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Westlake Legal Group > Posts tagged "Welfare"

Robert Halfon: There must be no tax rises for lower income voters to help meet the costs of the virus

Wanted from the Prime Minister: Social Capitalism

Boris Johnson did not just win the December election because of Brexit, although that was, of course, a core part of his success. There was another reason; he genuinely connected with working people – those on lower incomes, those doing tough jobs and those just about managing.

I saw this extraordinary affinity for myself when he visited my constituency of Harlow in October last year. At that time, I genuinely began to realise that we would win the general glection, though I never ever imagined the majority would be so high.

That link between the Prime Minister and working people is being sorely tested amid Coronavirus, not only because of recent events but also, as has been highlighted by the Institute for Fiscal Studies and others, because coronavirus has been a disease of inequality.

Data from the Office for National Statistics found that men in low-skilled jobs are almost four times more likely to die from Coronavirus than professionals, with 21.4 deaths per 100,000 people, compared with 5.6 among white-collar male workers. Meanwhile, women working as carers are twice as likely to die than those in professional and technical roles.

For our children, the Institute for Fiscal Studies’ latest report points to widening inequalities. Their research suggests that 64 per cent of secondary pupils in state schools from the richest households are being offered active help from schools, such as online teaching, compared with 47 per cent from the poorest fifth of families. Over the 34 days (at a minimum) that schools will be closed, students in the best-off families will have done more than seven full school days’ worth of extra learning time. They warn that if schools do not go back until September and current rates of home learning continue, the gap would double to 15 full school days.

Without wishing opprobrium on my head from esteemed ConservativeHome readers, when Emily Maitlis set this out on Newsnight a few weeks ago, she was right to do so. It is not something that can just be swept under the carpet and just wished away.

Of course, anyone can get this disease: the Prime Minister is an example of that. But the harsh truth is that if you are on a lower income, if you live in overcrowded conditions you are  at a greater risk of being afflicted with COVID-19, far greater than the so-called “professional classes”, safely ensconced at home, often with a garden.

It is the single parent families living in small studio/bedsits in permitted development housing who will have suffered enormously from the effects of this virus – even with the help of Universal Credit.  It is the families – of which one parent is self-employed or redundant – that are falling through the inevitable cracks of the Chancellor’s (albeit generous) furlough or Self-Employed Income Support Scheme. The small businesses, facing collapse because all of their customers have gone elsewhere.  The list goes on. Many thousands are likely to be made redundant, many more will be looking for work at a time when businesses will be cautious about spending and recruitment

As we come down from this Pandemic Everest, it is these groups that will need the Government’s support the most and will be looking to the Prime Minister – who they trusted last December – to do something real to make their lives better.

These people are not arch free-marketeers fighting to end an over mighty state. Their asks are quite simple: to cut the cost of living, protect the NHS, build affordable and quality housing, ensure that the streets are safe from crime and anti-social behaviour, to be able to send their children to a state school of their choice (ideally near whey live) and to have an offer of quality apprenticeships and good FE courses for their teenagers, without the overhanging debt  that comes with a university degree. They feel a sense of community and pride in their country.

The very first thing the Prime Minister needs to do, when we eventually get further down that mountain that he so describes, is to reaffirm this Government’s commitment to blue-collar voters. He should offer a number of guarantees on the cost of living, on education and skills and on housing, for a start. Johnson should not be afraid to use the two words “social capitalism” and state that his mission is to ensure genuine equal access to the ladder of opportunity.

Take the cost of living as just one example. If we come out the other side of Coronavirus and start hurting folk with fuel duty rises, self-employed taxes, income tax rises, more taxes on food and drink and the like, Conservatives will be giving a message that, far from being the party that cuts the cost of living, this is a Government that puts it up. So there should be a cost of living guarantee that says no one on lower incomes will see their costs rise from the Government. A triple lock on income tax, essential duties and VAT.

On top of the work that the Government has done since 2010 on raising the tax threshold for the lower paid, the National Living Wage and the fuel duty freeze, Conservatives must find ways and develop policies to ensure that the lower paid do not have to struggle in the way that they do at present.

What is needed after this pandemic is for the Prime Minister to place social capitalism first and foremost – building social capital and economic capital hand in hand.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Howard Flight: In my judgement, the economy is on track for a relatively short V-shaped recession.

Lord Flight is Chairman of Flight & Partners Recovery Fund, and is a former Shadow Chief Secretary to the Treasury.

We are in the middle of the sort of economic recession for which Keynes prescribed large Government deficit – spending support. It was a pity that Keynes was misinterpreted in the 1950’s and 1960’s. Right now, the UK economy needs all the business and financial support which Government can organise and provide. It is fortunate that interest rates are virtually zero and, in some cases, negative. The question is as to whether Government can channel enough economic stimulant, quickly enough, to turn around the economy.

In my judgement Andy Haldane, the eminent Bank of England economist, has it right. The economy is on track for a relatively short V-shaped recession. Spending has already picked up by more than even the Bank of England expected.

Haldane also expects that little long-term damage will be done to the economy. This is supported by the Government’s important decision to extend the Self-Employed Bail Out Scheme (SEISS) for the self-employed by a further three months, at a cost of £8 billion.

Keeping the self-employed portion of the UK economy afloat is fundamental to economic recovery. The major strength of the UK economy has been the size and spread of its self-employed and SME sectors – comprising some six million SMEs.

In an economic storm, practically, SMEs and the self-employed are more difficult to support than a few dozen large businesses. The Chancellor has thrown all he can at the small company and self-employed sectors. The main vehicle for the SME sector has been guaranteed loans via the Coronavirus Business Interruption Loan Scheme (CBILS). At the time of writing approximately £1.5bn has been lent to small businesses via CBILS. This, however, represents barely more than 6,000 loans, in contrast to Germany where the banks have already lent out seven times the amount.

The problem with CBILS was that, initially, banks participating thought they were obliged to assess whether the businesses requesting loans were eligible for a normal, non-virus, loan. This resulted in companies needing life or death support being tied down with lengthy requests for paperwork. They were then often offered regular loans including taking a director’s home as collateral, which was not the Government’s intention.

The larger banks’ justification for this has been EU State AID rules. Although Britain has left the EU, it transpires that we are bound by the State Aid rules until the end of the transition period. This needs changing speedily. The State Aid rules apply to all loans under CBILS. This appears to have been prescribed in small print by the Treasury, although it have denied knowledge of this. Subsequently, Rishi Sunak has changed the scheme so that banks can lend without first attempting a standard loan deal.

CBILS has also had an equally negative problem. While many Governments are guaranteeing 100 per cent of such loans the UK has been guaranteeing only 80 per cent. Increasing the Government guarantee to 100 per cent has been resisted by the Treasury, again on the grounds of not breaching EU State Aid rules, although Government guarantees are now going up to 100 per cent. In a situation in which the issue is rescuing our economy it is ridiculous to argue that appropriate economic measures can be stopped by EU State Aid rules.

The Future Fund has also had a damaging technical constraint on qualification. Where a company has Enterprise Investment Scheme or Venture Capital Trust investors, this is not tax compatible with required Futures Fund and Convertible Loan Note investment, which would disqualify EIS/VCT investors’ tax relief.

What is now needed is a faster sequential lifting of the lockdown package of constraints, both to accelerate the recovery of our economy and to give us a stronger hand to negotiate Brexit. The Business Secretary has the tools to preside over our economic revival, and his department must become a leading one.

It, too, needs to slash regulations that prevent businesses from getting loans. We also have the opportunity to carry out a revolutionary shift to a pro-business administration with an export led economy on the back of a weak Sterling. Here there is an argument for establishing a national export fund.

“Stay at home. Protect the NHS. Saves lives” now needs to change to “Get back to work. Protect the economy. Save livelihoods.” Our response to Covid-19 should now become more targeted, becayse the risks to millions of people who are younger is very small. Companies have complained about the lack of guidance where the outlook is becoming clearer.

I expect a major advance in the lifting of lockdown for the retail sector in June and, if all goes wel,l much of the lockdown will be lifted by the end of July. There is a range of business measures open to Government to boost the economy on a sustained basis.

The most effective are likely to be increasing the annual (company) investment allowance; reducing stamp duty on houses; rolling furlough arrangements into Universal Credit, providing incentives to work.

Equally important is to repeal regulations in the way of recovery – i.e: we have amongst the highest childcare costs because of our staff ratio laws. Infrastructure investment should be brought forward. Finally, EIS and VCT should be made tax compatible where companies have Future Fund or CBILS investment.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

James Frayne: More welfare spending. A business tax avoidance clampdown. The new economic policy that voters will want.

At some point, economic concerns will trump health concerns for the majority. Furlough has delayed this, but it’ll shift: when the death rate drops significantly, or when it becomes clear the country can’t sustain the level of support to wages granted until now.When this happens, what will the public want economic policy to look like in the long recovery period? And how should the Government think about public opinion?

Each of these questions is worth an article in its own right, but let’s start with the likely economic position in a few months: significant numbers of businesses will go bust; many cling on at the best of times and reduced demand will finish many off.

In turn, we can expect significantly higher levels of unemployment than during recent times, and more people on welfare.

Many businesses, too, in fear of a second wave of infections, will be cautious about hiring and investing generally; many will terminate or reduce office space and pay rises will be a thing of the past.

We can assume that those parts of the country where the private sector is relatively weak – and relatively much more reliant on consumer spending – will be more severely hit than the affluent South. High streets that were already struggling will be decimated. And we can assume astronomically high levels of debt. All in all, a terrible place to be.

Let’s now consider some of the parameters of policy for Government that will be set by public opinion.

First, public spending. The public will want health spending increased significantly. When people look at why Britain was so badly hit, even if a consensus emerges we should run healthcare differently, it’s inconceivable that one of the conclusions won’t be that the health service needs more money – it’s already what people think.

We can also be reasonably sure of demands for greater spending on social care, given how badly those in care have suffered.

It’s also likely the public will expect additional spending on welfare – to support the rising number of unemployed and more generally to support those communities which have suffered disproportionately during the crisis. While the public are, in normal times, quite sceptical of welfare spending, they are not going to see the new unemployed in the way that they saw (healthy) people without jobs in a near-full employment economy.

It’s also a reasonable bet the public will demand greater support for those in “precarious” work – workers seen to have kept the country going during lockdown. While there are many reasons to suggest those working in the gig economy love the freedom they’re granted and don’t consider themselves “victims” in any way, the likely campaign that Labour will run to reward these workers will have an irresistible attractiveness.

In other words, there will be significantly more money across three major areas of public expenditure. On the flip side, the public are less likely to have the same demands on expenditure on policing; defence; or even education, but these are likely to be dwarfed by the size of the welfare and health budgets.

Second, tax. The public will demand action is taken against those businesses perceived to unfairly avoid tax (presently and historically) – particularly if they have enjoyed bumper sales during the crisis.

When there are bills to be paid during the long recovery period, there will be no longer be any hiding place for them. And there’ll be demands for action against those businesses that splurged cash on high salaries and dividends while furloughing workers.

One area that has had relatively little attention, but could get much more, is the behaviour of commercial landlords across the country. This aspect of public debate could be very ugly.

On the other hand, they’re likely to be very positive towards the idea that tax cuts for small businesses are a necessary stimulus. They are likely to be open to the idea that these businesses need a break from high business rates and high levels of corporation tax.

It’s possible that they will ask for lower personal tax rates so they can start to save to accumulate protection for any possible re-emergence of the virus. Whether the Treasury thinks that such a policy is advisable is something else; but they’ll at least likely have freedom to think about targeted tax cuts.

Whether these two sides balance – higher taxes on a small number of very large businesses, lower taxes on a large number of small businesses – is another question. Together, these spending pressures and the need to stimulate the economy will put enormous pressure on Ministers for some time. It is fortunate that this Government doesn’t seem to have any philosophical adherence to low spending and debt, or the next year would be very uncomfortable.

Thinking about economic policy more broadly, it also seems likely this crisis will open the door to much greater radicalism in a number of areas. The nature of tax, spend, and economic policy could change very substantially.
  • We could end up building a lot more, a lot faster. Construction is an obvious place to go for a fiscal stimulus, and there will be huge pressure on the Government to meet some of its infrastructure promises before its term is up. That requires changing the planning system.
  • We could see much bolder incentives to industries that are essential for “national resilience” – pharmaceuticals and life sciences are the most obvious example, but agriculture and energy would be others. It is probably no coincidence that many of the countries that have done best during Coronavirus have also had decades of effective industrial policy.  There will be a race to replicate it here. (It is hard not to see how, in many parts of the country, universities will be part of the policy mix.)
  • Anything that rebuilds town centres and communities will be enthusiastically welcomed. Completely re-hauling the business rate and general small business taxation system is plausible.
  • Of course, the long-anticipated reforms to the structure of the state have been put on ice while the Government has been trying to deal with Corona. Here, the public simply don’t care that much – but the performance of different parts of Government during the pandemic will, surely, be used as a reason to reshape the state.

None of these are new territory for the Government. It’s the combination of parochial and modern that was obvious in the general election manifesto last year. But while the epidemic has created demands from the public, it does also create space to achieve large amounts in the next three and a half years, and change a lot of rules.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

David Callaghan: Whatever happened to the Liberal Democrats?

David Callaghan is a former Liberal Democrat councillor in the London Borough of Sutton and parliamentary candidate. He works as a freelance journalist for ConservativeHome.

When the Liberal Democrats joined the Coalition Government in 2010 they were back in the big time, with their first ministers in 65 years. Leader Nick Clegg became Deputy Prime Minister after his parliamentary colleagues and wider party overwhelmingly backed the coalition.

There was great excitement within the party, and I experienced this as a Lib Dem councillor and a parliamentary candidate in the general election, that the Tories had given far more ground than expected in the Coalition Agreement. Some Lib Dems could not believe that so many of the party’s manifesto policies made it into the agreement.

There were policies in the agreement on education such as the pupil premium, and on tax like an increase in the personal allowance, that enticed the Lib Dems into thinking ‘wow, we are actually going to put these policies into practice’.

Perhaps the most significant inclusion from the Lib Dems’ point of view was the promise of a referendum on electoral reform. The possibility of a system based on something other than first-past-the-post was the holy grail for Lib Dems, who were used to settling for a meagre number of MPs much lower than their share of the vote deserved.

One notable dissenter though to this historic new government was former leader Charles Kennedy, who saw some of the pitfalls and preferred ‘a confidence and supply’ deal to prop up a minority Conservative administration. Kennedy’s misgivings should have set alarm bells ringing in the party hierarchy and made the leadership think twice.

But at that point the party was being swept along by the hysteria created by the sweet scent of power, and the opportunity to see some policies implemented for the first time in living memory. Any talk of caution was quickly dismissed as party stalwarts, including influential former leader Paddy Ashdown, said the coalition was in the national interest and necessary.

This euphoria was to turn sour though within months as the blame for a trebling in tuition fees landed squarely on the heads of Lib Dem MPs who had signed a pledge not to increase them. Student protests were aimed at the government and more specifically the Lib Dems who were accused of ‘selling out’. Assurances from Deputy Leader Vince Cable that universities would not increase fees to the maximum of £9,000 per year proved to be based on wishful thinking.

There was also a backlash against the austerity measures, including cuts to welfare and local government, which was to prove damaging for the Lib Dems.

Clegg has admitted the party should have been more assertive in the early days of government, standing up to the Tories. He and his colleagues were stronger in their positioning later in the coalition, vetoing parliamentary boundary changes, for example, in retaliation to Conservative-led opposition against House of Lords reform.

The general election of 2015 was to be a catastrophic event for the party that it still hasn’t recovered from. It was slaughtered, losing most of its MPs, including Cable, as it was punished for five years of coalition and the tuition fees debacle. Clegg held onto his seat, but resigned as leader with his party on its knees.

Were the Lib Dem policies on education and tax big vote winners, and did the party get the credit anyway? The Conservatives made a point of claiming responsibility for the lightening of the tax burden, which was the one policy that might have a made a real difference at the polls.

The 2011 referendum on voting reform had proved to be a damp squib with a turnout of only 42%, and a decisive vote against change. The pro-reform campaign was characterised by splits and a lack of clarity over the benefits of any overhaul of the voting system. The referendum itself has largely been forgotten, as it is completely over-shadowed by the earthquake ballot on the EU.

By contrast to the plight of the Lib Dems, the Conservatives won a surprise majority in 2015 under David Cameron, and gleefully formed a new government without the need for a partner. The Tories have won subsequent polls in 2017, albeit without a majority, and then decisively last year. There does not appear to have been a political price for the Tories from austerity in the way it has hit the Lib Dems.

Most importantly, the Conservatives have got it right on Brexit since the referendum. Yes Theresa May’s agreement wasn’t approved by resistant MPs, but ultimately the party was rewarded for honouring the 2016 EU referendum result and promising to ‘Get Brexit Done’. Swathes of Labour voters switched to the Conservatives in December’s general election, and the Lib Dems faced another bad result, making no progress and losing their leader Jo Swinson.

A few months earlier the Lib Dems had voted to drop their policy of a second referendum and actually revoke Article 50, therefore reversing Brexit. Buoyed by a strong performance in May’s European elections, the party seemed to get carried away, especially as it attracted some high profile defections from other parties. In an attempt to gather all the Remain voters under its banner, it said it would win power and stop Brexit.

Brexit, like tuition fees, has proved to be a landmark in the party’s history. It achieved power in a coalition, but paid a very dear price, and is now reeling from another disaster of its own making.

Ten years on from the coalition launch, Sir Ed Davey is doing his best as interim leader to keep the party’s head above water, but it is struggling to be heard as the country grapples with the Coronavirus emergency. With only 11 MPs, the Lib Dems are a long way from the heady days of 2010 when they boasted 57 and were the government kingmakers.

There has been a series of strategic mistakes and a lack of understanding of what happened. The party got it badly wrong over tuition fees, and the MPs should take a large share of the blame for this after insisting the pledge of ‘no increase’ stay in the 2010 manifesto despite the misgivings of Clegg and Cable.

On Brexit, the party has misjudged the mood in many parts of the country, where even Remainers like myself, wanted the result of the referendum to be delivered.

A future direction for the Lib Dems is now unclear and they must learn from these mistakes over the last 10 years, which have left them on the sidelines, miles from power. They have been defeated on the big debate of the day with Brexit, after finding themselves on the losing side of the argument. Now perhaps they have to remodel as the party of ‘Return’ to the EU, but will this be tenable as the country moves firmly in the other direction? A series of false starts leave the party with an uncertain future.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Eamonn Butler: After the lockdown. If there is a role for the state, it is in getting out of the way of recovery.

Dr Eamonn Butler is Director of the Adam Smith Institute.

Worse than the World Wars, the Boer War, the Crimean War, worse even than the Napoleonic War. The Office for Budget Responsibility thinks the war against Covid19 could see the UK looking at its worst collapse in 300 years.

The economy’s productive capability will fall by 35 per cent in this quarter alone, ending up 12.8 per cent down on the year after a post-lockdown bounceback, and that’s before we mention unemployment rising by 2.1 million too

geranThere’s good reason though, to think they’re being far too optimistic. In Reopening Britain, my latest paper for the Adam Smith Institute, I make the case that officials should stop thinking of the economy as a machine you can just turn off and on again. It’s much more organic and interconnected. Damage any bit of it—by closing restaurants, for example—and you set off waves of dislocation and destruction in all directions.

Food and drink wholesalers, laundries, business services groups, truckers, insurers and many others suddenly find they have no customers. Their suppliers in turn lose business. But bills keep coming in, and if there is no end in sight to the lockdown, the more it makes sense to liquidate and let the staff go. So all the shops, cinemas, garden centres and tourist spots that those people used to spend their wages on are hit too.

The longer the lockdown goes on, the more the dislocation and destruction spreads out and accelerates. Not unlike the virus itself, each troubled business that falls passes on the disease on to many others, each of whom in turn affect many more. Catch it early, and you can limit the damage. Leave it too late, and the disaster is unstoppable.

And don’t forget: it’s not just economic damage. There is the psychological and social strain on families and kids who are locked down. The potential for domestic and child abuse, the expected rise in chronic health problems, and indeed suicides.

We are assured that Whitehall officials are talking about the unwinding strategy. That is really not good enough. People need to believe that there is a way out. More than that, if they are to accept the strategy, and not flout it and thereby reverse the clinical gains that have been made, they need to feel ownership of it.

Cambridge academics have suggested that we should all walk clockwise in public parks, keep cats indoors and face a £20 minimum spend to stop us going to the shops too often. That is exactly the sort of elitist thinking that will generate only ridicule and contempt rather than public compliance. Would a Whitehall version be any better?

We’re falling behind other countries in explaining how we might unwind the lockdown. While dithering ministers are in thrall to physicians who want to continue the lockdown indefinitely, Germany, Denmark, Austria, even Italy and Spain have already taken early unwinding measures. Their small steps at least bring hope to businesses and individuals that, here, must be thinking of just giving up.

Half of our firms are running out of cash, and the Treasury’s much-trumpeted schemes are not plugging the gap. Just £8.7 billion of the £330 billion emergency loans and grants have been paid out, and the furlough payments don’t even begin for three days. Forget the ‘bounceback’: pretty soon there won’t be anything left to bounce back.

Right now though, our sovereign Parliament needs to be discussing the shape of what’s to come. They should be seeking and putting forward ideas from their constituents and initiate a wide public debate in which those ideas can be critiqued, amended or rejected, and improved.

There is no shortage of quick-witted reactions within businesses that stayed open. Within days of the crisis, supermarkets had found new stocks, marked safe distances on the floor, controlled customer numbers, stepped up deliveries to millions, adjusted supply chains to meet changing demands, and protected their cashiers with acrylic screens. We should be drawing on the diverse and dynamic ingenuity of individuals and businesses for solutions not relying on the staid groupthink of officials.

Don’t imagine that yet more state schemes will save the day. As people see their own jobs and businesses falling apart, the idea of the civil service being not just unaffected but expanding will provoke huge unrest. If there is a role for the state, it is in getting out of the way of recovery: removing those taxes and regulations that will stop business from applying their ingenuity on the problem of rebuilding from the ruins.

Let’s recognise that revenue for most businesses has been cut to nil by the state and so maintain then expand to all companies the suspension of business rates. Rates are in any case supposed to reflect rents and therefore profits: but nobody’s making profits right now.

There should be cuts in corporate taxes and definitely no phasing out of entrepreneurs’ relief. We need those thinkers and innovators now more than ever. We could even just defer Corporation Tax payments until the crisis is well over. And let’s abolish the factory tax that makes it so expensive for firms to invest here rather than overseas. While we’re at it, recognise other G7 countries’ banking licences so they can invest here easily.

Employers’ National Insurance is a tax on jobs. Those are exactly what we’re looking at needing, there’s no sense in taxing job creators now. And it’s the poorest who’ve shouldered the burden most. Let’s take them out of NI entirely — not in future years, but right now.

Very importantly, we should slash VAT. Our consumption has plummeted and we will want to encourage people to spend and that in turn will get shops and other businesses on their feet again. It is pointless for big-statists to moan about how much money the Government will lose – if businesses go bust at an accelerating rate, it won’t have any VAT receipts anyway.

Construction too looks to be on the cusp of a collapse. But renovations, refits and brand new builds are the backbone of much of the economy up and down the country. Let’s not forget, if we choose to cut housing costs those young people currently cooped up will see the biggest welfare gain. We might put off some of the ‘intergenerational reckoning’ others warn about. Build out, build up and build different — but whatever we do, we must build, and so let’s scrap the fussy regulations that put progress on hold.

Most importantly, let’s remember to call on the ingenuity and innovation of our businesses and citizens. They will find ways of reopening Britain safely and quickly that Whitehall would never dream up in a hundred years.

Of all the ministers we’ve seen recently, Boris Johnson is the only one that gets this, the only one that can take the people with him.  His Churchill moment is coming. As we look to what comes after the lockdown, his motto must be his idol’s: “Trust the people.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: What is the Government using the shutdown for?

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

Covid-19 is producing an economic bloodbath across developed economies. OECD sectoral analysis suggests lockdowns will see day-to-day activity fall 25-30 per cent across countries for their duration; the Office for Budget Responsibility reckons 35 per cent in the UK. Even if this lasted for just three quarters, with immediate rapid bounce-back, GDP would be 10 per cent lower over the year – a much greater downturn than after the Great Recession.

You don’t need economic expertise to realise that closing businesses and locking people at home reduces activity. U.S. data shows 16.6 million Americans – over a tenth of its labour force – filed for unemployment insurance in the past three weeks.

Universal Credit here in Britain has seen 1.2 million extra claims since March 16. That’s after unprecedented actions, remember, to discourage layoffs. The OBR assumes a strong recovery and no permanent economic damage, but the longer this goes on, the more businesses fail and employment relationships get destroyed. After some duration, mothballing activity becomes more damaging relative to economic adaptation. No wonder, per Fraser Nelson, Boris Johnson wonders about the wisdom of restrictions.

Truly dreadful GDP and unemployment figures are incoming. But Johnson must remember this: the economy would still be cratering even without lockdown, because of changes to behaviour and collapsing supply chains.

Swedish unemployment is rising faster than after 2008, even with laxer social distancing measures. South Korea, with its test-and-track approach, has seen growth give way to recession. Consumers and producers will avoid getting sick by forgoing much “social spending” and risky production even absent government orders.

This effect probably accounts for 50 per cent of the downturn. We tend to attribute all outcomes to politicians, but you could re-open every cinema across the country tomorrow and barely anyone would go. So false dichotomy #1 is that the economic alternative to lockdowns is normality.

In reality, the economy will only fully “normalise” once the virus threat is vanquished. That means a credible vaccine, effective treatment or relatively stable herd immunity (it is unclear how long immunity lasts), or else such an efficient test and contact tracing system that public confidence is restored. Anything else is adaptation or destruction, with a cost. We therefore need less talk of an “exit strategy” for lockdowns and more talk of an exit strategy from covid-19’s stranglehold over our lives.

Here, though, the Government’s thinking is difficult to discern. Can anyone explain its aim beyond “protecting the NHS” from this first peak of infections? Is it to use the lockdown time to build extra NHS capacity and then manage future caseloads until herd immunity is reached? Is it instead to use restrictive containment to minimise deaths until a vaccine is in sight? Is the Government waiting on an effective treatment to facilitate loosening restrictions? Or building up South Korea-style testing infrastructure?

Last week, Dominic Raab alluded to a strategy for the next phase. But he would not express it, lest he muddy the waters on “stay at home” messaging. Yet, the population has been, if anything, more compliant with orders than expected so far. It belittles us to be kept in the dark. Absent a clearly articulated strategy, and business uncertainty will heighten, and severe non-compliance is risked if people start questioning why they are sacrificing their livelihoods and liberties. Particularly once the army of the immune grows and other countries take different approaches.

The absence of discussion of our true options here is sadly leading to false dichotomy #2: that the alternative to lockdown is doing nothing and hundreds of thousands of people dying.

Let’s be clear: lockdowns will “work” in lowering the virus’s transmission. In the face of uncertainty, overwhelmed health systems, and lack of infrastructure for other approaches, they are a precautionary nuclear option. But they aren’t an end game for the virus. They buy time to better manage cases or work towards a vaccine.

Yet they are a destructive, unsustainable stop-gap restricting much high-risk and low-risk economic activity alike. So grave are they in disrupting our lives and freedoms, we must first demand that they are not more draconian than they need to be and, second, that the time bought by them is used wisely, with a meaningful new policy once new cases are back at low numbers.

“Reviews” of lockdowns should therefore be meaningful. Worldwide, businesses are adopting strict social distancing safety protocols, such as screens, regular disinfecting, mandatory mask wearing, one-way systems, single entrances, and adjusted business hours. Capitalism finds ways of giving consumers and workers confidence to re-engage. As these develop, business shutdowns, logically, should be eased. Is the Government considering this? Life-sapping restrictions on outdoors activities likewise look disproportionate, given other steps that could be taken to lower risks.

Making sure any lockdown only disrupts what it has to should be the bare minimum we expect from governments. But ultimately the next stage requires confronting the messy trade-offs that come on the path to the end of the pandemic, best analysed using an all-encompassing economic cost-benefit analysis.

For keeping aggressive restrictions until a vaccine turns up is a non-starter – it guarantees an economic depression that would create civil unrest (especially if a vaccine proves elusive). Now is the time to earn public buy-in for balancing health and economic wellbeing going forwards, recognising the trade-offs inherent in any other path.

Allowing younger age groups back out brings significant risks for multi-generation households, for example, while industry-by-industry relaxations bring charges of favouritism. Immunity passports – allowing those who have recovered to live normal lives – brings risks of false positives if introduced too early, while also creating incentives for some to catch the virus to “win their freedom.”

Variolation –giving “safe” doses in controlled medical environments – requires using scarce healthcare workers for deliberate infections. Relaxing to social distancing measures after the peak, a la Sweden, but perhaps with at-risk groups isolated, sounds more feasible, but that would bring political accusations of “putting the economy over lives” given an inevitable higher death toll than suppression.

Testing-and-contact tracing as mitigation “works” elsewhere. But it has monumental civil liberties implications, particularly if it incorporates forced quarantine. Then there’s trying to end this through medical innovation – vaccines and effective treatments. These, surely, have to be an addition to a strategy and not its extent.

The lockdown bought time to weigh up these options, or some combination, considering the constraints of public opinion and technology. They are all imperfect, given this truly dreadful situation with no “good” outcomes. But the government must soon show its hand. The alternative, let’s not forget, is a deeply destructive, authoritarian, largely un-policeable lockdown. The vacuum of audible strategy is creating an inane debate that implies the only meaningful choice is between mass deaths or economic destruction.

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Victoria Borwick: Ministers must act to stop vulnerable people falling through the gap of the Covid-19 safety net

Victoria Borwick is the former Conservative MP for Kensington and was the Deputy Mayor of London to Boris Johnson from 2012 to 2015.

Over the past few months, we have had to learn a lot of new phrases: self-isolation, furlough, and shielding to name but a few.

Yet one of these, the new Government designation for “vulnerable”, has proved contentious, separating as it does those who can access additional help, quieter shopping times, and food or medicine deliveries from those who cannot.

I am calling on the Government to include in it carers and families with SEND (Special Educational Needs and Disabilities) and those with hidden disabilities. We have been promised parity for those with mental health conditions, but there is no evidence of this in the current Government list of those deemed “vulnerable”.

There are incidents up and down the country of employers demanding “the letter” which entitles you to additional shielding and assistance. The system should provide you with proof, drawn from all the data that the authorities hold for you – yet as you can see from the frantic calls to helplines and posts on social media, it is letting down those who need this help.

The current fallback position, “phone your GP”, assumes local doctors are not hard-pressed already. Nonetheless I followed this route, sent a message to our practice coordinator, and was delighted when one of the local GPs telephoned me a few days later. I asked about the letter for those that are deemed vulnerable – not because we needed shopping delivered, or any special treatment, but to understand the system better to support those contacting me for help.

The GP very openly explained that they are trawling through their records to write to those that they knew were vulnerable. Some are known and easy to spot as they already receive free flu vaccinations, but others had hidden disabilities.

The critical group which has fallen between the cracks of the current definition are families and carers of children with Special Educational Needs. Centres to support these families are currently closed, parents and carers have given up work to look after their charges, and there is no support net. They are often socially and emotionally vulnerable, and parent and carers associations across the country are asking for support. Many families are facing great hardship and the strain of looking after children and adults with special needs is taking its toll.

Charities such as Full of Life report that: “Learning disability and autistic patients are being failed by a system that does not provide proper care and support.” These families are known to the Government because they receive Disabled Living Allowance or Carers Allowance. Local Authorities also keep information on children and adults with disabilities.

From one of Full of Life’s recent surveys:

  • 30 per cent of parents care for more than one person some care for three other people.
  • 70 per cent have an average of 4.5 hours uninterrupted sleep. (Sleep deprivation is correlated with cardiovascular disease, insulin resistance, increased risk of falling, and dementia.)
  • 65 per cent have immune system problems.
  • 55 per centhave been injured in their caring role due to falling or aggressive behaviour by the person they care for.
  • 71 per cent feel depressed and sad – despite having medication!
  • 36 per cent experience anxiety/panic attacks/OCD/agoraphobia/claustrophobia.

The Government talks about “parity” of provision between those with mental health conditions with physical health conditions, and it is past time this was put into practice. Ministers must show some joined up thinking and to amend their list of Vulnerable People to include those who have Special Educational Needs and hidden disabilities, as well as their carers.

Many of us will know families and neighbours in our areas who fit this description and need our support. Voluntary organisations are already reaching out to help, but the Government must recognise their needs and put the proper measures in place as soon as possible.

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Tim Smith: What should we do for the furloughed worker?

Tim Smith works at the tech startup WhiteHat, developing alternatives to university through apprenticeships. He worked as a Special Adviser from 2015 – 2019 for Theresa May in Downing Street, Patrick McLoughlin in the Transport Department, David Davis at DExEU and Jeremy Hunt in the Foreign Office.

For a Government in crisis mode, there are urgent questions and questions that can be deferred. How do we stop this virus and prevent immediate financial collapse are the pressing issues – and at present a hundred per cent of Government resource is focussed on answering them. Anything else would be an indulgence.

There are, however, some questions that can only be put off for so long, particularly given the imperative to prevent a recession becoming generation-defining depression. None are more important than the measures put in place to support workers during the time they spend redundant thanks to the shutdown.

We are almost certain to face an employment crisis on a huge scale. All the economic indicators point to a substantial recession. Nearly a million people have applied for Universal Credit the last two weeks, almost ten times the anticipated figure for normal times of 100,000. While speedy action by the Treasury will reduce the financial hardship people face, the UK labour market is heading for a chilling slowdown.

Add to this the tens of thousands of school age children who have found themselves with little to do after their exams were cancelled, and we are looking at a substantial population who will have had their lives interrupted, and with spare time to burn.

The cash support that the Treasury is providing will be essential. But just as important for their long term prosperity will be the ways we encourage these people to spend their time, and help them get their next job.

It’s a question with massive human impact. The psychological difference between swift re-entry into a new job with colleagues and a regular pay cheque versus months sat at home, with a reduced social circle, is enormous.

It is also political. For Conservatives in particular, it is essential to avoid the mistakes of the 1980s, during which victims of de-industrialisation felt a lack of interest and attention for them and their communities.

So how people spend their time really matters. While the swift action from the Treasury to secure people’s finances is welcome, in the months ahead it will not be enough to leave support at simple cash settlements. So what might some best in class schemes look like?

First, we have to support the desire of individuals to contribute to wider society in this time of need. The formal structures put in place for NHS and wider societal volunteering are a brilliant first step, and the fact that so many have volunteers is a reminder that community spirit is a powerful motivator. While winning plaudits should never be people’s primary driver for taking part, establishing a formal system of recognition will help furloughed workers who give up their time demonstrate their character and work ethic to future employers.

But the most effective long-term scheme will be a national programme of retraining. The world of work is changing rapidly, with a decisive shift towards jobs in digital, tech and services. Time spent learning transferable skills, applicable to the new reality of work, could give a generation of workers long-term resilience. All it takes is the right provision supported with the right level of funding.

We are well set up to deliver this since the cash is already available – the manifesto committed £5 billion for a National Skills Fund and this money should be unlocked, fast. For the past two years, the Government has sat on its hands when it comes to the National Retraining Scheme – Ministers now need to be empowered to start delivering it, and with furloughed workers put in the fast lane.

Much retraining can be delivered remotely without people leaving their homes. The startup I work at, WhiteHat, provides training for apprentices and we have moved all our coaching online. Mobile-optimised courses exist for those without easy access to laptops or WiFi, though more targeted support will be needed for the most digitally disadvantaged communities.

Key to success will be allowing subject areas and courses to be determined by industry demand, rather than Whitehall diktat or where capacity happens to be in the college system. This will ensure training becomes a route to a productive job. The growing industry in online courses paid for employers and the rise of apprenticeships in tech and digital show that businesses are crying out for skills, and will support workers who want to develop them.

Finally, the Government will need to fund training at a broad range of levels. This economic crisis will be broad and deep, affecting young and old, with every level of educational attainment. They will all need our support. That means support for everything from short online courses to formal apprenticeships delivered in partnership with employers.

Of course, getting measures for retraining in place are a second order question. But ensuring they have the right blend and scale is also crucial.

Three, six or nine months out of full time work does not have to mean a break on career progression. If we get it right, the time people are forced to take off can accelerate their careers in the long run and hasten our economic recovery.

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David Gauke: The virus – and my journey from serving as Lord Chancellor to volunteering to stack shelves

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

“Are you relieved not to be dealing with this?” is a question I am asked quite a lot at the moment. The honest answer is “not really”. I suspect most former Ministers feel a sense that they would rather be back in post, at the centre of things, able to make a difference.

That said, I feel great sympathy for my former colleagues who are in office. They face far greater challenges than any their recent predecessors faced. There are a range of only bad options, the evidence of the nature of the threat and the advice received by Ministers can change very quickly and there is a strong desire in the media to apportion blame. If something is wrong, someone must be at fault. Ministers will always be high up on the list of candidates.

Not everything has gone smoothly in terms of communication but sometimes it is necessary to try to convey quite complex messages. The Government has tried to communicate messages that reflect a dynamic situation that moves us along the spectrum from ‘business-as-usual’ towards ‘lockdown’. If, as a society, we can only cope with simple, binary positions we will not be able to respond sensibly to the threat we face.

Getting the judgements and messages right has been difficult as we adopt extraordinary measures to combat the virus. This may be even more challenging when it comes to deciding how to relax these measures. There will always be a case for delaying any relaxation, but at some point we will have to move in the direction of normality. Those decisions will probably be the hardest to make.

– – – – – – – – – –

A further challenge for the Government is that there plenty of things which people are demanding be done immediately which is just not operationally possible. Most journalists and politicians spend their time focused on the questions of ‘what’, ‘why’ and ‘who’ but the most important question at the moment is ‘how’.

How do you provide support to the self-employed? How do you expand healthcare provision in a pandemic? How do you enrol millions of new claimants onto Universal Credit?

Apart from the NHS, the two most important delivery departments at the moment are HMRC and DWP. I spent nearly seven years as the responsible minister for one or the other of them, and the tasks in front of both of them are enormous.

As far as I can see, the staffs at both organisations are responding very impressively but do not underestimate how challenging then next few weeks and months will be for both organisations. Operational constraints mean that some problems don’t have a perfect answer.

– – – – – – – – – –

Progress in delivering public services digitally is helping us get through this crisis better than we would otherwise do. When I was at the Treasury, I was a strong supporter of updating how PAYE operated and brought in Real Time Information, which is crucial to the operation of the Government’s furloughing scheme. I also initiated Making Tax Digital, which – as the name suggests – meant that our tax system became more digital.

It was always going to be a long term reform but considerable resistance to the plan meant that it isn’t as advanced as it might have been. Had it been more advanced, I cannot help think that it would have been easier for the Chancellor to develop policies to help the self-employed.

Once we are over the current crisis, we will need to think about how public services can be more resilient in the event of a future pandemic. Improving our capability of delivering services remotely will be key to that. Online school lessons and university courses. GP surgeries by videolink. Greater ability for prisoners to maintain contact with their families electronically.

And are there some tasks which need to be done but don’t require people at all? We need tube trains to keep running. The Docklands Light Railway isn’t vulnerable to drivers being sick because they don’t need drivers. It is time that we move to the same situation with the London Underground.

– – – – – – – – – –

Ten days or so ago, my wife returned from our village supermarket. The shelves were empty not because the shop didn’t have the necessary items, but because they didn’t have the staff to stack the shelves. Our friendly but frazzled store manager was doing it all himself.

Keen to make use of my career experience (the bread and other bakery products shelves, Asda, Ipswich, summer 1991), I went down to the shop and offered to volunteer to do some shelf-stacking. Our store manager was keen but called the regional office, and it was all too difficult with worries about liabilities and so on.

As the response to the National Help Service demonstrates, there is a big appetite for people to volunteer. In the weeks ahead, we may see many shortages in critical parts of the labour market – not just in relation to the NHS – and emergency volunteers will be crucial in plugging gaps.

For the most part, the market will fill lots of shortages (supermarkets are rapidly recruiting new staff) but finding ways of quickly filling an emergency shortage with a willing volunteer – removing all bureaucratic obstacles – would be very beneficial.

Of course, identifying what needs to be done is easy. The challenge is how, operationally, this could be done.

– – – – – – – – – –

It is quite possible that, in a few weeks, we will have in society a special class of person. This will be a person who has been tested for the Covid-19 antibodies and is found to be immune from catching and spreading the disease.

Anyone who has received such a greenlight could return to living a normal life or could become super-volunteers, able to perform urgent people-facing tasks without the risks facing the rest of the country.

If that situation emerges (and it is, as yet, only a possibility dependent on many assumptions), there will be a new divide in society. The ‘greenlighters’ versus the rest. The greenlighters will be able to do more for the rest of society but it will be impossible to impose on them the restrictions that apply to everyone else.

This will create its own difficulties. For example, how easy will it be to maintain a message that most of the population have to stay at home but the minority who are greenlighters can go to the pub with their greenlighter friends served by greenlighter bar staff?

For a short period of time, a new caste of the Covid immune will enjoy their privileges, whilst the majority look on enviously.

– – – – – – – – – –

We are often being told that the current crisis is like the Second World War and that, once this is over, we will move in the direction of higher spending and higher borrowing. If we can do that now, why not in the future?

I suspect we may see higher spending, but I think it is worth reminding ourselves about one oft-forgotten attribute of the post-War Attlee Government. From 1948/9, it ran big Budget surpluses. Exceptional borrowing is justified in exceptional circumstances. Once the exceptional circumstances are over, the exceptional borrowing must come to an end.

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James Heywood: The virus has exposed the urgent need to reform how we treat the self-employed

James Heywood is a Senior Researcher at the Centre for Policy Studies.

While the Government’s response to the economic impact of the Coronavirus crisis has mostly been warmly received, it was widely accepted that the self-employed were the elephant in the room.

This is not simply down to neglect by the Chancellor, who has actually done his level best to do right by the self-employed, recognised that more needed to be done for them, and has now announced sensible solutions.

But the confusion over the issue speaks to a wider problem with the way our labour market and tax and welfare systems work. We still tend to operate on the assumption that almost everyone is an employee, pays PAYE and earns a steady wage each month, but this increasingly does not reflect the modern UK workforce.

Over the last two decades, the number of self-employed people has increased by 54 per cent and now stands at five million. Nearly one in three of the net jobs created since 2000 have been people becoming their own boss. Now, for every five employees there is one self-employed person.

More people working for themselves is a great thing both for them and for the economy, and many value the freedom and flexibility it brings. A lot of the growth in self-employment has been a result of technological changes which have made it easier for people to set up business in their backroom with little more than a laptop.

However, the phenomenon also poses major challenges for policymakers. As shown by the Coronavirus crisis, self-employed people are particularly vulnerable to sudden fluctuations in business and it is not as easy for the government to help them as it is for a normal employee. More widely, there is an ongoing debate around the gig economy and employment rights, and the self-employed have also been largely left out of the wider success story on workplace pension saving and auto-enrolment in recent years.

There are also anomalies in the tax system which are overdue reform. As the Chancellor said in his statement: “it is now much harder to justify the inconsistent contributions between people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally in the future.” 

Self-employed people pay a nine per cent rate of NICs compared to the 12 percent paid by employees (and the latter’s employer also pays NICs on their wage bill). This lower rate is meant to reflect the more generous State Pension entitlement enjoyed by employees but, under the new State Pension introduced in 2016, Class 4 NICs entitle you to the full amount ,just as Class 1 NICs paid by employees do.

Some can gain from setting themselves up as a limited company and taking their income as dividends. I personally know of people who have joined large, established companies and have been told by their colleagues on arrival that they should set up as a contractor, like everyone else in the office, meaning they can do the same job at the same desk but save themselves and the company thousands in tax. The Office for Budget Responsibility has previously calculated that the tax benefit for an employed person earning £30,000 of incorporating themselves as a company would be £3,300 per year.

Some people and companies can exploit the tax system to pay far less than their fair share while making no greater contribution to the economy than they would doing the same job with employee status. Not only does that make little economic sense, it also means the authorities end up being unnecessarily suspicious of genuine sole traders who are driving growth, for example through the controversial IR35 compliance rules.

There is a strong case for the tax system to reflect the risks involved in running your own business and the reduced entitlement to employment rights and some state benefits, but this should be proportionate and well-targeted and should take into account the heterogeneity of the self-employed population.

As the Institute for Fiscal Studies have pointed out, the tax advantages enjoyed by some are unfair on ordinary employees doing effectively the same work. The tax benefits of being self-employed or an owner-manager should be geared towards incentivising investment and innovation, and should reflect genuine value added relative to normal employment.

As an indication of how confused things are right now, it is currently entirely possible for someone to be classed as a worker under employment law but as self-employed for tax purposes. We need to think seriously about how exactly we want to define self-employment – how we can ensure that it does not expose people to insecurity and exploitation, and how its status should be recognised by the tax and welfare systems in ways which are fair on other taxpayers and provide economic benefit. There are millions of people working for themselves who are driving growth and increasingly form the backbone of our economy. If we can manage this in the right way, we can maximise the benefits of modern technology and working practices.

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