Counting the cost of Covid
Every morning the nation awakes to a cacophony of voices demanding extra resources to deal with the fallout from the pandemic and Brexit. A range of interest groups from the self-employed, to musicians, the hospitality industry, motor manufacturers and those campaigning on behalf of the least well off in society seek additional government help.
By opening the sluice gates of big spending, a huge appetite for ‘more’ – as Dickens caricatured it in Oliver Twist – has been encouraged. All of the above are important to future prosperity. The creative sector, electric vehicles and assistance for aerospace deserve serious consideration.
Similarly in these dark times, the case for strengthening the social safety net is overwhelming. As the latest data on the public finances shows, the exchequer is overstretched. Borrowing so far this year has reached £270.8bn and the deficit in December of £34.1bn was the third highest ever recorded. On current trends, Capital economics projects the UK is heading for borrowing of £410bn in 2020-21.
The projections of £280bn of extra Covidrelated spending laid out by the Office for
Budget responsibility in November already may be outdated.
The self-employed are among the noisiest of complainants. yet this group, which enjoys a more privileged tax position than those on PAye, collected £5.3bn in December alone. As free market think-tank the Institute of economic Affairs notes, borrowing has reached ‘wartime’ proportions. That is tolerable at present because interest rates are so low. Indeed, one- off payments to encourage people to self-isolate and stop the spread of infections may well be justifiable if the virus is to be suppressed.
eventually the country will have to find better ways of living within its means. Some of the help provided – decent free school meals during holidays and a permanent uplift in universal credit – should remain in place. One of the best ways of helping the least well off is to raise the living wage and to take people out of the tax system altogether as successive Chancellors have been doing.
Amid the gloom of the deficit and debt burden, there is a shard of light in the latest data. Both receipts from income and wealth taxes and vAT, sharply down on the last financial year, did increase in December.
As extra spending measures drop away and the economy bounces, so tax receipts across the board should respond without punishing wealth or home ownership.
All the more reason for the Chancellor rishi Sunak to sit on his hands as he frames his March 3 budget.
Green mission
IT is terrific for Sunderland and the North east that after more than four years of vacillation, Nissan has decided that its ‘just-intime’ production can withstand the UK’s choice to leave the eU and is ready to bestow upon us a new, green battery production facility. even the radical Unite union is gushing about the decision, arguing it is all down to an ‘incredible’ workforce.
Nevertheless, one can’t but help think that Nissan, its Japanese masters and the motor manufacturers, played successive governments like a violin during the Brexit debate. As important as car making is in terms of jobs and output, the 2.7pc of GDP it represents and the 180,000 jobs generated are only a fraction of the 7pc represented by the City, and a similar percentage from the collective creative industries. yet as the musicians and traders in euro-denominated stock might observe, they were left to sink or swim.
On some measures, the vauxhall factory at ellesmere Port, owned by Peugeot (now part of the Fiat Chrysler PSA behemoth) is highly efficient.
The owners have decided to hold it hostage to UK support for a new generation of electric vehicles. If Boris Johnson’s government is really serious about its 2030 goal of eliminating diesel and petrol vehicles from Britain’s roads, it ought to be an all-encompassing mission involving procurement in every Whitehall department. That requires the kind of vision and courage often lacking in a defensive civil service culture.
Short list
PITy to see Next withdraw from the battle for Arcadia, as Simon Wolfson is someone who inspires trust. In the current political climate, allowing the Topshop family of brands to fall into the hands of Chinese retailer Shein would be uncomfortable.
Hopefully, the other suitors, which include Asos, Boohoo and Authentic Brands (which is working with JD Sports), will find a way to save fashion and jobs.