Commonsense and rules

MPs and the government are flooded with calls wanting detailed answers to how people can live their lives under the new rules laid out in Parliament this week. This is understandable given the magnitude of the changes required.

The rules themselves are fairly general and broad. The aim of cutting back sharply on person to person contact  is very clear. People should stay at home unless they need to go out  to carry out important work that cannot be done from home, or to collect food and  medicines or to undergo health care. There are  not always detailed answers to what this means for any individual’s life and circumstances.  People are allowed to go out, and need to exercise their judgement of whether this should  be done . If so they should do it in a way which minimises risks to themselves and others.

The police now have powers to require people to return home where they do  not have a good reason, and to fine for  non compliance. The police are keen to carry out their duties by consent, and would like us all to seek to implement the spirit of the rules without needing a strict fine and compliance approach by them. When I am asked difficult questions about what individuals should do I advise them to apply commonsense, to think whether the neighbours would agree they have a need to be out and about.

There are issues about what constitutes a family, what living together as a family means, and what to do about family members who have been travelling and staying away from home for a period. Many of these matters are judgements, where in a  free society we look to the adults in the community to come to sensible decision for themselves in the light of the threat and the general requirements of society. The government does not have ready made answers to all the detailed questions because it has never drawn up a blueprint to tell everyone where they have to live, whether they may travel and whose work is essential. It sought to get people to make a big reduction in personal contact by advice, and has had to move to legal requirements as a large number of people ignored the advice. Let us hope now people respond well, to avoid the need for a tougher approach to policing and punishing offenders.

Meanwhile I have  renewed my proposals to

  1. Get income into the hands of the self employed who cannot now work
  2. Get more home deliveries scheduled by food shops
  3. Have  more national and local government support for volunteering to help those in need of assistance thanks to their need to self isolate for 12 weeks.
  4. Get faster and more helpful assistance with the employee cost scheme and the loan schemes for busienss.
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The timing of these severe measures

The health policy says close more things down and stop people getting about unless it is essential to the NHS, basic utilities  and  the food supply that they do so. Keep them closed until the disease is tamed enough.  The economic policy says close less down, re-open as quickly as possible, try to limit the economic damage.

Judging when to lift the new restrictions becomes the crucial decision. Do it too soon and the disease presumably leaps up again. Leave it too long and big swathes of the UK private sector will be excessively debt ridden or bankrupt.

So it would be good to have a bit more explanation from the epidemiologists how accurate their models are and when they judge it might be safe to reverse these measures. Learning from overseas countries ahead of us on the upwards curve of this disease is a good idea, but we need to understand the different bases of their figures and the big imperfections in them.

Some countries concentrate on testing after death. This can give a high death rate, as many people who  get the disease and recover are never tested and counted, whilst many people who may die of something else can have death attributed to the virus they were carrying. There may also be false positives in the tests.

Some countries concentrate on testing those who declare symptoms, who mainly go on to recover. This may well produce a lower death rate, though the figures may still be way out as many people with symptoms or with the mild  version of the disease may never report or seek a test. Some countries test key workers and patients at risk, yet another different set of figures.

It  would be good to see test results based on a proper sample of the population to know how many already have it, compared to full testing on all those who have died from symptoms like the virus.  It is still a medical judgement if the virus killed them. It will also be better when the new test to find those who have recovered from it and now have antibodies against it is available.

In the meantime government faces a difficult dilemma. Which of the many reports of various death rates and rates of new infection does it  believe or does it think we are most likely to follow? At what point would it be safe to reverse these measures?  When will we have in place sufficient tests to make the numbers more reliable than many of  those from around the world using selective testing? People’s lives depend on these numbers . Millions of people’s livelihoods also depend on them, so they better be available soon and they better be reasonably accurate. The only justification for the economic  misery is that the measures save lives. Giving businesses a better idea of how long it may take would also assist their plans and their financings.

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Food supply and home deliveries

There is plenty of food but still some problems getting enough into shops. There is a shortage of home delivery capacity for the elderly and ill needing that.

I have put the issue to Ministers again and asked that they broker further talks between the catering and supermarket companies over diverting food from catering packs to retail packs, and possible use of catering delivery assets and drivers to shift more for supermarkets. The government should suspend competition rules to allow collaboration.

Now most non food shops are closing the government could also ask the logistics companies shifting non foods to shops to see what they could do to boost food deliveries, and to see if some of the home delivery capacity of non foods could be used for foods.

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Help the self employed

I am going to submit my scheme to help the self employed to the Treasury again, as we have still not had an announcement from them.

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Handling the economic damage

The epidemiologists advising the government have succeeded in  persuading them to lock down as much of the country as possible. The aim is to stop the spread, and so reduce the numbers needing hospital treatment. The earlier policy of trace and isolate did not prevent escalation, though it may have slowed the progress of the disease as the advisers hoped.

Given this, the best outcome now must be a severe but short lived clampdown with a resulting drop in numbers getting the disease, followed by some relaxations to get more people back into work.  The worst outcome would be little progress with getting numbers down and a decision to carry on with many closures in the hope that the policy will sometime start to work as planned. A middle course is likely with a longer period of clampdown and some success with braking the rate of increase.

What does this do to the economy? More than 40% of it, the private sector not involved in food and food retail , pharmaceuticals, utilities and other basics will take a big hit. The obvious sectors that have been closed down will lose all their revenue, but it is likely new cars, new homes, discretionary purchases will all be cut back, some severely. We will see falls in output and incomes of a magnitude we have never seen before in a recession. They have come on us suddenly.

If the government aid for companies is administered well and promptly, and extended to the self employed, then many businesses will survive and be available to supply and serve us again as soon as restrictions are lifted. If the banks use the government guarantees well and make some of the ample liquidity to them available as affordable loans, that too will help see many more companies through the low or no turnover phase.

It is going to  be much easier for companies to revive and bounce back if the gap is not too long. More visibility on timetables would be helpful to those deciding whether their business can battle on and on how much they need to borrow to bridge the gap.

The government should give us scenarios based on better control of the virus to give some hope that these restrictions are temporary.  They can say that the short term closure model is more likely if we all co-operate and observe as much social distancing and isolation as our roles allow.

As of today we face the loss of a large number of self employed businesses without more financial support, and even  the loss of businesses  covered by the financial support scheme announced who nonetheless are losing so much  business from virus related effects and have large non employee costs..

It is nonetheless the case that the UK economy will lose a lot of  output from March onwards and that cannot return until the bans are lifted. Jobs will also be lost if the government financial support is not readily available at scale. The longer the closures and bans continue, the more businesses will give up and make their staff redundant to stop the losses.

Commercial rents will fall, dividends will be cut, pension funds will have much bigger deficits and businesses in trouble will have problems raising capital. There will be large falls in investment.

This is now happening all over the advanced world where similar policies are  being followed. I wish the experts and governments every success in limiting this disease . They also need to  recognise that the serious economic damage being done to try to arrest the progress of the disease is going to get very severe unless there is a relatively short time limit on the shut downs and financial help for all in the meantime.

 

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Heading for a big economic downturn worldwide

The new Governor and the Bank of England have risen to the task in the last few days. They have thrown everything into keeping banks and markets liquid. They are offering huge facilities for banks to lend on to the many individuals and companies that will need credit, and have now signalled they want gilt yields to stabilise. They have announced substantial new buying of government bonds, and operated at scale on  Friday to stabilise the market of gilts where prices had been falling. The commercial banks must  now show speed and purpose in offering loans to companies that need them, and need to curb their appetite for ultra high rates on the money they advance as overdrafts.

The government last week upped  their fiscal response to try to match the challenge. I have always argued the priority is to avoid mass unemployment from widespread redundancies. The new scheme to burden share on wages should go a long way  to help businesses keep their teams together while we await an upturn in demand.  The business rate holiday for the worst affected sectors and the direct cash grants also help. We still have not seen any decent response for the self employed, who are also an important part of our economy and should be helped.

Some argue that the large sums the government plans to borrow and the huge sums the Bank of England is committing to this task are excessive and dangerous. In a situation where there would  be a very large fall in economic output some offsetting action is needed. Millions of people are temporarily banned from working in their jobs or have to stay at home to look after children or to isolate themselves so  the government and Bank do need to offset some of this unprecedented hit to jobs, incomes and activity.

As the government has decided to close down a large part of the private sector, banning tourism, leisure, much travel, entertainment and hospitality, it needs to see it has to do more to plan for the consequences. Lots of discretionary spending areas from new homes and cars to clothes and many household appliances and furnishings will also drop sharply or effectively be banned.

Meanwhile there will be a continuing surge in demand for more food, food retail and home delivery.  As many people used to have more than 5 out of their 21 meals a week at their place of work or in a restaurant of fast food place there will be a big transfer of food demand to the supermarket as they eat at home. This requires switching food from caterers products to retail products and needs volume changes to the delivery system to households. There will be strong demand for smartphones, laptops and digital services, for home entertainment and for business digital systems. There will be more strain on domestic utilities as families stay home and load the broadband and electricity networks.

The government is  busy trying to divert more resources into NHS and social care. It  is buying up bed spaces, hiring in more medical staff, offering to buy huge quantities of tests, ventilators, pharmaceuticals and  protective clothing to handle a big outbreak. It also needs to help the private sector direct resource to home deliveries for all who have to self isolate, to ensure quick adjustment to the new patterns of food buying and consumption and the delivery of drugs where prescribed..

As the government is discovering, if it disrupts one thing like closing schools it has to help ensure enough people can still get to work in all the areas that do need to continue. As it closes restaurants, school lunches and works canteens it has to ensure all that food can be replaced through supermarket purchases. As it takes out train and tube travel and slashes services, it has to leave enough working for the key workers to get to the hospitals, broadband systems and electricity grid to keep things working.

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Flight out of Peru

Following extensive lobbying by many people the FCO has said it hopes Peru will now allow a flight to get UK citizens home who want to soon. They are trying to sort one out.

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Letter to Matt Hancock

Dear Matt

         When you briefed MPs this week you stressed that the government does not have all the answers and is open to good ideas from colleagues that could alleviate the problems emerging. MPs are well placed to pick up details of what is going wrong or what needs government help or clarification.  There are four main  areas where I would like to offer some suggestions.

  1. The need for volunteers to help where services are overwhelmed. We have the promise that many people in jobs where the business has effectively been closed will be able to keep their jobs pending re-opening thanks to  pay mainly from the state. We could ask some of them to spend part of their time helping in the community.  Immediately we need more people capable of doing shopping for the elderly or self  isolated. Maybe some could be lent to logistics and food companies  and food retailers under strain from extra demand. I doubt there would need to  be any compulsion, with many companies and individuals in enforced idleness being willing to help in positive and appropriate ways. There would need to be definition of what should be unpaid volunteer work and what work should be paid for by the temporary alternative employer.
  2. The need to match the scheme for the employed in affected areas with a top up income from the Tax and National Insurance system for the self employed.  The Tax Authorities know who they are, what they earned last year, and the number of their  bank account. The self employed should be able to notify the authorities of the extent of the downturn of their income from turnover loss and get a tax rebate or reimbursement to top their income up to 80% of past levels as long as they were still offering their service and relying on it for their livelihood. Any self declarations that turned out to be false would result in subsequent tough penalties and their publication.
  3. Food supply. It looks as if the main problem is aggressive hoarding, with stories of people buying abnormally large quantities and buying up new freezers to store it in. On top will be some genuine increase in supermarket demand as people who before had some of their meals out in a staff canteen or at events and working meals  instead eat all those meals at home. This latter does not expand the total demand for food but means diverting food from catering trade wholesalers to supermarket retailers immediately. The government should toughen its advice to supermarkets to impose appropriate controls on volume buying, and state that the police will stand behind the supermarkets in enforcing sensible measures to limit greedy behaviour. If necessary the Bill should grant enforcement powers for temporary supermarket ration rules.
  4. Greater conversion to on line and remote solutions to service provision. You  have done a great job persuading the NHS to do much more on line or  by phone at a time when exposing ill people to others who may have this virus would not be helpful. I would suggest that  state education makes  a more concerted effort to put educational materials and lessons on line so this generation of GCSE and A level pupils do not miss out on the remaining weeks of their courses and formal revision.  There would need to be help for those pupils who lack internet access at home through the loan of machines or opening school IT areas for their attendance with suitable segregation of pupils.

I will set out more detail behind these proposals in letters to the lead secretary of State in each case. I am writing to you in the first instance knowing how central you are to the total policy and responding to your invitation.

Yours ever

John

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Going out

People are mainly sociable. Most of us enjoy company, and like leisure pursuits based on sport or culture, dining out or drinking, adventure or romance.

The decision to ban these leaves a big hole in people’s lives. Governments have to allow people to go out to buy food, so the trips to the supermarket become more frequent as they represent one of the few reasons to allow people to go out as they wish.

The pressures on the supermarkets are mainly from the demand side. There are five principal reasons

  1. Some  have to buy more food more often because we are no longer eating in works canteens or attending working meals when working from home. Many people have to replace missed meals out with home cooking. This means food that used to go to wholesalers for the catering trade now needs to be diverted to supermarkets. This must now be happening and will help. Supermarket models of true demand need adjusting for the increased home meals effects. There is no overall increase in food demand.
  2. Some people have decided to greatly increase their stocks of food. Some have cleaned the stores out of new freezers to increase their storage capacity. Some have written unhelpful articles telling people what can be frozen, to swell the phenomenon. Most saw this as anti social and refrained, but a significant minority cleared whole shelves of items they liked .
  3. The government’s stronger guidance on 7 and 14 day isolation at home, and long term isolation for the elderly and ill, led more people to feel they had to lay in food for a longer stay at home, which increased the number of people building abnormal stock piles.
  4. The media fanned hoarding by highlighting empty shelves at periods of the day furthest from the restock deliveries, to encourage a feeding  frenzy.
  5. The statement that one of the few legitimate reasons to go out is to buy food meant people became likely to do it more often. Having got there they proceed to buy things they cannot eat anytime soon.

The government and supermarkets need to agree a tougher approach to limiting purchases, so we deter people from further large stock build. Once this can be achieved supply and demand should come into better balance, reducing the tensions and showing people we are not about to run out of food. Astute farmers will be watching all this and see an opportunity to plant and rear more food this spring and summer given the appetite for it.

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My Parliamentary office staff

I have been told that a few people have been aggressive with my staff who are trying to provide answers at a time of great demand. Please  understand they are trying to do their best for you. Keep your anger for a strong email to me or the government  if you must let off steam about the current difficult situation.

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  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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