Author: johnredwood

The decision of most governments and the world Climate Change conferences to go for electric cars unleashes a juggernaut of change on a shaken motor industry. Sales of new diesels and even of petrol engined vehicles have plunged. Potential customers have often decided to hold on to the vehicles they already have, to see what is going to happen to car fuel taxation, to subsidies for new electric vehicles, and to taxes and regulations on the use of diesels and petrol cars before committing to a new product. The wary who might like a new diesel or petrol  vehicle worry lest in a few years time they are blocked from going where they wish, given the way German cities for example are already blocking older vehicles from entry. What will happen to second hand values when we reach the point of a ban on the sale of all new diesel and petrol cars? Some fear a fall, others think they might paradoxically go up as people chose to buy a second hand one in the absence of a new one.

It is true that lockdown last year hit output and sales badly, but it would be wrong to think all the fall in  diesel sales was temporary. There was a  trend developing against new diesels before the pandemic hit, which will continue given policy as lockdown ends. The car industry has accepted, even welcomed the transition to electric.  It will be costly, disruptive and difficult for those involved. The industry has preferred to talk about other far lesser issues or more temporary concerns and ignore the structural imperatives that should preoccupy it.

The UK government needs to be engaged and concerned about the UK car industry. The UK with some government encouragement and help built itself a great position in diesel engine technology and output. Ford changed Dagenham from car assembly to an engine production plant. BMW put in a great automated engine plant at Hams Hall Birmingham. Jaguar Land Rover spent a lot of money with government help on a brand new engine facility at Wolverhampton. Toyota put in an important engine factory on Deeside.  The UK helped design and perfect the new clean diesels with practically no particulate material coming out of the exhaust. All these plants make engines which the government wishes to retire by 2030 at the latest, with encouragement to people not to buy such engines from well before that date.  These factories cannot make the big batteries that form the core of the electric vehicle power unit, nor can they turn out the electric motors without stripping out all existing equipment and starting again.

If the UK is to keep motor manufacturing at home it needs to support and encourage large scale battery production and new factories for new electric models. The problem both the government and the industry have is they need to put in all this electric capacity before there are enough customers to buy the vehicles. Jaguar Land Rover shows the problem. Their buyers still want to buy the petrol and diesel product. As they transition to an all electric line up they have decided to go  more up market, losing the better off and concentrating on the rich who can afford to pay many tens of thousands for a single car . This will probably mean much less volume. If they end up closing or greatly shrinking  the Wolverhampton engine works and Castle Bromwich assembly works, favouring more overseas production, they will also lose more traditional UK buyers of their product who like the Britishness of the brand.

Eskenzi PR and Marketing put out a press release yesterday reporting a sampled survey of 1000 people. They said that one third of those asked had stopped buying EU goods. Reasons given included extra costs and delays in  getting the goods into the UK and an unwillingness to buy EU goods given the attitude of the EU to trade with us in recent months.

I would be interested to know whether your experiences bears out this survey. Does it worry you? Do you yourself seek substitutes for EU products?

It is curious if true that the EU is trying to impede exports to us as well as seeking to make our exports to them difficult. The UK has made clear it was not going to impose new barriers at our ports to get in  the way of the substantial volume of imports from the EU that we have accepted, and is working with a grace period at our borders. Despite this there are reports of surcharges on card transactions and postal delays. It is also true that some continental websites have failed to collect UK VAT as required leading to an extra bill for the UK consumer who expected VAT to be included in the pricing,

I myself have long followed a policy of buying UK food items wherever possible, to cut the food miles and to back UK fishing and farming. My second choice is to import from a developing country who are in more need of the trade and who have warmer  climates offering products we cannot grow here.

I have explained before that the U.K. calculates real GDP differently from many other countries. It adjusts the cost of public services like health and education for real output where others just rely on money spent. The U.K. reported correctly a sharp fall in output in education when all the schools were closed and a substantial fall in health output when elective and non urgent activity was cancelled to leave more capacity for CV19 cases. Both services recorded sharp falls in productivity as a result.

If we look at nominal GDP figures based on spending the U.K. economy had a relatively small fall of just 2.2%. This was less than Germany, France, Spain and Italy though a bit more than the USA at minus 1.2%.

The big debate now is how do we get back the  lost real output and  reverse the decline in Nominal GDP. Some are briefing that the U.K. needs to return to austerity with tax rises to cut the state deficit. This would be a bad idea, leading to a larger state deficit than a policy centred on going for growth and recovery. As the figures reveal there has been a big transfer of spending from private to public sector as the state has tried to make up for the inability of millions  of people and hundreds of thousands of businesses to earn their own living thanks to the closures and social distancing imposed  to combat the virus. The way to boost real GDP and to cut the deficit is to allow many more people and firms to supply goods and services, boosting output  and tax revenue at the same time.

What we need is to expand output capacity. That needs keeping and reviving as many of the businesses as possible that we had before lock down. It also requires a positive environment for the  self employed and small business to invest cash and effort to  meet more of the new demands of the post CV19 world. The state needs to rebuild its service output in health and education as quickly as possible which will make our real numbers look more like others. This is a time when lower tax rates will boost output and investment and cut the deficit by more than attempting to lower it with tax rises.

The worry is too much capacity amongst the self employed and small businesses will be lost as they grapple with up to a year of lost turnover and revenue and as they work out how to pay back the loans they have taken on. There remains a number of issues for government and Parliament to help work out over liability for past rents, Business rates, and the other costs of keeping a business which cannot trade. In future posts I will look at more of the opportunities for the UK to expand its capacity as we emerge from lockdown.

It was good to hear the Secretary of  State for Health on Friday say a bit more about treatments, and express some optimism that this year should see approval for treatments for CV 19 which make it much less likely someone will die or have a bad version of the disease. The UK is currently conducting 96 trials of drugs and 9 trials of other vaccines. Worldwide there are reported trials of 700 drugs that may help with treating CV 19, with a total of 2607 clinical trials running for the drugs and vaccines. The USA alone is currently organising 555 clinical trials for CV 19 treatments and vaccines.

I have been long advocating the UK puts resource into these important efforts.  Without medical training, I do not know which if any of these possible treatments can do good. It must be  worth trialling them to find out.

So far the UK has approved dexamethasone, remdesivir and tocilizumab as options for doctors to prescribe where they think they are appropriate. There are a number of other treatments used elsewhere, and we await progress with further trials here for those. There have been strong arguments over Vitamin D, hydroxychloroquine and ivermectin in particular, with disagreements about the conditions for some past trials and strong views of whether these might be effective or  not. All  possible medical options should be fairly and promptly assessed. I hope the government’s new enthusiasm to share some more information and to express some optimism is a good sign that the medics do now feel treatments from adapted existing drugs and from new drugs can make an important contribution to lessening the suffering from this disease. I will follow up with some more questions to the government.

The poor UK GDP figures for 2020 are  not comparable with many other countries. As I explained on 12 August on this site, the UK statisticians reported a large fall in health output with the big drop off in non CV 19 work, and a big fall in education output with the closure of schools from the second quarter of the year. Other countries with large state sectors in education and health report the cost rather than the output, so they do not show any decline in these large areas of activity.

I agree with the UK statisticians that GDP should be based on output. It is a pity other countries do not use the same basis. If we included all the UK spending instead of output in the state sector then the UK had a relatively good GDP performance last year compared to other European countries.

This week the government published “Working together to improve health and social care”, a White Paper sketching proposals for reorganisation of the NHS and the wider care sector.

It set out three aims.

1, Better health and wellbeing for all

2. Better quality health service for all individuals

3. A sustainable use of NHS resources.

I have  no problems with these very general aims. 2 and 3 should be the main drivers of NHS care, whilst 1 of course will entail individuals and the private sector to continue to apply  our energies to the task which is so wide ranging.

The main reorganisation entails creating two new bodies in each local government area. The first will be an Integrated Care System  ( ICS )  NHS body to control, procure  and direct local NHS services and to supervise capital budgets of the local NHS Trusts. The second will be an Integrated Care System Partnership to work with local government and presumably with private sector care providers to ensure good services and relevant procurement.

The White Paper envisages removing some of the competition provisions in current health regulations, to take away powers to control trust mergers, and to limit competitive tendering. They wish to go over to a more collaborative model. NHS England will be merged with Monitor and the NHS Trust Development Authority. The Clinical Commissioning groups are absorbed by the new ICS bodies.

I need to know more about how joint working will take place between Councils and the NHS under these arrangements. I also want more detail over what additional powers the NHS will have over private sector care providers, and how if at all the relationship between  care homes and the NHS will alter.

As I consider my response more fully I would  be interested in any comments.

The world figures show accumulated cases of 107m  or 1.3% of the world population with deaths at 2.365 million or 0.03%.  These figures are by nature of variable quality, depending on how much testing was done throughout in each country, and subject to variations in definitions. There is the perennial issue of death with covid or death definitely from covid, In some places people will have died at home and not been tested. In other  cases there will be tests with false positives.  They are nonetheless important figures and invite come comparisons, subject to analysis of how they were collected in each country, how much reliable testing took place and how deaths were certified.

The figures show that the Europeans  and Americans have suffered more than the rest of the world. The USA has had a very high caseload, at 8.4% of the population compared to the UK at 5.8%, Portugal at 7.6% and Germany at 2.75%. Belgium has had the  worst death rate apart from a few small countries at 0.186%, with the UK and Italy also quite high by world standards. The USA at 0.1456% shows that it has a better recovery rate from its  high infection  levels. India has only had a case rate of 0.78% and a death rate of 0.01%.

Case numbers have been higher in the advanced world and have been higher in winter than in summer. Clearly high levels of international travel can introduce a community to more variants and cases of the virus, and large cities like London, New York and  Paris see spread  from more social contacts using mass transit systems and enjoyment of the social facilities of hospitality, leisure and entertainment which attract more people there. Asian countries in general have fared better that Europe or the Americas. Could there be something in the diet, or in past exposure to Asian flu types which has given Asian populations  better resilience to the disease? Did they handle test and trace better than the Europeans?

It would be good to have more commentary from experts on how and why, for example,  Taiwan had practically no deaths from  the virus and was able to get her economy back and running fully, so GDP is now higher than a year ago. Why has Germany done so much better than Italy or Spain? How does the USA manage cases of the virus to achieve a lower death rate as a proportion of cases? Is it partly that the USA tests more and so identifies more mild or otherwise invisible cases of the virus? Is it a greater range of approved medicines and treatments?

This week I was pleased to be sent an update  by Ministers on all the tests underway in the UK of existing drugs and treatments. It will be good to see more results soon, as a wider range of treatment options would probably help doctors and their patients.

Yesterday in a debate on the local government finance settlement for next year I raised some general issues about Councils and our Town Centres as well as local matters over the adequacy of grants and other  central government assistance.

When we come out of this extended lockdown we will be able to judge the permanent damage done more easily. Some shops and service providers will decide they cannot continue in business, given the long period of closure and partial working and the impact that has had on cash flows and borrowings. Some successful businesses will decide that they can carry on in future with more of their offer coming from digital commerce and less needing physical premises in each town and Village Street. There will be pressure to lower shop rents, and to move more rents onto a turnover related basis. Government will remain under pressure to keep business rates low where they have been reduced, and to cut them where they have not.

Councils are part of this debate because many have come to be important players in their local shopping areas. All principal Councils are important regulators and planners of shopping areas, deciding on what landowners can and cannot do with their properties, defining the streetscape and controlling the transport policies. Many are also now landlords of shop properties themselves, needing to consider the impact of recent changes on their rental and tenancy prospects. Many employ Town managers, help control shopping centres, run public sector facilities and determine the car parking and access strategies. They therefore need to both  decide how much of these various involvements they want, and what they are trying to do with their interests in these matters.

I urged them to wish for one thing – a strong commercially led recovery, helping shops and businesses rebuild their trade and earn the means to pay the rents again as soon as possible. The High Street has a high job content in what it does, adds to the variety of life by creating a social focus, and a backdrop for cultural, sporting  and civic events. It represents much of what we have missed during lockdown. Forlorn High Streets stand largely empty, each closed shop a reminder of the economic damage to tenant and landlord alike of forced closures.

A good Council will make access and parking easier to rebuild trade. It will be flexible over planning permissions for changes of use and adaptation of buildings. Where it is an owner it will be realistic over future rents and uses itself. It seems likely there will need to be closures of a good many shops, as we have too many for likely future levels of physical shopping. That means we need imagination by developers and good will from Councils to convert or rebuild retail estate as homes, places for entertainment  or other workplaces as soon as possible.

I was surprised to read of possible plans to undertake another reorganisation of the NHS. Apparently the government is thinking of reversing some of the changes introduced by the Lib/Con coalition government when Messrs Cameron and Clegg launched a joint document proposing giving GPs the power to procure services from hospitals and others through Clinical Commissioning Groups. There was some resistance to these changes which prompted a  review led by Oliver Letwin which concluded by  continuing the policy with some alterations to the detail. This system has been in place for a short decade now, and has just been tested by the pandemic. Reponses to the virus have greatly strengthened central decision making and resource allocation.

Ministers have become more involved in issues like protective clothing, capacity and medical priorities, listening to the advice of their national Scientific and Medical advisers on these matters and then making decisions based on that advice. As Health is a devolved matter the Chief advisers to Scotland, Wales and Northern Ireland have also had bigger roles, and there has been some effort to get agreement between the four parts of the UK. Usually there has been high level agreement about the overall priority of fighting the virus, sharing of approaches and data, but detailed differences in timing and magnitude of lock down responses. There have also been some differences in success with obtaining a range of supplies and in the pace of vaccinating. The roles of the NHS country Chief Executives and of national quangos and advisory committees have also been tested in public debate about their quality and wisdom.

The pandemic does provide an opportunity to review the system, though it would be wise for the crisis to be past before rushing to conclusions about what worked and what needs improving. During the phase of seeking to scale up the provision and future supply of protective equipment there was a danger of competing initiatives bidding against each other, and making it complex for local care homes and hospitals to know how best to secure the needs they had. There needs to be some review of how big are the benefits from central purchasing, how central purchases are  best distributed, and what are the continuing  benefits of local determination of need and procurement of supplies.

I see there is also discussion of rolling into the agenda possible changes to the financing and access to care homes. This is a perennial topic which we can debate again another day in the context of intergenerational fairness and fairness between elderly people with different ailments and needs. Any change to the approach which states that if an elderly person needs care home accommodation and hotel service they should pay for it out of capital until they hit a minimum when they can qualify for state payment of the fees could be an expensive new commitment for taxpayers, though popular with those who might then inherit the housing wealth of the elderly person. I think the urgent priority is to see government thoughts on how the central and the local management of the NHS has worked during the pandemic, and what can be done to improve it for the future.