Dodgy deals in 21st century Westminster, and the 17th century Square Mile Top of the Charts 11 February 2022 Torsten Bell Afternoon all, We need a bit less Groundhog Day in our news this February with the endless discussions of whether Putin will/won’t invade Ukraine, or Tory MPs fancy bringing down the PM. Obviously the two are very different – sending in letters ≠ sending in tanks. But in both cases the aggressors are demanding things that the other side can’t deliver (the end of Ukrainian sovereignty/a normal, professionally-run No. 10) and don’t seem to have a clear endgame if a fight actually does kick off. Meanwhile the rest of the world would like to get on with exiting this pandemic. We’re doing our bit. With the caseload falling and restrictions easing, we’ll be going back to real life in human events from 21st February – and we’ve got shed loads coming up. So, for some light relief from the news cycle, come along to: Monday 21st Feb, 6.30pm – A firm solution? – Speech by Chairman of the John Lewis Partnership Dame Sharon White on how businesses can rise to the economic challenges facing Britain in the 2020s Monday 23rd Feb, 5.30pm – Disruption nation – Discussion with Helen Thompson, author of Disorder, on how big economic and political shocks have shaped our world Tuesday 1st March, 2pm – Consuming Carbon – What does the net zero transition mean for households? Tuesday 8th March, 9.30am – Crunch time – examining the outlook for living standards in 2022 You’ll get charts (high quality), morning coffee /evening wine (more mixed if I’m honest) and lots of chat on some interesting topics. Have a great weekend and hopefully see you in Resolution towers sometime soon. Torsten Bell, Chief Executive Resolution Foundation Paying politicians. British politics kicked off its current omnishambles phase with Owen Patterson’s breach of lobbying rules. New research takes us back to the issue by studying the 2002 removal of the ban on MPs taking part in parliamentary proceedings (e.g. instigating a debate/being on a committee) related to their personal corporate interests. Firms with connections to MPs before the change saw their value rise by 4 – 5 per cent over three years. Lucky them. MPs changed their behaviour (those with corporate jobs were more likely to be appointed to committees and attended more regularly) and so did firms (paying MPs rather than making donations/employing ex-MPs). So even if we’ve forgotten what on earth Owen Patterson did wrong (his big mistake of course was asking Boris Johnson to get him off), this is a clear reminder why our democracy is stronger with clear rules on second jobs that are actually enforced. Superior stats. For balance we should note that most MPs aren’t bent, and they’ve got better at stats! So finds the Royal Statistical Society’s survey of MPs which asked them what the chance of getting two heads was if you toss a coin twice. 52 per cent got it right (a 25 per cent chance) up from 40 per cent when the survey was last done ten years back. Before you ask, there wasn’t much difference between MPs of the main two parties – but those from the North/Midlands did do better, raising serious questions about how we’ve going to level up the maths abilities of the South’s elected representatives… Taxing transactions. Cash is on the way out – contactless payments are surging and Covid put us off handing each other bits of metal/paper. The good news is cutting cash also boosts tax receipts. A study, focusing on India’s controversial demonetisation of 2016 (when 86 per cent of cash ceased to be legal tender, hitting output but also triggering a big surge in electronic payments), shows that the shift towards electronic payments increased the taxes firms pay. Specifically, higher sales were reported to the tax authorities in areas where electronic payments increased faster. There are some well-discussed inclusion challenges with moving away from cash, but the last two years have shown they are smaller than often claimed. And before anyone says a study in a large developing economy doesn’t tell us much about the UK, a bit of humility about ourselves is in order: it’s nuts we tolerate widespread cash-in-hand payments/tax evasion to the extent we do. Levelling-up listening. We had some levelling up blogs last week, but for some easy listening on the history of England’s north/south divide check out the latest Westminster Insider podcast. This week’s Briefing Room also asks the not unreasonable questions, what is levelling up and will it work? If you want something a bit more interactive, this levelling up chat has triggered the creation of some new data tools: Tom Forth has built a site for anyone after knowing what population live within a particular distance of a single point, and the ONS have a page to let you find loads of data (employment rate, life expectancy, life satisfaction etc) by local authority. London lending. For some light relief from levelling up, I enjoyed this note on the economic aftermath of levelling down London via the 1666 Great Fire. The city had been largely rebuilt by 1673 (although St Pauls wasn’t completed until the 18th Century), which the authors show was partly because the City of London Corporation could borrow so cheaply (at better rates than the Crown – which itself went bust in 1672). This is largely put down to the Corporation’s reputation. But that reputation wasn’t well deserved, with its finances already weak before the fire (with extensive borrowing via the Orphans Fund – a mechanism that saw those holding inheritances on behalf of orphans deposited them with the Corporation). For rebuilding purposes, Parliament assigned the Corporation revenues from the tax on coal shipped in by sea (lots from Newcastle), but that wasn’t sufficient. Only the lack of transparency of the Corporation’s finances kept the show on the road through the 1670s, before the house of cards came down with a default in 1683. Chart of the Week There’s a certain kind of Conservative MP who wants lower taxes, and for everyone to stop banging on about net zero. But really the low tax fanatics should be the biggest net zero fans – it’s basically the only thing actually reducing taxes right now as our swifter than expected uptake of electric vehicles (EVs) eats into fuel duty revenues at a rate of knots. Eventually we’ll lose £35bn from this tax over the next two decades, but the pace of decline matters a lot – not least for a Treasury needing time to implement an alternative (hello road charging). And that pace is heating up, with EVs going from under 10 per cent of sales in early 2021 to over 15 per cent in the autumn and a quarter by December. This week’s chart (from this major new report) shows what our consistent underestimate of EV take-up could mean for fuel duty revenues. If we follow the trend of swift adoption seen in Norway since 2016, EVs will reach around 60 per cent of sales by 2025-26, setting us on course to lose £8 billion for fuel duty on cars alone by 2030 – significantly more than implied by previous government plans (£5bn). So electric cars = good news for consumers, great news for the planet, and yet another headache for the Treasury to grapple with.
