The Cost-of-Living Crisis: How could Government help, and how could it pay for it?

How can Government help?

Rapidly rising prices are causing real hardship in the UK- especially for the poorest. Fully compensating everyone for the cut in their real living standards would cost £50bn and is neither feasible nor affordable. A more manageable goal would be to maintain the value of welfare payments by making timely adjustments to reflect increases in the cost of living. This would cost roughly £12bn. It would not only maintain the incomes of those wholly dependent on benefits, it would also support the incomes of many workers who have their income topped up by universal credit[1].

How can help be paid for?

Government can find the money to pay for more help to those in need by borrowing more, cutting spending in other areas of Government, or increasing taxes.

A fourth option is to raise economic growth – increasing the size of the cake available to be divided. Labour have rightly made the point that our difficulties are in part due to low economic growth, part of which is self-inflicted by conservative economic policies. Policies to raise economic growth will not provide a solution to how we finance emergency spending this year, but they are the key to how higher spending can be sustainably funded into the medium to long term.  An additional 1% of GDP would generate about £9bn per year in additional tax revenues, as well as reducing expenditure by taking more people out of the welfare bracket. A good place to start looking for a growth bonus would be by improving our economic relationship with Europe: the OBR report says explicitly that the impact of the hard BREXIT remains a significant brake on growth. Rejoining may be off the table, but there remains scope for short term benefits by moving closer to the single market.

Increased Borrowing: unwise at present?

Turning to the three options for financing extra spending in the short term, increased Government borrowing appears unwise at present. Debt interest on Government debt is forecast by the OBR to increase by £30bn in the current financial year, more than double the cost of inflation proofing all welfare payments, and has reached £83bn, equal to 7.6% of Government revenue. The OBR expect this to be a temporary blip, but that depends on the current inflationary episode being quickly controlled and any period of significantly higher interest rates being short lived. Both assumptions already look optimistic.

Spending in other areas needs to be increased -not cut

There is also no scope to finance increased welfare spending by cutting Government spending in other areas. After a decade of austerity, many areas of Government spending were already desperately underfunded before the COVID crisis. The most recent OBR report argues that an additional £5bn is required to make up for the impact of cost increases on other areas of public expenditure.

Taxes are high by UK standardsbut not compared to other countries

That leaves increased taxation as the only realistic option for financing increased spending to help households cope with rising prices. This is difficult for both major political parties. The Conservatives already face backbench grumbles at the increasing tax burden, and Labour remain anxious to avoid being labelled as the party of high taxes and spending. But is the hysteria of the tabloid press about high taxes justified?

Taxes are forecast by the OBR to reach 36% of GDP by F2026-27. This is high by UK historical standards, but not by international standards. The institute for fiscal studies, an organisation deeply opposed to irresponsible tax and spending policies, describes such a tax rate as ‘middling’ compared to other wealthy countries in the OECD and EU. The tax: GDP rate is mainly increasing because of sluggish GDP growth for the next few years, held back in large part by the self-inflicted wounds of BREXIT. An exceptional increase in taxes to help us get through a major international crisis would not be unreasonable, and the tax: GDP rate will fall back as economic growth recovers. An extra £17bn of tax financed spending would be equivalent to just 0.7% of GDP. It would still leave our tax: GDP ratio in the middling range, especially as other countries face similar fiscal pressures, and will also be likely to respond with similar measures.

How should extra tax be raised?

Labour has proposed funding additional support to households via a windfall tax on the profits of energy companies. This is a reasonable idea, but it would only raise £2bn – a fraction of what is needed.

Several major reviews have argued that the UK tax system gives excessively favourable treatment to taxation of business and of capital gains, relative to income from employment. The difficulty of taxing capital gains is perhaps the major anomaly. Capital gains tax raises less than £15bn per annum in the UK. The wealthy increasingly fund their expenditure by borrowing against the value of their assets. Borrowing is not income and therefore escapes income tax, while capital taxes are only incurred if assets are sold at a profit. This ability of the rich to avoid tax is both manifestly unfair, and economically inefficient.

Reforming the tax system along the lines recommended by the Mirlees[2] report should be a longer-term aim. However, to help meet the costs of the COVID pandemic[3], The Wealth Tax Commission developed detailed proposals for a one-off wealth tax on individuals that could quickly raise significant sums from those best able to pay. As just one example, the Commission estimate that a tax of 5% of wealth levied only on individuals with assets in excess of £10 million would raise £43bn. Because it is a one-off tax, it avoids many of the complications and potential tax avoidance that come from having to assess gains and losses each year. It seems well suited to dealing with a national emergency in a way that ensures that those best able to pay bear the biggest burden. An individual with assets of £10million would not face significant hardship in paying £50,000 especially if, as proposed, the payments are spread over 5 years.

Conclusion: Help those who need help, by modestly raising taxes on those who can afford to pay

 In conclusion, the Government could afford to finance full inflation proofing of welfare payments, plus other compensation schemes, by raising more tax, with the burden focused on those best able to pay.

One attractive idea would be to implement the proposal for a one-off wealth tax. This is not the only way of raising the relatively modest additional funds required, and the conclusion that spending more is feasible does not depend on the introduction of a wealth tax. The current Government of very wealthy individuals is unlikely to implement such a tax -but opposition parties might want to take note.

[1] Based on data in the Office for Budget Responsibility Economic and Fiscal Outlook, March 2022.

[2] Tax by Design, James Mirlees et al, Institute for Fiscal Studies, 2011; and other more recent studies by Stuart Adam, Helen Miller and others available at

[3] Wealth Tax Commission, A wealth tax for the UK: Frequently Asked Questions, Arun Advani, Emma Chamberlain and Andy Summers, LSE, 2020

Boris and the Civil Service

This post provides some facts to illuminate the discussion that the Tories have initiated on the size and efficiency of the civil service. All of the data used is from official Government statistics.

The number of non-industrial civil servants (the main target of Tory rhetoric) has been on a declining trend throughout the post war period. The Labour Governments of 1997-2010 started and ended with about 480,000 full time equivalent civil servants.

Under the conservatives, the full time equivalent civil service was cut by 20% to 384,000 between 2010 and 20016. The population per full time civil servant increased from 131 in 2010 to over 170 in 2016. This implies a massive increase in workload, because the main driver of much of the work that the civil service does is the size of the population they must deal with.

The subsequent increase in civil service numbers to 465,000 in 2021 was the direct result of BREXIT (well over 50,000 civil servants recruited to negotiate and then carry out functions previously performed by Brussels) and the pandemic. The increase reflects civil servants being recruited to do jobs that would have been entirely unnecessary in the absence of BREXIT and the pandemic. Further strains will since have been added by the cost of living crisis.

The civil service represents only 10% of employment in general Government. Looking more broadly,  the 1997-2010 Labour Governments expanded both local and central Government employment, with two thirds of the extra staff being employed in health and education. This restored the pre-Thatcher ratio of one public employee per 11 people. The conservative led Governments from 2010 then cut numbers back to a ratio of 1 per 13 people, lower than under Thatcher.

The big story however is the catastrophic cuts in local Government employment since 2010. Employment in central Government was broadly stable at about 2.8 million during the coalition, before growing rapidly in response to BREXIT and the pandemic. Local Government employment in contrast has fallen from 2.9 million in 2010 to just 2 million in 2021 – a loss of close to one in three of the workforce.  Some of this may be the result of changed responsibilities (e.g. the growth in academy schools). Nevertheless, the catastrophic scale of the cuts is just one indicator of the extent to which the conservatives have severely damaged the capacity of local Government. Many of the services on which the population depends are most efficiently planned and delivered locally, as pandemic experience has illustrated.

 In Conclusion: if anyone in the UK Government is lazy and useless, it is not the civil service. The Prime Minister could not be bothered to find out the facts before throwing baseless allegations at the increasingly hard-working civil servants on whom his Government depends. The drive to reduce numbers further will be yet another self-inflicted wound. Civil servants of worth and integrity are already leaving in droves to avoid having to work for this Government of incompetent liars prone to blaming anyone but themselves for their failures. A drive to reduce numbers will assist even more of the experienced and competent ones to leave.

Why are the Conservatives ahead in the polls?

Boris Johnson heads a Government of staggeringly incompetent liars. Their mistakes over the management of the pandemic have resulted in one of the highest death rates in any developed economy, whilst they have wasted eye-watering sums of money on failed contracts that have been awarded without competition to their friends and allies. How is it comprehensible that they can be ahead of a Labour opposition of sane, sober, competent and level-headed pragmatists?

The biggest dividing line in UK voting behaviour is between young and old. According to YouGov polling, Labour took 55% of the votes of 18–24-year-olds but the share shrinks continually as age increases. Labour took a larger share of the vote than the conservatives in all groups under 40, while the Conservatives took a larger share in each group over 40, with the lead increasing with age. Education is another dividing line, with the conservatives taking 58% of the votes of those educated to GCSE level or below, but a little less than 30% of those educated to degree level, where labour took 43% and other left-of-centre parties nearly all of the rest. The big expansion of higher education in recent years means that younger people are also better educated on average, so the two effects are not independent of each other.

Social class is no longer a predictor of voting intentions, with the conservatives ahead in both ABC1 white collar occupations and C2DE blue collar jobs. However, although people no longer vote according to class as determined by occupation, those with wealth remain far more likely to vote conservative. As one indicator, the conservatives lead labour on voting intentions among owner occupiers, but lag far behind among those in rented accommodation[1]. This is also likely to be in large part a reflection of the age divide.

Recent surveys of voter intentions show that electors view COVID 19 as by far the most important issue that will determine their vote if an election were held tomorrow. Allowing for higher turnout among older voters, roughly half of all conservative voters in the 2019 general election were over 60, the age group that accounts for over 90% of COVID 19 deaths. It might seem that miss-management of an epidemic that overwhelmingly kills the old should be bad for the future electoral prospects of the conservatives, who draw so much of their support from this group. There are two reasons why the health impact of the pandemic is not the main influence on voter intentions: –

  1. Though devastating for those affected, only a relatively small proportion of the population has been directly affected by the COVID 19 related death or serious ill-health of someone to whom they were close. A death toll of 145,000 or so, if we take all of those cases where COVID 19 was mentioned on the death certificate, represents only 0.22% of the population. It compares to a normal annual death toll of about 600,000. Some of those who died were in the last stage of life and would have died from other causes – excess deaths have turned negative in recent weeks, reflecting the fact that a significant proportion of those who died with COVID 19 had their lives shortened by months rather than years. Adding in those who have experienced symptoms for 5 weeks or more raises the share of the population who have experienced serious health consequences from the pandemic to about 1.5% of the population. Those most at risk have now been vaccinated, so fear for the future is also much diminished.
  2. For most of us, the most significant impact of the epidemic has been on livelihoods and lifestyles. Here, as I will show, the population in general, and conservative voters in particular, have fared far better than they might have expected.

According to the Bank of England, about 20% of households reported experiencing financial difficulty due to COVID 19, but experience is very variable[2]. About 28% of households experienced some reduction in income as a result of the pandemic, while 65% had no change and 8% actually saw their incomes rise.

Although nearly three quarters of households experienced no reduction in income, 57% reduced their spending, partly due to lockdown preventing spending on holidays and recreation, and partly a precautionary response. As a consequence, total household savings have increased by about 8% since the start of the pandemic.

Among retirees and high and middle-income households, a clear majority increased their savings. Incomes and wealth typically rise with age and experience, and thus we can conclude that the group in the population from whom the conservatives draw the majority of their votes have actually improved their wealth during the pandemic. This is confirmed by very recent data from a March 2021 YouGov poll. This found that 74% of those who voted conservative in the 2019 election increased or maintained their savings during the pandemic, compared to 62% of labour voters, with the median increase of £5000 by conservative voters compared to £3000 by those who voted labour[3].

Among those who are employed but on low incomes, the Bank of England found that there is not much change in income or expenditure, with similar proportions of households increasing or reducing savings. Only among the group of unemployed and furloughed workers is there clear evidence of a majority of households drawing down their savings in order to maintain their spending. Even among furloughed workers, only 35% reported reducing their savings.

In summary, the picture that emerges is one in which the conservative Government has been able to protect the majority of the population from the economic consequences of the pandemic. Partly because of the sharp reduction in household expenditure, Government has been able to massively increase Government spending without having to raise taxes and without causing inflation: see my previous blog post for a slightly more technical discussion of how this is possible. The consequence is that most (but by no means all) of the population feel better off than they expected to at this stage in the pandemic. They may be aware that some aspects of the pandemic have been very poorly managed, but they are more influenced by two things the Government has seemed to get right from their perspective:- rolling out immunisation, and protecting their incomes.

Those who have suffered most from the pandemic are less likely to be conservative voters.

The young have had their education and career prospects blighted and their social life severely disrupted.

Those working in the public sector in health, education, and social care in particular have had a horrible and stressful year. There is no data on their voting habits, but anecdotal evidence and a consideration of self-interest suggests that the conservatives are unlikely to have a lead in this group.

A significantly higher proportion of BAME households reported themselves as struggling financially at the onset of the pandemic, and the major study undertaken of the impact on ethnic minority households confirmed that they have been disproportionately affected[4]. This will have little impact on the conservative vote because BAM|E households are overwhelmingly labour supporting. For example, a November 2020 poll by Number Cruncher Politics found 61% support for Labour among non-white voters compared to just 14% for the conservatives[5]. This result is something of an outlier, but all polls give Labour a substantial lead among non-white voters, though differences in turn-out reduce the impact at the polls:- only 39% of BAME respondents in the same poll said they were ‘very likely’ to vote in a general election compared to 61% of white respondents[6].

Of course, elderly conservative voters have children and grandchildren, they are the heaviest users of health and social care, and are presumably no less compassionate than the rest of the population. It would be unwise to assume that they do not care about what happens to the young or to the low paid health and care workers who look after their nearest and dearest. Nevertheless, their perception of how well the pandemic is being handled will be dominated by the success of the vaccination campaign, and by the fact that their personal finances have largely escaped unscathed. Even the low income red wall voters have fared far better than might have been expected.

I am not sure whether the interventions to combat COVID 19 were deliberately skewed towards conservative political advantage, or whether this was just an unintended consequence that reflects the fact that economic shocks almost always bear most heavily on the most vulnerable. When the 5th March 2021 edition of a conservative newspaper like the Financial Times says that the bias towards Tory seats in the ‘Levelling Up Fund is ‘pretty blatant’, it seems like a question that is worth asking.

[1] Ncpolitics, op cit

[2] How has Covid-19 affected the finances of UK households? | Bank of England

[3] Savings during COVID, Survey Report (

[4] ONS, C|oronavirus and ethnicity: a summary of what we know, 14 D|ecember 2020

[5], ITV C|ovid-19 poll, November 2020


Has the Tory Government found a ‘magic money tree?’


This note tries to answer a question raised by some non-economist friends: to what extent can Government pay for it’s expenditure by just printing the money? Is there a ‘magic money tree’, and what are the pitfalls and limitations on using it? I have simplified the argument in places, for ease of exposition to a non-technical audience. I have also included some speculation about the political implications. The emphasis is on the concepts – I haven’t done any analysis of the UK data, so the speculation is no more than that.

How does Government finance it’s spending?

Government has three options for financing an increase in spending. It can tax more, it can borrow more, or it can ask the Bank of England to create the money it needs – which sounds like having a ‘magic money tree’.

Government spending financed by taxes is fairly simple to understand. Government takes money from taxpayers and spends it instead – hopefully on purposes that most taxpayers agree are worthwhile.

 If Government finances it’s extra spending by borrowing, the Bank of England sells Government bonds, which takes money out of the economy when those who purchase them reduce their bank balances in order to make payment. When Government spends the money it has borrowed, the situation reverses, as the bank balances of those providing those goods and services increase. There is no overall increase in money supply.

If Government spends without taxing or borrowing to pay for it, what happens is that the Bank of England increases the money supply by raising net credit to Government, with no offsetting reduction in bank deposits held by the private sector: overall money supply has increased. When Government spends the extra money, Government bank balances fall back to their initial level, but private sector bank balances increase as those providing goods and services to Government bank the proceeds. If it is easier to visualise, the effects of this process are exactly the same as if the B of E physically prints extra bank notes for Government to spend.

The Demand and Supply of Money

The Bank of England can create as much money for Government as it wishes. The interesting question is what happens as a result. The answer depends on the relationship of the money supply to real output and the price level.

The money supply consists of commercial bank deposits, plus net credit from the banking sector to Government, plus net foreign assets (foreign exchange reserves held by Bank of England and the banks). Commercial banks are also able to create money:- every time they extend a loan, they create a deposit in the name of the person receiving the loan. The limitation on their ability to create money in this way is that they must keep sufficient reserves to be able to meet the demand from depositors wishing to withdraw their funds. Reserves are normally a tiny percentage of their total assets, most of which are in the form of longer term loans and investments. If customers suddenly wish to withdraw more funds than the bank has provided for, the Bank of England steps in to advance funds to the banks, albeit at a punitive interest rate to discourage the banks from taking unreasonable risks. This happened on a massive scale after the 2008 financial crisis, when banks experienced a high level of withdrawals by customers no longer confident that their money was safe.

An important task of central banks like the Bank of England is to manage the money market in such a way that the commercial banks supply sufficient funding to support economic growth and allow the economy to operate at close to full capacity. If too little money is created, interest rates are pushed up, and investment and economic growth stalls; if too much is created, inflation may ensue, as a result of ‘too much money chasing too few goods.’ The Bank seeks to manage the growth of the money supply by changing the interest rate at which it will lend to the banks, and by buying and selling Government debt in order to either supply more funds to the market, or absorb surplus cash.

We have discussed the supply of money, but what determines the demand for it?

Economists like to decompose national output into real output Q and the price level p. You can think of Q as the physical bundle of goods and services actually produced in a given year, and p as a vector or list of the prices at which they were sold. Every time a good or service is sold, money is transferred from buyer to seller. It is true by definition that the total money supply (M) in a given period equals total output (p times Q)  divided by the number of times each £1 is used, a number that economists call the velocity of circulation of money, or v. This is simply true by definition:


The monetarist economists turned it into a theory by assuming that v is broadly constant in the short term. The assumption that the number of times each £ is used in a year is broadly constant is quite a strong one  -especially in a pandemic when everyone’s ability to spend is quite constrained. It continues to be debated to what extent v is stable, but the key insight is that there is a relationship between the demand for money and the monetary value of national output. The more we produce, the more money we need in order to finance the buying and selling of goods and services. This means that the Government (or, more accurately, the Bank of |England on behalf of Government) can indeed use the ‘magic money tree’ to increase the money supply as demand for money increases.

If we start from a situation where the supply and demand for money are in balance, then an increase in Government spending financed by increasing the money supply will be balanced by an increase in money demand, as Government seeks to buy more goods and services. If there is ample spare capacity in the economy, then real output will expand to meet the increased Government demand. Problems arise if the economy is at or near full employment, and firms are unable to increase their output to meet the extra Government orders.

If there is no spare capacity, then Government will only succeed in obtaining the extra goods and services it needs for it’s expanded expenditure programme if the private sector consumes less. This could happen through a reduction in v – perhaps the private sector saves more, or has to wait because of shortages of critical labour or goods and services. However, a large part of the gap between demand and supply is likely to be met through suppliers increasing prices as they realise that the extra Government demand gives them more bargaining power.

To summarise: if there is no spare capacity, the extra quantity of goods and services that Government wishes to buy can only be supplied if the private sector consumes less. Price increases are the mechanism by which the amount that can be purchased is brought into balance with what is available. Government is only able to secure the increased quantity of goods and services it has planned to purchase by reducing the supply available to businesses and households, just as would have happened if it had financed the spending through taxation. Everyone, including the Government itself, will find that, because of increased prices, planned levels of spending will buy less than expected, and the objectives of the spending will not  be fully achieved.

In a trading economy of course, part of the excess demand can be met by imports. Introducing the external sector to the analysis adds some complications but does not fundamentally alter the picture. If goods and services can be purchased from abroad, there is no capacity constraint. If Government increases it’s spending beyond the ability of the domestic economy to supply, then money will flow out of the country as imports increase and less is available to export.

The country will have to buy more foreign currency in order to buy the extra imports. This will reduce the excess money supply, as £s flow out of the country to foreign suppliers. The increased demand for Euros will change the exchange rate, raising the £ cost of buying a Euro. The excess demand for foreign goods and services will eventually be self-correcting as the depreciation of the exchange rate reduces demand for foreign goods and services, in the same way that inflation frustrates demand for domestically produced output. If domestic demand continues to exceed the capacity of the domestic economy, then foreign holders of UK currency will eventually become wary. Interest rates charged by foreign creditors will increase to reflect the expected rate of decline in the value of the currency. Contracts will be denominated in Euros rather than £s. If continued for too long, the combination of a collapsing exchange rate and public and private debt denominated in foreign currency can eventually lead to unsustainable debt problems as African and Latin American countries found in the 1980s. I am not suggesting that this is a serious risk for the UK, but there is a need to manage domestic demand to be broadly consistent with a sustainable balance of payments position in the medium term.

Economists and central bankers generally discourage Governments from making too much use of money creation to finance their spending. The danger if Government continues to have recourse to the printing press to finance it’s expenditure is that a vicious circle can develop. Firms and households expect prices to continue to rise, and therefore seek to protect themselves by holding tangible assets rather than money, and seeking to adjust their prices and wages to the rate of inflation, building more excess demand into the system. In the jargon, the velocity of circulation can become very high. If not checked, the result can be hyper-inflation, banking collapse, and a retreat into a barter economy. This is not just fanciful theory, there have been plenty of real world examples from Germany in the 1920s to Zimbabwe more recently.

COVID 19 and the Magical Money Tree

The circumstances of the current pandemic in the UK make the risks of financing Government spending through borrowing or through money creation relatively modest, at least in the short term. To understand why, a short explanation of the national accounts will be helpful.

The key concept is that every good or service produced in the UK or any other national economy generates an exactly equivalent income for someone. Labour and capital are combined through a production process to produce outputs that are sold to produce income that is shared between the workers and the owners of the capital. Output consists of investment plus consumption goods, and equals income that consists of consumption plus savings. The output of consumption goods equals consumption expenditure by definition -because consumption goods that are not sold in the period are defined as an investment in stocks . This means that the condition for the supply and demand of goods and services to be in balance is that savings should equal investment. This is true by definition after the event.

The problem occurs when investment plans and savings plans differ. If firms plan to invest more than households plan to save, the physical capacity of the economy to supply the necessary goods and services will be exceeded. The banking system may create the money to finance the investment, but physical supply limits will push up prices and interest rates as firms compete for the available labour and capital equipment, reducing the profitability of investment. Conversely, if savings exceed investment, there will be insufficient demand to fully employ the available labour and equipment. The interest rate may fall, reducing the incentive to save and making investment more profitable. However, there is no guarantee that any positive interest rate exists at which the two can be brought into balance. The key insight of Keynesian economics was that, if the private sector is unwilling to invest the available savings, then Government can step in and restore full employment by spending more, increasing the Government deficit. This was the basis of economic policy from the end of the second world war until the rise of monetarist economics in the 1980s.

The lockdowns and the restrictions that have accompanied the COVI|D 19 pandemic caused a reduction in output in the UK economy, and therefore a reduction in people’s incomes. Government tried to limit the reduction in people’s incomes by measures such as the furlough scheme. Other things being equal, one might have expected the population to try to maintain their expenditure by drawing down their savings and borrowing more. This, combined with increased Government spending, might have resulted in total demand exceeding total output, with inflation the result. That was my expectation, in an earlier blog post. In practice, this did not happen.

Somewhat surprisingly, the lockdown has seen a big increase in household savings. Those towards the bottom of the income distribution have struggled, as have many in the hospitality sector and many self employed. However, those who are retired or remain employed have increased their savings, partly a precautionary response to a less certain future, but mainly the result of frustrated consumption as holidays and recreation plans were prevented by lockdown.  This increase in savings has been accompanied by a reduction in investment. Banks and other financial institutions are reluctant to lend in uncertain times where the viability of firms is unclear. The combination of increased savings and reduced investment came at a time when interest rates were already close to zero.

This puts Government at present in a very strong position to finance a massive Government deficit. The Government stock of debt has reached about 100% of GDP, which is high but by no means unprecedented in our post-war history, while the cost of servicing that debt is very low, due to near zero interest rates. With such uncertainty over the viability of private sector investment, Government looks by far the safest place to invest savings, which means the Government can borrow as much as it likes for next to nothing.

The interesting question is what happens when the current unusual situation begins to unwind. Savings are likely to fall quite substantially as it becomes possible to spend on all of the things that have been denied us during lockdown. Investment will revive as easing restrictions removes the uncertainties that prompted delays to investment plans . The banks are very liquid at present, which means that they are well placed to expand their lending very rapidly if credit-worthy customers come forward. With investment likely to increase and savings likely to fall, it is likely that the economy will experience significantly higher interest rates and some inflationary pressures. This is manageable, but will require the Government to reduce the stimulus to demand represented by it’s greatly expanded deficit. This will partly happen automatically as the need for pandemic support eases and higher output brings in more taxes. However, the pandemic revealed the need to spend a great deal more to rectify long standing problems of insufficient spending on major areas including the health service, social care, and local Government, while the cost of servicing the debt will increase. The danger is that an irresponsible Tory Government intent on winning an election may be unwilling to raise the necessary taxes, and may indeed want to reduce them. With similar problems across the globe, there is a potential risk of a return to relatively high inflation and interest rates that could make debt management more difficult, but it seems a remote possibility at present.

As the economy revives, the demand for money will increase, and Government can in normal circumstances make increased use of money creation to finance it’s spending, without causing inflation. This also has the advantage of limiting the increase in Government debt stock and debt servicing costs. A significant caveat is that this depends on what happens in the commercial banks. If revived confidence leads the banks to greatly expand their lending, something they are well placed to do at present, then the Bank of England will become concerned about excessive money supply growth and inflation. In that situation, the Bank may need to reverse the Government contribution to money supply growth to make room for increased private sector demand . The Bof E will need to sell more Government debt than is required to finance the deficit – turning the public sector money creation into reverse, raising interest rates, and raising the cost of financing the Government deficit.

Political Implications

These strange economic times may also partly explain why a Government that appears to many of us to be hopelessly incompetent has nevertheless maintained a lead in the polls. The massive increase in domestic savings has enabled the Government to spend staggeringly enormous sums without raising taxes, and without causing inflation. Many in the country have improved their financial situation; many others have benefitted from generous support via the furlough schemes, enabling them to survive the pandemic with lower costs than they might have expected.

So far, nobody has had to pay for this generosity. Those who have suffered most are perhaps not Tory voters – and we have seen plenty of gerrymandering efforts to direct more of the available largesse to Tory seats. The incredible wastefulness of the chumocracy has yet to cut through precisely because it appears that nobody has yet been asked to pay for it.

The continuing Tory lead might thus be explained by the goodwill factor of the vaccination drive, and the extraordinary scale of the support to household incomes. This positive view might erode when economic revival puts more pressure on Government finances – but that does not look imminent. For the moment, enough people are positively surprised by the extent to which Government has succeeded in protecting them from a pandemic that the Government is not perceived as having caused. Those who have been paying attention may know that the impact in the UK is far worse than it needs to be, but enough people have had a better pandemic than they were expecting to give Government the benefit of the doubt.

How does Labour get elected – and what does it do then?


Our Government in the United Kingdom has been taken over by reckless and incompetent right-wing fanatics who achieved power by telling lies, and who are implementing policies that are disastrous for the majority of the population. This note offers an explanation for how this came about in a democracy, some thoughts on how we might win our country back, and some suggestions on how we can make it more likely that future Governments will be truthful, honest, reasonably competent, and less dangerously extreme.

How did extremist liars take over our Government?

For most of the period that the House of Commons has existed, the vote has been limited to those with wealth or property. The fear of the rich and powerful has always been that universal suffrage would result in the poor majority of the population voting to redistribute wealth and income from the haves to the have nots. Representative Democracy based on universal adult suffrage is still a new form of Government, less than 100 years old in the UK.

The Labour landslide after the second world war did bring to power a Government committed to creating a more equal society. It achieved an enormous amount in terms of social welfare, but the economy was slow to revive. It was followed by a thirty-year period when Governments of both political parties favoured a mixed system. Both parties accepted the role of private capital in generating economic growth, and they also accepted the case for Government to provide an effective social safety net, and to use the tax and benefit system to support greater equality of opportunity. Labour favoured a bigger role for the state and a bigger share for the working class, while the conservatives were more sympathetic to the private sector and the owners of capital, but the difference was one of emphasis. Democracy worked well because there was little disagreement about fundamental objectives, the political debate concentrating instead on the means to achieve them and on which party was better able to manage the economy.

The shift to the right that began in 1979 and has accelerated since the conservatives returned to power in 2010 has seen a complete breakdown of the post-war consensus. Surprisingly, the Conservatives were able to gather support for a right-wing agenda that does not at first sight appear to be favourable to the interests of the majority of the population.

The initial victory of the conservatives in 1979 was in large part a reaction to the winter of discontent, when a series of strikes by public sector trade unions caused major disruption to people’s lives. Labour efforts to limit the power of the trade unions had been rejected by the party, and the Conservatives were elected because they were perceived as better able to address the issue. The severe monetarist policies that they implemented resulted in a deep recession, high unemployment, and the loss of much of the manufacturing sector – destroying the power of the trade unions as a by-product of the loss of jobs in manufacturing and mining where most of the trade unionists were employed. These policies ought to have resulted in defeat at the next election in 1983, but the conservatives were returned to power on the back of victory in the Falkland Islands and opposition to a labour party that had responded to the rightwards lurch of the conservatives by itself going to the radical left – the 1983 Labour manifesto was described by Gerald Kauffman, one of its own MPs, as ‘the longest suicide note in history’.

The loss of manufacturing jobs not only weakened the trade unions, it also severed the close linkage between the working class and the labour party. Renewed growth was concentrated in the South, in service sectors that were not unionised, and where those who were employed did not necessarily see themselves as working class, and did not naturally identify with the Labour party. The aspirations of this rapidly expanding class were cleverly exploited with a series of measures to give them a direct financial stake in the conservative Government – notably the sale of the public housing stock and the sale of shares in privatised companies, both at attractive prices. The electorate was grateful for the bribes and voted Tory, ignoring the problems of housing shortages, rising inequality, and private sector monopolies being created for the next generation.

Labour learnt the lesson of 1983. In a mirror image of the Conservatives response of moving to the left after the 1945 Labour landslide, Labour eventually ended the period of Conservative dominance by moving to the right. It was able to return to power in 1997 and hold it until 2010. Although the economy performed well, and they achieved a lot in addressing poverty in the UK, the policies pursued by the Labour Government were in many respects further to the right of the spectrum than those pursued by Tory Governments prior to Thatcher.

Until 2016, the electoral system worked after a fashion. Governments of both parties respected constitutional conventions, they submitted to Parliamentary scrutiny, were generally honest and truthful. The major exception is the lies told by the Blair Government to justify the Iraq war, but the eventual exposure of the dishonesty of the case made to Parliament did irretrievable damage to the reputation of Mr Blair and the Government that he led.

The 2016 BREXIT vote and the three general elections that followed have witnesses a new and far more damaging lack of respect for truth, for constitutional convention, or even for basic honesty[1]. The conservatives have demonstrated that it is possible for a Government to fail on every one of the aspects of performance that we used to think determined election results, and yet still be returned to power.

Part of the explanation of how this has been possible is the deliberate circulation of lies and misleading information. The media have reported the statements of leading politicians on both sides of the argument, but have proved unable or unwilling to challenge statements that are often misleading, and sometimes blatantly untrue. It is worth unpacking a little why our media has been so reluctant to point out the lies.

Television remains the most used platform for news, and the most trusted of the major sources, with 77% of adults over 16 still using it for news and with the BBC still dominant, followed by ITV. It is followed by the internet, which is used by 65% of adults for news, and is the most used source by 16-24-year olds. Some 47% of adults use newspapers and newspaper web sites[2].

The fragmentation of news sources makes it easier to target biased, false or misleading content to specific target groups in ways that are difficult to challenge, because it is only seen by those who are more likely to believe it

The continuing consumption of TV news, and specifically BBC news, by more than half of the population may appear reassuring. However, the BBC, still the largest single provider of news, has been increasingly timid and unwilling to hold Government to account. In a world where news sources have fragmented, the BBC recognises that it is harder to sustain the argument for a compulsory licence fee, and appears to have one eye on not appearing to be biased against the paymasters. In an attempt to appear unbiased, the BBC have given minimal attention to analysis of BREXIT. They have reported the claims of BREXIT advocates and of remainers without facts or meaningful quantification, so that a casual consumer of their news coverage would be unaware of the overwhelming weight of expert analysis confirming that BREXIT will make us poorer and lead to massive disruption and loss of jobs. Only now, when it is too late to have any impact, has the BBC begun to analyse some of the consequences.

The nature of news coverage has also changed. The most read ‘newspapers’ carry less political analysis and more celebrity gossip. With one or two exceptions, they are right wing, reflecting the views of their wealthy owners. The 24- hour news coverage endlessly repeats a few headline items, but lacks detailed analysis. News picked up via the internet is targeted to the interests of the consumer, and mostly assumes a short attention span. Users are unlikely to encounter views they disagree with or subjects they are not interested in.

Engagement in politics has drastically reduced, raising the risk that our political parties will more easily fall into the hands of extremists and those who provide the funding. Conservative party membership has fallen from a peak of 2.8 million in the 1950s to less than 200,000[3]. The membership is older, more socially conservative, and more reactionary than those who vote for the party. A smaller and more centralised party is also more vulnerable to being influenced by the wealthy donors on whom it depends for finance.[4] The donors presumably expect some return in personal favours or policies favourable to themselves.

BREXIT is a surprising policy for the Conservatives, who were traditionally the party of business. The explanation may lie in the increased dependence on donations from wealthy individuals rather than major corporations. Wealthy individuals may be more concerned to protect their personal wealth from EU legislation to control tax havens or from threats to tax wealth directly. They are less concerned with protecting manufacturing enterprises, because they can always shift their money elsewhere. Our PM’s notorious comment ‘fuck business’ perhaps reflects the new reality that those with money can shift it at will, and need have no loyalty to specific companies, still less to specific plants established in a particular country. It is ironic, and perhaps highly cynical, that the wealthy backers of BREXIT have little real interest in UK sovereignty or the UK ‘taking back control of it’s borders.’ Their wealth is definitely under their control, it is held and managed globally and shifted across borders at will with no loyalty to any particular jurisdiction or particular company. It doesn’t damage their interests if cars are manufactured in Germany instead of the UK, but they do care that they can continue to shelter their wealth in tax havens.

The victory of the extreme BREXIT faction was also facilitated by the nature of our first past the post system of Government. In 2019, the Conservatives won an 80-seat majority in the house with just 45% of the votes cast, and just 30% of the electorate. For half of the electorate, voting makes little difference because only one party has a realistic chance of winning in their constituency. It is actually even worse than that, because the candidate is selected by the party, which ensures that there is little diversity. A conservative supporter who would like to vote for a moderate is likely to find that the candidate in his constituency is a right wing BREXIT supporting fanatic.

A well-resourced party can win a general election by focusing on the electors in a limited number of marginal seats. It can target its messages using social media in ways that make misinformation hard to challenge. It can target election promises on messages appealing to that group. If the campaign is supported by the wealthy and by the media barons, it can outspend its rivals, and ensure that the message is reinforced by a predominantly right-wing media more than willing to distort facts in order to support the conservatives while smearing the opposition.

To summarise, the two-party system worked well when Labour represented the working class, while the conservatives were the party of business. Both had an interest in economic growth and prosperity, seen as good for both wages and profits. The liberalisation of capital markets from the 1980s has broken this commonality of interest. The owners of capital are still the backers of the conservative party, but they are no longer closely linked to specific locations or businesses. They maximise their wealth by moving their money across borders and between companies, and no longer have interests in common with a workforce tied to a specific job or location. Despite this divergence of interests, the wealthy and radical right-wing extremists have been able to dominate our electoral system. This is possible because the population as a whole is not well informed or actively engaged, and is therefore vulnerable to a well-resourced campaign based on endless repetition of simple half-truths and deliberate misinformation.

How can Labour win back the Government?

Age is now the biggest dividing line in UK politics, with the old predominantly voting conservative or BREXIT party, while the young predominantly vote for left of centre parties[5]. Young people want a Government that is less socially conservative, and more committed to addressing the issues around climate change, poverty, inequality and inadequate social services. History should therefore be on the side of change, as the weight of the current generation of the very old in the electorate gradually declines. One problem is that a lower percentage of young people vote or have much knowledge or engagement with the political process. Less than half of 18-24-year olds voted in the 2019 general election, compared to nearly three quarters of over 65s[6].

A more general point is that many of the electorate have felt ignored and let down by the political system. They feel that all politicians are the same, only in it for themselves. Experience since 2010 has taught them that the Government does nothing to solve their problems. Few remember the very real progress in reducing poverty and inequality under labour in 1997-2010, even fewer know about the leading role that labour played in mitigating the global financial crisis, and instead blamed Labour and voted them out in 2010.

The negative attitudes of the electorate towards politicians in general and Labour in particular are not based on any sophisticated understanding or knowledge of the causes of their problems. Ignorance leaves the electorate very vulnerable to the arguments of populists. If you start with the assumption that your vote makes little difference anyway, it is very tempting to give populists with simple solutions a try: perhaps it really is all the fault of the EU, or the Chinese, or immigrants, or benefit scroungers, or whatever scapegoat the Government and the right-wing press are touting this week as the cause of all our troubles.

We have learned to our cost that a Government willing to blame foreigners and immigrants, willing to tell lies about its own policies and those of the opposition, and able to find a few juicy bribes for potential voters can get itself elected. Even more remarkably, it turns out that The Who were wrong and the electorate will get fooled again – change the leader, and pretend it is an entirely new Government.

When the Government goes to the extreme right, it is tempting for the opposition Labour party to settle in the stodgy middle ground. The new Labour leadership at the time of writing in January 2021 have finally captured a small lead over the Tories in recent polls of voting intentions, and are arguing that this is evidence that the middle ground is where they will gain a victory at the polls. I am not convinced that this is the case. The conservative Government has presided over a decade of severe austerity, has negotiated a thin BREXIT deal that is predicted to shrink the economy by 4%, and has presided over total chaos and confusion in its response to the Coronavirus. Add to this a succession of scandalous contracts going at high cost to Tory party chums who had no relevant experience and who charged exorbitant prices and still failed to deliver. With that record, Labour should be trouncing the conservatives with a lead in the high teens. The fact that they are not suggests that the electorate remain uninspired by a leadership that is perceived to offer little that is new. Indeed, with Labour votes concentrated in urban areas, and with Scotland lost to the nationalists, the current lead is too small to even make Labour the largest party.

I would suggest that four key elements are essential to a successful Labour election strategy: –

  1. Work with Allies: The parties of the centre and moderate left will need an electoral pact. The disastrous experience of coalition should not be repeated, but it is essential to minimise the number of seats won by conservative candidates. Other progressive parties should stand down in favour of the candidate with the best chance of defeating the conservative. To secure such a pact, Labour may need to be relatively generous in ceding to minor parties some seats that might be winnable. The bigger picture should be the focus.
  2. Communicate effectively: relentlessly focus on just three or four messages, but also have a strategy to deal with a hostile media. In 2019, the leadership was not active, agile and articulate enough in refuting the lies. It will be essential to re-establish a rebuttal unit, to instantly correct lies or mis-information and get the corrections out on every available platform. It would not be wise to get into bed with media magnates to the extent that Tony Blair did, but it would make sense to invest in improving relations with the media as far as that is possible without compromising on policy.
  3. Attack: The conservative record has been truly appalling. Lies, waste, corruption, incompetence, every target missed, promising everything, delivering nothing, apart from an extreme BREXIT that will severely damage the country for a generation or more. Labour have been too hesitant in defending their own record in Government and far too restrained in attacking the record of the conservatives.
  4. Organise: Build on the mass movement of younger supporters created under Jeremy Corbyn, making smart use of new media. The trick will be to focus on a policy agenda that is both inspiring to the members, and perceived as credible and attractive by the broader electorate.

Without getting into policy detail, I would suggest that the three or four key messages that Labour should focus on are:

  1. Genuinely take back control –a fair distribution of expenditure, managed by local Government with restored powers, and an end to the scandal of public services delivered through dodgy deals with private sector spiv companies.
  2. Invest in a green revival to achieve zero carbon.
  3. Things are better under Labour –the statistics show that the Labour record in managing the economy, providing public services, and reducing poverty has been consistently superior to the conservatives, and Labour needs to own that proud record rather than seeming embarrassed by it.
  4. The BREXITERS lied to you: Restore our trading relationships and end the chaos that a very thin BREXIT has caused.

In 2024, an incoming Government is certain to inherit a collapsed economy, with high unemployment, massive poverty and inequality, dilapidated and under-funded public services, inadequate infrastructure in dire need of rehabilitation, and a much depleted and impoverished private sector, shrunk by COVID and by BREXIT, with those businesses that have not relocated facing higher costs of doing business. It will face a very high public debt as a share of GDP, an on-going public sector deficit, a much smaller tax base, and a more difficult environment for funding the deficit, with higher interest rates and probably further deterioration in the HMG credit rating. It will face a hostile media, intensified pressure to break the union of the United Kingdom, and international relationships in urgent need of repair.

In order to win the election and not take the blame, the campaign needs to hammer home the cause of all of these problems. They are mainly the result of stupid policy decisions, and were avoidable. There is no need to be afraid of ‘project fear.’ Labour should own it. The remainers were right to be fearful of the consequences of BREXIT, and those who told us not to be fearful were lying.

It is unfortunate that Keir Starmer voted for the Tory BREXIT deal, and has said that Labour must accept it, and that it may not even mention the issue in future election materials. It seems like a major error to offer this unnecessary support just at the point when polls suggest that a majority of the electorate now think BREXIT was a mistake, a majority that is likely to increase when the full consequences hit home. If things go as badly as seems inevitable with this crisis prone and incompetent Government, the Conservatives will be very quick to share the blame, pointing out that both parties supported the deal. I accept that it is not realistic to argue for re-joining in the short term, but a far closer relationship, perhaps including membership of the single market, is something that should be discussed.

Labour should also be honest and transparent about the public finances. Labour is simply not believed when it makes expenditure promises while saying most people will not face higher taxes. Labour may as well make a virtue of promising to dig the country out of the mess left by the Tories. Arguments to make are: –

  1. We intend over time to raise taxes as a share of national income to levels similar to successful European countries like Germany.
  2. The burden will fall more heavily on those best able to pay it, particularly through wealth taxes, but we will not pretend that the necessary repair to public finances can be accomplished without some increased taxation of those on middle and higher incomes.
  3. Public expenditure will be repaired as quickly as our limited resources permit. Highest priority will be given to repairing the damage that has been done to local Government services, with increased revenue raising powers, linked to a comprehensive deal to redistribute public sector revenues in favour of poorer parts of the country, with less central control of how money is spent.
  4. A health service funded from general taxation and free at point of delivery will continue to be a cornerstone of Labour policy, and will be properly funded -with steady progress towards spending the same share of national income on it as those of our European neighbours with highly effective health systems.
  5. Education continues to be a high priority, but with less focus on private sector providers, and a reduced burden of testing and inspection. As and when resources permit, we will relieve students from the anxiety of student debts that raise little revenue, but that systematically discourage participation by the most disadvantaged students. The priority will be education for life – not the soulless production of employment fodder.

How do we stop it happening again?

This final section discusses how we can build our democracy to be more representative, honest, and accountable.

Build a more representative democracy

A two party, first past the post system can work where there is a high degree of consensus about fundamental values, and broad participation by the population, including party membership that reflects the make-up of society. None of these conditions are met in the UK. There are fundamental fissures on every major issue: – relations with Europe and the rest of the world, how to deal with climate change, the role of the state versus the free market, the extent of decentralisation of power, and even whether Scotland should leave the Union.

If a Labour Government gains power with an absolute majority it will be tempting to conclude that the system does not need to be reformed: – politicians tend to think that any system that elected them can’t have much wrong with it. However, electoral reform is essential if we are to protect the country from once again falling victim to a Government of extreme zealots. In 2016 it was BREXIT bigots intent on severing ties with Europe at any cost, but it would be equally unfortunate to find ourselves with a Government of Maoist revolutionaries, or intolerant religious bigots. The point is that parties with a small membership are vulnerable to being taken over by extremists. In a two-party system, this means that a Government can end up with a majority in Parliament, even though the majority of the electorate do not share its views.

The best protection against this happening again is to introduce a form of proportional representation. A specific version of PR was rejected in a referendum in 2011, partly because the specific option was complex and hard to understand, and the two major UK parties did not support it. Next time, it should be presented as a protection against extremism, it should be a priority in the manifesto, and the details should be worked out in Parliament and not subject to a yes/no referendum.

The aim would be to ensure that, as far as possible, every vote is of equal value. If 10% of the population vote for the green party, then that is the proportion of MPs that they should have in Parliament.

Three main objections are commonly raised to PR: –

  1. It may result in weak and unstable coalition Governments. A more positive way of expressing the same thought is that a coalition Government will need to seek policy positions that are genuinely acceptable to representatives who reflect the views of the majority of the voting population. This may mean that action on significant issues might take longer to be agreed, but it should be more sustainable and less likely to be abruptly reversed because future Governments will also need to reflect the majority view, making abrupt changes in direction less likely.
  2. Minority parties may exact a high price for their support, while extreme and dangerous views may find themselves reflected in Parliament. With a larger number of parties, the scope for any one party to acquire excess influence as a price for supporting a coalition is arguably less than under first past the post, where Theresa May was left with no option but to pay a hefty bribe to the DUP in order to sustain her Government. Representation of extreme views in the national parliament can be genuinely upsetting, but the constitution should be able to keep behaviour within the confines of legality and decency. Giving a legitimate outlet for views that most people find abhorrent might reduce the pressures for non-parliamentary violence, and provides an opportunity for them to be challenged.
  3. PR breaks the link between individual MPs and their geographically based constituency, something that many of them greatly value. The first point to make is that the need for MPs to take up the cases of individuals within their constituency reflects the weakness of local Government, which has been allowed to atrophy under successive Governments. Local issues facing individuals or households should be dealt with by local Government representatives, who will be able to do so if given more devolved power and resources. The second point is that, when it comes to national issues, there is little point writing to a local MP who represents the party you did not vote for. If your point is not in line with existing party policy, you will get a stock response and no action. Moreover, most MPs will only respond to letters from their constituents, which means that those of us not represented by an MP of our choosing have no effective route for raising our concerns. Any form of PR would reduce this problem. Much larger, multiple member constituencies elected on PR would retain links to a geographical area, while giving everyone within that area access to at least one member who broadly represents their views and priorities.

It is true that some countries that use PR have suffered from short lived Governments that have been unable to address their problems. It is equally true that others, notably in Northern Europe, have enjoyed stable and effective Government for decades. What is undeniable is that UK Government over the last decade has represented the worst of all worlds – unrepresentative, divisive, and hopelessly inept, making a series of disastrous decisions, and then executing them with startling inefficiency and a degree of cronyism that reflects appalling Governance and gives the appearance of corruption.

Rebuild Local Government

Many of the worst disasters that have beset us are caused by the long -term erosion of local Government under both parties, but especially under austerity since the conservatives returned to power in 2010. Over centralisation of functions that would be better performed locally has been at the heart of repeated disasters, with track and trace merely the most visible. The steepest cuts have fallen on local authorities, while their freedom of action has been eroded by a culture of micro management. Local Government is impeded by centralised setting of targets, severe restrictions on the ability of local Government to allocate funds based on local priorities, and the ability to plan services compromised by introducing private providers in education and health, leading to considerable waste and inefficiency. Dealing with inequality and alienation from politics requires a much stronger role for local Government, with central Government ensuring a fair distribution of revenue based on need, with extra support for those authorities least able to raise local revenue. This is critical to winning back the ‘red wall’ constituencies lost to the conservatives in 2019.

Strengthen engagement in politics

There is a strong case for education of both children and adults in the tools they need to make sense of politics and to identify lies, distortions and exaggeration. All citizens need at least a basic understanding of how central and local Government operates, and at least basic understanding of statistics.

Improving Governance

The most depressing aspect of our declining Governance has been the willingness of HMG to tell lies, including telling lies in Parliament. Until quite recently, a Member found to have deliberately lied would be expected to resign from office and usually from his seat, as Minister of War John Profumo did in the 1960s.

Standards have slipped so far that the Johnson Government lies continually, in all forums including Parliament, and faces no sanctions or comeback for doing so.

 It is difficult to over-emphasise how catastrophic it is for a society when the word of the Government cannot be trusted. It wrecks treaties and alliances, it makes fair elections impossible, it undermines law and order, and creates a cynical and despairing society in which nobody can be believed.

In a world where we can’t rely on our Right Honourable Members of Parliament to be either Right or Honourable, we need some statutory protection against deliberate lying in Parliament. How best to achieve this needs study, but a possible approach might involve establishment of an independent body responsible for checking the veracity of statements made in Parliament. It would need to have a budget set independently from the Government of the day, and access to professional staff with relevant skills.

To be relevant, the fact checkers would need to issue their findings on the truthfulness of statements within days, if not hours. This would involve no more than a quick and simple check of statements that can be definitively determined to be either true, false, or needing qualification to avoid misleading. The fact checkers themselves could be accountable to a select committee of Parliament, to whom they would make regular reports on their work.

The point of the exercise is not just to catch Government out in a lie, but to provide an incentive for changed behaviour. If possible, it would be great to have a statutory requirement that a Minister found to have deliberately lied to Parliament is required to resign, and is barred from holding public office.

Restore a strong, permanent, apolitical civil service

When I joined the civil service in the mid-1970s, special advisers were unknown. Before each election, the permanent civil servants in each Department would scan the party manifestos, and set out in briefing papers how the commitments in the manifesto could best be delivered. We would implement what our political masters decreed, but we would provide impartial analysis of the consequences of each policy option, and might point out better approaches to achieve the same ends. In my experience, Ministers did not interfere in decisions on civil service postings or promotions.

The model began to change under Thatcher. Special advisers were brought in, initially with a role limited to political advice, but the distinction was never clear cut, and they increasingly encroached on the permanent civil service role of fleshing out the practicalities of how political priorities could be realised in practice. More and more functions that had been undertaken by the civil service were either privatised or hived off to ‘next steps agencies’, semi-commercial bodies intended to operate under market disciplines. More and more roles were filled by people brought in from the private sector on contract, usually on far higher salaries. Many of them were brought in explicitly to implement a particular political vision of how an area of Government should operate, and they wanted to surround themselves with others who shared that vision, not with cautious civil servants who would tediously point out the pitfalls. The character of the civil service began to change. The ambitious recognised that true believers were more likely to be the high flyers. A period in the civil service was increasingly seen as a stepping stone to well paid work outside. The key to success within the civil service began to depend on being ‘one of us’ rather than a boring Sir Humphrey.

A more open civil service brought challenges to the independence and impartiality of civil servants. Those moving back and forth from private sector roles inevitably came with baggage. They had worked for firms with an interest in Government contracts, and would expect to return there when their contract ended. They had close relationships and investment interests that were potentially compromising. Attempts to avoid the appearance of bias were only partially successful, because those charged with implementing the rules would themselves wish to return to the private sector at some point, and were therefore inclined to be sympathetic.

If we charitably assume that the current chaos in Government is due to incompetence rather than graft, it suggests a need to return to a system where all salaried Government jobs require competitive recruitment. The main exception to this has been the proliferation of political appointments. There is a strong argument for requiring a competitive recruitment process for appointments to all posts that draw a tax-payer funded salary. If Ministers wish to appoint special advisers to fulfil political roles, they should be paid for from party funds, not by the taxpayer, and they should not have any role in the management of public funds. This is not only important for ensuring that posts are filled by competent officials with relevant experience, it will also be essential if equality of opportunity is to be extended to all groups within the population.

Ideally, it would be good to prohibit civil servants (or anyone who draws a public sector salary, including Ministers and SPADs) from working in any capacity related to an area of the economy where they had a decision-making role for a minimum period long enough to avoid the risk of corrupt influence, I would suggest 2 years. To be feasible, this might require better salaries to be paid – something that would be politically contentious.

Ensuring Probity

One of the most depressing aspects of current Governance in the UK has been the proliferation of high value contracts being let without competitive tendering to companies completely lacking in relevant experience. If this were happening in a developing country, nobody would be in any doubt that corrupt motives lay behind such bizarre decisions. The remedy is the same in both cases. We need procurement guidelines to be agreed and enforced by statute, with waivers from normal tendering processes only agreed in exceptional, defined circumstances, and able to be challenged in the courts. This needs careful design to avoid vexatious court cases being brought by every firm that loses a tender, but there does need to be some process to prevent the current chaos.

It is difficult to understand quite how public procurement became so dysfunctional. Procedures to ensure competition in procurement have long been in place. The Permanent Secretary in each Government Department has remedies he can take if asked to sign off on inappropriate expenditure, the most extreme being to write a formal letter to the PAC. Reports by the PAC can draw attention to wasteful or potentially illegal expenditure. For whatever reason, these remedies have not succeeded in restraining the behaviour of a Government that has a large majority and is indifferent to conventions or criticism. If convention no longer works, it may be necessary to make it much easier to prosecute Ministers for wasteful, negligent and corrupt expenditure of public funds. 

Ensuring Government is not for sale

An equally dangerous source of undue influence on policy is the dependence of both political parties on large donations from businesses, trade unions, and individual wealthy donors.  The large donations are clearly not provided out of public-spirited charity. They are given in the expectation that a future Government will return the favour by ensuring a policy environment that is favourable to the interests of the donor. This limits the appetite for taxing the wealthy, or insisting on green measures that inconvenience carbon-emitting businesses, or that threaten the jobs of union members.

There has long been a debate about replacing the current ad hoc funding of political parties with a system funded from taxation. This has not been pursued because it would be politically unpopular, and because of difficult issues surrounding how best to allocate any funds. These questions are not insurmountable – funding could be shared on the basis of the share of the vote, or individuals could be asked to nominate the party they would like to receive their contribution, perhaps when filling in their annual tax or benefit form. Irrespective of whether state funding of political parties is introduced, there is a very strong case for imposing a low annual maximum ceiling on the contribution that any individual, firm, trade union or other organisation can make to a political party. This needs to be set so low that no individual or organisation acquires significant leverage as a result of its contribution. Suitable safeguards will be needed to prevent donors disguising the size of their contribution by paying it via multiple agents acting on their behalf.

The implication is that party funding would drop, and would be more dependent on developing a broader membership base and more diverse funding. Both would arguably be good for our democracy.

Reform the Media

The ‘post truth’ society has been led by the media, dominated by rich oligarchs able to push out lies and distortions through multiple platforms without significant consequences. The related problem is that messages that are false or misleading can be sent exclusively to target groups that might be swayed by them, without being seen by those who would be able to correct or challenge what is being said.

BBC journalism, still the source from which 60% of the population obtain their news has sunk to abysmal levels. This may be partly due to a new vulnerability to political pressure. With the fragmentation of media, the BBC knows that it can’t rely on independent financing via the licence fee forever. Accused of bias against the Government, it has felt unable to subject Government plans to rigorous analysis. It has been reduced to reading press releases and conducting far too many vox pop interviews that provide neither information nor insight. Throughout the BREXIT debate, the BBC has been a fact free zone, quoting both sides of the debate as if they had equal worth, conducting no analysis of its own, and failing to ask the hard questions.

The future income of the BBC needs to be secured and insulated from Government control, perhaps with a long- term deal on the licence fee. The BBC charter may need some amendment. It should have an explicit remit to hold the Government of the day to account for the accuracy of their claims, and an explicit responsibility to give space to independent analysis and views. This ought not to need saying, but clearly does. If they would like to be reminded how to do current affairs, they should take a close look at how Al Jazeera English operates. They should also have an explicit remit to uphold the constitution and the institutions of democracy, and to draw attention to any threats to them.

Turning to other media, it is clear that media oligarchs have acquired an unhealthy dominance over news outlets. In addition to the direct consumption of their output, it is shared and re-tweeted multiple times on other platforms in ways that are hard to control. Even if most people are getting their news via their mobile phones, the ultimate source of a lot of what they are watching is from more conventional TV or newspaper on-line sources.

There is a strong case for imposing a lower limit on the audience share owned by any one provider on any communication channel. If they have more than the agreed maximum share, one approach could be to require the excess to be leased to other providers, perhaps overseen by an independent body.

There should be higher fines and more effective redress for knowingly broadcasting falsehoods.  Corrections should be required to be broadcast at the same time and with the same prominence as the original falsehood. If the BBC were to reform itself to be a credible news organisation, the fines could be paid to the BBC for the explicit purpose of generating the content to correct the original error, for broadcasting on the offending channel as well as on the BBC.


The UK is in a dangerous place. It has a reckless and extreme Government that does not represent either the wishes or the interests of the bulk of the population, and that is doing severe damage to our economy, our society, and our international reputation.

Changing the Government, and ensuring that Parliament does not again fall into the hands of rogues and scoundrels, requires progressive parties to work together to win the next election, and to then reform the electoral system with the introduction of a form of PR. The behaviour of the current Government confirms that MPs can no longer be relied on to be truthful and honest, while the news media are too fragmented and biased to hold them to account. We therefore need to bring in some statutory protections to discourage the circulation of deliberate falsehoods, both lying in Parliament, and the circulation of lies and misrepresentation through other media.

Genuinely levelling up the more disadvantaged areas of the country requires local Government to be re-built. Resources for local Government need to be significantly increased, with a formula to channel more funds to those areas least able to raise revenue locally, and with expenditure priorities set locally rather than by national targets. This provides a more meaningful form of ‘taking back control’ than the empty promises made concerning BREXIT.

Finally, we need to encourage the population to re-engage with politics, with a particular focus on education. Our citizens need reminding that the price of freedom is eternal vigilance.

[1] According to First Draft News, 88% of Tory advertisements during the 2019 campaign featured ‘questionable’ claims.

[2] Ofcom, News Consumption in the UK:2020

[3] Stuart Wilks-Heeg and Stephen |Crone, Funding political parties in Great Britain: A Pathway to Reform, Democratic Audit 2010.

[4] 48 people on the Sunday Times ‘rich list’ donated more than £200,000 in 2019 to political parties, 43 of them to the conservatives. The London Economic 23rd December 2020. Donations and legacies accounted for 60% of conservative party income in 2005-09, double the proportion of labour income Wilks-Heeg and Crone, op cit.

[5] You Gov analysis of 2019 election results

[6] IPSOS MORI polling research.

‘No deal’ is entirely Johnson’s fault

Boris will undoubtedly blaim ‘EU intransigence’, but no trading bloc or nation could possibly have agreed to Johnson’s demands – and this has been blindingly obvious from the outset.

The reason for defining common standards for health, safety, animal welfare, environmental issues, and for limiting Government subsidies is to ensure that domestic manufacturers are not undercut by cheap imports that are produced by methods that are unethical or that involve unfair competitive practices. The common standards help to keep out goods produced by environmentally damaging methods or with starvation level wages or that involve animal cruelty or that are judged to pose a risk to health or safety. If the UK chooses to apply different standards on any of these issues then it cant be given free access to the EU trade area. It is not just that anything we produce ourselves may not meet EU regulations and standards, it is that producers elsewhere in the globe will want to channel their exports via the UK as a way to access the EU market.

The EU have said, very fairly, that we can continue having unimpeded access to the EU market as long as we adhere to the same rules and standards as members of that market. If we diverge from those rules and standards, they reserve the right to impose tariffs or other penalties to prevent us from flogging stuff in the EU that actual members of the EU would not be permitted to sell. This is entirely reasonable, and indeed essential if the single market is not to be fatally undermined.

The stupidity of the HMG approach is that diverging from EU standards will not only risk barring our producers from the EU single market, it may also bar us from every other market. At present, our goods are accepted around the world because they conform to EU standards that the local authorities find acceptable as set out in trade agreements with the EU. As we are no longer party to those trade agreements, our future access to every market depends on persuading other trading partners to accept British standards that currently have no accreditation and no track record.

Some thoughts on Black Lives Matter

I support the BLM campaign, but BAME lives seem to matter less when they are the lives of people living in poor countries – look at any news channel and compare the coverage given to relatively low impact disasters in the USA compared to events that kill thousands in Africa or Asia. Why aren’t more of us protesting about our complicity in selling arms and providing training to the murderous regime in Saudi Arabia to enable them to prosecute the humanitarian disaster that is the war in Yemen? Why do we tolerate the US and UK Government using drones to murder people we are not at war with, without legal process, and with reckless disregard for civilian casualties? Why do we vote for Governments that maintain our rich country privileges by increasingly draconian measures to keep refugees (many from wars that the US and UK initiated) outside our borders? We are right to protest against racism at home and abhor the abuses of the past, but we still buy cheap clothes produced in appalling conditions by workers paid a pittance. We cling to  our high consumption lifestyle, reducing greenhouse gas emissions just enough t save ourselves, but never contemplating cuts that are steep enough to allow the poorest nations to enjoy even a fraction of the wealth that we thoughtlessly squander. We don’t even question the ethics of COVID 19 measures that are causing a global recession that will cost millions of young lives across the planet in order to add a few years to the life spans of a few hundred thousand mostly old people in rich countries.

Those of us living in rich countries are all guilty of maintaining our comfortable life styles by taking a grossly unequal share of the world’s wealth while keeping the poor powerless and firmly outside the barbed wire. Now that the environmental limits to consumption are clear, we can no longer argue that the lifestyles we enjoy will eventually trickle down to everyone.  We may join the odd protest and try to consume ethically, but to the best of my knowledge,  no rich country has ever elected a Government that was seriously committed to reforming the current world order. It may make us feel good to overthrow the statues of those who committed vile crimes in the past, but our ‘woke’ feelings of moral superiority rest on very shaky foundations – our descendants may be just as keen to tear down any monuments we leave behind.

China and the world

I am involved in an on line debate about the post-COVID world. This is my first post in response to some comments by another participant about the need to confront and contain China:-

As a European, I feel very uncomfortable with Trump’s USA as the sole hegemon in the world, and see China as a useful and necessary countervailing power. There are many aspects of Chinese society that are deplorable, particularly the treatment of minority communities, but they have not threatened peace and security of foreign nations in anything like the continuous and aggressive way that the USA has since at least the end of WW2.

In economic policy too, it is the US which is basing it’s trade policy on an ignorant mercantilism that risks impoverishing us all. In contrast, the rapid growth of the Chinese economy pre-COVID 19 has been the major engine of continuing improvements in world GDP. Although aspects of the statist approach are uncongenial, dealing with threats such as global warming and CO|VID 19 will certainly require a bigger state role than we are accustomed to in the West, and we are more likely to find solutions in Chinese experience than in the capitalist economies that have yet to find any organisational models for harnessing private enterprise to pursue societal goals. On the contrary, the state has been suborned to create perpetual war to boost the profits of the arms industry, while privatised health suppliers and big pharma have produced the most expensive, unequal, and therefore ineffective health services in any developed country.

It seems to me that China isn’t really a threat to the West, though it is a competitor. China as a unified state has a history going back thousands of years, throughout which it has shown no interest in geographical expansion. It pursues what it perceives to be it’s own interests, as do we all, but has usually done so through peaceful means where that is feasible, particularly in the post-Mao era. The economic policies it pursues do pose some problems to those wishing to develop trade and investment relationships, but the way to resolve those differences is through the rules based international system that the USA seems so intent on tearing up. The US under Trump is a bigger threat to mutually beneficial economic relationships, relying on naked power to bully it’s partners in ways that impoverish both sides.

Throughout most of it’s history, the UN respected the useful principle of not interfering in the internal affairs of other states. That attracted criticism for not confronting gross human rights abuses committed by states against their own citizens. However, the terrible consequences of attempts at regime change in the Middle East and Latin America might lead us to conclude that non-interference was a wise policy -with exceptions perhaps in extreme cases such as the Rwanda genocide. Our current set of alliances make it clear that there is no moral or ethical principle governing which countries we befriend and which we characterise as terrorist states – I find the US use of non-judicial murder by drone, and the  actions of our allies in Yemen and the Gaza strip just as repugnant as anything that China or Iran are accused of.

This leads me to the view that we should try again to revive the use of rule-based systems to address international disputes, which is more likely to suggest cooperating with China to restrain the US through non-military action. We need to deal with the world as it is. By all means speak out against injustice wherever it occurs, and seek to promote and protect human rights by exposing abuses, but we need to accept that external actors rarely improve the situation by using lethal force. Trade, investment, diplomacy, and cultural and sporting exchange are the strongest weapons we have. An overly aggressive approach to China (or to other states perceived as problematic) is more likely to reinforce the position of those within those states who oppose cooperation. 

UK Approach to COVID 19

I posted on April 3rd 2020 to suggest that the UK approach to COVID 19 was accepting very high costs from social distancing measures based on very little evidence, while medical judgements were being held to a far higher standard of evidence. I am deleting the original post because it reported claims about the efficacy of hydroxychloroquine treatment that turned out to be false.

At the time, Didier Raoult and his colleagues in Marseilles were claiming a nearly 100% cure rate for treatments involving hydroxychloroquine in combination with zinc and an antibiotic. At the time, though not based on double blind trials, Raoult argued that the results were based on successful treatment of 1500 patients and it would be unethical to offer a placebo. At the time he was the most cited infectious diseases expert in the world, and the treatment was based on drugs long in use and was both low cost and involved negligible risk even if ineffective. The mainstream profession was sceptical based on double blind trials which had reached negative conclusions. Rauolt argued that the treatment only worked in the early stages, whereas the trials had only included patients with advanced disease. There was clearly a need for better trials, but there didn’t seem to be a good reason meanwhile for banning the treatment.

It subsequently became clear that the results claimed were false, and could be argued to be fraudulent. They were based on comparing two groups of patients with different characteristics, and some cases with worse outcomes had been excluded from the reported results. I also became aware that Raoult’s eminent position in the literature had been achieved in part by having his name added to virtually every article published by his institute. I am therefore deleting the post.

The other point made in the post was that the approach to the pandemic in the UK (and in most other countries) involved costs that were disproportionate to any benefits from deaths averted.  It fails the UK Government’s own criteria for cost effective health interventions by a wide margin.

I still think it is reasonable and indeed essential to ask questions about how much damage to our economy and society it is reasonable to incur in order to avert additional deaths. I would not necessarily want to insist on rejecting measures that exceed the NICE guidance that a year of extra healthy life is worth £30,000. I would, however, have expected a far more rigorous approach to assessing which interventions work at acceptable cost. It is appalling that after nearly a year, we have the highest per capita death rate from COVID 19, have incurred deep damage to our economy and society, yet still do not have the epidemic under control. For an island nation, none of that was inevitable. It reflects:-

i. a decade of neglect of the health service, including not maintaining adequate stocks of PPE

ii. not closing the borders

iii. not using existing resources for test, trace and isolate, relying instead on setting up an over-centralised and enormously expensive system contracted to Tory party cronies with no experience. The system is still not working nor is there any prospect that it ever will, but political embarrassment prevents it being abandoned despite ruinous cost in both lives and billions of pounds.

iv. Ditto, multiple other decisions that have wasted time and money and lives by being over-centralised and let to inexperienced contractors with nothing to recommend them but an unhealthily close relationship with the Government. Normal procurement processes have been overturned in ways that can only be described as corrupt.

v. Despite claiming to follow the science, a series of confusing, inconsistent and largely ineffective social distancing measures, poorly timed and poorly coordinated without much consultation with those affected. Some forms of high risk interaction are allowed, others are banned, with the boundaries of what is permitted continually shifting without much rationale.

Had we been willing to learn from the experience of other countries, especially those in Asia and Australasia, much of this was avoidable.

Consequences of the Coronavirus Pandemic

The negative impact of the measures being taken to control the Corona virus look likely to be very severe, and will themselves have profound consequences for public health. While all reasonable measures to save lives should be taken, there is a point beyond which the costs may be judged to be worse than the effects of the virus itself.
The Health Impact of the Virus
Impact of doing nothing
The Government response is largely based on the findings of the Imperial College study . The mathematical modelling suggests that, in a ‘do nothing’ scenario, an estimated 81% of the population would become infected, there would be an additional 510,000 deaths, and the capacity of the health system would be overwhelmed. For comparison, total deaths in 2018 were 616,000 and the increase would represent an increase of more than 80% on the normally expected death toll.
Benefits of a mitigation strategy
The initial HMG strategy focused on mitigation measures: – isolation of suspected cases and home quarantine of those living in the same household, social distancing by the over 70s and others in the high-risk categories.
This approach would reduce the additional mortality to about 258,000, but the capacity of the health system would still be completely overwhelmed. Because the majority of the population would still contract the virus, immunity would build up relatively quickly, and the deaths would be concentrated over a matter of a few months.
The net increase in total mortality might be somewhat lower than this gross estimate to the extent that some of the very vulnerable population would have died in the current year of other causes if they had not contracted the virus, and the public health measures such as frequent hand washing will have a beneficial impact in reducing deaths from other infections.
Impact of measures to Suppress the virus
The unacceptably high death toll even with mitigation measures in place has led HMG to move to more drastic measures aimed at suppressing the virus. The additional measures encompass social distancing for the entire population (not just vulnerable groups) plus school and University closures. These measures have the potential to reduce the total number of deaths to a much lower level, estimates vary according to when the measures are triggered, but the total mortality in most scenarios is expected to be contained below 50,000 deaths.
The further reduction in mortality only occurs if the measures are kept in place until an effective vaccine can be made available. Universal social distancing means that herd immunity has not been built, and the modelling predicts that the epidemic will experience a second peak as soon as the measures are lifted. There may be some options for partially lifting restrictions in some areas, aided by expanded testing and isolation of contacts. However, for suppression to work, the Government assumption in an announcement made on 20th March is that the measures will need to stay in place for at least a year.
Economic Impact of Measures to Suppress the Virus
Reduction in output and incomes, and increase in firm failures
The economic consequences of the epidemic take the form of a severe interruption to the capacity of the global economy to supply goods and services. Some of this is directly the result of the epidemic with workers off sick, but most of it is the consequence of the unprecedented measures being taken to reduce travel and all kinds of social interaction.
Massive Government spending commitments
The reduction in social interaction has profound consequences for output, for incomes, and for the ability of firms of all sizes to survive. Governments around the world are therefore planning to massively increase their expenditure in order to limit the impact on household incomes and prevent the collapse of firms that suddenly find themselves without customers, or unable to produce without breaking the social distancing guidance.
In the UK, measures already announced include £30bn of support in the budget, a further £330bn of loan guarantees announced on 17th March, with further support promised. The loan guarantees alone are equivalent to 15% of GDP. With more to come and with GDP shrinking, the final percentage will be even higher, and is without precedent.
The dangers of ‘Stagflation’
We have become used to very low levels of inflation and of interest rates, but that is about to come to a dramatic end. Stagflation – the combination of a stagnant economy and high inflation – classically takes place when a reduction in supply is not matched by a reduction in demand, resulting in too much money chasing too few goods and services. We last saw it in the 1970s, when OPEC related interruptions to the supply of oil were accompanied by relatively loose monetary policy. What is about to happen globally will be on a rather larger scale.
If the Chinese precedent is any guide, Western economies may face supply reductions of up to 20% of GDP while increasing Government spending by an equivalent amount.
How will Governments finance this increased spending, when their tax revenues are eroded by declining GDP, while their existing spending programmes are already facing increased demands from the health sector, from benefit claims, and from rising costs due to supply interruptions? The Government will have to borrow more.
If it was concerned about inflation targets, the Bank of England would need to make room for the increased Government borrowing by tightening monetary policy in order to reduce the excess demand by squeezing out corporations and households from credit. This would completely defeat the object of the Government spending, by tightening the squeeze on households and firms rather than alleviating it.
If the Bank of England accommodates the excess demand, as it has said that it will, then inflation will be the inevitable result. This will have profound implications for the distribution of wealth and of income. Firms and workers who are able to increase their prices and wages will benefit. Those with less bargaining power will lose, including many of the poorest and most vulnerable.
The most worrying aspect of the situation is that inflation can easily spiral out of control. Government will find that the costs of everything it is trying to do continue to increase as excess demand enables firms and workers to increase their prices and wages. Excess demand will also spill over into an increased balance of payments deficit as Government spending not matched by demand sucks in imports. Loose monetary policy may keep interest rates low in sterling but the excess demand will contribute to pressures on the exchange rate which will further intensify the cost pressures by reducing the sterling value of our exports while raising the cost of imports.
We do not know how much of the money that Government has committed will result in extra spending, nor do we know how severe the impact on the economy will be. However, we can make some assumptions to give an indication of the possible scale of what lies ahead. It is not implausible to envisage that: –
– Additional COVID 19 spending adds £350bn to the Government deficit;
– Government revenue falls by about 10%, adding a further £80bn to the gap
– GDP falls by about 10%

This would result in a sharp increase in the Government deficit to £490bn, or about 24% of GDP, with Government debt increasing in a single year from 80% to over 100% of GDP. This level of deficit clearly could not be sustained for long.

The nightmare scenario would be hyperinflation, of the sort experienced by Germany in the 1920s and more recently by Zimbabwe. Hyperinflation destroys savings and causes untold misery as the currency becomes worthless. I am not saying that this is likely to happen, but it would be reassuring to know that policymakers are alert to the potential risks of such a massive increase in spending beyond our production capacity. I have seen nothing to suggest that they are.
The only way out of a process of accelerating inflation is to end the excess demand, either by the supply of goods and services increasing to close the gap, or by austerity measures to raise revenue and cut spending.
There will be a significant supply bounce back once the epidemic is defeated. We do not yet know when that will be, and it may not be enough. Despite the Government efforts to sustain demand, many firms will be financially a lot weaker, and will be poorly placed to invest in increased output, especially as consumption will also be depressed by the legacy of lost livelihoods and increased indebtedness. The Guardian on 19th March was already reporting that motor industry firms that have closed due to the Coronavirus may not re-open, the virus representing a major additional burden on companies that were already considering their position in the light of BREXIT.
A significant part of the adjustment will therefore need to take the form of harsh cuts in public spending and increases in taxation. That will be politically very difficult, and the risk is that Governments will instead resort to trying to inflate their way out of their difficulties. A prolonged period of recession or slow growth looks probable, possibly accompanied by high and unstable inflation..
Is the cure worse than the disease?
This discussion inevitably prompts the question, is the cure actually worse than the disease? The most severe economic costs are not the result of the disease itself, but of the measures being taken to suppress it.
It is worth contrasting the Coronavirus death toll with estimates of the health consequences of a prolonged recession and associated cuts in health spending. Two studies of the excess mortality experienced by the UK during the years of austerity have estimated the number of excess deaths . The study by UCL estimated an additional 120,000 deaths over the period 2010-2017; a study by IPPR estimated 130,000 preventable deaths over the same period compared to the pre-austerity trend.
Both studies are at pains to point out that causality cannot be proved. However, it is important to also recognise that the likely death toll from Coronavirus under alternative mitigation and suppression strategies is also highly uncertain.
It seems reasonable to assume that UK recovery from the severe recession and budget financing crisis associated with the measures taken to suppress the virus will be both slow and painful. There are ample examples of developing countries facing a decade or more of lost growth as they tried to stabilise their economies after debt and deficit problems of similar magnitude. It seems plausible to assume that such a prolonged period of economic difficulty will be associated with some increase in mortality, both as a consequence of increased poverty and economic distress, and as a result of constrained post-virus spending on health and social welfare.
The Coronavirus induced recession is likely to be deeper than that following the 2008 financial crisis, and is likely to be more prolonged given the scale of the shock to output, the already weaker state of many economies, and the fact that it is global.
The initial UK response of mitigation would have limited the economic damage caused by the virus. We have subsequently joined the rest of the world in taking severe measures to supress the virus, measures that will cause much deeper damage to our economy and the fabric of our society (will the village pubs we will lose ever come back?)
Nobody sane would argue against trying to reduce the health impact of the virus.
If the modelling is correct then we face the prospect of 250,000 additional deaths if we mitigate rather than perhaps 50,000 with measures to suppress the virus. The problem is that the costs of the additional measures now being taken to try to achieve this further reduction are staggering. The health benefits are likely to be offset by further deaths as a result of the prolonged period of austerity that will then be needed to stabilise the economy. The damage to every aspect of our way of life is incalculable.
We have never contemplated similar measures for any previous health emergency, yet have implemented them now with little or no discussion. There needs to be a debate on whether they are disproportionate to the uncertain benefits.