The UK has a successful aviation industry. Heathrow is one of the great hub airports of the world. Several other leading  airports are substantial generators of jobs and an important part of the connectivity of a trading nation. The UK manufactures smaller planes and wings for large passenger jets.  It has a number of important airlines offering good choice of carrier, route and fares. The large and successful UK service, tourist and leisure  sectors need easy access to the UK for clients and partners.

Today the airline and civil aviation industry is one of the worst hit  by the pandemic and the measures to contain it. There are many bans on flying in various countries around the world, and many people no longer wish to fly to countries that may not welcome visitors for the time being. There are also issues over how social distancing rules can be applied to the tight spaces inside the fuselage of a passenger jet.

So what does the future hold for this group of businesses? Will there be a permanent diminution in people flying around the world, with more virtual conferences and meetings? Will there be more national and less international leisure and tourism? Should the industry be planning for less volume, or will there be the usual bounce back as the virus fades?

During the period of gradual relaxation, what steps could the airline industry take to allow flights with greater social distancing? How practical is it to cut  numbers on a flight, and what will that do to the economics of flying? Can the airlines increase the proportion of a plane given over to  cargo ? What damage is the collapse of passenger numbers doing to the economics of air freight?

It looks likely a larger number of older planes will now be retired. Cash strapped airlines are likely to avoid new commitments to buy new planes and to look for legal ways to cancel planes they had discussed buying. Airports will also struggle financially, as their revenues are badly depressed by the reduction in flight numbers and the small numbers of people using terminals and taking advantage of the shops.  How should the different parts of the industry be financed from here?

Some High Streets were suffering badly  before the anti virus policies closed down most of the shops.  More people were buying more things on line. More were travelling to the best shopping centres to enjoy the choice and facilities they afford. Secondary and tertiary locations and ageing centres were losing custom and losing businesses. There were more empty properties and more rent reductions.

Investment in improving High Streets, relentless promotion of a location with events, discount and loyalty schemes and good restaurant and  café back up were all important ways to retain life and footfall. Some succeeded, others were floundering. There was too much retail space for the customer base overall. As a result retail chains were shedding shops in marginal locations, and at the edges of Town Centres and shopping malls some property was gradually being converted to new uses. The process of conversion was slow because the shops were still expensive and commanding relatively high rents compared to alternative use values.

The damage done to shop retailers by the closures is two fold. There is the lost revenue, making investment in shop improvement and in stock more difficult to afford. There is the diversion of business from shops to on line,  some of which may be difficult to reclaim.  The issue becomes, what are shops now worth?

A simplified way of valuing a shop is to take the rent paid and multiply that by a  number of years purchase to get a capital value of the property. Let’s take a case of two shops with rental income of £25,000 a year. One is in Smart City, the other larger unit is in Troubled Town. The Smart City unit might have been valued in February on a 5% rental income, or 20 years purchase. It would have had a capital value of £500,000. The Troubled Town Unit might have only commanded a 10% income yield or ten years purchase, giving a capital value of £250,000.

Let us suppose that both were independent shops, and  both have now notified their landlords they cannot afford to pay any rent for the time being. At the very least they want a rent holiday for the period of closure, followed by a rent reduction to reflect lower earning potential in a recovery period to follow the end of lock down.

So what are these shops now worth? What discount should you apply to the past rent to allow for the likelihood that a deal has to be done for lower rent? Might it be that the unit in Smart City still has a retail future at a lower rent, but the unit in Troubled Town does not? Do the values of either  now fall to a level where conversion to another use is viable?

And what outcome would you like to see for these two independent traders and two shop units?

In the week ahead Parliament will debate the lock down, and government will determine a back to work policy. To do so, they need to examine some of the  numbers they are using carefully.

1. Comparative deaths globally. It is quite wrong to say the UK after the US will have the most deaths. The government must adjust the death figures for population, which so far shows Belgium heading the lists, and the USA still relatively low
2. The government needs to do more work on trying to get comparable death rates. Some other  countries only list hospital deaths. There are different views on whether dying with Covid 19 is the same as dying of Covid 19. The UK figures for deaths have probably been boosted in recent days and weeks by counting more deaths where the patient died without a Covid 19 test as a Covid death, and by adding in non hospital deaths to the total. It is a  bad idea to change the way you calculate numbers over time for  a series when you are using the curve of that series over time  to determine policy.
3. Now there are so many more tests available the government needs to start testing a sample of the total population to get figures for how  common  this disease is, and to chart that over time.
4. The accuracy of the tests. I have been given widely different figures for how many false negatives the tests might provide. There are apparently issues about how to secure a good sample so any disease does show up.
5. How good are the returns reported centrally from Care Homes, as most of these are privately owned institutions that are not formally part of NHS management and reporting systems.
6. Future capacity of the NHS. The government is right to want reassurance that the NHS can cope in future as it has done so far. There needs to be a rebased figure for Covid care beds and Covid Intensive care beds in the system in a world where there is also  capacity for other serious medical conditions. Will the NHS move to identifying specialist Covid hospitals and units, to free more District General Hospitals to do everything else?
7. The value of R or the reinfection rate. We were told this week it is currently 0.6 to 0.9. That is a very wide range. How can it be more precisely and accurately be discovered, where there are not sampled tests of the whole population over time? Doesn’t it need regular sampled testing to  get it more accurate? As  great stress is placed on R, it is crucial to get it right.
8. Will the government publish the range of forecasts of deaths from the disease their experts have come up with, and show us the trend in these forecasts?  That too is important in making a judgement.

There is a much greater sense of urgency in the USA to offset some of the damage done to the economy by anti CV 19 policies. The Central Bank, the Fed, has ridden to the rescue. It has printed money and bought bonds on a huge scale. It has supplied the world with dollars, driven down rates and stabilised the market for financing companies.

Its balance sheet has soared from $4.3 trillion on March 11th to $6.6bn by mid April, a massive expansion of more than 50%. In contrast the Bank of England has gone from £580 billion in early March to just £647 bn in mid April, an increase of 11%.

The US sent everyone below $75,000 a year   a cheque for $1200 as well as setting up business grant schemes and a furlough scheme. The UK has also set up grant and employment retention schemes.

The US money supply leapt by an annualised 20.9% in the first quarter. The UK’s increased modestly to a 5% rate of growth.  Which of these institutions is right?

In the short term I fear the US is correct. The huge downturns the fashionable anti Covid 19 policies generate are designed to do maximum economic damage to all but  health, food and essentials and the public sectors.  All  out of home entertainment ,tourism, most travel and hospitality and most non food retail are simply shut down. Consumer demand plunges. Many people lose their jobs and can only afford the basics. Those who keep their pay are very restricted in  what they can buy so they  end up saving.

Printing money does not bring the closed businesses back to life, and it cannot in the short term generate more demand where business is banned.It does however make borrowing more affordable for the government and for companies fighting to stay alive. It is better than doing nothing and watching more job losses and bankruptcies.

There are many arguments over the details  and duration of the current health policy. There are no arguments over its economic impact. Everyone agrees it is a disastrous economic policy. The US is right to fling money at people and companies to try to offset some of the damage. You cannot go on doing that for very long. The huge budget deficits, the big expansions of money can only  be short term palliatives. The only sensible economic policy is to get many more people  back to work as soon as possible. The Fed will need to rein in the extra money as the economy starts to recover to prevent inflation.

I spoke in Parliament this week on a link from home, as MPs are encouraged to do. I am grateful to the Speaker and House authorities for their hard work in making sure Parliament can meet whilst  obeying the social distancing rules. They responded to those of us who requested we meet.

 We can only have a Parliament by limiting numbers strictly in the Chamber itself, where I would rather be. A Parliament working remotely is better than a Parliament not meeting at all, but there are losses from this temporary system. An MP cannot intervene on another to debate an issue or challenge an assertion. You cannot spontaneously ask a question or decide to make a contribution to a debate. You have to book a slot well in advance, with plenty of competition for such slots. Parliament is meeting for less time so opportunities are more limited.

Readers may be relieved to know there are still plenty of other meetings and communication underway between MPs, though we no longer  benefit from those many informal conversations and rapidly convened meetings that characterise a usual Parliamentary day. Ministers are making themselves available by tele conference. Groups of MPs and committees meet through Zoom or Teams. There is intensified email traffic and phone calls. Many of us are trying to find substitutes for the many face to face meetings and conversations which help shape government policy and government responses to problems.

Meanwhile I sit at home watching Parliament live tv, frustrated that whether at home or there it is not possible to intervene based on  the flow of the debate.

The Minister of State for Trade has  told us that the UK has now taken her place as a full WTO member and is making an important contribution to the world trade discussions. Secretary of State Truss made the first UK Ministerial speech there since 1972 earlier this year.

The Department for International Trade is  now  planning trade talks with the USA, Australia, New Zealand and Japan. These will be in parallel with the PM’s negotiations through Mr Frost with the EU. The US Trade Representative has made a recent visit to London, and the US is keen to make rapid progress. Since 2008 our trade with the rest of the world has been bigger than our trade with the EU and growing faster, despite the absence of Free Trade Agreements with most of it.

Trade talks with the US were scheduled to take place face to face in April, but these are having to be transferred to audio visual conferences owing to anti virus controls. I want the UK to respond positively to the US wish to press on with them quickly.

In discussions with the EU State aid issues can  be best handled by the UK having a strong competition policy of its own whilst accepting that the EU regime is sufficient on the continent, so each party can trust the other’s system.

The UK should aim for lower tariffs than the EU common external tariff. We should  encourage cheaper food where we cannot grow the products for ourselves.  We should set our own high standards for food quality, animal welfare  and hygiene, and aim for mutual recognition of each other’s standards with counter parties in Free Trade Agreements. There is no  need to charge any tariff on imported components needed for Uk manufacture.

The US/UK Agreement could become a template for other deals worldwide by both the USA and the UK.

There is some good news to pass on. It looks as if the virus spread has peaked in our area. Hospital admissions are down, and the Royal Berks Hospital  has plenty of capacity in both normal beds and Intensive Care beds should there be any relapse in progress. The first aim of policy to ensure the NHS can cope is so far working.

This also means the NHS has capacity for the other killers and serious conditions that people contract. Patients should not be deterred by the priority to the virus. There are additional hospital facilities in the private sector that the local NHS is using for cancer and other conditions. The NHS wishes to provide a good service to anyone who is seriously ill.

I have continued to pass on contacts who can supply protective clothing to our public services, where there are shortages. West Berkshire and the Royal Berks Hospital report no problems, and Wokingham Social services is managing with help from national and regional stocks. The government is well aware of the need for more and is working with  the national and overseas suppliers on schedules and deliveries.

More testing is becoming available. There are local test centres at Whiteknights in Reading and at the Community Hospital in Thatcham for NHS and care staff. The aim nationally is to extend the range of people eligible for tests as the supply increases.

I am urging a managed return to work for more people. Working practices will need to be adapted, but business shows every willingness to do so. There will be social distancing, more home working,  more use of remote technology, more screens, more protective clothing and more automation. I am  very conscious of the economic damage being done, and keen to promote more safer working as the obvious way to improve things.

I spoke in the debate on the economy yesterday using the video link from home as MPs were encouraged to do. It demonstrates there are ways to adapt and to do our jobs in these difficult times.

 

Let me go back to the Brexit discussions we were having  before Covid 19 monopolised the agenda. Sir William Cash spoke to the Brexit  conference about the clauses he helped the government produce to reassert UK sovereignty in the Withdrawal Agreement.  They were essential, given some of the rest of the text.

The legislation makes clear that  nothing in  the Withdrawal Agreement  “shall derogate from the sovereignty of the UK”. The Act allows Parliament to debate and vote against any measure the EU proposes during the so called Implementation period up to the end of December, when we finally leave all aspects of EU control.  This is important to prevent the EU attempting to tie us into unacceptable and damaging measures before we are free.

The Act includes a method for the UK to reject unwanted legislation during the Implementation period should the EU try to damage us. The European Scrutiny Committee of the Commons can refer an EU proposal for a debate and vote to determine whether ti should become part of UK law or not.

I was pleased to see recently the Treasury is at last going to propose getting rid of the tampon tax, but only effective from next year. I want them to add getting rid of VAT on green products and domestic fuel at the same time. We need to show we have taken back control of our taxes by altering VAT, an EU tax and removing it from things we do  not wish to tax.

It is also important that we become an independent coastal state with full control over our own fishing grounds this summer . We should ensure much more of the fish is landed in the UK, and where we need time to build up our fishing industry capacity we should allow a period of recuperation of fish stocks after the  bruising impact of continental industrial trawlers.

The Current UK negotiating position is strong and needs to be kept up. We do not want any delay beyond December and wish any Agreement to be based around a Free Trade Agreement. We do not wish to perpetuate EU controls over our economy.

 

I am glad to read today that the government is dropping the Chinese death figures from CV 19 from it deaths graph, as they cannot be sure about the basis on which they are compiled.

They might like to adjust the other country death figures to numbers per million of population to make them a bit more meaningful. There will still be differences in basis for regarding a death as a CV 19 death, and differences from density of population and other factors not related to disease management and healthcare.

I also read that London paramedic advice is being altered to ensure a higher proportion of Covid 19 cases are taken to hospital. If this is true, then the London figures for hospital admissions becomes a useless guide  as recent figures will clearly be relatively higher than older figures.

The government needs consistent and accurate figures as a basis for decision making. Hospital admissions was the best series they showed, as I assume they have in place the right procedures for counting patients actually in hospital. They also said they tested the patients to see if they had CV 19.  No-one has any idea how many people in the community have or have had CV 19.

During the long debates about Brexit Remain MPs and campaigners centred much of their argument on  the plight of the car industry in the UK. They falsely claimed Brexit would disrupt supply chains from the continent, ignoring the fact that substantial numbers and volumes of components come into UK auto factories today from non EU sources with no border issues.

They often alleged we would end up with EU tariffs against our cars whilst  presumably imposing the same 10% tariff against theirs. That is the tariff the EU makes us impose today on on EU vehicles. They wrongly said this would  be very damaging, refusing to accept that were that to happen UK factories would sell more to UK customers whilst losing some sales to continental ones.

They wanted to create the impression that an important industry would lose sales heavily and suffer loss of investment and jobs as a result. Instead major motor manufacturers pledged their continuing support for making cars here.

Over the last year or so there has been a large collapse in car sales, especially of diesels. This is a big loss to the UK which has done much to improve the cleanliness of diesel engines . The UK is a major diesel engine producer. This sales drop  has nothing to do with Brexit. It is the direct result of the EU/UK policy of trying to get diesel and petrol cars off the road as part of the decarbonisation policy, and to switch as many people as possible from personal transport to public transport. In the last few weeks the impact of anti virus policies has exacerbated this trend and further worsened the plight of the industry.

In  the first quarter of 2020, mainly before the lock down, sales of diesel cars in the UK  fell by 51% and of petrol by 36%. In March the trend grew worse with a fall of 62% for diesels and 50% for petrol vehicles. There was scarcely a word from all those Remain campaigners and MPs about this disastrous plunge in sales and output by the industry, yet it has been on a scale out of all proportion to their falsely pessimistic forecasts about Brexit.  Why the silence? If they truly cared about the  car industry why are they not demanding policy change?

The government increased new vehicle taxes in the 2017 budget which harmed the industry. The Bank of England tightened credit for car loans which harmed output. Government announcements about the need to move on from diesel and petrol put people off  buying new ones. Isn’t it time those who shed false tears over a Brexit impact that was never likely to happen, shed some genuine ones over the current situation? All our car factories are presently closed. There will be reduced working re-opening  of some next month. The problem is not just the virus, but also the underlying policies towards modern petrol and diesel cars.