Dear Constituent

This is not the letter I wanted to be writing to you this Spring. I had been working hard on an agenda with the government to boost our economy, speed up our growth, create more better paid jobs and improve public facilities in Wokingham. We were making progress when the virus struck.

Now I have to report to you that the economy will shrink substantially as a result of the measures being put in place to combat the epidemic. I am only too well aware that many of you are now experiencing severe difficulties in your businesses, with activity drying up or with the business effectively closed by cancellation of events, eating out, tourism and the rest.

I have switched my main activity to pressing for a comprehensive economic package to keep more people in jobs and to mitigate the worst of the impact of the enforced closures and big decline in demand in many areas. I am pleased that the Bank of England under a new Governor is working closely with the government and has come up with major injections of cash and support to the banking system so commercial banks have the means to help their customers through a difficult time. I have asked for a wide range of financial measures to support business and  the self employed , with the stress on grants rather than loans where businesses have lost much of their revenue through no fault of their own. I welcome the emphasis on trying to avoid redundancies, as businesses need to keep talented teams together ready for the upturn when restrictions are lifted on normal life. Yesterday’s measures help but do not do enough for the self employed in particular.

I am very conscious that the government has no election mandate for the economic measures it has taken with the purpose of cutting the spread of the virus.  Indeed, they are the opposite of what we wished to do and talked about doing. So far I find a minority of you think the government should be taking more and tougher measures, whilst another minority think the fear of the virus is overdone and we should treat it more like winter flu and let it run its course. The majority seem to be in support of the government’s tightening of controls as the virus started to spread, to seek to limit the strains on the NHS. I am urging the government to proceed only with measures which command cross party support. The government’s chosen way of battling the virus is to limit human contact to limit spread. This requires buy in from most people to succeed, so it cannot be done with just one main political party support where a significant constituency in the country fundamentally disagrees. The government is following an international consensus on how to respond, and drawing on evidence and guidance from the World Health Organisation.

The government is taking emergency powers, which include the right to quarantine individuals who are carrying the disease, and the power to prevent public gatherings. There are also powers to direct and flex the health and schools sectors to meet the extraordinary requirements on  healthcare. These powers expire after 2 years. Some in  Labour have been suggesting they should be reviewed and only  if necessary continued for a second year after one year. I am urging the government to accept that sensible advice.

I am posting on this website relevant communications from the government that might help people with difficult problems created by the new circumstances. In general terms the position is as follows

  1. People caught abroad. The FCO has promised to work with the national governments involved to organise ways back home for all UK citizens wishing to return soon. They should contact the UK Embassy or Consulate near to them who will know if and when this can be organised in their case.
  2. Self employed and businesses starved of customers and cash. Various grants, tax holidays and tax deferrals are listed on government websites and here. We await the details of yesterday afternoon’s package which I will also post, which was designed to put more help into business to ward off redundancies.
  3. People’s right to a school place within the reduced educational provision. The list of occupations which qualify parents for places at school for their children has been published, based on the need of the parents to work away from home to maintain essential services. The list of key workers is available to view here.
  4. Food supply. There is plenty of food available to feed us all. There have been temporary shortages on  the shelves of supermarkets pending extra deliveries. This has mainly been brought about by some people deciding to fill freezers and store cupboards with an unusually large reserve which leaves the shops temporarily empty for customers who need an evening meal. At some point presumably the freezers will be full and demand will return to more  normal levels. It would be neighbourly for people not to do this, and great if people who have stocked up  now kept away from the shops and used some of their stocks. Informal rationing is  being operated by the supermarkets, who are doing a wonderful job in difficult circumstances. If there are too many empty shelves too often they will need to tighten the ration rules.

I wish you all success in avoiding or overcoming  the virus yourselves and in your families. I and my staff will help where you need assistance with government rules or think government can do something to improve the situation. None of us have all the answers to this new disease which so far evades treatment and vaccination. Government policy is changing at pace and it sometimes takes a little time for the detail and implementation to catch up.

 The best advice I can give is commonsense. Try to avoid contact with anyone outside your immediate family at home as anyone may be carrying the virus or you may yourself be doing so. Behave towards others as if you did have the virus by keeping a respectful distance. Look  after the vulnerable in your family. Buy what you need,  but be  mindful of the needs of others.  This is a time when communities can come together to help each other. It is a time where if you have the capacity it would be great  to help those in need, and for local and voluntary efforts to emerge to take some of the strain . Lonely people in isolation would appreciate safe communications  by social media or phone.

Yours sincerely

John Redwood

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The twin crises

The government have many difficult decisions to make. They are mainly seeking to manage the virus. The science tells them it does not have medicines  to prevent the virus nor to treat it. Understandably with a new virus there are many limits on what scientists can tell us about it.  The science Ministers draw on is epidemiology. It comprises a series of guesses or forecasts of how the infection may spread around the population, and  how many people may die as a result of it. They  usually die  by  compounding other health problems.

These graphs rest on the figures from China, Italy and elsewhere where it is a bit more advanced than here. None of the figures can be that reliable. No country has been able to test enough people to know how many at one time in a country actually have the virus. There is an element of chance as to whether a death is ascribed to the virus because the person was tested, or ascribed to the other health conditions because they were not. There is  still a lack of clarity over whether you can catch it twice.

The epidemiologists agree that if a country cuts the rate of increase and the total number of cases by enforcing segregation of people, the virus may spread again once the restrictive measures are removed. They also think people will become better able to fend it off after they have had it once, so as more people have experienced it so there are fewer hosts in the population for a new virus attack.

At the same time the government  has to manage the economic crisis which the heavily restrictive measures to deal with the virus creates. As an economic commentator I can give the government a much clearer view of the economic damage the measures will inflict, and can explain how their economic response needs to be much bigger  given the extent of the damage.

The short term hit to the economy is going to be a much bigger decline in output and incomes than is normal in the first quarter of a nasty recession like 2008-9. More than a fifth of the economy will face little or no custom as hotels, bars, restaurants, pubs, clubs, leisure and pleasure events close down. There will not be many discretionary purchases either, as people put on hold any plans for new cars, new homes, or larger household items. High Streets will be largely deserted or locked down.

If the state does not come up with ways to sustain employment many people will lose their jobs. Many businesses will go onto care and maintenance or will go into wind up, bereft of revenue and purpose.

The epidemiologists cannot give us a date by which the controls can be removed and the all clear sounded. The thought that this may drag on for many months, with some seeming to say we can only relax the controls when people have been successfully vaccinated with a vaccine still to be developed and approved, will ensure many more people lose their jobs and their businesses.

Government needs to weigh very carefully the balance between the health crisis and the economic crisis. Measures that damage the economy are only worth taking where there is considerable certainty they will save a material number of lives. The case for a major cash injection to offset the damage to companies and people is overwhelming if the close down has to endure more than a couple of weeks.

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The markets are badly rattled

The last couple of weeks have been the most extreme in post war advanced country Stock market history. Never before has there been such a plunge into recession so quickly, and never before has there been such a large and uninterrupted fall.

What are they telling us? Why have so many investors decided to sell out at ever lower prices?

The rational part of the story is the sudden coming of the virus and the combined decision of governments on World Health Organisation advice to close down big parts of their economies to slow the spread of the disease.

Normally in a bad recession the parts of the economy serving the discretionary purchases people make when they are feeling reasonably confident and well off like holidays, higher end retail, restaurant meals get hit more. The businesses involved may see a 20-25% fall in turnover, often taking them into loss and maybe threatening the dividend. In this recession, created to fight the virus, many of these businesses will lose most of their revenue for a time or may be forced to close.

Some running a hotel or B and B or pub or restaurant or travel business will be asking themselves today whether they should sack their staff now to cut their outgoings, and negotiate soon with landlords and suppliers to get their other bills down. As more do this so there will be a further contraction in demand as their staff lose their jobs and experience a sharp fall in income and consumer confidence. It is vital governments do more to avoid staff losses and to help companies through what should be a temporary problem. I have put my proposal again to government to offer substantial cash support for paybills for companies with a large virus created drop in turnover in return for those companies keeping the staff on for the recovery.

The happiest outcome we can now look forward to is an early decline in new cases of the disease in the major countries followed by an early removal of controls. Then the economies can bounce back. If this is prolonged more businesses will go bankrupt, more jobs will be lost and the misery compounds.

In the markets there has been a big shortage of dollars. 5 leading Central Banks were aware of this and made more dollars available, but it has not proved enough so far. There has been a rush into cash, especially dollar cash. Even so called safe haven assets like gold have sold off recently.

Nothing on this site is investment advice. This is commentary on what has happened.

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How should the government support the economy?

The Chancellor’s second package of support marshalled up to £330bn of guaranteed loans for a business sector facing shutdown of many enterprises.

It offered a welcome holiday for all businesses in the worst affected sectors from business rates for a year. It offered small grants to smaller businesses.

This is unlikely to be enough to prevent a wave of job losses from pubs and clubs, hotels and restaurants, from tourist attractions and events. As some of us pointed out in questions to the Chancellor yesterday evening, he needs to come up with a working burden sharing scheme soon that lets businesses with no revenue keep on their workforce waiting for the all clear on the virus.

Businesses cannot be expected to borrow indefinitely to pay the wages when there are no customers. They don’t need loans, they need revenues. Some restaurants will try take away meals. Some hotels will offer their services to the state as temporary hospitals. Many will contemplate closure to cut costs and reduce losses. The government should do what it takes to avoid this.

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Ploys to make a politician look bad

I try to accept interviews on topics I know something about and have well based or distinctive views on. Usually the media want to offer an interview on a topic where I am not an expert where they think I will have difficulty supporting the position of my party or government so they can create a split which does not yet exist. When I do get an offer that is worth accepting I spend my preparation time not on the topic itself, because I know the subject and know what I wish to say. I spend the time thinking about all the other things the interviewer might wish to deviate to in the hope of ensnaring me.

There are a series of regular ploys.

  1. The creation of a caricature. The BBC often claims to know the  views  of the interviewee better than the interviewee knows them himself. When the person  explains their   view to them they counter argue by asserting they  must believe something else because they have invented a caricature of the person as a “right winger” or “left winger”, or “Eurosceptic” or whatever. It makes the interviews foolish, with the BBC setting out their version of the person’s  view and the interviewee  denying it. They then seek to suggest that their version of the view is the real view and so the   interviewee is in someway dishonest to say otherwise.
  2. Undermining by false association. The BBC quickly diverts the interview of a politician who is doing well into an interview about the worst or stupidest thing some other member of that person’s party has said or done recently. The interviewee is forced to deny what the person has said or done to avoid contamination. An original interview about an important subject then becomes instead repeated pressure to get the interviewee to set themselves up as the moral arbiter and disciplinarian for their party with questions about whether the person who misspoke should be  sacked, prosecuted etc.
  3. Subverting from past quotations. Someone setting out a cogent and appropriate case for current conditions is confronted with something they said or wrote many years before in different circumstances. It may be that the two views are fully compatible because circumstances are different, but precious interview time is lost trying to establish that. It may be that the interviewee has changed their mind owing to new facts and insights. This should not be a crime unless it is one of those cases where a party does do a major U turn in a dishonest or flagrantly political self serving way.
  4. Setting the interviewee up against others in his or her party. Someone making a good recommendation or providing informative background to policy may suddenly be faced with a contradictory quote from another senior person in their party, as if this invalidates their position.
  5. Quoting so called experts and insisting that because they are experts their opinion is correct and the politicians must be wrong. The politician is never allowed to debate with the experts and will not have advance warning to be able to explain why these particular experts may have flawed judgement or be coming  at the problem from a biased vantage point.
  6.  Mistaking fashionable viewpoints in media circles like Remain and a particular version of Green for facts and attempting to shout down or crowd out a politician who has a considered but different opinion.
  7. Trying to ascribe base motives to any politician expressing a different view from those deemed acceptable to the BBC. The interviewer alleges motives of personal career advancement or party interest when someone is putting forward their best judgement of what is in the public interest or the interests of their constituents.
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Half a statement

Yesterday the Health Secretary explained the government’s approach to the virus, going a long way to cut contacts between people to slow or prevent contagion. The measures mean the effective closure of a huge part of our economy in sport, leisure, culture, hospitality and transport.

There was no complementary statement from the Chancellor explaining how they will help the many businesses that will struggle as a result. Cash flow dries up with no customers. Many employees will be made redundant, and many businesses will fold.

We need the government to help, to prevent large scale loss of good businesses which will result from this policy. Individuals losing their job or their self employed work will need Income support. I asked about the scheme in yesterday’s blog in the Commons and got various MPs to voice the need for some such relief.

The media are saying we should expect a Statement from the Chancellor today. I hope it includes cash assistance to keep people in work, a business rate tax holiday for larger as well as the smaller businesses in the badly affected sectors, and income help for the self employed facing a big contraction in work and those losing their jobs.

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Cushioning the economic impact of the virus measures

It s time to take stronger economic action to offset the impact government measures against the virus around the world, along with  consumer behaviour is now having on jobs and  business.

It is clear that as the virus spreads so people cancel travel plans, hotels, restaurants and pubs lose clients, cultural and sporting events are stopped, business and academic conferences  abandoned and  discretionary shopping and tourism fall substantially.

Let us take a bad case of what could happen. Let us suppose that the  20% of our economy most exposed to these activities that lose out from closures and loss of customers  are in  trouble for four months. Let us guess that they lose a large 50% of their revenue on average. They are likely to lose more turnover than businesses do in a typical recession, as in some cases what they do is simply banned and in other cases consumers walk away from them in big numbers.  

This would mean a fall of 3.3% in annual GDP just from the impact on the most vulnerable 20% of the economy. There would then be second round effects. These businesses would shed labour quickly as they try to stem their cash losses. Some will go bust with every employee losing their job. This then means lower incomes for people to spend on other things, and a further loss of consumer and investment confidence.

What could be done to reduce this bad outcome? The government could step in with temporary help for employees working for basically sound businesses that have experienced a big loss of turnover thanks only to the special circumstances of the virus.  It could be like the German temporary reduced working scheme which has got through state aid tests.

The terms might be that the government will pay a specified quite high percentage of the wage bill for a company that was profitable up to the end of January, but has faced a fall of more than say  50% of turnover since thanks either to the virus putting off customers or from bans and closures required by law. This would be a grant, available for a limited period related to the progress of the virus. It would be conditional on the business not taking on any extra employees during  that period, and not making anyone redundant. The business would otherwise  be loss making.

It is most important that say a good hotel in a town or city can keep its core staff together during a period of much reduced bookings to be available again for the recovery once we have an all clear from the virus. Putting more businesses through bankruptcy is not a good idea if they are sound businesses for the future damaged by this one off extraordinary event. Bankruptcy puts the costs of the employees onto the state anyway when they lose their jobs, and makes recovery for them and for business more difficult afterwards.

The new facilities to lend to business, and the capacity of the Treasury to delay tax payments are both very helpful to many businesses hit by the virus slowdown. They will not be sufficient for the businesses at the sharp edge of the problems, as their revenues fall too much to survive just on  more loans and deferred tax.

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Experts, politicians and the media

Beware the tyranny of experts.

Whilst like the next person if I fell ill I would turn to a good doctor to help me, that does not mean experts are always right or should make all the decisions.

It has been fashionable for some years to say experts should be in charge of more of our public policy decisions and politicians fewer. This resulted in some famous policy disasters chronicled here . It has also led to greatly contrasting styles of interview on the UK media, especially by the BBC and Channel 4.

If an “expert” is interviewed  they are introduced positively, they are rarely interrupted, they are asked questions designed to let them explain their knowledge and viewpoint. The interviewer is often on their side and usually concludes with a short summary of their main points to reinforce them.

In contrast a politician interviewed on the same subject is often introduced with some critical or derogatory reference or characterisation, interrupted often, asked questions which make allegations or allege views to the interviewee which he or she does not hold, seeks to set the interviewer against the politician with a superior moral position and ends with a put down or critical comment.

I have a bigger complaint about the way the so called expert is interviewed than the politician. I of course think interviewers should be challenging and put alternative views where necessary. When interviewing an expert we should be told

Who they represent

Who pays them

Their political affiliations where they have them

What their main qualification is

The interview should consider covering professional competence where relevant. For example, if interviewing an economist about the current crash, did they forecast it or the last one and what did they say about previous disasters? If they earn money from a related interest the interview should also refer to or ask about that. If the expert is a known supporter of  a particular political party or movement that too might need to be questioned.

No politician should be given an easy interview, but they should be allowed to state their case before it is probed and questioned. I sometimes am frustrated by interviews of Labour people because the interviewer talks over them to the point where we cannot hear what Labour does actually think or recommend about a crucial topical issue. I will look in a future post at the ploys interviewers use to ensure politicians come over badly.

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EU advice on borders and the virus

The EU Commission has reminded all EU states  on its website that “it is the responsibility of the Member States to refuse entry on public health grounds to individual 3rd country nationals” where they are judged to be a risk to public health.  This applies at all borders between an EU member and third country.

It wants the  external border of the EU to be reinforced, with migrants kept separate on arrival until their health has been checked.

It has also made clear it does not recommend that action at internal borders within  the EU between member states.  It states

“It should also be noted that according to the WHO and others, reintroduction of border controls at internal borders in  order to refuse entry is not considered an appropriate preventive (or remedial) measure”

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Closing schools?

The Republic of Ireland and Scotland have closed their schools. The rest of the UK has not. I invite views on this.

I do not have a strong  view myself as I am not an expert on the virus and do  not have access to much of the  medical and statistical information about it.

The latest medical view I heard from the government is that the virus either does not attach to so many children, or if it does many remain without visible symptoms.  If many children do or will experience a mild or invisible form of the illness it may be impossible to know whether tested or not whether they have had the virus. The test apparently works better on people with symptoms. Medical opinion seems agreed children are the least likely to get a bad version of it and extremely unlikely to die from it.

The one plus from shutting schools is it prevents circulation of the virus between pupils and teachers in school. If the pupils off school continue to socialise with each other and with other adults a lot of this  benefit is lost. Only if they go home and stay at home would there be a major and lasting  reduction in their number of contacts and therefore in their vulnerability to picking up the virus.  If they already have the virus spending all their time at home might increase the chances of other family members contracting it.

There are several  negatives in closing schools. Many more adults will have to give up work and mind their children at home. These will include many nurses, doctors and other health workers needed to work in  the hospitals and surgeries to tackle the health emergency. Those who make a living out of supplying and providing contract work for schools will lose their income. Education, exams and training will be interrupted, disrupting the life chances of those facing early public examinations that matter.  

I am happy with the government’s decision so far not to close the schools. It is difficult to believe closing the schools would slow the spread much  or protect many more people. Limiting access to care homes and places where vulnerable elderly live might achieve more in limiting infections of those most at risk.

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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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