The state ends up penalising the heirs of those who aim for resilience, and rewarding many of those whose parents become most dependent.

For example, if an elderly person struggles on in their own home without much money, the state picks up the bill for their carers, and the potential strain on the NHS is maximised. Yet, if they own that home, their heirs will maximise the windfall when they die, compared to the alternatives. This has been exacerbated by the George Osborne tax break on Inheritance Tax, which greatly increases the exempt allowance, if and only if the inheritance is tied up in bricks and mortar.

On the other hand, suppose the same old person were to sell and move into purpose-built sheltered accommodation. They are less likely to have accidents where design has the frail in mind – and easier to release from hospital especially if there is warden assistance or such accommodation was selected to be close to relatives. Such people are also much less at risk in times of crisis – overall, a resilient arrangement.

Yet, from the point of view of their heirs, their estate diminishes, as the cash released from sale of the home is used to pay carers and service fees. If the original home was worth more than half a million pounds, thanks to the Osborne inheritance tax break, the heirs also face paying more tax than if the parent had soldiered on in the original house.

Similar points can be made about the position of families who look after elderly relatives at home, who have sold or moved out of their own houses. The one incentive such families currently get from the system for providing their loving care (and potentially relieving the state) is the carers’ allowance. Yet it is rumoured that there is a plan afoot to means test that. So, if the arriving parent or relative owns the proceeds of selling a property, that allowance would be lost.

It is time we built the promotion of resilience into our design of social care. My proposals are as follows:

  1. Abolish the Osborne bricks and mortar tax break by re-establishing a single allowance rate for Inheritance Tax.
  2. Extend that principle across the range of tax and benefit policies for the elderly to ensure that there is no financial incentive for potential recipients of inheritances to encourage their parents/relatives to stay in their homes, if they wish to move.
  3. Keep the carer’s allowance universal, so that those caring for relatives at home or in nearby accommodation can continue to draw it.
  4. Resist lobbying from the care sector and residents’ heirs for the taxpayer to take on more of the cost of residential fees to protect inheritances. Despite the political clamour, such proposals would be paid in part from by the taxes of those who are looking after relatives either at home or in neighbouring accommodation. That would doubly incentivise more people to move into residential homes, further increasing cost and – critically – still further reducing national resilience.
  5. Offer tax incentives to the elderly to move out of family homes into sheltered accommodation, including a permanent end to stamp duty on such properties. (Ironically, many councils pay ‘key money’ to release family accommodation but there is no scheme for owner occupiers). Gareth Lyon’s excellent article on this site pointed out how small this sector still is compared with Australia and new Zealand.

Shakespeare’s adage “sorrows … come not as single spies, but in battalions” is apt in the era of globalisation.  We simply do not know what shocks and challenges are just ahead. We must recognise that how we structure social care – and the associated tax and benefit framework for the elderly and their heirs – has profound consequences for resilience in major crises. It is also important for services under pressure in ‘peacetime’.

Nick King: London is unlikely to have another “Big Bang” moment – but here’s how we can boost its potential post-Brexit

15 Jan

Nick King is a Research Fellow at the Centre for Policy Studies

When Rishi Sunak was recently asked whether the UKs departure from the European Union meant we should revisit the Big Bang Playbook for the City of London, what choice was there but to agree? After all, what self-respecting neo-Thatcherite Chancellor of the Exchequer could say anything else when such an enticing proposition is dangled in front of them by a newspaper editor (in this case, Andy Silvester, of CityAM)?

But the world were living in is not that of the mid-80s. The EU, for all its faults, does not have the equivalent of the Restrictive Practices Act which Nigel Lawson – another political hero of the Chancellors – worked so hard to overturn. The idea of another Big Bang moment, the kind of sudden, overnight liberation which occurred on October 27, 1986, is unlikely to materialise.

But that doesn’t mean that there isn’t huge scope to use Brexit to boost the City, and the British economy – especially if we learn the right lessons from those Thatcher-era reforms.

As well as sweeping away anachronistic, inefficient practices, the Big Bang served to introduce three vital new operating principles to the City of London, turning it from a relatively sleepy, parochial industry into a global powerhouse. Those principles remain as valid today as they were in the 1980s.

The first was to open the City up to the world. For generations, the institutions of the City had been highly clubbable places, populated mainly by members of the British establishment. The Big Bang introduced competition – and global competition at that – which led to drastic changes in attitude and performance. In time, that led to London becoming one of the important financial hubs in the world alongside New York, in either first or second place for insurance, investment banking, asset management, FX trading and more.

Some worry that leaving the EU risks this preeminence. Certainly, ever since the Brexit vote, it has been clear that Paris, Amsterdam and Frankfurt (among others) have had more than one eye on the opportunity to knock London off its perch. Fortunately, for all the reports of 100,000+ jobs going, the impacts thus far have been limited. As one industry player put it to me, not even the Germans want to go to Frankfurt.

But the ability to access, and deploy, capital across the continent is clearly vital, and jeopardised by the fact we have left the European Single Market without a deal on services. It certainly does not make sense for the City to be regulated by Europe: given the relative size of our financial services industries, that would be the tail wagging the dog. But the Chancellor and the Treasury need to negotiate a Memorandum of Understanding that allows us to continue to operate in, and cooperate with, the EU as soon as possible.

Yet we must also turn that challenge into an opportunity – to not just maintain but enhance the UKs status as a global centre for capital and financial services.

Our equity markets are already some of the deepest in the world. But we need to remain world-class and be able to finance the industries of tomorrow. The Listings Review, being undertaken by Lord Hill, is fully focused on achieving precisely that by making the regime more competitive.

Already it is estimated that the UK investment management industry manages some £10 trillion of assets. But again, we need to work harder to attract more capital from South America, the Middle East and South East Asia.

Attracting more capital – and talent – while continuing to build our reputation as a global centre for financial services should a central pillar of the Global Britain agenda.

The second principle from the Big Bang is proportionate regulation. Just as those reforms were predicated on, and driven by, regulation that works, we now need to make sure that our regulatory regime is one which supports rather than stifles our financial services industry – and which is tailored to our needs.

Coming out of the Single Market there are few voices clamouring for a bonfire of regulations in financial services. But at the same time, there is no point in sticking rigidly to a set of rules which dont necessarily work for us or our markets. Other authors on this site have, rightly, pointed to changes which should be made around the Alternative Investment Fund Managers Directive and the Markets in Financial Instruments Directive II. The collapse of the financial advice industry, in particular, has been entirely been driven by overzealous, anti-competitive regulation.

Another set of regulations we should put in the crosshairs are the Basel capital requirements, which can treat a small bank or a building society in the same way as a large investment bank – which also damages competition by making it much harder for the new challenger banks to compete. By taking a more proportionate approach, and freeing up domestic lenders’ capital, UK regulators can create a more competitive market and immediately unlock more funding for domestic priorities like sustainability, net zero and levelling up. It is also striking that Britain’s regulators rarely have a duty to consider the growth impacts of their decisions: as George Osborne once said, we do not want the financial services industry to have the stability of the graveyard.

Proportionate regulation is linked to the third pillar that drove the Big Bang’s success: our absolute reliance on innovation. The reforms of the Thatcher era brought in new players, new instruments and new ways of doing things. That same willingness to embrace innovation is imperative if we are to thrive in the future.

Today, despite our world-leading fintech industry, much of the pioneering innovation in financial services happens in Singapore, Shanghai and other Asian markets. Industry insiders claim that an abundance of caution prevailsat the FCA. For all the successes of its innovation “sandbox” (a concept some claim was forced on it by Osborne), it is still not doing enough to support innovation or to open up new markets. These are issues I have written about before but those in the fintech industry tell me FCA authorisation still takes too long.

The tone for the regulators is set by the Treasury, of course – and the Treasury needs to back innovation now like never before. It must ensure its regulators lose the “gold plating” mentality of old, which has put us at a competitive disadvantage, and use the Future Regulatory Framework Review to help us capture the global opportunities which abound.

The fundamentals of our financial services industry remain strong, as the Chancellor himself said, but they cannot be taken for granted. Despite the fact we are blessed in our language, timezone, history and rule of law, the forces of competition are ever stronger – on the continent and beyond. To maintain London and the UKs preeminent status will take hard work and determination.

And that, I would argue, is the most important lesson of the Big Bang. The new entrants, innovation and subsequent global success came about because we had a government that was ready to back the industry as required. It was a Government that recognised that financial services, the profit motive and shareholder interest were fundamental goods – and spoke out on their behalf.

We might not be in line for another Big Bang but to help us make the most of Brexit we need the Government to be pro-business, pro-City and to offer financial services enduring political support. If those principles are in the Chancellors “Big Bank Playbook”, then sign me up.

Anthony Browne: Post-Brexit Britain. Now we’ve taken back control, here’s what we can do with our new powers.

31 Dec

Anthony Browne is MP for South Cambridgeshire and a former Europe Editor of the Times.

When I worked for Boris Johnson during his first term as Mayor of London, I led on devolving powers to City Hall, and went through it with Oliver Letwin, David Cameron’s policy honcho. One idea was to devolve VAT to London, copying regional sales taxes in North America. “We can’t. It is against EU rules. Not sure why,” said Letwin.

With our agreement with the EU, arguably the biggest change is not individual policy areas, but the sense of empowerment. Throughout government, naysayers and those suffering excessive status-quo bias have been able to stop any initiative saying: “you can’t. It is against EU rules.”

Sometimes – like the abolition of the tampon tax and banning live animal exports – it was a correct interpretation of EU law. But often it was just a general prohibition. It would end the matter, because no one really understood the EU rules, they were too difficult to challenge, and basically impossible to change. It bred throughout the UK government machinery an intellectual dependency on the EU that led to a pervasive “can’t do” attitude.

But from January 1, no longer will anyone be able to say: “you can’t – EU rules”. We have jumped from the passenger seat to the pilot seat. Can’t do becomes can do. So – what should we do?

Eighteen months ago, at the depth of our Brexit political paralysis, ConservativeHome asked me to write a series of 10 articles highlighting potential “Policy Gains from Brexit” – things we might want to do and would be able to do once we had left the EU. So how are we doing?

On most of the issues, we are making great headway. Across much of government, the new empowerment has led to a renaissance of democracy and policy making. The Department of Environment, Food and Rural Affairs used to be a body for transposing EU rules, with a bureaucracy that had gone native.

But under Michael Gove, Liz Truss and George Eustice, civil servants have transformed from passive recipients to enlightened creators, giving the department a buzz of excitement.

The Agriculture Bill – the first time we have had an agricultural policy for over 40 years – scraps the dysfunctional Common Agricultural Policy, and replaces it with environmental subsidies (it was a pleasure to do my maiden speech on it).

The Environment Bill (which I sat on the Bill Committee of) doesn’t just replace EU environmental law, but enhances it and tailors it for the UK, much to the delight of green groups.

The Fisheries Bill gives us our own, more sustainable, fisheries policy (subject to quotas agreed with the EU).

The Government is consulting on banning the export of live animals for slaughter, which the impotent Labour government was unable to do when it wanted to.

We now have a Department for International Trade, with our own trade negotiators, giving us a trade policy for the first time in forty years, and pumping out our own trade agreements. Agriculture and environment groups have been enthusiastically debating how we protect standards in our trade policy, something nobody discussed before because we had no power to deliver it.

The Treasury is reviewing the whole framework of financial services regulation, with the aim of setting out an ambitious financial services strategy. Previous strategies for financial services (which I played my part in, as chief executive of the British Bankers’ Association) were rather optimistic exercises – the UK government didn’t have the power to do very much. Almost all our financial services regulation we have inherited from the EU, but we need to ensure it is proportionate, and supports innovation and competition, as well as international competitiveness and high standards.

The Treasury has scrapped the hated tax on tampons, which EU rules had prevented George Osborne from doing. The popular duty free from EU countries is coming back after a 20 year absence – with the ferries from Holyhead to Dublin offering it from Friday. The Government is launching freeports to boost trade and regeneration of more deprived parts of the UK. The Home Office has scrapped the much-hated freedom of movement, and replaced it with a global immigration policy making sure we can get the talent that our economy needs.

But now that we have this empowerment, what else could we do now we have left the EU? Here are some other possibilities:

  • Reform public procurement (under the OJEU rules), to make it fit for purpose and give small businesses more opportunities.
  • Promote competition among retail banks by reforming EU inherited capital rules.
  • Remove VAT on housing insulation and other environmental products, and reform the biofuels regime.
  • Transform our waste and recycling regime, so it is not an exercise in hitting EU targets.
  • Reform the EU’s second company directive to reduce pointless red tape for public companies.
  • Reform the General Data Protection Regulation to protect privacy while reducing burdens on small charities and businesses.
  • Reform Solvency II so our insurance companies can compete globally.
  • Promote collaboration programmes with the Commonwealth, rather than just the EU.

It has been obscured by the dramas around Brexit and Covid, but the policy arena is the most exciting it has been for a generation. Say goodbye to can’t do. Say hello to the new “can do” Britain.

Hancock bounces bounces bounces back

9 Dec

Matt Hancock came yesterday to the House of Commons and declared:

“At 6.31 this morning, 90 year-old Margaret Keenan from Enniskillen, who lives in Coventry, became the first person in the world to receive a clinically authorised vaccine for covid-19. This marks the start of the NHS’s Herculean task to deploy vaccine right across the UK, in line with its founding mission to support people according to clinical need, not ability to pay. This simple act of vaccination is a tribute to scientific endeavour, human ingenuity and the hard work of so many people. Today marks the start of the fight back against our common enemy, coronavirus.”

Such cheering news was also faintly disconcerting, for we have grown used to Hancock as one of the handful of ministers trusted by Downing Street to take to the airwaves and field question after question about the lethal onward march of the pandemic.

As Health Secretary, he is second only to the Prime Minister as the figure people seek to blame for the many grievous deficiencies in the official response to the crisis, ranging from care homes abandoned to their fate, through shortages of personal protective equipment, to the appalling deficiencies of the track and trace system and the dodgy use of statistics to justify restrictions on personal liberty.

The British media generally proceeds on the assumption that someone in high office has blundered. This is a healthy frame of mind, for it helps to ensure ministerial accountability, and to instill the fear of being found out which is one of the most effectual checks on corruption.

Hancock has proved resilient in the face of ferocious criticism. As a former minister remarks, “He’s got india-rubber bounce back – if you punch him he just gets up again.”

He received his early training in the George Osborne school of politics, which gave Hancock (in the words of Janan Ganesh in George Osborne: The Austerity Chancellor, published in 2012) “a pitiless focus on the political bottom line”.

Unlike many of Osborne’s followers, Hancock survived and flourished in the era of Theresa May, who in the summer of 2018 promoted him to the post of Health Secretary, to fill the gap left by Jeremy Hunt, whom she moved to the Foreign Office, to fill the gap left by the resignation of Boris Johnson.

A year later, May was forced out and Hancock entered the crowded race to succeed her, but after receiving the votes of only 20 MPs in the first round, threw in his lot with Johnson and asked to be made Chancellor of the Exchequer.

Johnson conducted a ruthless purge of May’s Cabinet, but kept Hancock on as Health Secretary, always an arduous role, and during the pandemic far more arduous.

Hancock, who is still only 42, communicates a somewhat gauche decency, but is also a highly professional and intensely ambitious man of government, valued by three successive Prime Ministers for his ability to keep the show on the road where others might crumble.

Neither he nor Johnson is especially popular just now with Conservative Party members: in this site’s most recent Cabinet League Table the two of them were barely above zero.

But the arrival of several vaccines which work, and the world-beating speed with which the first of these is being administered in this country, could well transform those rankings.

The pandemic has led to astonishing advances, for which the Health Secretary deserves a share of the credit, just as he deserved a share of the blame for the many things which went wrong, so that towards the end of April Hancock was in acute danger of becoming, as this site put it, the Scapecock.

It is a mark of the sudden improvement in the country’s prospects that Hancock was yesterday able to tell MPs, without a murmur of criticism, that in only eight months’ time he intends to take some time off:

“It makes me very proud that we have managed to start this vaccination programme sooner than many people anticipated. People told me that it was not going to be possible and that it was all very difficult. It has been difficult, but we have got there, and we did so because of international science, working with German scientists and American pharmaceutical companies, and people right around the world working on this project. I have high confidence that the summer of 2021 will be a bright one, without the sorts of restrictions that made the summer of 2020 more restricted. I have booked my holiday—I am going to Cornwall.”

Dean Godson: It’s easier for the right to a left on economics than for the left to move right on culture. That’s a plus for Johnson.

21 Nov

Dean Godson is the Director of Policy Exchange.

“You have limited time, limited capacity, and limited choices. Where does your focus lie?” asks Rachel Wolf on this site last week. Well, the Conservative Party has been walking and chewing gum since Disraeli’s 1867 Reform Act — and there is no reason why the “reset” triggered by the departure of Dominic Cummings should change that.

Representing a critical mass of both the prosperous and the “Just About Managing” classes and parts of the country is what all successful political parties do in democracies. Since the Tory party became the party of Brexit and expanded – or maybe one should say rediscovered parts of its working class base – it is certainly true that the heterogenous coalition which it represents has spoken with a somewhat different accent.

Indeed, a case can be made that the part of the political class that ascended to power after December 2019 represents a significant break with all governments since the fall of Margaret Thatcher. The governments of John Major, Tony Blair, Gordon Brown, David Cameron and Theresa May (though less so the latter) tended to put global integration before national sovereignty, the metropolitan before the provincial, higher education before further education, trains and planes before buses, diversity before cohesion, the cognitive classes before the artisanal ones.

Their version of the national interest broadly reflected the priorities of what my colleague David Goodhart, who was interviewed recently by this site, has called the people who see the world from Anywhere. And in his most recent book Head, Hand Heart, he describes a narrowing definition of a successful life, as seen by Anywhere Britain, based around academic success, a university education and entry into high-status professional employment. This is the world of the big cities, the university towns and much of the middle and upper public sector, (and certainly of wide swathes of the senior civil service which were at daggers drawn with Dominic Cummings).

But what of that part of the population that cannot achieve or does not want to achieve this version of success? They still want recognition, and to feel able to contribute to the national story and the Brexit vote provided the opportunity for many of them to say ‘no’ to much of that governing class consensus.

The Vote Leave strand of the Johnson Government sought to represent and appeal to this part of the electorate – summed up in the phrase “Levelling up” – in a way that no government, let alone a Conservative government, has done for decades. That has, unavoidably, created tensions with many powerful interests and beliefs, including inside the Tory Party itself, many of which came to be focused on the pugnacious personality of Dominic Cummings.

A more emollient tone can be struck – but to abandon what was termed “Erdington modernisation” (after Nick Timothy’s Birmingham roots) and return to the necessary but not sufficient Notting Hill modernisation (in which the party made its peace with much of modern liberalism) is now very hard.

This is the case for electoral reasons as much as any other – with both Keir Starmer and Nigel Farage both praying for a return to Cameron-Osborne era Conservatism with its implicit assumption that the common good can be achieved through a kind of trickle-down from the most successful and dynamic parts of our society.

There are other reasons for thinking that it would be foolish to switch back now. Politics for most of the post-war period has been dominated by economics. And, of course, a thriving economy is still a sine qua non for any government. But economics is a means not an end, and the economistic bias of the Anywheres gave us the failed cost-benefit analysis of the Remain campaign.

Today’s much higher profile for the security and identity cultural issues ought to be a boon to the centre-right because, as has been pointed out, it is easier for the right to move a bit to the left on economics (as it certainly has done) than for the left to move right on cultural issues (as Starmer would no doubt like to do, but will find his path blocked).

This does not require an aggressive culture war from the right. The cultural offensive has been coming mainly from the left – as exemplified by the controversies over statues and the decolonisation of museums. The right needs to stand up for common sense, and for the large majority who accept the equalities of modern liberalism but do not want their sensibilities constantly undermined.

Conservatives should be the party of value diversity. Go back to the 1950s and the country was often dominated by a conformist, traditional culture that stunted the lives of many people and often punished those who deviated. Over many decades, much higher levels of choice and freedom for women and minorities of various kinds have been achieved.

Part of the Left now wants to impose a degree of progressive conformity comparable to the traditional conformity of earlier decades. Tolerance and pluralism should be the watchwords in these matters — with a strong bed-rock of rights and anti-discrimination legislation, but also an understanding that rights and values often clash and the ratchet should not only turn in a progressive direction.

That all said, walking and chewing gum is possible, and there is space, post-Cummings, for a new tone and a new stress on policy bridges that seek common ground between Anywhere and Somewhere priorities.

The green industrial revolution is clearly one of those policy areas, and should not be seen as a soft bourgeois indulgence. As the Prime Minister said on Tuesday, it is places like Teesside, Port Talbot and Merseyside that are now centres of green technology and jobs. Ben Houchen, the mayor of Tees Valley, underlined the same point in the introduction to Policy Exchange’s recent report on The Future of the North Sea, and on ConservativeHome earlier this week. Research we will soon be publishing on redesigning the national grid should also generate many good, skilled jobs in areas that are sometimes seen as “left behind”.

The re-set seems more likely to be a milder form of reboot. Without Cummings, some of the urgency will go out of parts of the recent agenda, particularly the machinery of government and data in government focus. But many of the priorities of the new conservatism—Brexit, levelling up, higher spending on the NHS and police, social care, boosting further education, immigration reform, restoring some bustle and pride to Britain’s often unloved towns—are owned by a broad range of the people that matter.

The Red Wall voters are likely to prove more complex beasts than in the Vote Leave or Remain caricatures – and no political strategy can focus too much on just one slice of the population but without producing visible, tangible improvements to the lives of people in places like Stoke and Leigh before the next election the Conservatives will not be returned in 2024.

Amy Selman: How to be a campaigner and a governor – lessons from Johnson’s time as London’s mayor

16 Nov

Amy Selman was policy adviser to Boris Johnson when he was Mayor of London from 2010-2016.

Much was written about the personalities of the key players within Downing Street this week – and the consequent drama and intrigue captures the interest of the Westminster classes.

Less headline-grabbing are the methods of working which may also need a refresh in order to reassure Conservative MPs that the Prime Minister’s team is working for one of their ultimate goals – re-election in their constituencies.

It is too glib to say that campaigners can’t deliver in government. MPs know this because of the impressive record of many of their local council leaders, who tend to stay in office for longer, and run successful re-election campaigns.

In London as Mayor, Boris Johnson snapped up key local leaders, from Stephen Greenhalgh, Mike Freer and Theresa O’Neill (then leaders of Hammersmith & Fulham, Barnet and Bexley councils respectively), to replicate at the city level what they had done for their boroughs.

This team, managed first by Simon Milton as Chief of Staff, and then by Edward Lister, helped the Mayor run a united team of both civil servants and politicians. Some observations:

Gearing everything towards delivery – publish a traffic light system

The first is that the machinery of government can and wants to work for you, and the best way to consolidate that is through your manifesto.

Leaders are elected on a platform, and the civil service’s duty is to help execute it. A focus on delivering policies that voters chose is key to getting the machinery working. At City Hall, this was done by a diligent senior team who produced a monthly traffic light scoresheet for each 2012 manifesto commitment, and brought those in charge of implementing it to an Investment and Performance Board, with minutes that were almost wholly public.

This meant some difficult conversations both with heads of such agencies as Transport for London, and with the Deputy Mayors appointed to oversee them, but the process both integrated the teams and served as red flags when commitments were under threat.

The traffic light system was not always the favourite part of people’s work – more exciting, glamorous comms opportunities would capture daily headlines  – but the Chief of Staff and Permanent Secretary ensured that this core business had to be met first.

Adapt delivery for campaigning materials – so providing a record

The Board papers allowed the political team to extrapolate for London’s Conservative MPs achievements they could use in campaigning materials, such as those that CCHQ provided borough versions of newsletters.

Conservative MPs need regular red meat – material they can use to campaign on a record. Progress on manifesto commitments are the way to provide that, regardless of daily stories that blow hot and cold. Donors, too, want to see a scorecard that can reassuree them that core policies are being worked on.

Brand your successes.

Johnson’s team also instigated the appropriate branding for schemes – such as, at the insistence of Richard Blakeway, one of the Deputy Mayors, that all new part-funded Homes for London were attributed to the Mayor’s office as well as the private housebuilder.

There is a current debate about this practice in relation to UK Government schemes in Scotland.  It should be settled immediately: if taxpayer money is being spent in any part of the UK, the brand of Her Majesty’s Government must be displayed.

Adapt set pieces with bitesize briefings for MPs to use

Set pieces such as the Budget are another amalgamation of campaigning and governing. As Chancellor of the Exchequer, George Osborne was a master of this fusion, and would pass on long shopping lists from London to civil servant teams, which would then whittle it down to list concrete commitments.

One example is the Long-Term Economic Plan for London of 2015, which adapted the work of the independent London Finance Commission – triangulating between Whitehall, local enterprise partnerships and other regional demands that the then Government was facing to ensure a fair share of investment.

Bitesize briefings based on the LTEP ensured that the huge sums pledged by the Treasury could be translated into local schemes and MP campaigning wins – such as nine new housing zones and two new tube stations. Mayors and regional MP leaders have a huge role to play in similar processes, and should feel that they are working with others as one team all along.

Create a network of insiders at all Party ranks

As Mayor, one of Johnson’s most frequent requests was: ‘what’s happening?’

These were not idle queries” rather, he created a network of allies to help respond to whatever target audiences were talking about: advisers and senior civil servants on forensic London issues; Tory MPs on constituent postbag audits (along with the gossip from dining clubs and the terrace), local council activists on doorstep concerns.

Remember who put you there – so get out and about.

Machiavelli wrote that “he who becomes a prince through the favour of the people should always keep on good terms with them”.  Jonathan Powell’s twentieth century addition was “and if his popularity goes down, his party becomes restless”.

For a mayor known only by his first name, the key to keeping on good terms was to get out and about. In a non-Covid-19 world, I’m sure that we would have seen a Prime Minister Johnson out and about in high streets across the country.

The rotating local London People’s Question Times, as with David Cameron’s Cameron Directs, created a discipline of looking at how wider policies were improving specific areas.

Instead of talking about body-worn cameras or free school places in the abstract, we would have to produce the figures for a borough and explain the exact nature of their benefits.

This helped local campaigners, along with such activities as the boost of a star-power walk, opening of one of London’s 100 new Pocket Parks or regeneration flagships such as Battersea Power station. There was never any tension at the dual nature of these events, with political visits coupled to official events -and Ministers are itching to get back to this even in a virtual world.

Respect the Grid, but don’t expect it to deliver key messages to target audiences

City Hall straddles – without fully controlling – policy areas, agencies and delivery bodies. Whitehall of course has this writ far larger. So the temptation to try and centralise announcements is natural: but in London, it rarely worked seamlessly, and with the audiences the Mayor wanted.

The grid is really a tool for journalists and Westminster, not for voters. It is important, especially if a key audience is the Tory backbenches, who need a Minister for The Today Programme, Newsnight and social media. To get to the voters, a string of random announcements on a topic such as transport should be consolidated into key messages repeated – which meansresisting the need to feed the news cycle beast.

Use the authentic voice – no-one writes to connect like Johnson

The style and reach of Johnson’s Monday Daily Telegraph column did more to focus on priorities than set speeches in warehouses or hard-hatted engineering visits.

Not that it was always disciplined: we would often reassure Numbers 10 and 11 on a Sunday that he would publicly support a new NHS or tax initiative…only for Monday morning’s paper to be a musing on ski holidays or working habits

But the Mayor’s authentic voice though cut through to core voters. And it became clear that when other Ministers wrote diary columns – in the Spectator for the Tory faithful, or in Grazia for new audiences – these would get far more discussion than press release columns.

After a difficult period that no post-war Prime Minister has had to grapple with, a refocus on what the Conservative Party promised voters in 2019, and how each constituency will feel the benefits, would help the Government to regroup. Time to return both governing and the campaign to Tory ground.

Finkelstein shows that moderate, decent, pragmatic, intelligent conservatism is alive and well

5 Sep

Everything in Moderation by Daniel Finkelstein

One of the many merits of Daniel Finkelstein’s collection of his columns from The Times is that it sent me back, for purposes of comparison, to the two other collections by writers for that paper which I happen to possess.

Taking Sides, the first selection of Bernard Levin’s journalism to be published, includes his account of his mother’s troubles with the North Thames Gas Board, written in 1973. Rather to my surprise, it still made me laugh out loud.

Best Seat in the House: The Wit and Parliamentary Chronicles of Frank Johnson, edited by his widow, Virginia Fraser, includes the piece read at his memorial service by David Cameron, which was written in 1981 for Now! Magazine and begins:

“Unsuccessfully, as will now emerge, I had resolved from the outset that there were two subjects which had received sufficient airing on this page and would not be mentioned further: Wagner and Mr Roy Hattersley.

“Concerning the one: nobody in his right mind would deny his capacity for the sublime, his surges of lyricism, his sheer weight and scale, but there is also his torrential prolixity, his essentially outdated nineteenth-century attitude towards his art, his foggy symbolism and an epic tedium which modern audiences should surely not be expected to endure. These are some of the drawbacks of Mr Hattersley.”

Again I laughed out loud. Johnson was an even finer comic writer than Levin. They were among the wittiest figures of their time, gave enormous pleasure to their readers, and are now passing into the obscurity which awaits even the most celebrated journalists.

Finkelstein is not so brilliant a stylist as his two illustrious predecessors, but it is right to place him in this tradition, for since the age of eight, when he started to read The Times for its football coverage, he has been a devoted reader of that paper, and treats it with the high seriousness, one might say the reverence, which is required if one is going to do one’s best work for it.

He is now 58, has contributed to The Times since 2001, and brings to it several qualities which neither Levin nor Johnson possessed. One is a knowledge of politics as conducted on the inside: Finkelstein has worked closely for David Owen, John Major, William Hague, George Osborne and David Cameron.

His columns are informed by his experience of what works, and more importantly, what does not work. On 4th October 2006 he began a piece with the words:

“I am worried about David Cameron. I fear he will have too much policy. I am concerned that there will be too much substance and not enough style.”

Finkelstein proceeds to an exposition of political parties as “identity brands”:

“Voters make choices in order to make statements about themselves, to establish their own identity, as much as they do because of anything the parties offer them.”

I am allergic to the discussion of parties as “brands”, but Finkelstein does it so well that I always read him on the subject. Apart from anything else, he has invariably read some book, on, say, game theory or social psychology, which I know I shall never read myself, and has extracted valuable insights from it, which he proceeds to share with his readers.

The principal task of the social scientist is to establish, by the most laborious research, the truth of propositions which were already known, by anyone with a modicum of common sense, to be true.

Finkelstein gives us the best of this social science, without himself degenerating into a deluded policy wonk. As he goes on to say in his piece about brands:

“Policymaking…is a bit of a con. Manifestos pretend to be an entire programme for government when in reality even the most detailed of them only cover a few items. Voters don’t make judgments based on these programmes and they shouldn’t either.

“What matters is not such bogus ‘substance’, it is the governing style of the prospective rulers. Are they strong or weak? Interferers or liberals? Atlanticists or Europhiles? Moderates or extremists? Localisers or centralisers? Tax cutters or big spenders?”

And he applies this insight to the then Labour Government:

“Labour has spent much of the past five years undoing stupid things it committed itself to in opposition and then did in its first five years. The problem with politicians, you see, is not that they don’t do what they say they will, but the opposite – they try to do what they said they would do, even after realising it wasn’t a good plan.”

I’m sure Boris Johnson – who barely appears in these pages – would agree with every word of that. So would Lord Salisbury, who said “the commonest error in politics is sticking to the carcass of dead policies”.

Like all good columnists, Finkelstein acknowledges his duty to entertain the reader. For New Year’s Eve 2014 he reflects on how much time he spends writing individual replies to emails, and devises a number of standard replies to the most common emails:

“Thank you for your email. I would be happy to help you with your PhD on ‘Idiots who have given the Conservative Party electorally disastrous advice’. Please thank your supervisor for thinking of me. Since you need only four hours of my time, we must fit in a meeting. It might be difficult in the next twelve months, as it is election year, but I will make every effort to organise it. It would certainly be easier for me if I didn’t need to visit you in Sheffield.”

If Finkelstein had wanted to be a comic writer, he might have been in the Stephen Leacock class. But the charm of his columns lies in their mixture of deeply felt politics with a sense of his own absurdity.

Max Beerbohm said Trollope reminds us that sanity need not be philistine. Something similar might be said of Finkelstein. He reminds us that a devotion to compromise, moderation, loving one’s parents and getting on with one’s neighbours need not be philistine: are among the pillars of our civilisation.

He defends the suburbs, including Brent Cross Shopping Centre, and made me feel a bit snobbish for disliking that place so much.

And although he makes almost no references to English literature, not even to that eminently political playwright, William Shakespeare, Finkelstein knows more about our political history, and our 55 Prime Ministers, than just about any other columnist now writing.

When he suggests that “the British voter never gets it wrong”, and the right party has won every election for the last 80 years, he is not indulging in windy idealism, but has at his fingertips the arguments needed to support his case:

“You see, for all that the Conservatives fell apart in the 1992 Parliament, I still think it was clear that a Kinnock government would have been worse. No one needs to tell me how bad things got by 1997, because I was there (I always insist on the retention of that comma). But I still assert with confidence that the voters did the right thing putting the Conservatives back in power.

“Neil Kinnock was entirely unsuited to being prime minister. His endless whirling speeches showed that. As John Major pricelessly commented, as Kinnock didn’t know what he was saying, he never knew when he had finished saying it.”

A collection of newspaper articles is like a box of chocolates: one fears that if one scoffs the whole lot at a sitting, one will end up feeling sick.

But with Finkelstein, I kept on saying to myself “I’ll have just one more”, and didn’t end up feeling sick at all. I felt that moderate, decent, pragmatic, intelligent conservatism is alive and well.

Ryan Bourne: A message for Johnson and Sunak on tax rises. Not now. And not these.

2 Sep

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

How’s this for a false dichotomy? Last Saturday, Prospect asked: “Post-Covid, are taxes hikes essential to fund the future? Or should we abandon “deficit fetishism” and spend our way to prosperity?” [i.e. through borrowing]. I shouldn’t need to tell ConservativeHome readers that “spend to grow” and “spend to grow”—the only difference being how to finance it—are not an exhaustive set of fiscal policy options post-pandemic.

But that tweet, sadly, reflects conventional wisdom. You should take the pre-Budget briefing in the Sunday papers about Treasury desires for £20-30 billion in tax hikes through capital gains tax, corporation tax, fuel duty, an online sales tax and restrictions on pensions tax relief with a pinch of salt. Before every recent budget such stories have emerged, perhaps due to kite-flying or overexcited journalistic coverage of illustrative exercises in how one could raise revenues. One suspects the briefings may even be a political ploy—raising fears in the Tory base before Number Ten saves the day.

Yet there’s undoubtedly an unnerving regularity to them. Alongside a steady drumbeat from “One Nation” Tories and such organisations as the Resolution Foundation, the idea that large tax hikes will be desirable and necessary is taking hold, with Covid-19 apparently making this agenda more urgent.

We are told, as the kitchen sink of argumentation is thrown, that the pandemic itself proves the false economy of a “hollowed out” state after a decade of austerity. Or that the “levelling up” and the “inevitable” higher spending we will now want on health, welfare benefits, and higher public sector pay means tax hikes are needed. Or that the crisis necessitates urgent repair to the public finances, and that there’s simply nowhere left to cut spending.

None of these arguments, however, stand the test of reason. Countries that have dealt with the Coronavirus better include those (South Korea, Taiwan, Australia) with much lower tax-to-GDP ratios than the UK and much lower health spending too. Many with higher tax-to-GDP ratios (France, Belgium, Italy) have seen similarly shocking death tolls to us.

At best, any failure to deliver resources where needed reflects bad state priorities, not an impoverished public realm. Indeed, the story of a hollowed-out state at a time of the highest tax burden since the early 1980s, coupled with this international evidence, suggests ascribing blame to austerity for poor performance is both ahistorical and parochial.

The wisdom or otherwise of  the “levelling up” agenda, and how best to pay for it, is largely unrelated to the pandemic too. Actually, to the extent that Covid-19 affects the desirability of infrastructure and public service spending in the regions, it throws substantial doubt on the benefits of projects such as HS2 and other city and town revival plans.

Who knows what lasting impact the crisis will have on remote working, the location of activity, and favoured transport modes? One Nationers arguing that the virus proves the need to level up would have us believe that the pandemic’s effects are significant enough for a tax revolution, but insignificant enough to alter the desirability of any of their proposed spending. One might almost suggest motivated reasoning here.

In macroeconomic terms, the case for significant tax rises now is weaker still. The point of bridging support through furlough was to shelter businesses and workers from this unexpected shock. To pass the bill to the private sector now as it struggles back to life would strangle the recovery. And for what? Borrowing costs are low, and we have no idea yet whether and how much this crisis will leave a permanent budget hole once emergency spending stops and private sector activity revives. In fact, even borrowing to date has not been as high as initially feared.

Of course, the extra debt to deal with the crisis has to be paid somehow, eventually. But, as I argued here before, unusual shocks such as pandemics and wars primarily result in step-level debt-to-GDP increases rather than ongoing budget holes, because you stop spending on the immediate threat afterwards.

The implication is that modest consolidation over decades is optimal to account for the extra incurred debt, rather than adopting large tax increases to compensate over a Parliament. Economists call it “tax smoothing”—debt provides a safety valve to allow us to only modestly change spending or taxation over long periods to maintain incentives. Of course, if the Government thinks that, for political reasons, it must expand welfare benefits or health spending permanently, this would be a normative choice: there is nothing inevitable about sharp tax hikes.

Even if you think permanent scarring will occur, those taxes suggested to raise revenue seem bizarre choices today. The Government presumably wants us to be Covid-cautious still. Two ways of reducing risks would be to drive more rather than use public transport and to shop more online.

Aside from all the other downsides of raising fuel duty and introducing an online sales tax, to use the tax system to incentivise worsening virus transmission right now by making driving and online shopping more expensive seems bizarre.

Raising top capital gains tax rates to 40 or 45 per cent would simply be self-defeating from a revenue-raising perspective. Capital Gains Tax on many investments represents a double tax. The justification for having it at all is to deter people hiding income as capital gains.

But there’s a revenue-maximizing balance between this effect and deterring people from selling assets. The Coalition government introduced a top 28 per cent CGT rate precisely because HMRC research suggested this raised most revenue. Though it was then lowered to 20 per cent under George Osborne, raising it to 40 per cent plus would reduce revenue relative to a lower rate. We’d get less investment and entrepreneurship when we need it most too.

And then there’s the mooted corporation tax rise from 19 back to 24 per cent. Taxes on mobile capital will deter foreign investment just as Brexit is set to happen, as well as reducing the after-tax return on new domestic projects. Who will bear the costs? Not just “the wealthy,” as commonly asserted, but workers too: evidence suggests that they bear between 30 and 70 percent of the burden of taxes on corporations.

Not only is the tax rise call premature then, but the specific proposals don’t conform to the pandemic’s needs or Boris’s Johnson’s ambitions to create a high-wage economy. Covid-19 may permanently scar the public finances, sure. But as yet its full effects are unknown and there’s little cost to pausing to see. Anything else at this stage is using the crisis as a pretext for raising funds for hobby horses.

If the Prime Minister truly objects to this rationale as reported and understands the threat to the nascent recovery of sharp tax rises today, he should take this message to his Chancellor: on tax rises, not now and not these.