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

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.

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.

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

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.

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.

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.

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.

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.

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.