15 October 2020
Breaking the Rules
by J.R. Thomas
This column has in a covidish grumbly way already launched one attack on the “New Normal”, that irritating fashionable phrase that is deployed too often, without hesitation, and mostly without thought. Last time we boldly suggested that “working from home” would last just as long as bosses forbore from measuring productivity and team work. Already there are signs that some major corporations have noticed that homeworking does not really cut the mustard when it comes to speed and quality of performance. This, not suprisingly, includes some major City banks and advisory houses, and firms of accountants – try doing a major audit from employee’s kitchens – but also a number of digital firms where team work and innovation is key. Much better, the bosses think, to have brainstorming or problem solving with everyone all together in the office (even if social distance rules must be observed) than distant along the fibre.
But what ought to concern anybody with even a slight interest in the economy or our future, and that includes our childrens’ and grandchildrens’ futures, is another New Normal. This is one exemplified by our Prime Minister, who talks so easily of “billions”. Billions of pounds, sterling. Tens of billions. Hundred of billions. Mr Johnson throws these sums off with such casualness that one’s first assumption is that he means “millions”. But he does not. It is Johnsonomics, a flinging about of billions of tax payers’ cash.
It is hardly necessary to point out that a billion pounds is a lot of money. There are very few people in the UK who can be reliably said to be in possession of a billion pounds or more. The Duke of Westminster certainly has several of their equivalents in property, as have his fellow London landowners, mi’lords of Portman and Cadogan. Among great industrialists Sir James Dyson has accumulated a couple of billions selling purple vacuum cleaners, and Sir Jim Ratcliffe a similar amount from chemicals. The Rausing family may have even more, but great philanthropy is probably reducing that. Richard Branson figured in various rich lists with similar amounts, but that was pre Covid. You get the point, it is very hard to make a billion pounds in the UK – and the UK is said to be a relatively easy place to build a fortune.
So, for instance, there are no business persons or holders of great fortunes who could begin to fund a high speed railway, even over such a short distance as from London (Euston) to Birmingham. That will cost somewhere from £50bn to over £100 billion (see how the figures get a bit vague when they get larger?). Or even from Paddington to Liverpool Street (was £11bn, now £21bn and counting, and certainly not yet operating). But this is nothing compared to the Boris brandished government cheque book. £4.7bn extra for hospitals? Extra for what? No idea, and it is a fair bet that there is nobody in government who could quickly tell us what. Wind farms? No idea, but £160m (yes, just million) to help upgrade production facilities for building the giant sea bird choppers. Not the turbines, note, not the cabling, not the relay stations and converters, not building of the kit, just upgrading production lines. Total cost of offshore windmills £20bn? £40bn? £100bn? Who knows. Hinckley Point, that legacy of the George Osborne years, is costing £21bn – for one power station, albeit a big one, and you are paying for it. We all are, by a surcharge on our electricity bills, as we will for North Sea windfarms. And for Thorpness nuclear power station in Suffolk, recently approved.
All this is nothing next to the way in which the governments budgets have been blown to smithereens by Covid19. The Chancellor, who as an ex Goldman Sachs executive does know what a billion pounds looks like, thought in April that the extra costs to the economy of the virus – in furlough costs, grants to failing businesses, help to the unemployed, the support needed to enable the NHS to function, might come to £300bn. £300bn extra on the government’s already groaning expenditure plans. That is, to be horrible and brutal, roughly £6.5m for each person who has died with Covid-19. Not of it, with it. The average age of death of persons dying with Covid-19 is 81. Do not even think of computing age-adjusted figures.
The local shutdowns and restrictions, more to be announced this week, will almost certainly push that £300bn to £400bn. What will be the cost of the extra healthcare which will certainly be needed for those unfortunate people who have not had early diagnosis of oncoming illnesses such as cancer, circulatory problems, heart malfunctions? Who knows is yet again the honest answer, but there has been an enormous delayed financial cost in clearing hospitals for a deluge of Covid-19 patients who have not yet arrived. Just the Nightingale hospitals have cost a quarter of a billion pounds so far. They may yet be used, of course.
In an emergency, of course the government must spend to protect its people. Churchill did not sit around working out the cost of a Spitfire as against the number of citizens projected to die in urban blitzkriegs. But he did have two tough Chancellors of the Excheqeur, Sir Kingsley Wood and then Sir John Anderson, who thought very carefully about how the government would pay for the war, and what the money should be spent on. Churchill regarded both of them highly and listened to them carefully. Rishi Sunak, who remains so far that unlikely figure, a popular Chancellor, is of the same mould, so far as can be seen, but he has a neighbour who as Mayor of London was a lavish and impetuous spender, and now has a much larger credit card to indulge his flights of fancy. And he has a cabinet who seem not to be inclined to say “Boo” to the Boris goose when it comes to money. More to the point they do not seem able to ask tricky questions about two things. One: how do we pay for all this? Two: where is the cost reward analysis? Those questions are the wrong way round of course, because in most businesses and government departments, the first question is, what are you wanting to spend the money on and why, and the second is, where are you getting the money from.
There is no doubt that some of these enormous sums are unavoidable or may well be money well spent. We may come to see our new North Sea energy as a long term bargain, our nuclear power stations as useful back up. The public enquiry may say the government avoided a major slump by the Chancellor’s judicious spending. (Our grandchildren, passing the costs to their grandchildren, may not.) But it would be nice to have a cabinet of hard faced ministers who asked every time a spending suggestion was put to them, “what is the payback for that?”.
Sir Alec Douglas-Home, prime minister 1963-64, caused much laughter when he said he had to do economics using his fingers. But we may well wish in future years that our current premier had used his fingers to count the cost, rather than his hands to fling our money about so liberally.
Correction: In last weeks piece on the US Presidential elections I overlooked amongst recent Vice Presidents, Gerald Ford, who took over from Richard Nixon in 1974, and lost to Jimmy Carter in 1976. Thanks to a certain Corbynista who knows his Veeps!
