Chess games, Touchscreens and the Chancellor’s challenge Top of the Charts 29 January 2021 Torsten Bell Sign up for our weekly Top of the Charts reading email Afternoon all, Good to have some more vaccine-related good news for a Friday, via the Novavax effectiveness study. The only downside is that being told the jabs are 89 per cent effective is a recipe for making me feel bad about my own 8.9 per cent effectiveness amid lockdown III and the home-schooling nightmare. On which note, I could do without the study this morning pointing out that we’re all exercising less and eating more than during the first lockdown… it’s almost like it’s winter. The only coping strategy is to break out the chocolate bars, the beer bottles and this week’s TOTC reads. Have a good weekend all, Torsten Chief Executive, Resolution Foundation Checkmate. The Queen’s Gambit (WATCH IT NOW!) means chess is having a bit of a moment. But chess tournaments can give us great research, not just good TV… A fascinating study takes data from 24,000 chess games between 1890 and 2014 , and compares the moves made by competitors to the ‘best’ move possible according to AI – essentially grading how well the players are performing. It also looks at when they were performing at their ‘best’ by following the same competitors over time, and how the peak age in mental capability of chess professionals has changed over time. The good news is that us humans have been getting better at this complex cognitive task over time (those born around the 1970s perform 8 per cent better than the 1870s cohort, and the 1990s saw particularly sharp improvements). Less encouragingly, there’s a clear ‘hump’ pattern to mental performance, which improves fast during our 20s and peaks around 35. Those of us self-identifying as middle-aged are on the downslope of mental ability. Which is nice. The kids’ chess lessons are off. Put down the iPad. Apologies in advance for compounding a week of bad news for home-schoolers. It turns out that while toddlers using iPads and smartphones is sanity-saving for parents, it stuffs up the kids concentration-wise (obviously). A study looks specifically at touchscreen devices, and compares how groups of children who were high and low users of touchscreens reacted to tasks testing their ability to choose to concentrate on a target, and ignore a separate flashing image. The study found that children who were regular users during the first 3.5 years were less successful in the tasks and more easily distracted. Something to think about. After lockdown. Scottish Budget. Burns Night, an ‘essential’ PM visit, and a budget, mean it’s been a big week north of the border. Recently-engaged Cabinet Secretary for Finance Kate Forbes had a tough gig given the grim (and expensive) second wave underway. The Fraser of Allander Institute’s instant reaction is a good place to start. Election year in Scotland means business rates were cut and council tax basically frozen (to contrast with rises down south). The SNP government signals leftiness on income tax rates (which are slightly higher for those earning over £27k) but the overall approach on tax levels is pretty similar to the Conservatives in England. The new ‘Scottish Child Payment’ will start being made to families with young children this year, but no new cash was announced for it despite the coming years being likely to see rising child poverty. The Scottish Fiscal Commission’s forecasts were more pessimistic about early 2021 than the OBR’s from November. And because of the many complexities of the UK/Scotland fiscal relationship, this means a ‘Scotland specific economic shock’ has been triggered – meaning the Scottish Government has additional powers to borrow/dip into reserves (although this is likely to disappear when the OBR updates their forecasts in March). Convoluted? Yes – which is why the UK / Scottish fiscal framework is currently under review. Wobbly firms. We’ve spent a lot of time examining crisis-impacted household balance sheets (which are improving for many, but not looking good among poorer families). But firms’ balance sheets will also shape the next phase of this crisis and have received too little attention so far. Ahead of new RF research on this in early February, check out two papers with very different takes. Some rare optimism comes in this paper focused on Japan. While many Japanese businesses saw a lot less cash coming in (SME sales fell 20 per cent in 2020), government support stopped firms defaulting due to being short on cash, with shortages of ¥3.3 trillion reduced to ¥0.6 trillion. The result, along with higher reserves firms have built up post-financial crisis, is that firm defaults have broadly remained in line with 2019 levels. The Bank of England comes to similar conclusions for the UK. But what about the future? A second (UK focused) paper by John Van Reenen is much gloomier about what’s to come, noting that 900,000 businesses employing 2.5 million people are at risk of failure in the coming months. Rishi emails. We’re pro-competition here at TOTC so it’s only fair to advertise the Chancellor’s new Friday email. Rishi promises the “latest news, stats and info every Friday evening”. But has he got a chart of the week I ask you? The newsletter is called “No.11”, referring to Downing Street rather than riffing on the Chanel scent. I think. But rather oddly it’s a personal thing run from his parliamentary office not the Treasury. The plus side I suppose is he gets to hold all your data personally (politicians LOVE collecting email addresses). The downside is the title is going to have to change if he moves up to No.10, or anywhere else for that matter. Chart of the Week A big week for the labour market too, with changes to the Kickstart Scheme on Monday followed by new ONS job stats on Tuesday, and equally important HMRC take-up data of the furlough scheme yesterday. The furlough stats offer an insight into where the labour market hit is greatest right now, and the risk of rising unemployment when the scheme ends after April. This week’s Chart (okay, it’s a map) shows where the UK’s furlough hotspots are (and before you think the graphics show London bias, it’s a cartogram with areas based on population size). The map shows that furloughing is most prevalent in big cities with young populations and tourist-reliant areas (ie Cornwall and the Lakes). Outer North London is the hotspot – where low earners used to commute into the (now deserted) city centre for work. The scale of government intervention is still huge – over four million of us were furloughed in late 2020, and that will have risen in lockdown III. Managing the transition away from furlough will go a long towards determining the scale of rising unemployment this year – and the scale of the challenge we face in ensuring we don’t lose a Covid generation to long-term unemployment.