Corporation tax debate. A major focus of pre-Budget debate has been the proposed rise in corporation tax, in part because of an apparent, eyebrow-raising reversal of roles - the Conservative government is proposing higher taxes on businesses, while the Labour opposition argues a rise in corporation tax should not be introduced until later in the recovery. The issue is particularly thorny because it speaks to a number of interrelated debates.
~~...but would raising corporation tax slow down recovery? Some have argued that given the UK’s low rate of corporation tax and the fact it is only paid on profits, not revenue, raising corporation tax would not unduly dampen recovery if accompanied by a large enough stimulus elsewhere. (See e.g. IPPR’s paper on taxation and the Budget, and Beyond Covid analysis of tax and recovery).
Narrative and political challenges. Many people now agree that the UK corporation tax rates (19%, down from 30% a decade ago) is too low. It is much lower than other G7 countries, where the average rate is 24%. But among those who support a rise in corporation tax in the long-term, there is disagreement over the politics of supporting the near-term increase.
~~Support. Critics of Labour’s strategy, for instance, have argued that opposing corporation tax now risks wasting a time-limited opportunity to reform the tax system to make it more redistributive, and/or that Labour risks landing on the wrong side of public opinion. There is also a danger that opposition to tax rises helps reinforce their perception as anti-business.
~~Opposition. The opposing argument is that supporting a rise in corporation tax now may reinforce the government’s claim that the public finances need to be ‘repaired’ through another round of austerity and fiscal consolidation. Regardless of other reasons to support an increase, it is this austerity narrative (it is argued) which will inevitably dominate debate and public perceptions.
Supporting businesses and households. IPPR research has highlighted that more than 500,000 businesses are at risk of bankruptcy (equating to 9 million jobs) and argued for continued support, including through public equity stakes. Meanwhile NEF research estimates that around a third of UK residents will be living in hardship by May, even with the Universal Credit uplift.
~~Public attitudes. Surveys indicate that public support for increasing the generosity of social security far outweighs support for cutting benefits - a reversal from in 2014.
~~Universal Credit. The New Statesman’s George Eaton has highlighted that the UK’s unemployment benefits as a proportion of previous income are the least generous in the OECD. (See House of Lords review “Universal Credit isn’t working” for a comprehensive overview).
Size of stimulus? President Biden’s proposed $1.9 trillion economic recovery package has received a huge amount of attention. IPPR has highlighted that the UK faces a deeper recession than the US, but is planning to spend far less as a proportion of GDP on stimulus - and has called for planned spending to be increased 4x to match American ambition. (See FT coverage here)
Environment. Guardian environment correspondent Fiona Harvey has analysed pre-Budget announcements will mark a test of the government’s green credentials ahead of COP26.
Unequal Britain. King’s College London’s Policy Institute and UK in a Changing Europe have conducted a study on public attitudes to inequality in light of Covid-19 for the IFS’s Deacon Review of Inequalities. The authors said the overall findings showed “meritocratic and individualistic tendencies” are likely to temper calls for action on inequality. (Guardian Coverage here)
~~Blaming individuals for pandemic job losses. The survey found that Britons were more likely to believe those who lost their jobs during the pandemic did so as a result of personal failure, rather than bad luck.
~~Racist attitudes. One in eight Britons surveyed - and one in five Conservative voters - said they believed lower earnings and higher unemployment among black people are due to a lack of motivation or willpower, and that negative views of minorities are still common in the UK.
Gendered impact of coronavirus. The Women’s Budget Group published a series of pre-budget briefings to set out the gendered impact of coronavirus on different groups of women. The briefings make recommendations for investments and policies in a range of areas such as social care, childcare, local government, social security, household debt, taxation and more.
~~Public attitudes. Despite ample evidence of Covid-19 exacerbating socioeconomic gender inequalities, only 17% surveyed in the KCL study (see above bullet) viewed this as a probable consequence of the pandemic, and a third actively said a widening of gender inequality as a result of the crisis would not be a problem.
The Government’s record on social security. LSE’s Centre for Analysis of Social Exclusion published a report evaluating key outcomes of social security reforms between 2015-2019, focusing on how these changes shaped the system in place in March 2020 to cope with the shock to living standards during the pandemic.
~~Summary: The authors concluded that “Universal Credit has proved much easier for many new claimants than it would have been under previous systems. But that safety net is far lower than it was at the time of the last economic crisis, and has much wider gaps in the protection it offers, particularly for families with children. Those weaknesses can be traced back to the accretion of policy decisions over the last decade.” (Summary here)
Call for evidence. The Runnymede Trust is co-ordinating a shadow report assessing the Government’s implementation of the UN Convention on the Elimination of All Forms of Racial Discrimination (CERD), and is seeking evidence from civil society organisations, academics and institutions to shape the report and help hold the Government to its legal obligations. (Deadline Monday 8th March)
Climate change
Global climate change mitigation plans are still insufficient. A UNFCCC report analysing 48 new national climate plans (accounting for almost a third of global emissions) found that the world is still wildly off track meeting the Paris Agreement goal of holding temperature rises to 1.5°C.
~~Mind the gap. The plans analysed would reduce those nations’ emissions by only 0.5% by 2030 compared to 2010 - compared to the 45% reduction in global emissions needed to reach 1.5C. (New Scientist coverage here)
UK flooding indicates climate crisis approaching ‘worst case scenarios’. Sir James Bevan, head of the UK’s Environment Agency, gave a dire warning in a speech to the Association of British Insurers. He warned that, unless politicians take further action to reduce emissions, “the net effects will collapse ecosystems, slash crop yields, take out the infrastructure that our civilisation depends on, and destroy the basis of the modern economy and modern society”.
Blue Industrial Revolution. Ben Houchen, Conservative Mayor for Teeside, explained what a Conservative-led Green Industrial Revolution might look like, outlining a plan for increasing investment in clean technologies to create good quality jobs in deprived regions, decarbonising existing energy intensive industries and using low-tax freeport zones to encourage trade and investment.
Coverage of climate change in UK media. Charlotte Tobit wrote for the Press Gazette explaining how traditionally climate-sceptic tabloids like The Sun and the Express moved from denialism to acceptance.
Skills gap threatens green recovery. IPPR published a report with a ‘call to action for the UK construction sector’, finding that skills and employment programmes in the infrastructure sector are hamstrung by a lack of collective action among firms, and a lack of leadership in government.
~~Collapse in the pipeline. The report argued that, whilst the construction sector is essential for tackling the climate crisis, “up to 750,000 construction workers could retire or be on the verge of retiring over the next 15 years and not enough is being done to replace those workers, with just 20% of construction workers currently aged under 30”. (Coverage here)
Precautionary financial policy. A paper by NEF’s Frank van Lerven, IIPP’s Josh Ryan Collins and UCL’s Institute for Sustainable Resources’ Hugues Chenet proposed a ‘precautionary financial policy’ for central banks to calculate climate-related financial risk in a way that legitimises “more ambitious financial policy interventions in the present to better deal with these long-term risks”.
Brown investors sue green governments. Investigate Europe revealed that the EU, the UK and Switzerland could be forced to pay more than €345bn in Energy Charter Treaty (ECT) lawsuits over climate action in the coming years. The ECT allows fossil fuel companies to sue governments when profits are reduced from government action on climate change. (Explainer on the ECT here)
Health and Covid-19
Chronic pandemics. Writing for the Peterson Institute, Monica de Bolle argued “policymakers everywhere should focus on preparing for a chronic pandemic now rather than wasting valuable time speculating over its unknowable end point”.
Open source vaccine? A research team at the University of Helsinki’s Department of Virology has had a patent-free COVID-19 vaccine ready since May 2020, but failed to secure significant investment from the Finnish Government due to the patent-based funding model in pharmaceutical research.
Pfizer accused of bullying in vaccine negotiations. The Bureau of Investigative Journalism discovered that Pfizer had asked some Latin American governments to put up state-held assets - such as embassy buildings and military bases - up as collateral for any future legal costs incurred by Pfizer by civil claims raised by citizens.
Digital platforms, work and finance
Remote platform work, freelancing and the gig economy. The International Labour Organization (ILO) produced its annual report, this year focusing on digital labour platforms and their effect on the world of work.
Digital Automation at the Future of Work. The European Parliament’s Panel for the Future of Science and Technology published a study by Leeds University Business School on the scope and possible effects of digital automation on job quality and a reduction in the volume of work. The report offers policy options to facilitate transitions for workers in ‘at risk’ jobs, reduce working time and create a new Digital Social Contract.
Wellbeing in the digital workplace. Open University’s Jamie Woodcock talked to the House of Lords COVID-19 Committee about the increasing use of digital platforms for gig work in the health and social care sector, “which will have a hugely detrimental impact on predominantly women workers and BAME women workers post pandemic”. The TUC’s Kate Bell spoke to the rising surveillance of digital works and the need for new legislative protections.
The Kalifa Review of UK Fintech. An independent review commissioned by the Government proposed a series of recommendations to help Britain build on its “existing attractiveness to start-ups firms and become the best place for a fintech business to reach global scale”.
~~Criticism for failing to encourage social purpose. Finance Innovation Lab’s Marloes Nicholls argued that ”The review prioritises growth and competitiveness over social purpose and sustainability, creating a major risk that the financial system of the future will entrench inequality, exclusion, and the climate and environmental crises”.
Industrial strategy
Sunak modifies emergency support measures. The FT reported on the Chancellor’s plan to reveal a to replace business support loans with a new UK state-guaranteed loan programme with “more stringent criteria as it seeks to wean companies off state support and return the economy to a more normal, post-pandemic footing”.
~~Public equity stakes. Bloomberg found the Government has taken public equity stakes (£30.4 million) in 37 start-up companies through the British Business Bank’s Future Fund program, after the startups couldn’t repay their loans.
~~ICYMI: Last December, IPPR and Common Wealth proposed using public equity injections more widely to support businesses during the pandemic.
