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.

Garvan Walshe: We can be sure that those who have been vaccinated won’t die of Covid. So the case for lockdowns is vanishing fast.

18 Feb

Garvan Walshe is a former National and International Security Policy Adviser to the Conservative Party.

Having detected three cases of Covid–19, Melbourne has been put into lockdown. The European Centre for Disease Control suggests it might have to be maintained until the summer. Germany is getting increasingly jumpy about new variants, despite never exceeding 300 cases per 100,000 people.

Spurred by vaccine delays – particularly acute thanks to the European Commision’s utter mess of procurment – a narrative is taking hold. It states that the vaccines are ineffective against new variants, and could be ineffective against variants yet to emerge. What is needed, the argument goes, is to prevent the circulation of the virus, and therefore the chance that these variants could ever emerge.

We know, of course that for the elderly, and for those with co-morbidities, Covid is lethal. In old and fat Western societies, these can easily be millions of people. For the rest of us, it, with a few exceptions, is not unlike other afflictions: it ranges from utterly harmless to deeply unpleasant – sometimes with long-term effects. We don’t shut society down to eliminate these in the case of other diseases.

For the last year, most of these populations have been deprived of their freedom. They have sacrificed their ability to pursue their normal life and exist as social beings in order to protect the vulnerable in society. Perhaps the introverted don’t mind do much: the other day I asked a friend, a writer of scholarly books who lives in America, how he was coping, and he replied “since I’m a hermit, I’ve nothing to complain about”.

But some of us like company, and have been hard hit. And since in our open societies people tend to gravitate to jobs that suit them, the inequality is sharpened.

Strict, long confinements like France’s and Belgium’s are the toughest to bear. In Spain, by contrast, cafes and restaurants have usually remained open, if for fewer hours. People with secure jobs in the public sector will come out of this pandemic with higher savings ,because there’s nothing to spend money on.

But if you run a small business, the difficulty in meeting people makes finding new clients extremely hard, even if you’re not in a sector hit by restrictions. It’s worst of all for workers in hospitality and travel – hugely improtant in sunny southern Europe.

The mental health effects of enforced solitude are only slightly leavened by our knowledge that everybody else is going through the same thing. Thankfully, Spanish and Italian authorities have been less draconian this time, and don’t restrict people from walking outside.

That’s not the case in Paris, where you are formally limited to staying within a kilometre of your home. It goes without saying that it helps to be richer: self-isolating in a cramped flatshare with unsympathetic housemates is much more difficult than in a spacious family home with a garden. For people trapped in abusive relationships, it’s a living hell.

It’s one thing to endure all this in order to prevent people dying, and for a relatively short period of time; quite another because something could happen that might return us to this situation. Our nerves are already wearing thin, capital running low and reserves of hope becoming exhausted.

As the most basic level, the aggregate effect of vaccination is to reduce the number of people susceptible to the virus. So what would happen if restrictions were lifted entirely once the vulnerable were vaccinated?

If 80 per cent of the vulnerable are vaccinated, instead of 10–15 per cent of the population being at serious risk, then two to three per cent are.  If their infection fatality rate is five per cent, they are all infected, and vaccination is 70 per cent effective, that would result in 0.2 per cent death rate – or around 90,000–120,000 deaths in the UK.

But in reality, their death and serious illness numbers would be considerably lower than that. For a start, they would not all be infected. Though vaccination is at least 70 per cent effective against infection, it is 100 per cent effective against serious illness and death: this is true even for the variants. We can be sure that anyone who has been vaccinated won’t die of Covid.

Indeed, evidence is now emerging that vaccination reduces transmissibility as well as severity of infection: this is good in itself, and also because it reduces the number of copies of the virus that are capable of generating mutations, and therefore the likelihood of more troublesome variants emerging.

Finally, with good surveillance of infection strains, we will have time to adapt the vaccine to variants that emerge. This is because the maths of exponential growth leads to an explosion, but only after a phase of slow expansion. That phase, which lasts several months with Covid, is enough time to refine vaccines, provided the mutations are detected early.

This changes the calculation that justified the earlier lockdowns. Last year, Imperial College’s modelling calculated that 550,000 people could die, and so justified the extreme restrictions that were imposed.

As the threat recedes, reopening should not be an all or nothing affair. Measures that don’t cost very much, such as tests before international travel, masks on public transport, working from home where possible, limitations on capacity for cinemas and theatres, bans on large events where superspreading can occur, and so on, should continue for longer.

But basic restrictions on seeing our fellow human beings, particularly outside, and on people who make their living serving food and drink while we do so need to be among the first to go.

Timing is critical, of course, because vaccinations take a few weeks before they generate strong immunity, but their effects can be tested by observing the number of more severe cases and hospitalisations. The dramatic success of Israel’s vaccination programme has been overshadowed by the ultra-Orthodox community’s refusal to take part in even basic social distancing but, even there, the make-up of hospitalisations has changed. As vaccines are distributed, the proportion of severe cases will go down, and pressure on hospitals will ease, allowing more opening up. This – not the mere fact of vaccines being administered, nor the complete elimination of Covid cases – is the essential metric.

Actual eradication of viruses is extremely difficult, and seems only to have been achieved with smallpox. Covid will stay endemic and mutate in the world population. However, that’s not as scary as it sounds. The virus only cares about replicating and finding new hosts. Mutations that help it spread harmlessly are much more useful to Covid than the ones that kill us.

As long as most of us are exposed to it while young, like the other coronaviruses that circulate and cause colds, it won’t cause a public health crisis. That, not zero-covid, is an outcome that we, and the virus can both live with.

Ryan Bourne: The lifting of lockdown. Yes to prudence but no to pessimism. The projections of these gloomy scientists seem absurd.

16 Feb

Ryan Bourne is the author of Economics In One Virus, a forthcoming book available for pre-order on Amazon UK. 

As Boris Johnson’s February 22 “roadmap out of lockdown” day draws closer, the Prime Minister faces sharply conflicting advice. The backbench Covid recovery group (CRG) demands that schools return on March 8, and that all lockdown restrictions are lifted by April’s end.

Scientists and Covid-19 modelers from Warwick University and Imperial College, on the other hand, say a gradual lifting of restrictions from March through July would see between 83,000 and 150,000 people perishing from a massive fourth wave death spike. They recommend “non-pharmaceutical interventions” remain intact through summer.

Who is right? Given what we know, the politicians appear slightly too bullish. The modelers, on the other hand, seem ridiculously pessimistic. But a great deal of uncertainty remains and value judgments abound.

Committing to the CRG’s timetable would leave the Prime Minister a hostage to disappointment if first vaccine doses prove less efficacious against death than widely believed. Precautionary prudence demands we wait to see clear trends in the data before delivering major policy change. Especially because a release, amplified by its signal, will inevitably raise the prevalence of the disease over time, including among those still susceptible who would be vaccinated soon.

Looking at the collapse of children’s infections during lockdowns suggests that school closures may have had a large impact on disease prevalence. So here, in particular, I’d be more cautious as first doses continue to be administered to groups 1-9. Yes, the societal damage of lost schooling is enormous. But is re-opening them entirely in early March, rather than a month or so later when prevalence is much lower, really so crucial to life chances, on the margin, to risk the lives of those for whom vaccinations will occur within weeks?

This is not to say that targeted relaxations cannot begin. Outdoor activity, certain sports, and indoor retail could be green-lighted relatively safely, with the usual social distancing protocols and stronger guidance on ventilation. If schools can do rapid surveillance testing, we could have targeted closures only if multiple cases arise. In the depressing absence of that, localised returns in rural low disease prevalence areas seems reasonable. But until the high first dose efficacy against death or severe disease is confirmed and we’ve vaccinated more people, I’d probably opt for slightly more caution.

For all that I might quibble with the CRG on timing, they appear to understand the coming trade-offs better than certain scientists. Pretty soon, almost all over-70s will have been vaccinated once. These demographics make up 88 per cent of deaths to date. Vaccinations should therefore slash deaths rates observably in March, in turn reducing lockdowns’ benefits.

Hospitalisations will prove stickier, because of the large numbers of middle-aged people susceptible to severe disease. The capacity of the hospital system will remain a binding constraint, hence why everyone is advocating a glidepath to normalisation, rather than a “big bang” reopening.

That said, the modelers’ pessimism for even gradual relaxations is jarring. The Warwick model predicts 2,000 deaths per day in August if we “fully reopen” by July, even if 95 per cent of care home residents and 85 percent of over 50s are vaccinated. That would mean more deaths this summer than the pandemic to date. Imperial’s model assumes an 85 per cent general population vaccine take-up, but similarly predicts 130,800 more deaths even if vaccines are administered at a sustained rate of three million per week.

The logic behind these shocking figures is that if 85 per cent of people get a first dose which is, say, 70 per cent effective against symptomatic disease, then 40.5 per cent of people remain “at risk.” Presuming normal Covid-19 death risks apply to those with symptomatic infection implies lots of people still susceptible to death. On the path to everyone getting vaccinated, then, they believe a gradual release of restrictions will see an increasingly unmitigated spread that kills many, even accounting for the higher efficacy Pfizer vaccine and second doses.

Yet these assumptions seem absurd. Vaccine take-up rates have been higher so far. Official data for England through 7 February suggests 93.5 per cent of those eligible in care homes have been jabbed once, as have 91 per cent of over 80s, 96 per cent of 75-79s, and 74 per cent of 70-74s already. The modeling, meanwhile, seems to ignore entirely the evidence that vaccines might mitigate against severe disease or death, even among those vaccinated who still catch Covid-19. If confirmed in data, that alone would invalidate these results.

What’s more, modelling restriction relaxation as if this is synonymous with unmitigated spread seems misguided. Those in vulnerable groups who cannot take vaccines will surely remain cautious. In fact, they would probably be even more careful in the knowledge others are mixing more. A host of voluntary social distancing, mask-wearing, and an ongoing preference for outdoor activity will surely remain for many younger people too ,as they seek to avoid disease in spring and summer before being vaccinated or boosted. Releasing government mandates, in other words, won’t return us to “normal” behaviour.

But even if we did a lot of normalisation, lockdown-like measures would still be disproportionate against the end risks. If severe disease and death rates will indeed plunge after one dose, the value of the health benefits of population-wide restrictions fall dramatically relative to their extraordinary costs too.

Some scientists advising Johnson use banalities such as “the lower the cases can get, the better.” But the idea that nationwide restrictions remain the most cost-effective policy in a world where the overall fatality and severe disease risks are low, and highly concentrated in a tiny slither of the population, is clearly absurd.

Once priority groups have had their vaccines, the Great Barrington Declaration will be essentially correct: “focused protection” for those still vulnerable will be the order of the day.  This will be all the more feasible given the smaller number of people still at risk. For a much lower social cost than lockdowns, we could send these people a healthy supply of N-95 masks, indoor ventilation machines, a year’s worth of rapid testing kits for any guests, and have taxpayers finance carer networks that minimize disease-spreading risks for them.

Such measures will obviously be far cheaper in mitigating the remaining risks than imposing massive restrictions on everyone indefinitely. And, of course, ongoing surveillance will continue to monitor new mutations and local clusters, just as many businesses will also maintain mask requirements that mitigate risks for vulnerable patrons.

What scientists must acknowledge, then, is that the same logic that said lockdowns’ benefits were huge when vaccinations were imminent says they could be tiny once vulnerable people are protected. If first dose efficacy proves as strong as we think, the Prime Minister will have to break with those overly cautious scientists who fail to think about the marginal costs and benefits of lockdowns as vaccinations proceed.

George Freeman: The industrial strategy reforms I led helped to deliver Britain’s vaccine success. Now for the next phase.

1 Feb

George Freeman is a former Minister for Life Science and Chair of the Prime Minister’s Policy Board (2016-18). He is co-author and editor of the 2020 Conservatives book Britain Beyond Brexit.

The combination of Covid-19 and the Crash of 2008 have left this country facing the most serious crisis in our public finances since 1776. Unless we make the post-Brexit, post-Covid recovery a transformational renaissance of enterprise & innovation on a par with that unlocked by Thatcher Governments of the 1980s, we risk a decade of high debts, rising interest rates and slow growth.

We have a truly unique opportunity before us. As a science and innovation superpower, with the City of London now outside the EU’s rules for the first time in nearly fifty years, we can unlock a New Elizabethan era of growth – with Britain a world-leader in global commercialisation of science, technology and innovation. It is what our entrepreneurs have been crying out for. Now is the moment to make it happen.

That’s why I’m delighted to have been asked by the Prime Minister to help set up the new Taskforce for Innovation and Growth through Regulatory Reform (TIGRR) with Iain Duncan Smith and Theresa Villiers.

Reporting directly to the Prime Minister & the Chancellor’s Cabinet Committee on deregulation, and supported by a secretariat in the Cabinet Office, the Taskforce will consider and recommend “quick wins” to use our new regulatory sovereignty to unlock high growth sectors of the economy to drive post-Brexit post-Covid recovery.

Rest assured: there will also be no big report or a thousand pages of footnotes to wade through. We will be crowd-sourcing the best ideas from the business community and the entrepreneurs and innovators who are the engine of our economy.

The Prime Minister has asked me to bring my career experience in business starting & financing high growth bioscience technology companies as well as my experience as Minister in Health, BEIS and Transport leading our groundbreaking Industrial Strategy for Life Science which has paid such dividends this year.

The reforms I led in our Industrial Strategy – launching Genomics England, the Early Access to Medicines Scheme, MHRA and NICE reform, Accelerated Access procurement have been fundamental to our ability to lead the world in developing a Covid vaccine.

We now need to make Brexit & Covid the catalyst for bold reforms to unlock big UK opportunities for recovery & GlobalBritain across a range of high-growth sectors such as those I have worked on extensively as both entrepreneur and Minister:?

  • LifeScience: harnessing the potential of the NHS as a research engine for new medicines, unlocking digital health & innovative approaches to Accelerated Access, clinical trials & value-based pricing.
  • Nutraceuticals: health-promoting “superfoods”, cannabis medicines.
  • AgriTech: smart clean green twenty-first farming technology like the blight resistant potato banned by the EU.
  • CleanTech: new biofuels, Carbon Capture & Storage & digital “smart grids” to reward households & businesses for generating more and using less.
  • BioSecurity: harnessing the potential of Porton Down and UK vaccine science for plant, animal & human biosecurity.
  • Digital: removing barriers to UK digital leadership outside the EU GDPR framework.
  • Hydrogen: using the full power of Gov to lead in this key sector as we did in genomics.
  • Mobility: making the UK a global test-bed for new mobility technologies,

Before being elected to Parliament, I spent 15 years working in life sciences around the Cambridge cluster, financing innovation. I saw time and time again how the best British entrepreneurs and their companies struggled to build business to scale here in the UK.

So often we have invented the technologies of the future and failed to commercialise them effectively.

After several years working as the Government Life Science Adviser, I published my report for the Fresh Start Group on The EU impact on Life Sciences: Avoiding the Global Slow Lane.

Three years before Brexit, the report was the first to highlight the growing hostility of the EU to ‘biotech’ and the increasing tide of ‘anti- biotech’ legislation – driven by a combination of the German Green Party, Catholic anti-science and lowest commons denominator regulation by the “precautionary principle” which was having a damaging effect on the Bioscience Economy and risked condemning the EU – and by extension the UK – to the global slow lane in biotechnology.

The report set out how the genomic revolution was beginning to offer untold opportunities across medicine and agriculture to help generate huge economic, social and political dividends for mankind. Billions of people were being liberated from the scourge of insufficient food, medicine and energy. The main threat to that? The EU’s hostile regulatory framework.

This was seen clearly in numerous case studies. At the time, the EU’s hostility to GM led German-based BASF and major U.S firm Monsanto to announce their withdrawal from Europe in agricultural research and development. My report argued that unless something was done soon, other companies would follow suit, with dire consequences for the UK Life Science sector.

The report recommended a shift away from the increasingly widely used risk-based ‘precautionary Principle’ and greater freedoms around data protection, using public healthcare systems to help accelerate early access to medical innovations, and for the UK to be able to ‘go it alone’ in designing appropriate regulatory frameworks for GM crops.

The UK’s departure from the laws and requirements of the EU provides us with a once-in-a-generation chance to redesign and improve our approach.

This new Taskforce, therefore, is emphatically not another long-term Whitehall de-regulation ‘initiative’. Neither is this is about cutting workers’ or environmental rights that we rightly guaranteed in the 2019 election manifesto.

It is of vital importance that the UK maintains the high regulatory standards that we have consistently championed. In some of the fastest growing new sectors like Digital Health, Nutraceuticals and Autonomous Vehicle Tech, clear global regulatory standards are key to investment confidence. By setting the new global standards here in the UK we can play a key role in leading whole new sectors.

But we must think innovatively about supporting businesses to start and grow, and make the most of the cutting-edge technologies and sectors we nurture in our universities for global impact. For example, why don’t we use our freedom to pioneer new disease and drought- resistant crops, and use our aid budget and variable tariffs to help create new global markets for UK Technology Transfer?

We won’t unlock a new era of the UK as an Innovation Nation generating the technologies and companies of tomorrow with technocratic tinkering. We need bold leadership, clear commercial vision and reforms to support innovation and enterprise. The two go hand in hand. We won’t unlock an innovation economy without an enterprise society. So we will need to look at tax and regulatory incentives for high risk start/ups like the “New Deal for New Businesses” I proposed back in 2010 to drive recovery after the Crash.

This is a once-in-a-generation moment. Together we must seize it.

Ryan Bourne: A reassuringly conservative speech from Starmer’s Shadow Chancellor. The Tories will need to up their game.

20 Jan

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

Just in case the Conservatives hadn’t got the message: Labour under Keir Starmer is a very different beast to the party under Jeremy Corbyn.

Dueing the past fortnight, the Labour leader has parked his tanks on conservative lawns, talking first of Labour as “the party of the family,” then setting out a foreign policy vision of the UK as a “bridge between the U.S. and Europe.” Annelise Dodd’s Mais Lecture on economics was perhaps more striking still in the break of tone and type of criticisms made of Conservative policy compared with the last leadership.

Gone were the unhinged attacks on “neoliberalism” that characterised Corbynite bloviating. The fault-finding was specific and targeted. Dodds acknowledged the difficulties any government would face in a pandemic. Her surgical critique was that the UK’s Covid-19 outcomes were worsened by government foot-dragging on tightening lockdown restrictions, and Treasury attempts to fine-tune the balance between economic and public health.

Specifically, she claimed that its mixed-messaging on financial support to businesses, first delivering it and then threatening to withdraw it based on firms’ “viability,” created needless uncertainty. With the vaccines hopefully soon ending the pandemic, she argued that supporting firms until reopening was now more prudent than letting the chips fall when furlough ends in Spring. On the balance of costs and benefits, most economists would probably now agree.

There was little Corbyn-like wailing about past “austerity” either. Dodds’ criticisms of the last decade of government fiscal policy were restrained, and more plausible for it. She claimed that some spending cuts may have adversely impacted the pandemic response; that 16 fiscal targets coming and going since 2010 has created instability; that there should be more focus on the long-term public finances rather than the short-term; and that rapid deficit reduction coming out of the pandemic (including tax hikes, as Rishi Sunak reportedly wants) would be economically destructive. All these criticisms, individually, would not be surprising in ConservativeHome op-eds.

Yes, Labour still wants a bigger state than the Conservatives. Yet unlike many on the Left, Dodds appears under no illusions that running up debt is riskless or a free-lunch. “…it would be an irresponsible economic policymaker who planned on the assumption that low interest rates will continue indefinitely,” she said, while musing about a longer-term inflation risk. Her new “fiscal framework,” focused on planning to balance day-to-day spending and tax revenue, would be based on the recommendations of the Institute for Fiscal Studies.

Now none of this is particularly exciting. The speech was littered with boilerplate progressive assertions and the usual touching faith in the power of government. But it’s telling that Dodds actively shirked the opportunity to announce some glitzy new retail offer to grab newspaper headlines. There was no promise even of a Labour government “creating” high-wage jobs, or “transforming” the economy.

Instead, the speech was quintessentially small-c conservative. Labour, we were told, would protect the independence of the Bank of England, be “responsible” with the public finances, embrace free trade, protect businesses from Covid failure, focus policy on thorny structural problems rather than chasing day-to-day media coverage, and deliver “value for public money” from government spending.

Indeed, peer through the mundane parts of the speech, and you see a rhetorical critique of the current government that wouldn’t have looked out of place coming from Conservatives a decade ago. Dodds’ subtle message was that government decisions on infrastructure and procurement contracts were often determined more by short-term, pork-barrel political considerations than sound economic judgment, bringing with them at least a whiff of crony capitalism.

The speech highlighted waste and mismanagement through Covid-19, for example, including on the test-and-trace programme and the purchase of faulty antibody tests. Any errors are more forgivable in a pandemic when there were potentially huge returns on such investments and time is of the essence.

But those types of criticisms will likely amplify with Conservatives’ newfound penchant for large regional infrastructure projects (prone to massive cost overruns) and place-based revival packages (prone to political cronyism). Again, the argument that Conservative economic decisions are politically-motivated and wasteful is a very different attack than the more ideological opposition from Corbyn and McDonnell.

None of this is to say that all of Dodds’ analysis is coherent or correct. The theme of the speech was “resilience” – that is, how the pandemic shows the need for an economy robust to future shocks. Mercifully, Labour has not jumped on the bandwagon of saying the pandemic proves we need the government to actively re-shore a whole bunch of medical manufacturing production—the braindead, yet widespread “fight the last war” recommendation of those unable to conceive of shocks originating here. Yet there was still a bit of a “this crisis proves much of what I’ve always believed to be true” about her analysis.

Dodds suggested, for example, that a lack of savings among the poor, job insecurity among gig economy workers, and “socio-economic inequality” all help explain Britain’s poor Covid-19 outcomes. Perhaps on the margins those factors did make things worse. But the overwhelming reason why the UK has performed badly so far relative to countries such as South Korea, Taiwan, Australia, and New Zealand, is surely little to do with the labour market or macroeconomic policy, and almost entirely explained, to the extent that policy can actually explain things, by public health decisions at various times.

It is within Labour’s comfort zone to say reducing inequality and strengthening workers’ rights would have mitigated the costs of this pandemic. It would have been braver for them to expose failures in government bodies: say, Public Health England, whose centralisation of testing proved a disaster; or the NHS, with its systemic rationing reducing the incentive for spare capacity; or government scientists, who downplayed the early need for tough measures and told people mask wearing was unnecessary. If they really want “resilience,” they would surely explore the future case for deregulation in medical innovation. Earlier human challenge vaccine trials, for example, could have sped up delivery or a working vaccine, negating much of the last year’s pain.

Such a broad evaluation was perhaps always too much to hope for. But this speech proved that Labour is developing a more refined critique of the Conservatives. This is not the sort of emotional “blood on their hands” or anti-capitalist screeching we saw from Corbyn’s Labour.

Instead it is a crisp focus on the need for decisiveness, competence, and propriety in delivering effective government. The upgrade in opposition may well, in time, sharpen government decision-making. But a party with half-baked plans to rebalance the economy through massive infrastructure projects and shifting around government departments, led by a Prime Minister known for making late calls, may find such criticisms difficult to shake off.

Ryan Bourne: First, Covid-19 lockdowns. Next, climate change ones – rationed car use, no red meat. Coming soon to a country near you?

9 Dec

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

We are at the beginning of the end. Provided vaccines prove as efficacious as trial results indicate, and absent unobserved side effects, the rollout to vulnerable groups should reduce Covid-19 death risks substantially and rapidly.

Inoculations down through the priority list will then put us within reach of a herd immunity robust to ordinary behaviour. Life, it seems, could be “back to normal” by the spring or summer of next year.

I’ve never been a “V-shaper” Panglossian on the economy. You can’t switch economic life on and off without causing permanent damage. But there is nevertheless reason to be optimistic of a robust recovery next year. What is more uncertain are the longer-term consequences of this experience on our collective psyche and politics.

American economists Julian Kozlowski, Laura Veldkamp, and Venky Venkateswaran have warned of a depressive “scarring” effect, as we use the experience to revise our assumptions on the probabilities of major shocks. If we collectively infer that tail-end risks such as global pandemics are larger, then investments become less attractive.

Think alone about the willingness of entrepreneurs to go into the travel, hospitality or leisure industries after this. Then think of the effect of the risk of having to pivot to home working again, generalised across other sectors.

Alongside that are the impacts on the role of the state. Economic historian Robert Higgs’ work has highlighted how crises generate a ratchet of government power. Wars, depressions, and emergencies see powers centralised, before receding again.

But the state never quite falls back to the same size and scope as before. After the Coronavirus, we will see more taxpayer funds for virus-related public health, vaccination research, and the subsidisation of PPE production capacity. Government will also be met with demands to maintain Covid-level welfare benefits and industry-specific stimulus as a tool for future downturns, a la Eat Out to Help Out.

Lockdowns are the obvious area where these two effects could come together most damagingly. Highly crude shutdowns had a strong logic in Spring, given the high uncertainty about the prevalence and risks of the virus, and with Italy highlighting the dangers of overburdened hospitals.

More recent national measures reflect instead an ongoing policy failure to institute better control of Covid-19, but may nevertheless have passed a cost-benefit test given the arrival of vaccines (a case that the Government did not adequately prove).

Whatever your position on the desirability or consequences of lockdowns in this particular crisis, however, it’s clear that suspending economic and social liberties today brings with it the temptation for politicians to utilise such powers again – and for businesses and individuals to suspect that they could.

Given the way that politicians throw around terms such as “emergency” or “epidemic,” it is not an intellectual leap to imagine future leaders demanding similar measures for other ambitions. And therein lies a source of economic discontent—an incalculable drag or doubt for a generation.

Already, the economist Mariana Mazzucato has pitched the idea of “climate lockdowns,” should governments not deliver the green revolution she desires. In the service of mitigating the “climate emergency,” the “state would limit private-vehicle use, ban consumption of red meat, and impose energy-saving measures, while fossil-fuel companies would have to stop drilling.”

Of course, we can avoid all that, she says, if we are willing to “reorient our energy system around renewable energy” and “evict fossil-fuel interests and short-termism from business, finance, and politics”—the goals Mazzucato wants to achieve with her threats warning of what might be needed otherwise.

Now, it might seem far-fetched to imagine a world where one could face fines or jail time for driving too much, or eating steak frites. But before this year, one could have said the same about meeting four households on Christmas Day, or not eating at least a scotch egg with your pint.

Madeleine Grant worries about how the example of this pandemic might normalise health surveillance or screening for colds or flu. But it’s the everyday lifestyle regulations that have been truly novel – including the forced closure of certain businesses and the bans on gatherings. The threat of repeats predicated on the ends justifying the means is what we should be most attentive to.

To mitigate this temptation requires a reaffirmation of the legitimate justifications for government interventions. From an economic perspective, there is a defensible consequentialist claim that governments should act where huge, dangerous externalities result from collective action problems. Yet in doing so they have a duty to both prove the case and to account for these externalities in the least harmful way possible, only reaching for the most extreme measures when the consequences of inaction are grave or imminent.

The climate lockdowns idea is so pernicious not just because the imminent threat is absent. The reasoning presumes that governments should go beyond accounting for the externality, say through carbon taxes or emissions trading schemes, instead using the “emergency” to justify actively ignoring market conceptions of value, threatening vast restrictions on how you live your life unless the planners’ vision of the world is achieved. Mazzucato’s argument is not just about reducing CO2, in other words, but about using the threat of lockdowns to push for abandoning consumer-led markets entirely.

We have seen this type of thinking proliferate during this crisis. Last week, Jenny Kleeman wrote for the Guardian about lab-grown meat, which many see as a useful pathway to reducing the environmental impact of farming and the ethical concerns many have with meat consumption. Rather than embrace these innovations as a way to work with consumer preferences to reduce the impacts of meat eating, Kleeman simply declared it would be preferable if we “simply stopped eating meat, or ate it far less often.” Her inspiration? The sacrifices of the Coronavirus in showing the massive behavioural changes we are “able to make” in extremis.

As we exit this crisis, we must not forget that underpinning a healthy market economy is the idea of the sovereign consumer, who knows what he or she wants, and whose welfare is enhanced by acting on those preferences. The bar for curbing activities that bring us joy or happiness should be very high indeed. And to the extent that economic or social problems do require government interventions, they should work with the preferences of consumers, not treat them with contempt, lest the economic welfare costs spiral.

Lockdowns were a panic button reaction to an acute emergency. Their re-use was a signal of the government’s dismal failure to mitigate the virus in less costly ways. But we must quell talk of them becoming a model for solving future economic and social challenges, or else the expectation of them could itself be economically corrupting today.

Neil O’Brien: Tomorrow’s Covid vote. We must stick to the plan – and stick together.

30 Nov

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

I can’t believe they’ve gone. One, a local businessman. Not much older than me. Full of plans, things to do, a business to build. The other, a party supporter. Retired, but larger than life, and full of fun. Coronavirus got them both before their time. There were tens of thousands like them this year.

Tomorrow night, we face a choice about how we handle the final months of this pandemic. We still have a lot of winter and spring to get through until mass vaccination, the time when the NHS comes under most strain. And we must avoid a third set of national restrictions.

If we start from rules strong enough to keep driving down transmission of the virus, we can relax later. In contrast, going in the other direction will test the patience of voters.

Nor do we want to grind along with infection rates stable but not falling. We want infections coming down decisively, so we can loosen up. With the vaccine so close, people dying unnecessarily in the final months of the pandemic would be tragic.

And though polls show strong support for the measures we’ve taken, it would be much better to head towards the finishing line with good news about infections and restrictions falling.

Every MP wants to make sure restrictions in their area are as limited as possible. As infections fall, we’ll have regular reviews. But overall, we have to stick together, and stick to the plan. With Labour and the SNP not voting against, the new Government’s new regulations will pass. But we should remember the electorate brutally punishes divided parties.

Of course, there are a lot of legitimate debates about policy. Some ask whether restrictions do more harm than good. It’s a reasonable question, but I think sometimes the arguments are put back to front.

For example, during the second wave here in Leicestershire, the numbers hospitalised shot up, rising above the level we saw in the spring peak.

But after the national restrictions came in, the infection rate turned round, and started falling. Hospitalisation rates turned round too. That meant that while non-urgent procedures were postponed, the measures we took came just in time to allow life-and-death services like cancer treatment to keep running throughout.

If we’d waited or done nothing, those services would have been forced to shut. Restrictions saved not just coronavirus deaths, but other patients too.

It’s wrong to assume current restrictions are having the same effects as the emergency measures in spring. And some claims are wrong: it’s said suicides have shot up, but the best data suggests that’s not true.

People ask what the economic cost is of restrictive measures. The difficulty here is knowing what the counterfactual should be. For example, if we’d let the virus rip in spring, pretty much all MPs acknowledge that the NHS would have been overwhelmed.

With TV news showing people dying in hospital car parks across the land, how many people would still have been heading down to the pub? Or out to work? Any estimate is guesswork.

We can see that countries like Sweden which went for looser policies had a bigger hit to their economy than their neighbours, as well as much worse health outcomes. So it isn’t obvious that there has been a trade off between the economy and controlling the virus.

Sweden has had ten times the death rate of their Scandinavian neighbours, with a dramatic second wave and 397 Covid deaths in the past nine days. “Sweden’s strategy has proven to be a dramatic failure,” says Lena Einhorn, a Swedish virologist. The country’s Prime Minister recently made a rare televised address, and has been forced to introduced a “rule of eight” on gatherings plus locally tiered restrictions.

And Sweden is far less densely populated than the UK, with more people living alone than any other country, two massive advantages. So what has proved merely disastrous in Sweden, was arguably never even really an option for us. So what’s the counterfactual?

Some arguments are over. Media pundits pushed the idea that we had hit “herd immunity”, and that rising cases were just “false positives”.  They’re still peddling these ideas, but we can now see how badly they got it wrong.

In June Toby Young wrote: “there will be no second spike – not now, and not in the autumn”. He claimed 91 per cent of cases were “false positives”: claims repeated by some MPs. In reality, according to the Office for National Statistics, true number is microscopic.

Alistair Haimes, a Covid-sceptic, wrote in August that “it’s over”; and in September that there was “no second wave.”

Leading Covid-sceptic Michael Yeadon wrote that thanks to “prior imminuty”: “the pandemic is effectively over.”

Sunetra Gupta, a lead author of the “Great Barrington Declaration”, promised in May that “the epidemic has largely come and is on its way out in this country” … “due to the build-up of immunity”.

In August, Karol Sikora, another Great Barrington leader, said “The gloom and doomsters are predicting another wave of it. Where’s that going to come from? I just don’t believe it.”

With over 2,800 now dying a week with the virus, we can see these rosy theories were catastrophically wrong. Other myths pushed by the media include the idea that flu has “disappeared”, or that Coronavirus is just displacing it. That’s simply not true.

Others say the victims are “dying with” the virus, not “dying of” the virus. But the Office for National Statistics looked at the data, based on doctors’ assessments, and found: “of 50,335 deaths between 1 March and 30 June… 46,736 had Covid-19 assigned as the underlying cause of death.” That’s 93 per cent.

The argument I most dislike is that the victims of the virus were all old or would have died anyway. It’s true older people are more at risk. True that many people who died had other conditions. But a study by academics at the University of Glasgow suggested people typically had over a decade to live based on their age and prior conditions.

A decade is worth a lot. For my parents, the last decade involved the wedding of one son; the birth of two grandchildren; two others becoming young men; adventures exploring Europe and hiking with my sister; learning French and how to drive a canal boat; amazing summer flowers in their little garden; charity work, friends – and being here for everyone who loves them; like my daughter (four).

An angry man emailed the other day to say I was obsessed with “saving granny”. Well, I want to live in a culture where we value older people, not belittle their worth or regard them as an inconvenience. A culture that would kick the old and ill into touch on grounds of efficiency would be a profoundly ill culture.

We’re close to the end of this thing now. Let’s not fall near the finish line. No-one wanted to have to bring in these tiered restrictions. But they are more tailored than countries like France, where all restaurants everywhere are shut till next year, and all bars are shut with no date to reopen.

Yes, we must keep supporting those for whom this year has meant hardship. But there’s been more than seventy thousand excess deaths linked to the coronavirus here since mid-March. If you read out all those people’s names one after another, it would take you more than four months.

We have to see the bigger picture. We have to finish the job, and beat this killer virus.

Sunak opts to suck it and see

25 Nov

We must be thankful that no-one is forecasting that Government borrowing will rise to record levels this year.  Or Rishi Sunak wouldn’t have been in a position to announce that Government spending will rise at its fastest rate for 15 years.

Apologies for the sarcasm – which isn’t aimed at the Chancellor’s measures, but is meant instead to provide an introduction to the thinking behind them.

One response to a ballooning deficit is to cut the rate of growth of spending.  That’s what the Coalition did after 2010, when the deficit hit seven per cent of GDP.

The Office for Budget Responsibility is forecasting a peak of 19 per this year.  But Sunak’s response is to raise the rate of spending.  Why?

Because in 2010 George Osborne judged the deficit to be structural (he was right), and his successor judges this one to be exceptional (he’s right, too).

It is almost entirely a product of the pandemic and what has followed.  It is in this context that the OBR forecasts the economy to shrink by 11 per cent this year and unemployment to hit 2.6 million next year.

In these circumstances, the Chancellor has found it impossible to produce the four year spending review he hoped for, and has been forced to issue one for a single year instead.

Furthermore, his statement was only one side of the tax and spending coin. Today, we got the spending.  In the Spring, we will get the Budget – and the tax.

Given all this, it will be very odd if Sunak turns up then with large-scale tax rises to raise revenue quickly.  The foundation of his measures today appears to be: suck it and see.

Broadly speaking, the spending package suggests that the Chancellor is going for growth.  That’s the logic of the infrastructure spending, the coming review of regulation, the new northern bank and the enlarged Restart programme.

The Levelling-Up Fund is a classic Treasury exercise in the English centralist tradition, with its central feature of bids from the provinces to Westminster for money.  So it is in a country with relatively few local taxes.

On that point, Sunak announced “extra flexibility for Council Tax and Adult Social Care precept”.  Local authorities will like that, council taxpayers not so much.

It’s worth stressing that the OBR’s forecasts, like all such animals, shouldn’t be taken too seriously.  Our columnist Ryan Bourne debunked its record on this site earlier this week.

If you walk down the sunny side of the street, you will smack your lips at the thought of a Roaring Twenties effect, as employment recovers, consumers spend, the hospitality sector booms and people pile into holidays abroad.

And it may be that post-Covid changes even out for the better, with a shift in activity and spending from city centres to the suburbs and countryside, together with music, art, theatre and all the rest of it.

That might not be such a bad things for towns and their centres, at which the new Levelling Up Fund is partly aimed.  Our columnist James Frayne believes they are a core concern for provincial voters, and government listens to him.

If on the other hand you stick to the shady side, you will point to the economic equivalent of Long Covid: fearsome economic and social bills for damaged mental health, postponed operations, lost educational opportunities.

All that is a big minus for levelling-up – because it’s the disabled, poor and disadvantaged who have been hit hardest by restrictions and lockdowns, especially if they work in the private sector.

The background in recent years is not encouraging.  Since the financial crash exploded, we haven’t grown at more than 2.6 per cent a year.  That suggests recovery may be sticky.

Sunak’s persuasive manner, grip of detail and spare eloquence have served him well during this crisis.  Others holding his post would not have survived roughly ten major finance annoucements in less than a year.

It’s not as though he hasn’t sometimes had to recast his plans – as in October, when he pumped more money into his Job Support Scheme.

And if the economics of his strategy are straightforward enough, its politics was sometimes a bit odd.  If the Government’s overall plan in the short-term is expansionary, why raise the minimum wage but curb public sector pay?

If spending on nearly everything else is rising, why crack down on the 0.7 per cent aid spend?  Doing so because you think aid is wasted or the target is wasteful is one thing.

But that wasn’t the basis of Sunak’s decision – since, after all, he said that the Government intends to return to 0.7 per cent “when the fiscal situation allows”.

The Chancellor also left a big unresolved question hanging in the air.  What will the Government do about the Universal Credit uplift?  Will it be extended or not?

The sense of a statement with contradictory messages was picked up Rob Covile of the Centre for Policy Studies.  (The Treasury would do well when the Budget approaches to look at its supply side ideas.)

“Feels slightly like Treasury couldn’t decide whether the message was ‘tighten belts’ or ‘we’re still spending’,” he tweeted. “So we’re getting two or three minutes of each in turn.”

That first element in the Chancellor’s statement, plus the OBR’s horrid short-term forecasts, comes at a bad time for the Government.

For tomorrow, the toughened tiering details are announced. Lots of Conservative MPs won’t like them.  The detail of which tiers apply in which areas will be published, too.  Many Tory MPs will like those even less.

Graham Brady, Steve Baker, Mark Harper, and the Covid Recovery Group will say that the economic damage of restrictions is so severe that the Commons should not vote for more – at least, without an impact assessment.

They may not be alone.  “These measures may be a short-term strategy, but they cannot be a long-term one,” Jeremy Wright declared in the Commons during the recent debate on the lockdown regulations.

He and Edward Timpson (another ex-Minister) plus other MPs backed the Government but, sounded a cautionary note.

Will the prospect of vaccines be sufficient to rally the doubters round?  Or will they take a leaf from the book of Theresa May, who savaged the regulations during the same debate?

We shall see – but Ministers are not helping themselves by dodging requests for that impact assessment, urged by this site and others, and the subject of a dogged campaign by Mel Stride, Chair of the Treasury Select Committee.

All in all, Sunak is shaping up to go for growth.  Good for him.  Nonetheless, he must watch and wait to see how and when the economy rebounds.  Brady and company are less patient.

Liam Fox: Today, the Chancellor should aim to boost an unambiguously private sector-led recovery

25 Nov

Liam Fox is a former Secretary of State for International Trade, and is MP for North Somerset.

The successful development of vaccines by the world’s largest – private sector – pharmaceutical companies brings much-needed optimism as we look forward to 2021. Yet, any political respite for the Government is likely to be short lived, as the focus inevitably shifts towards the seismic economic impact that the coronavirus has created at home and abroad.

As the Chancellor said at the weekend “people will see the scale of the economic shock laid bare”.

The UK’s overall debt has now reached 100.8 per cent of gross domestic product (GDP) – a level not seen since the early 1960s. It is terrifying to imagine where we would be if the public finances had not been improved to the extent they have over the past decade. The most recent Bank of England forecast estimates that unemployment may peak at around 7.7 per cent in April to June of next year but could be as high as 10 per cent.

The key to the post-Covid-19 recovery will rely on the ability of Britain’s small businesses to create jobs on the scale that we have seen in recent years. At the beginning of 2020 there were 5.82 million small businesses (with 0 to 49 employees), 99.3 per cent of the total business population.

Despite the unprecedented support from the Government through the Coronavirus Job Retention Scheme (the furlough) which has been extended to the end of March 2021, the Business Interruption Loan Scheme and the Self-Employment Income Support Grant, many small businesses fear that they may not survive the transition to the economic “new normal”.

The unprecedented government assistance has masked the fact that this group has suffered more than most in the varying degrees of lockdown that we have experienced since March, with some still struggling to get lenders to support them.

The longer that lockdown continues, the more that demand for their goods and services is likely to be depressed and their viability threatened. Many fear they may not survive to see the recovery. That is why, in his spending statement this week, the Chancellor must make clear the Government’s commitment to Britain’s SMEs, for this must be an unambiguously private sector-led recovery.

While there are understandable demands to pump more funding into the public sector, we must restore the habit of making sure we have the money in the bank before we start spending it.

Unless we are able to grow our economy through the private sector and generate more national income, then we will be back in the territory of having to choose between damaging tax rises or unpopular spending cuts.

Our ability to borrow heavily during this crisis has maintained the viability of a large part of our economy but an inability to control future borrowing will be deeply damaging to our long-term prosperity and our ability to fund the quality public services on which we depend.

I would like, in his financial statement, to see the Chancellor replace or at least add to David Cameron’s policy test which was “how will this affect and be perceived by every family in Britain”. The new test would be “the entrepreneur test”. This is in line with his natural instincts.

We must assess how every bit of legislation and every regulation will affect the wealth creating part of our economy and our every statement and every speech should be mindful of the message it sends to our small business community.

We must ensure that we are not only a great place for business start-ups but that we can deal with the lack of capital that often results in a failure of scale ups. We must ensure that the elements that make the United Kingdom such an attractive place for foreign direct investment continue – a stable regulatory framework, an attractive tax environment, flexible skills in our labour force, access to quality higher education, access to tech and gold standard protection for intellectual property. As the world’s third largest destination for foreign direct investment, we are already strong in all these areas.

In the 1980s, the Conservatives demonstrated our commitment to the ownership society through our totemic policy of council house sales. The Conservatives must now be seen as the natural ally for every white van man and woman, every tech entrepreneur and every corner shop owner. The Chancellor must make us unequivocally the party of small business.