...but with tax rises? At the same time, it is reported that the Government plans to raise corporation tax and make progressive reforms to property taxation (Times).
~~Political divides. The mixed messaging reflects ideological divisions within the Conservative Party (small state versus “levelling up” interventionism, in brief), and indeed a tension between the free market libertarianism of the party’s most prominent Eurosceptics and its new electoral base (see Unchecked UK's research on public attitudes to regulation in Red Wall seats).
~~Electoral strategy. The FT reports that Sunak hopes to put “clear blue water” between the Conservatives and Labour with his proposed tax rises (and spending cuts). The Chancellor might also hope that bringing forward tax rises will give him the freedom to cut them again before the next election, as reported in September.
~~Need for stimulus. The progressive tax changes Sunak is considering could well support recovery, but the Chancellor’s hopes for restrained spending in the near-term go against consensus among the IMF, OECD and others on the need for large-scale fiscal stimulus. Read our analysis here.
Labour market deregulation. New Business Secretary Kwasi Kwarteng has confirmed his department is reviewing EU employment protections, following reports that “worker protections enshrined in EU law… would be ripped up” under proposals for a post-Brexit labour market overhaul.
~~“Own goal for Britain”. The measures reportedly under consideration - ending the 48-hour work week, excluding overtime in holiday calculations, changing rules around rest breaks and logging of work hours - have been roundly criticised by the Financial Times as unaligned with the needs of both employers and workers.
~~UK labour market standards. In defence, Conservative MPs are pushing the line that the UK’s labour market standards currently compare favourably with the EU’s (e.g. here). The category error here is comparing the UK with an EU-wide floor. Most individual EU countries go beyond this minimum and more so than the UK, which has “one of the most lightly regulated markets in the OECD in terms of employment protection”.
~~Britannia Unchained. Kwarteng has insisted that the Government is not trying to “whittle down standards”. Sceptics point out that he - alongside fellow Cabinet members Priti Patel, Dominic Raab and Liz Truss - advocated strongly for the removal of worker protections in Britannia Unchained, a publication which accused British workers of being “among the worst idlers in the world”.
Environmental protections. IPPR has warned that the Government’s Brexit deal leaves both workers’ rights and environmental protections at risk of erosion. It is worth noting that the “build back better council” of business leaders being consulted by Johnson on regulatory reforms include the CEO of BP, the Chairman of Heathrow and other representatives from big polluters. (Independent)
~~Level playing field? While safeguards in the UK-EU deal are meant to prevent too much regulatory divergence on e.g. labour market and environmental measures, IPPR argue that the bar for proof of infringement is so high that enforcement would be rare.
Financial deregulation. This month, the Chancellor promised the UK financial sector a “Big Bang 2.0”, harking back to the explosion of financial deregulation in the 1980s. City of London bosses have welcomed the Government’s keenness to engage with businesses, but have argued there is “little need for wholesale deregulation in the UK” and the focus should be on “reregulation”.
Freeports. The Government hopes to establish its first freeports this year, and we may see announcements on these in the Budget as part of the Government’s deregulatory stance, Meanwhile the SNP have proposed “green ports”, though it is unclear how much these differ in substance.
~~Analysis. The criticism of freeports is that these encourage a politically costly race to the bottom, while the “advantages to business are almost non-existent”, as argued by the UK Trade Policy Observatory. Tax Justice UK’s submission to the Government’s freeports consultation highlights significant money-laundering risks in addition.
Red tape. The irony is that Brexit has, in some cases, led to a lot more red tape for British businesses. Over the weekend, the Times reported that “tens of thousands of small British firms are being crippled” by the new administrative burden of trade with the EU, while the Observer revealed that the Department for International Trade has advised British firms to set up in the EU to avoid extra costs resulting from Brexit.
~~Northern Ireland. Earlier this month, NI first minister Arlene Foster came under fire as Brexit red tape has left the country facing the prospect of prolonged shortages.
Weekly Updates
Work and welfare
Levelling down pay. Research from the TUC indicates nearly 1 in 10 workers have been exposed to fire and rehire tactics since last March and that black and ethnic minority workers are almost twice as likely as white workers to be forced to reapply for their jobs on worse terms and conditions. (Independent coverage here.)
Gaps in Support APPG launched. A cross-party group of 260+ MPs has been formed to urge the Treasury to help 3m self-employed people excluded from the Government’s support packages. (Guardian coverage here)
Mapping the data economy. Autonomy released a “Data Archeogram” - a visual representation of the datafication of work, mapping “the web of ramifications that link the worker... to vast systems, strategies, and infrastructures of data capture, processing, storage, circulation, and monetisation (data rent).”
Measuring unemployment. The Alliance for Full Employment called for an urgent review of official measures of employment and unemployment before the March Budget, suggesting that at least 300,000 jobless people across the UK are being missed by official statistics. (Guardian coverage here.)
Flood defences. Following the flooding damage from Storm Christoph, Greenpeace UK found 1/20 ‘high consequence’ flood defence assets were rated as being in poor or very poor condition in 2019/20. (Guardian coverage here)
~~Scattered ownership is limiting action. Echoing a National Audit Office report on managing flood risk last year, the authors argue that “little can be done to compel these actors [owners], which can range from private landowners and transport companies to local authorities, to improve the condition of vital flood defences”.
Doughnut Economics. Time Magazine explored Amsterdam’s application of Kate Raworth’s Doughnut Economics.
Green recovery. E3G and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) published a paper outlining "a practical framework that captures the key elements of green recovery" for economic advisors and other practitioners.
US Green Recovery plans. President Biden urged Congress to ‘act now’ on a $1.9tn economic rescue plan, with a second bill expected in February aiming to outline the President’s longer term goal to create jobs, reform infrastructure, combat climate change and advance racial equity.
~~America’s responsibility. See Jason Hickel’s Twitter thread on what the US needs to do to uphold its fair share of the Paris Agreement’s 1.5C target.
Devolution and local economies
Defining levelling-up. Georgina Bailey from Politics Home explored the nebulous definitions and competing policy solutions around the ‘levelling-up agenda’, concluding that: “there is wide agreement that further devolution to local government structures around England will be a boost to levelling up around the country”.
~~Community Wealth Building.CLES's Tom Lloyd Goodwin and Neil McInroy argued that longstanding regional inequality can only be solved through genuine devolution and community wealth building.
~~City regions. Martin Wolf analyses British regional inequality through the competing lenses of people and place, productivity and consumption - and proposes the development of “city regions” as a solution.
Local councils under pressure. Meg Hillier, Chair of the Public Accounts Committee, said the Treasury has “a worryingly laissez-faire attitude” towards local council bankruptcy.
Constitutional reform. Gordon Brown called for fundamental constitutional changes in an article for the Daily Telegraph through a “commission on democracy” that would “review the way the whole UK is governed”.
Covid-19
Exiting lockdown. The Tony Blair Institute for Global Change and the COVID-19 Actuaries Response Group have released separate modelling of vaccination rollout rates and explained what this might mean for easing of lockdown restrictions and the effects upon economic recovery. (Twitter thread explainer from Ben Chu here.)
Prolonging the pandemic.Echoing warnings of a "catastrophic moral failure" over vaccine distribution plans from the World Health Organisation, David Pilling repeated in the FT that unequal access between developed and developing countries could cause the virus to mutate and limit the efficacy of the vaccines. (We covered this and other political economic issues of vaccine rollout last November - see our analysis here).
