John O’Connell is the Chief Executive of the Taxpayers’ Alliance.
After the Government’s significant coronavirus interventions of the last few weeks, Brits are adapting to life under lockdown. The public health response is underway, and the NHS is facing up to a big challenge over the next few weeks; financial support is already arriving (at least for those who aren’t self-employed); and the public information campaign is in full swing, complete with daily press conferences and a personal letter from the Prime Miniser to every household. Most are wondering aloud how long it will be before we can get back to normal.
Current circumstances are, of course, very far from normal. Last week, the TaxPayers’ Alliance issued our response to the unprecedented measures that have been taken. Naturally, the very idea of some of these interventions makes us wince, not least given the degree to which it equips ministers with powers much of the public would never accept in normal times. But in the debate of the Oxford vs Imperial models, it’s understandable that the Government has veered on the side of caution, and rolled out a plan based on the worst case scenario.
With that choice made, the policies to tackle the public health emergency have been stringent, thereby meaning that Rishi Sunak had to step in to prevent the economy from collapsing. We do not want to lose capital in businesses which are normally viable, but demand for their output has been temporarily suppressed. Preventing contagion means encouraging people not to go into work. That means totally different policies from those that any reasonable person would usually suggest 0 let alone those sensible in a typical recession.
We know about the £330 billion loan package, the furlough scheme to provide 80 per cent of salaries for PAYE staff, measures for the self-employed and the £1.1 billion handout for Britain’s charities. Adding to this any future action – of which there is sure to be plenty – it is entirely reasonable for a fiscal conservative to be worried about the next decade.
Some things haven’t changed. One is that money must be spent well. Not all measures need to be at odds with the TaxPayers’ Alliance agenda and, while there may be a lot more money going around, wasted cash is still intolerable.
Another is that taxes make up a significant proportion of the cost of living, meaning reductions will help families get through these hard times.
A third is that regulations hinder delivery and cost taxpayers a fortune. Indeed, there have been some reassuring reports of bureaucracy – particularly in the NHS – simply falling away to let staff get on with their jobs and ensure every penny of taxpayers’ money is reaching the frontline services that are desperately needed. Wards have been prepped in a matter of days, when such a task would normally have taken months. While appreciating that this is a time of crisis, maybe afterwards those delivering public services can tell politicians that they would rather not have those regulations back.
With those three principles in mind, the TPA has recommended to the government three more policies which would also help in this effort: divert the aid budget to help fight the virus; freeze council tax and focus money on frontline services; and suspend Sunday trading restrictions.
In the past decade, we have consistently highlighted the level of waste in Britain’s overseas development spending. We have called out spending on space programmes and Spice Girls. Focusing the funds on genuine emergencies is a far better use of cash, and there is no more acute emergency in the world today than the coronavirus. That is why, if we insist on keeping the 0.7 per cent target, almost all of the UK’s £14.6 billion overseas aid budget should be immediately reallocated to combating the coronavirus both in developing countries and in the UK, with all non-humanitarian development operations suspended.
That could mean, for instance, allowing aid funds to be used for the rapid deployment of hospital ships to provide temporary critical care facilities. In order to ensure this can be done swiftly and effectively, the International Development Act 2002 should be altered to ensure that spending moves beyond merely that which is likely to contribute to a reduction in poverty.
A move like this would undoubtedly be popular with the public. Polling last year from this site’s James Frayne showed almost three quarters of working class voters backed reallocating aid money to priority areas like the police and NHS. It would certainly make good on the government’s word that it was doing whatever it takes to combat coronavirus.
Unfortunately, regardless of what measures the Government takes, the economic shock of the coronavirus is going to hit living standards in the UK. Council tax is a significant proportion of the cost of living, particularly the poorest households, costing them eight per cent of their income. Instead of rises of close to four per cent across the board, a nationwide freeze on council tax rates would mean one less worrying bill for anxious residents.
At the same time, of course, councils must be able to assist with the public health and social care efforts needed to combat coronavirus. To that end, all non-statutory and low-level council spending should be suspended. Councils should take up this call: alongside the necessary cancellation of any planned trip, conference or event, a recruitment freeze and an immediate end to extras like hard copy council tax letters, council newspapers, canteen subsidies and councillor allowances and pensions could send a powerful signal that local authorities really were pulling out all the stops.
Unnecessary regulations must be suspended, particularly if they stop us tackling the outbreak. Sunday trading rules are currently doing this. Supermarkets, including those with premises of over 280 square metres, should be encouraged to open for as many hours as possible on Sundays as possible, to reduce overcrowding and the spread of the coronavirus. Social distancing is threatened when people are on top of each other in supermarkets.
With bookings for online delivery slots permanently full at present, large physical stores can help to clear the backlog and spread the demand. Moves such as this will allow the heroes in the private sector to play their part in the national effort. See, for example, firms moving heaven and earth to produce ventilators for the health service, produce hand sanitiser and keep the shelves stocked for desperate shoppers. The Government must let them do what they do best.
The extraordinary economic measures announced by the Chancellor are justifiable, but at some point soon they will no longer be – and they will need to be reversed. Significant fiscal repair will be needed in the coming years: debt levels will need to be brought back down rapidly through growth-enhancing measures and spending restraint. It is clearer than ever that sound public finances are needed during good times to ensure the country is ready in case of a crisis. Taxpayers cannot afford this pause in fiscal conservatism becoming permanent.