It is now apparent that 2021 is going to be much harder in the UK than anyone might have expected, even a few weeks ago.
Due to the government's failure to tackle coronavirus, its dithering, and even its active promotion of its spread through mechanisms such as ‘eat out to help out', the UK is now one of around 20 countries with a significant second wave of coronavirus.
The risk we now face is enormous. Some forecasts suggest the NHS will be overwhelmed by 12 January. We then simply do not know how the sick and dying in this country might be managed. There will be no facilities available to help many of them, through no fault of their own.
I do blame the government for this.
We have insufficient vaccine. We know that its rollout is going to be seriously problematic.
Worse, policies that left schools open, that permitted inadequate tiers, and were always too late aided transmission. In turn that permitted the mutation to develop that is now underlying this current crisis. Scientists were ignored.
But so too was sound economics, which has been absent from this crisis from the start.
Furlough apart, almost every measure taken during this crisis, apart from business rates holidays, has been wrong. And even with that said, furlough has now lasted too long when broader based solutions have been required for some time now, whilst the business rates holiday is coming to an end. Whatever glimmers of hope there were are now fading.
As I stressed last spring, this crisis always required a decision to be made as to whom the government was going to support. The choice was between people and businesses, or landlords and bankers. The productive economy, versus the rentiers, in other words. The government chose the rentiers.
Vast amounts of money in the form of loans to business was shovelled through banks, on which they took fees but rarely have to accept risk. Indeed, by moving their existing risky loan books into government backed arrangements their overall risk in their loan books has reduced. This has been a great crisis for banks. Many have seen profits rise.
But businesses now have loans that have funded losses, and which they therefore have no means to repay. And they still have deferred tax bills to pay that leave them in the same impossible cash-flow position as this crisis continues. The solvency of thousands of businesses remains in doubt as a result. And insolvent businesses fail.
Meanwhile the mortgage holidays that could be applied for are coming to an end and the right to evict tenants in arrears is about to resume. Landlords have seen property prices increase as a result of government policy during this crisis. They're sitting very pretty, confident now that whatever happens the government will bail them out.
Many of their tenants are not so fortunate. Business failure is one threat to landlords. But the 20% or so reported increase in households in arrears on basic bills like utilities, mortgages, rents and council taxes suggests that a wave of tenant evictions will emerge this year and threaten a crisis of homelessness in the UK that could overwhelm social services as surely as the NHS is being overwhelmed by Covid.
And reinforcing this is the fact that the additional £20 a week in universal credit given during the crisis is threatened with withdrawal in April.
Furlough is also scheduled to end again. And the gross, and random injustice of that scheme, that provides considerable unemployment benefit for some relatively fortunate people who were in employment at the right moment, compared to those who were not, or were self-employed, continues. No wonder a private debt crisis is emerging.
And yet at the same time there is, of course, a boom in private savings. Government deficits have to be matched by increased private wealth. It is impossible for it to be otherwise. Double entry book-keeping simply requires this. And it is undoubtedly true that for significant parts of the population the coronavirus crisis has been a financial blessing, simply because income continued and outgoings were cut. But that is not true fir everyone, by a long way. The social malaise of inequality is growing in our society, and quite probably around the world.
The government has shown no more awareness of this economic consequence of coronavirus, and the long term impact it will have, than it has of the epidemic itself. It has randomly bunged money (no other term is appropriate), without reason, and with indifference to consequence, at both crises. The failure of policy in both cases is now all too clear. The economic costs will also continue long after we have eventually learned to accommodate this coronavirus, whenever that might be.
That is the inevitable consequence of this government having just two current priorities. The highest would seem to be to profit its friends, and so buy their own post-politics careers. The second is to limit government spending because they believe, wholly erroneously, that we can ‘run out of money' when glaringly obviously that is not true, as QE has proved. There can literally be no shortfall in the supply of money now to deal with the crisis that is happening.
However, just as coronavirus will need us to re-evaluate how we provide medical and social care in the future - and enhance our capacity in both - we also need to re-evaluate how we manage our economy. It was already imbalanced. It is now chronically so, with the direction of travel being that things will get worse.
After suffering substantial losses through no faults of their own many businesses in the UK are now massively under-capitalised. Simply continuing to trade is going to be a struggle for many. Investment is beyond their imaginations. What that means is that what we need now is an industrial strategy, which is something no UK government has had for decades. Money has to be spent, wisely. This is, of course, why we need a Green New Deal and a national investment bank to direct it, including by taking stakes in companies.
That though is not enough. We now need to correct imbalances. There is a case for windfall taxes on companies that have done well from this crisis, banks included.
And given the massive increases in wealth inequality we need to tax wealth a great deal more. Aligning capital gains and income tax rates starts the process. An investment income surcharge is essential so that wealth is not taxed substantially less than work. Rents may need to be targeted. Caps on total ISA contributions are essential. Pension reliefs must only be at basic rate. All really easy stuff to do, and quickly. A wealth tax can wait.
Critically, the proceeds must be redistributed, and not saved.
A universal basic income plus a job guarantee has now to be worked on.
And there is clearly more required. To create inter-generational fairness student loans have to be written off. And there must be better education in new education opportunities.
Top that with an effective replacement for inheritance tax, that includes lifetime gifts.
And never threaten austerity when there is need, because that crushes this country.
We need to begin again. It can be done. But it requires vision. Who has it, most especially at Westminster? Maybe the SNP? And they're going. How are we to address the crisis that we face?
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My brother lives and works from Southern Ireland (may I call it ‘Eire’?) as a truck driver.
He was at Heathrow on New Year’s Day making a delivery. He told me that he did not see a face mask anywhere in the Freight handling area. He uses the North/South Wales ports too, and says that the further south you go in the UK, and towards London, the more people seem to be behaving as if nothing has happened.
This Government came into being to finish off the Thatcher project from 1979.
That is all it is capable of doing I’m afraid.
Red Wall voters out there – please note.
It’s just Ireland – not Eire
Under Mr. De Valera
Ireland changed its name to Eire
But Britain did not change its name
It stayed England all the same.
(long ago ditty from Punch magazine)
One eye may be on the next election but, right now we are still in the honeymoon period of this government, so core values to the fore! This bunch is a truly ideological administration, yet the central tenet of that ideology (kick-out Johnny Foreigner) has come to pass. So, what to do? Back to Tory business as usual. Wake-up sociopaths everywhere. It’s devil-take-the-hindmost time (again).
Free of the constraints of the Guardian’s increasingly narrow “range of acceptable opinion”, George Monbiot pulls no punches in his take on the latest form of capitalism, exemplified by this government and the vested interests it represents:
https://www.doubledown.news/watch/2020/10/december/why-brexit-is-capitalism-civil-war-george-monbiot
Richard Have you changed your position on universal Basic Income
I seem to remember you were doubtful of it and more inclined to support universal basic services.
i just wondered ??
I pragmatically think a combination of UBI and UBS plus JG may well be required
I see no one of them as a complete magic bullet – and know tat is MMT heresy
I was travelling through Blackpool before Christmas due to work and whilst in the area I thought about what could help an economy that is seasonal, dependant on the British weather and also, according to various sources, has a decline in permanent population and mental health plus several other major issues.
More “secure” employment is usually found going down the M55 in the opposite direction. (Preston)
The likes of Fleetwood once relied considerably on fishing (Cod Heads)
Lytham and St Anne’s has an “older” demographic.
There are some decent older homes around the area, although I saw little room for GSHP’s or ASHP’s (this is something that needs much further investigation into wether it is practical)
How do you mitigate the fact that you can get better value (and weather) by holidaying abroad (which means air travel)
There are several other coastal communities with similar issues.
I think that more than a green new deal is needed here.
“Maybe the SNP? And they’re going.”
Where are they going?
We need to increase the cost of air travel.
It really is remarkably simple….
The Scots are going to leave the UK is what I meant
“We need to increase the cost of air travel.”
Pardon the pun but this won’t fly with the holidaying public.
And eve if air travel costs do increase, that does not solve the problem of coastal communities, amongst others.
Any government legislating for more expensive air travel will be vilified by the fourth estate, most of the opposition, and a sizable majority of the public who will see it as their freedom to holiday taken away from them.
There are still far too many climate deniers out there, look at the (uncalled for) abuse Greta Thunberg gets.
Also, even if the SNP win a majority in May, I can still see a referendum being refused, out of spite more than anything, and no “third way” planned.
The holidaying public may have no choice – tourist flights are 92% of air travel
Ok – Noted.
Almost a year ago now I wrote to my MP asking why Exercise Cygnus and the 2019 National Security exercise had been ignored. At the same time I asked how the risk registers within the Department of Health were consolidated with those of the hospital trusts, the local authority and the care sector. I did not receive an answer; I did from my local councillor who received an assurance from the local authority that the risk assessments that the LA was legally required to do had been done.
It is now surely obvious that there has been no forward thinking, no application of risk management strategies, no sectoral co-ordination. What there has been are reactive spasms of activity triggered by criticism of the government in the Mail.
As someone who was required to maintain a risk register, to devise risk management strategies and to correlate these to free accumulated fund balances for entities within the public sector and whose work was reviewed annually by the NAO I now ask myself what was the point. What is the point of these reporting and auditing standards if, like the procurement standards, they can simply be brushed aside and ignored – to the detriment of us all.
I may be in a minority here but detail matters, rules matter. I am afraid the accounting and legal professions have a lot to answer for.
I agree with you!
Locally, few young[er] people wear masks when out. Several retail parks have, at night, become home to quite large numbers of youth, in cars.
One of my friends was complaining to me (!) about his sons attitude, his son works in a retail distribution warehouse, where few workers wear masks, and who refuses to wear one at home either. Both my friend and his wife are in their late 50s’ and have health problems. I told him to sling his son out!!
Noted a poll that showed Labour 5 points ahead of the tories today. That won’t last!
PS.
My ex works in the hospital in a patient-facing role.
Her first vaccination against CV19 is on 8th of February. Level 1.
I figure that I will get mine in about 6 weeks. Level 4.
8th of January; sorry.
Off topic but concerned with government accounting:-
https://new-wayland.com/blog/its-just-debits-and-credits/
That’s dangerous thinking in the sense that it’s doing what standard macro does and is taking money out of the equation
That is really not helpful
That’s why I really do not rate Neil Wilson as a thinker – because he appears to have no concern about distribution. That’s a gift to left wing critics, and I am one in this occasion.
Worth making the point that in an average year
1. About half the UK population dont fly
2. Most of the half that do fly make no more than 3 flights
3. 10% take half of all the flights, and
4. 1% take 20% of all flights
The frequent flyers are typically wealthy with holiday homes abroad, hence the squawking from the media.
It would not be that difficult to devise a ‘frequent flyer’ tax that would target the 10% or even the 1% but of course these are the ‘Movers and Shakers’ who have the ear of the press, or are the press.
I did quite a lot of work in such a tax, having been commissioned to do so, and it died a death
I am not sure why
Happy new year!
The Remainers told the Brexiters: “We want the UK to remain in the EU”.
The Brexiters told the remainers: “But we want our independence, our sovereignty, our freedom and make our own laws and regain our great empire”.
The Remainers: “If we leave the EU we will be worse off”.
The Brexiters: This is “Project Fear”.
The Scots told the Brexiters: “We want our independence, sovereignty, freedom, to make our own laws etc and join the EU”.
The Brexiters told the Scots: “We are not going to let you leave”.
The Scots: This is “Project dictatorship”.
Won’t they just stumble along, pursuing their hopeless libertarian vision, and reacting late to real-world events that force them into actin against their vision ? Eg, the furlough scheme, completely against their worldview but something like it unavoidable? Scottish UDI might shake things up enough for change, but that is quite a gamble. Ireland reuniting more likely but that’s probably not enough to reset England.
You may be right
But I think events will stop them
One of the key elements I look for in a business plan is “successes, failures, lessons learnt”. This government has spawned failure everywhere, but NO lessons have been learnt except that they are never held to account. Keep calm and crony on.
How about a Zero Covid strategy, as has been working well for a number of countries, if it’s not too late? It’s being found to be better for economies as well as saving lives. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/crushing-coronavirus-uncertainty-the-big-unlock-for-our-economies
Almost certainly too late now
As someone currently living in a zero-covid country (Australia) and having watched Victoria learn how to get to zero and stay there, I’d say it’s not too late for the U.K. to pursue zero in principle but it is way too late in practice, or rather was never a possibility. The key missing ingredient in England is competent leadership, listening to public health experts, willing to provide all the necessary support, able to communicate well, and committed to zero. Once Johnson was elected any chance of such leadership was lost. At least for this pandemic.
Speaking from a Scottish perspective, the main barrier we have to managing Covid down to eradication or negligible levels is that we have no control of our borders. The Scottish Gov, Public Health experts and NHS Scotland could develop all the necessary clinical strategies (we were very nearly there in the early summer of 2020), but, with a porous border with England and border control policy at ports and airports reserved to Westminster, sensible clinical policies and controls can swiftly become overwhelmed by events.
That’s another reason to add to the lengthening list of reasons why Scotland would do better as an independent nation state. Keeping the population safe is one of the most important duties of any government. On two public health counts the UK Gov fails us: housing WMDs in close proximity to our largest population cluster and failing to provide non-porous border controls during a grave pandemic. Daily it becomes increasingly inconceivable that we could make a bigger hash of running our own affairs. There are now only 66 days until the Scottish Election. The clock is ticking.
One of the cornerstones of MMT is that the purpose of tax is not to create a government spending fund but to control inflation. The massive rise in income of the very rich over many years, directed into property investment, has created unprecedented property inflation which has distorted the economy and inevitably filtered down to the bottom, making home ownership impossible for many people, huge profits for landlords (who benefit from both inflated rent and property values) and increasing homelessness. Surely MMT demands a huge increase in wealth tax, not for government funding or spite, but simply to control this malignant inflation?
I agree
And have said so for a long time
New money is directed into the economy via cheap loans to the top end of town.
Creating asset price inflation and services charges (profit for a bank).
It is more effective economically to use new money on the bottom end of town.
Preventing asset price inflation.
The current Political Vision at Westminster is all based around this (IMHO):
https://alastaircampbell.org/2020/12/the-brexit-revolutionaries-have-barely-begun-britain-needs-to-wake-up-fast/
We have a problem………………no idea how we overcome it. It’s been in planning for years. We took our eyes off the (political) ball………..Explains why JRM is always smirking.
(Sorry it’s a longish read – but it saves having to read the book).
🙁
I recommend reading it
That’s the libertarian vision I was referring to in an earlier comment. Their difficulty is it doesn’t work, unless the population is willing to bow down, which I don’t think is the case in the U.K. It can’t deal with COVID, or unemployment, or climate change, or any serious collective problem, so unless people are willing to get infected, lose their jobs, and trash our ecosystems, it will fail. However the road to failure could be pretty horrible.
Thanks to Richard Curtis for the link to Alastair Campbell’s exposure of the government’s intentions under the influence of Sovereignty fanatics like the Rees-Mogg dynasty and friends. As Richard M suggested, an essential (but frightening) read. These monsters hold all the cards and are playing them for all they are worth.