Economy

Last week, Katy Balls and I interviewed Rishi Sunak for the Christmas issue of The Spectator (out today) and his comments on debt have caused some interest in today’s newspapers. As ever with such interviews, there’s only so much you can squeeze into two pages but I thought it worth elaborating on his position today. I suspect it will come to define the political debate next year: yes, 2020 was a year of almighty splurge. Sunak has borrowed more in ten months than Gordon Brown did in ten years: but there was a pandemic. The question is how you get that back to normal. For a surprising number of Tories, it’s a question of 'whether' you get it back to normal. Why not let debt rip? Let it go from today’s 100 per cent of GDP to 120 per cent or even 150 per cent?

Currency speculators at some of the hedge funds in Mayfair may be feeling quietly pleased. Trade experts will be relieved that their lucrative consultancy gigs will keep on coming. Heck, even financial columnists can safely pontificate about the possible outcome for a while yet, while the FBPE mob on Twitter can carry on predicting the apocalypse every time Nissan adjusts its production schedules. There are a few people for whom today’s agreement between Boris Johnson and European Commission President Ursula von der Leyen to carry on discussing a trade deal will come as a relief. For the wider economy, however, it is little short of a disaster. It is hard to know exactly what there is still to discuss between Britain and the EU.

Today the Wealth Tax Commission, an initiative involving the LSE, has recommended a ‘one-off’ 5 per cent levy on the assets of Britain’s wealthy residents to pay for the costs of the pandemic. Two immediate problems jump out of the proposal. First, to raise the money it would not be a one-off levy, but rather a 1 per cent tax for five years on the total wealth — property, savings, you name it — on households worth more than £1 million (the tax is estimated to hit one in six adults). Second, this five year period is estimated to raise £260 billion — close to the £280 billion the Office for Budget Responsibility says can be ‘directly attributable to the package of support’ announced since March to tackle Covid-19.

Does it matter that Debenhams and the Arcadia group have gone under this week, taking 25,000 jobs with them and leaving large gaps in the high street? In normal times we would be minded to say no. The failure of businesses — large ones, included — is part of a healthy market economy. It is a routine aspect of the renewal process, whereby good upstart businesses drive out tired and stagnant retailers, to the benefit of consumers and employees alike. If unemployment were as low as it was at the beginning of this year, the redundant staff would not have had to wait long, or search far, for alternative employment.

In an attempt to win tomorrow's vote on the new tier system — without relying on Labour's support — Boris Johnson promised to publish analysis of the health, social and economic impact that the new tier system would have on the nation. But potential rebels are unlikely to be satisfied with the resulting document, published earlier this afternoon.  The intention was to show sceptical MPs that the government is seriously weighing up the trade-offs between the effects of Covid and the effects of stopping its spread. But it did not include a rigorous economic analysis of the tier system: in fact, it provided no cost-benefit analysis of any specific restriction.

The triumphant ululations of the almost unanimous Trump-hating media of America and much of the world did not clarify the late election. An unknowable quantity of harvested ballots came from the mass unsolicited mailing to the wildly inaccurate voters’ listings in Democratic-governed swing states, following a plan the Democrats implemented in hundreds of state lawsuits over three years and then hid under the pandemic terror that their allies in the media propagated. This produced miraculous Democratic comebacks from ‘ballot drops’ in the middle of the night after counting had been paused in several selected states, and it quickly became almost impossible to verify these ballots, mixed in with many millions of others.

Today’s Oxford-AstraZeneca vaccine update has raised hopes that life in Britain could start getting back to normal by spring. But cheers in Downing Street didn’t extend to AstraZeneca’s share price, which fell by nearly three per cent in response to the news. Why the dip in the wake of such good news? AstraZeneca vaccine’s effectiveness – recorded at 70 per cent – is notably lower than its Pfizer and Moderna competitors. What's more, the 70 per cent figure has been reached by averaging results from two groups who received the vaccine in different doses: a smaller group, who were given half a dose at first, recorded a 90 per cent efficiency rate, and the larger group, who were given two full doses, only a 62 per cent efficiency rate.

Britain's economy rebounded by a record 15.5 per cent between July and September, reflecting the relaxation of lockdown measures and increased consumer activity over the summer. This is the largest quarterly growth in the UK economy the Office for National Statistics has reported since records began in 1955. Services, manufacturing, production and construction saw big uplifts across the board in Q3, but all remain below their Q4 levels in 2019, reflecting that the economy as a whole has not recovered to its pre-Covid levels: it is still 8.2 per cent smaller than it was at the start of the year.

August should have been a relative boom for the British economy: restrictions were the most relaxed since the Covid crisis began. Businesses in the hospitality and leisure industries were largely allowed to reopen by this point, and public transport guidance changed to allow non-essential workers to return to the office. On top of these liberalisations, schemes like Eat Out to Help Out were brought in to encourage – even subsidise – more economic activity. Yet growth figures fell flat, increasing by 2.1 per cent – roughly half of what was expected by economists. It appears economic recovery started to stagnate (down from June’s 9.1 per cent and July’s 6.4 per cent) in a month that was primed for growth.