Speaking for England

I am going to have another go at getting the government to speed up and widen the eligibility for its schemes of help for small businesses and the self employed. I am receiving numerous very worrying emails from people whose incomes have been stopped  who do not  qualify for assistance.

1. The government needs to include owner Directors of small companies who rely on the income and maybe dividends of their business to pay their living costs.
2. It needs to raise the earnings ceiling on the self employed scheme
3. It needs to include people who have set up businesses that is their sole means of financial support more recently
4. It needs to aim for an early payout, not sometime in June.
5. It needs to offer downloadable simple forms now that permit people to apply for money on  a self certified basis, with adjustments made later in the year. These should be made through the tax system with the payments made as a kind of negative tax against claims based on  no income

The government also needs to speed up the applications and decisions on the furlough scheme for business. Otherwise more companies will conclude they have to  make people  redundant to  save costs.

The commercial banks need to rethink their demands for detailed business plans and cashflow forecasts, and  for personal guarantees, for what is bridging finance for enterprises that have been forced in to temporary closure so producing no revenue. The interest rates charged should also be realistic compared to the commercial banks’ very low financing costs with official rates around zero.

I was recently interviewed on the Politics and Polemics podcast about my book ‘We Don’t Believe You: Why Populists and the Establishment See the World Differently’.

The podcast is available to listen to here.

If you can measure it you can manage it. Government policy towards the virus is to manage down the numbers of people with the illness seeking admission to hospital, for the doubly good reason that we do not want many people seriously ill and there are limits on hospital capacity to deal with them.

They are advised by epidemiologists, people who predict the likely numbers of individuals who catch a disease in a epidemic based on past experiences of other epidemics and daily data on the course of the one they are following.  In a situation where there is no known or agreed  successful treatment for a disease and no vaccination to block its spread, their advice is to stop many  people catching it by social segregation. In the meantime medical research may find treatments and a vaccine for future protection.  It also allows rapid expansion of the capacity of the medical facilities, and wholesale transfer of trained medical personnel and wards to treating the epidemic victims.

The issue I am seeking more guidance on from the government and their epidemiological advisers is what does winning look like? When will they have flattened the curve enough?

Public Health England on behalf of the wider government publishes daily two sets of figures. One is the daily addition to the case total, and the other is the grim daily addition to the total deaths ascribed to the virus. The problem with these data sets is they are incomplete and prone to error. In default of reliable tests for significant samples of the entire population, repeated regularly,  we do not know the current infection rate or the  case total. Many people have caught a mild version of it – or  something like it – and have self isolated. Their recovery will not  be reflected in  the total because they were never tested .

The Death rate is also based on a set of judgements. Worldwide practice varies, with some doctors attributing numerous deaths of people with the virus to pre-existing or other serious conditions, whilst others are more likely to regard any patient dying with the virus as dying because of the virus. The UK is currently thinking of adding more deaths to the total by ascribing death to the virus in cases not admitted to hospital. To get a more accurate figure most deaths would need to include a virus test, and protocols would  need to  be followed over how to judge the virus contribution to mortality.

So I am asking if we have a consistent set of figures based on clear definitions with resilient data collection, which is needed to decide how much to flatten the curve and to determine how successful policy is. We all are willing the government on  because we want to cut the death rate. The next few days are crucial as we should be seeing a drop in new cases reflecting the days people are spending in isolation.

I am uneasy that I cannot go to Parliament and raise there the issues and problems that concern my constituents. I appreciate this is the normal time for an Easter recess, but these are not normal times. My case load, email box and website are even more active than usual. There is heightened awareness of government given the large increase in powers and the direct effects it is having on all our lives. I of course take things up by email, phone and letter, as Ministers are working.

I am seeking  reassurances today that Parliament will b e allowed back after the recess as planned. I understand we will need to continue adapting the work pattern to offer more protection to those involved, assuming the social segregation measures are still in place. The Speaker set out some changes which helped before the recess and more might be possible, to limit the number in the chamber at any time, but to ensure that public questions and arguments can still be put. Maybe there can be a temporary use of remote technology, so Parliament can have its version of the daily Number 10 press conferences with MPs asking the questions and making the points to the Ministers on duty.

This should be a time to demonstrate the importance of single member constituency representation at Westminster. Each of us receive many practical pieces of advice and difficult cases that reveal cracks or imperfections in  the rules and government programmes. These need to be put to government Ministers by MPs who are used to speaking truth to power and who know the Ministers well and how they might respond.

I would like strengthened accountability during this recess. The Cabinet office does allow a daily call to put issues, but it would be good to have a recess written question facility to all departments and virtual Ministerial statements with questions from MPs when the government is making important announcements.

I am raising these issues with the Speaker.

Two highly qualified and experienced lawyers told the Conference (held before the virus restrictions but the comment held over here owing to virus news) that the UK needs to get rid of the Irish protocol one way or another. The current protocol seeks to treat Northern Ireland differently from the rest of the UK, and in default of a comprehensive borders and trade agreement seeks to lock Northern Ireland into the rules and customs of the EU.

The UK government is right to say it will not place a trade  border   between GB and Northern Ireland. This could be the result of the negotiations achieving a free trade and trade facilitation package that avoids any need for one. Alternatively if there is no trade deal, the UK government could simply refuse to impose one.

Sammy Wilson for the DUP pointed out that  most trade flowing between NI and GB stays within the UK so there is absolutely no  need for checks and tariffs as it moves across the Irish Sea between the two parts of the UK. He also pointed out we have a complex Northern Ireland/ Republic of Ireland border today, with the need to calculate VAT and Excise payments. This is all done with an invisible border, with the tax calculations and payments being made by computer from the truck manifests. There is no need for a person at a border post with a calculating machine taking fivers. It should similarly be possible to handle international trade crossing the North Sea within the UK by electronic means and by payments at international borders.  

The general mood of the conference was the government must keep its word of no new physical customs border between GB and NI, whether by agreement or not. It is difficult to see how the EU could enforce any interpretation they might place on the Withdrawal Agreement to require a GB/NI border in the event of no agreement. This would be an internal matter for a sovereign UK.

During the crisis so far the EU has battled to keep its belief in open borders as law around the EU. The member states have taken a different attitude.

The EU says “A crisis without borders cannot be resolved by putting  barriers between us”. It has despite this allowed or encouraged tougher border controls around the EU as a whole whilst wanting to avoid all controls at borders between member states.

Instead Germany has imposed border checks against Austria, France, Luxembourg and Denmark for the movement of people. France has imposed checks on Germany, Belgium and Spain.

In the UK there have been criticisms that the government did not impose stricter controls on people entering through our airports and ports. I currently get complaints  that there are still lots of planes flying into Heathrow. I have to explain that some are planes bringing UK nationals home from holidays and stays abroad, and many are freight planes. Some are passenger planes that have been adapted to carry more freight. Passenger services have traditionally also carried some freight in holds as part of our complex supply system.

The EU, realising that countries do wish to impose checks on people at their national borders, is now trying to protect the idea of a barrier free single market for goods.  They state “All internal borders should stay open for freight”. Regardless of  this some member states are diverting export goods for home consumption and inserting their own rules. France and Germany for example are keeping various medical supplies for home use.

This crisis is putting the world trading system under new pressures. In a world of lock down there is more attention to the local and national. Countries are seeking to increase their own productive potential in shortage areas like tests, protective clothing and other medical supplies.

I am writing to update you on the virus crisis, and the  damage to jobs, incomes and lifestyles   that the virus response is causing.

The government has taken advice from epidemiologists, based on worldwide work through the World Health Organisation. This work concludes that because there is no current cure nor vaccine to prevent the spread of Covid 19, and  because people with severe versions of the illness die, tough action has to be taken to slow or stop the spread of the disease. As it appears to be easily caught, this requires as much separation between people as possible.

The UK has adopted a range of measures similar to those in Italy, Spain, France and Germany who also have bad attacks. The measures are a  bit less severe than those adopted in China, which claims to have tamed the virus, but more severe than the Swedish approach. The USA seems to be moving to join us with more severe measures as it spreads rapidly there.

I have constantly pointed out to the government that closing down more than  a third of the economy for an unspecified period will put many people out of work, bankrupt many businesses and create hardship for people who lose their income. I suggested a number of measures to offset some of this damage. I am pleased to report that the government has announced a scheme to enable companies to furlough their staff, keep them on the payroll when  not working, with the government paying 80% of the cost for the period of shutdown up to an individual  pay ceiling. It has announced a similar scheme for many self employed people. It has also offered state guarantees for commercial banks to lend to keep companies with much reduced turnover going through the difficult period.

I welcome this big response, but do not think it goes far enough. I am trying to persuade the government to underwrite more jobs and incomes, and to make the payments earlier. Only if we keep company workforces in being can we be ready for recovery as soon as the restrictions are lifted.

I am also about to tackle the government on the all important timing of exit from these emergency measures. I understand cautious advisers wanting to stamp out the disease want maximum isolation for the maximum number of people for as long as possible. They are worried that if we lift the bans early with numbers ill falling there could be a second wave. The government, however, has to balance this risk against the undoubted substantial extra damage to jobs and incomes if we keep the closures in  being for too long.

As capacity builds in  the NHS to handle high numbers with pneumonia like symptoms, and as more people get the mild  version of the illness and gain some immunity, so it should  become easier to relax the tough economic sanctions against normal business activity. We clearly need to keep in place strict safeguarding measures for the ill and vulnerable whilst medical research works on treatments and vaccinations.

I am also conscious of continuing shortfalls in on line food delivery services, where I have proposed measures to harness volunteers and use delivery services from companies previously supplying non essential items. There is plenty of food but still problems with switching items like eggs from large catering packs to retail packs, leading to some empty shelves. Again I have proposed some measures to deal with this backlog.

I hope you and yours are keeping well and are managing in these difficult circumstances. I would like to say a big thank you to all of you who are going to work to maintain our essential services, ensure there is food for our tables, and to care for others. I am working from my home in Wokingham Borough, and doing as much as possible of my job on the phone and on line.

Yours sincerely

John Redwood

Today I joined the MP call to the Cabinet office to provide feedback on virus related problems. One of the issues I raised was the continued empty shelf problem for a few products. I took the case of eggs as an example.

There are still the same number of eggs being produced as before the clampdown came into effect. Apparently there are plenty of eggs, but a large number are available in catering packs which are far too big to sell in supermarkets. According to the BBC  Radio 4 Farming  programme big caterers are more than  happy to transfer their egg contracts temporarily to the supermarkets, but the eggs need to be packed in retail packs. There are few manufacturers of the egg  boxes, with a main producer in Denmark said to be closed for virus reasons.

I suggested the Cabinet Office/DEFRA  help the private sector come up with a solution to a shortage of retail egg packs. UK packaging firms may be able to respond to the need quickly. Retailers might be able to buy in the catering packs and let people buy loose eggs, as we buy loose vegetables, for those who keep their last egg box and take it back to refill. That would take some pressure off.

There are a few other lines in common short supply where there can be fixes.

I am also sending these thoughts to DEFRA, as filling all the shelves again would reassure the public and remind people who are thinking of hoarding they have no need to hoard.

Yesterday I sent the letter beneath to the Chancellor:

Dear Rishi

Thank you for developing and announcing a scheme to ensure many people currently self employed will receive an income top up from the state during a period when many of them are not allowed to work or are experiencing a big decline in  activity over the virus restrictions. I am pleased you settled on ensuring 80% of past income up to a ceiling. 

There are, however, some people in need that your scheme does not help at all. Will you please ensure that someone who has set up a self employed business more recently and who depends on that income is also covered? They should be paid on the basis of what they were earning on average per month in the period after start up, if the start up was before the beginning of 2020 and the start of the virus.

 There are self-employed people who run their own small companies and paid themselves in dividends. Where they do not have other material accessible  assets and are clearly living on the income from their self employment, they too should be able to claim assistance.

 I understand your concern to avoid fraud. In these cases I suggest self certification in the claim, to be followed later after the immediate crisis by HMRC random sample testing of the sound basis of  claims and of course follow up by HMRC in specific cases where fraud is suspected. HMRC should be able to impose tough penalties and to publish fraudulent conduct as a further penalty for the few cases where crooks abuse the system.

Yesterday’s scheme is also delaying payments until June. Many self-employed people on modest earnings do not have large cash buffers waiting to pay all their family bills for three months. One of the main reasons given for the delay was the need to allow more self-employed people to submit tax returns. It seems unfair on the large majority who have done so to hold everyone up for this, so why not get on with dealing  with all of those who have filed and give them earlier payments.

 I do not agree with you about the possible need to tax the self employed more when this is over. Self-employed do not get the same benefits as employed. Giving them a scheme now for these quite unprecedented and we hope not to be repeated circumstances does not equalise their treatment generally. At a time when we wish to care for people being put through extreme financial distress by government actions taken on health grounds, they as taxpayers have as much right to help as anyone else.

Your general statement of aims and your understanding of the importance of the self employed was great. Please persuade your officials to make the scheme friendlier to the sector as a whole which serves us well and will be needed again soon.

Yours

John

Many self employed are worried that their business has dried up, removing their income. Many small companies are concerned that they have been closed down temporarily for an unspecified time period but still have to pay rent, other overheads and employees pay. They welcomed the government pledge to pay 80% of the wage bill up to a ceiling, but still have to wait for the scheme to deliver them some cash.

So what do they do? They will turn to the banks. On Wednesday the Chancellor and Governor of the Bank of England wrote to all the banks, reminding them of the  various schemes set out to allow more lending to business. They told them to “take all action necessary to ensure the benefits of these measures outlined above are passed through to business and consumers”.

That’s fine advice,  but the banks have to operate within the rules of the schemes and within the confines of the Regulatory system that governs them. As the lending to  business schemes offer a government guarantee of 80% of the loan, the banks still need to take care with the 20% they could lose. As the scheme says the banks need to reclaim personal guarantees and cash in collateral assets before claiming losses under the scheme, banks will obviously feel the need to apply some  criteria about collateral and future cashflow projections when making the loans.

There will be difficult judgements for banks to make. How much of a business case can they expect from a company that has lost all its turnover and does not know when it will trade again? How much of a personal guarantee or pledged asset can they require, when this lending is for an extraordinary purpose, a temporary collapse of revenue, which is not about to be reinstated but will be permanently lost?

Banks still have to keep capital buffers and ensure the future solvency of their businesses, so have to keep an eye on the possible loss rate on this type of lending. Meanwhile the companies suffering from the shock of no money coming in are not that keen on a loan as they wish to avoid becoming heavily indebted for past losses that cannot be easily replaced.

The self employed need the money they would be earning to pay their domestic bills as well as meet their business commitments. The scheme outlined yesterday helps a bit, but leaves higher earners very short of cash though they may well have commitments commensurate with their normal earnings level. All this points to one inescapable conclusion. If this cessation of activity continues for too long there will  be a lot of lost businesses and considerable longer term economic damage. In the short term the government has not done enough to avoid redundancies and the loss of some small businesses.