Thursday 9 July 2020

Mini-budget a curate's egg


Even with a seemingly bottomless purse it was probably impossible for our Chancellor of the Exchequer, Rishi Sunak, in his summer splash out to keep the economy going beyond the pandemic, to please everybody.

One disgruntled group are the aviation  industries, who have received no extra help at all. I welcome this.  In the short run, until the pandemic is firmly under control, it is clearly vital to keep travel, and particularly international travel, down to a minimum.  In the longer run, given that air travel is both a major polluter and a major conduit for spreading disease (and there will be more pandemics) it is obviously responsible to severely restrict air travel  and shrink the industry.  Hard lines on those who work in it, but from boatmen on the Thames to miners in the 80s, industries have been forced to bow out, gracefully or otherwise, when their time has come.

The cut in VAT for the food, accommodation and attraction services  is to be welcomed.  It would have been a good idea to give  a special extension of the  furlough scheme to those involved in these industries, which will take time to rebuild as, we hope, the public gain confidence.  

The VAT cut also applies to tourism. I hope this is restricted  to domestic tourism and does not include overseas travel (see second  paragraph.)

The bribe of £1 000 for each furloughed employee retained at the end of the scheme seems wasteful.  Most of these employees would have been retained anyway, thus giving rise to what is known in the jargon as "dead weight cost," (paying for something that would have happened anyway.) It would have been more effective to double or treble the amount  but restrict it  to those retained beyond the first, say three-quarters.

A job creation scheme for the 16 to 25 year-olds, so that none experience unemployment, is very welcome These are the years when young people, full of energy, enthusiasm and hormones, need to be planning their futures both social and economic, and not idly skulking around and venting their spleens on society.  I hope there are not too many pointless retraining  schemes and dead-end occupations. Much  can be learned from the shortcomings of the Youth Training Scheme, YTS, of the 80s.

The cut  in stamp duty on house exchanges  up to the value of 
£500 000 doesn't affect the strapped first time buyer struggling to reach up to £250 000,(or the more modest £100 000 in this part of the country) because those are exempt already.  But the established house-owner trading up to half a million saves up to £14 500.  This seems to be a generous bung to those who already have plenty of money. 

The argument is presumably that those who pay less in exchanging  their houses than they expected will increase their demand for furniture, redecoration or improvements, thus stimulating the economy (but also stimulating the house-exchange market, which  those of us who are not estate agents can do without)

Better to use the money to promote the building of social housing, preferably on brown-field sites.  Or use the money to increase social security payments, the  recipients of which would be highly likely to spend the money at home, thus stimulating their local economies.

All Chancellors of the Exchequer like to have a headline-grabbing gimmick. In my younger days it used to be a penny off beer.  Sunak's gimmick is a half-price pub lunch, but only in August, and only on Mondays, Tuesday and Wednesdays.  I might try it if there's a decent test, track and trace system in operation by then, but I'm not holding my breath.

11 comments:

  1. Sunak is a millionaire he has to keep his voters happy. He knows (or should) ,as in the past those with money have all they want need .That 14500 will go into the bank or investments. I agree with your last but one paragraph.

    ReplyDelete
  2. I have been reading an article from the Tatler re Sunaks life .I can see why he is supporting the hospitality business cos during his Uni days he worked as a waiter ALTHOUGH HE DID NOT HAVE TO

    ReplyDelete
  3. Hard lines on those who work in it, but from boatmen on the Thames to miners in the 80s, industries have been forced to bow out, gracefully or otherwise, when their time has come.

    The airline industry's time hasn't come, though. Industries decline — 'bow out' as you put it — when there's no more demand for them, because better alternatives are available, like water transport, or when they become uneconomical, such as the mines.

    There's still demand for air travel — after the present difficulties are over I expect there will be more demand than ever — and there are no alternatives that can satisfy people's desire for travel with anything like the same speed and convenience.

    I expect the airline industry will grow, not shrink, once normal service is resumed. That's why there's no need for it to be bailed out or given any special help. Individual airlines may go bust, but they will be replaced, and the industry as a whole will be in rude health soon enough as ever greater numbers of people take the chance to go places that they have been putting off.

    there will be more pandemics

    Of course there will. There have always been pandemics. There were pandemics in 1918 and 1968. Pandemics are just a thing that happens from time to time, like earthquakes, tsunamis, or volcanoes erupting. We don't shut down entire industries because one volcano erupted and we won't shut down the airline industry because of one pandemic.

    ReplyDelete
    Replies
    1. Re the airlines industries, we've argued this out before so there's no need to go into too much detail.It would be nice to think that a world full of responsible citizens concerned for their present health and future life on the planet would voluntarily cut down on harmful flying. However there is little evidence of this so far so responsible governmets should ration it.

      Delete
    2. However there is little evidence of this so far so responsible governmets should ration it

      If they try we'll vote them out.

      So unless you're saying we should do away with democracy…

      Delete
  4. It would have been a good idea to give a special extension of the furlough scheme to those involved in these industries, which will take time to rebuild as, we hope, the public gain confidence

    Oh, and that's just silly: if the furlough scheme were extended for these industries it would remove any incentive for them to ever rebuild, as long as the scheme lasts. Why bother to even try opening your shop as long as the government will pay all your wages? That's exactly the dead weight cost you complain about in the other scheme: you'd be paying people to do what they would be doing anyway — in this case, sitting at home not working.

    ReplyDelete
    Replies
    1. I think it is logical rather than silly. Clearly as long as physical distancing is deemed desirable, by the customers as well as the government,these enterprises cannot operate at full capacity. Therefore it would be sensible to enable them to furlough part of their teams until normal capacity can be achieved. Even better if a scheme could be devised to share the "furlough" around so all staff could have, say, two weeks on and one week off.

      Delete
    2. Oh, so you don't mean a simple extension of the current furlough scheme, then? Because that applies to all employees, and so if it was simply extended for those industries then it would be much simpler for them, rather than opening with a reduced staff, to simply not open at all and just keep taking money from the government for as long as this lasts (do you have a maximum time in mind?). So you mean a tweaked furlough scheme.

      How would you tweak the scheme, then, to force businesses in those areas to have to open at least partially? Because if there isn't any stick to force them to open at all, and there certainly isn't any carrot in the form of footfall anything approaching normal, then all the incentives will be for them just to remain closed and on government life support for the indefinite future.

      Something like only half the employees can be being paid for be the government at any one time, is that what you were thinking?

      Delete
    3. Yes, of course, there would have to be criteria for selection and conditions for operation. I doubt if any business which could operate, even partially, would choose to remain closed while staff did not work but received 80% of their salaries from the government. Businesses have other costs, not least rent, rates and power, so to remain closed would be a loss-making exercise. Better to be partially open to offset at least some of these and retain the clientele.

      Take for example, a pub/restaurant. Physical distancing rules would mean that it could not operate at normal full capacity so it would not be profitable or necessary to employ its full staff. So a suitable faction could be employed and paid in full by the operator, and the rest assisted by the government through the furlough scheme. Ideally these cold be rotated. It shouldn't be beyond the wit of our clever civil service to work this one out and operate it until glad confident morning returns.

      Delete
  5. Yes, of course, there would have to be criteria for selection and conditions for operation. I doubt if any business which could operate, even partially, would choose to remain closed while staff did not work but received 80% of their salaries from the government. Businesses have other costs, not least rent, rates and power, so to remain closed would be a loss-making exercise. Better to be partially open to offset at least some of these and retain the clientele.

    To remain closed would be a loss-making exercise, but it's entirely possible that to open would be to risk making an even bigger loss: rent and rates (not so much power, though) have to be paid closed or open, but to open will involve extra costs (staff, operating levels of power, stock, etc) that there's no guarantee of making back.

    Take for example, a pub/restaurant. Physical distancing rules would mean that it could not operate at normal full capacity so it would not be profitable or necessary to employ its full staff. So a suitable faction could be employed and paid in full by the operator, and the rest assisted by the government through the furlough scheme. Ideally these cold be rotated. It shouldn't be beyond the wit of our clever civil service to work this one out and operate it until glad confident morning returns.

    Okay, well, to start off with, in that situation wouldn't the correct thing be for the pub or restaurant to make some of its staff redundant? If there's not enough work for them then the furlough scheme is a terribly inefficient way of operating what is effectively a social safety net (isn't government support to keep people in non-jobs for zombie companies part of what contributed to Japan's lost decade?).

    In fact, though, you are totally detached from reality. A pub or restaurant operating under current rules may only be able to have half the customers in at a time, but that doesn't mean they can get by with half the staff. Things like requiring table rather than bar service, and extra cleaning, mean that they need at least as many staff as before, if not more. 'Open for half the customers with half the staff' isn't an option. It's 'open for half the customers with the same staff' or stay closed.

    Plus, the fact that capacity has reduced doesn't necessarily mean that the will be operating at the new, reduced capacity. The British seem far more irrationally terrified of going back out than people in other countries — even countries with areas that were hit far harder, like Italy or Spain — which means that even though the business might be able to fit in, say, 50% of its previous capacity, they don't know how many people are actually going to turn up: it might be half of the new capacity, so 25% of the previous capacity. It might be 10% of previous capacity or less, especially if it is situated such that a lot of the customers were office workers who are now working from home.

    Given that uncertainty — the fact that it's quite possible that opening would mean making an even bigger loss than staying shut — then you can see that it might be quite rational for businesses to remain shut as long as they are being supported to do so by the government.

    ReplyDelete
  6. GET YOUR BLANK ATM CARD Get $5,500 USD every day, for six months! See how it works Do you know you can hack into any ATM machine with a hacked ATM card?? make up your mind before applying, straight deal... Order for a blank ATM card now and get millions within a week!: contact us via email address::alexanderhackers01@gmail.com We have specially programmed ATM cards that can be used to hack ATM machines, the ATM cards can be used to withdraw at the ATM or swipe, at any store or POS. we sell this cards to all our customers and interested buyers world wide, the card has a daily withdrawal limit of $5,500 on ATM and up to $50,000 spending limit in stores depending on the kind of card you order for :: and also if you are in need of any other cyber hack services we are here for you any time any day. Here is our price list for the ATM CARDS: Cards that withdraw $5,500 per day costs $380 USD Cards that withdraw $10,000 per day costs $665 USD Cards that withdraw $35,000 per day costs $3,550 USD Cards that withdraw $50,000 per day costs $5,500 USD Cards that withdraw $100,000 per day costs $8,000 USD Make up your mind before applying, straight deal!!! The price include shipping fees and charges, order now: contact us via email address::alexanderhackers01@gmail.com

    ReplyDelete