UK economy: stuck in a rut of low growth, and politics is to blame

“The low tax, low regulation regime combined with globalisation ended up widening income disparities in a way that not only hurt those at the bottom of the income distribution, but ended up having adverse macroeconomic effects.”

Editorial  (Extract)

….Gertjan Vlieghe was appointed to the bank’s rate-setting committee by then-chancellor George Osborne and has proved a thoughtful commentator on the UK economy. On the verge of stepping down, his valedictory speech made last week is remarkable for going beyond the usual banker’s fare.

The great weakness of the UK, he says, lies in the policies it has followed for decades. “The low tax, low regulation regime combined with globalisation ended up widening income disparities in a way that not only hurt those at the bottom of the income distribution, but ended up having adverse macroeconomic effects.” Those effects include very high levels of debt held predominantly by households and low levels of workplace productivity, which is the result of businesses not investing. Add all those together, Mr Vlieghe suggests, and the UK is stuck in a deep rut of low growth and low rates. In other words, the exact hue of Conservative most worried about low [interest] rates has been a cheerleader for the very policies that mean we are stuck with low rates. To fix this situation, the central banker proposes stronger trade unions, much tougher rules on competition and higher taxes. Such policies are not in the bank’s gift but the government’s. Will Boris Johnson implement them? If he did, he might legitimately call them “levelling up”.

Devon’s Covid hotspots as many areas record more than 50 cases

Many areas across Devon have recorded more than 50 cases of Covid-19, according to the latest figures.

Charlotte Becquart

Devon had 15 coronavirus hotspots of more than 50 cases between July 24 and 30, data published by the Government has revealed.

The biggest cluster – area where three or more cases have been reported – was Central Exeter, with 78 confirmed positive tests.

Four other areas of Exeter recorded over 50 cases. They were: Countess Wear & Topsham (59), Heavitree West & Polsloe (63), Pennsylvania & University (56), St James’s Park & Hoopern (68).

In the Torbay area, three areas recorded more than 50 cases. They were: Chelston, Cockington & Livermead (60), Paignton Central (59), Shiphay & the Willows (56).

In Plymouth, Cattedown & Prince Rock had 54 cases, City Centre, Barbican & Sutton Harbour recorded 65, Ham, Beacon Park & Pennycross had 54, Honicknowle & Manadon had 57, Lipson had 60, Millbay & Stonehouse had 69 and Mutley had 61.

North Devon’s highest number of cases was 39 and was recorded in Braunton. South Hams’ biggest cluster was Totnes Town with 45 cases.

In the Teignbridge area, the highest number of confirmed positive tests – 38 – was recorded in Starcross & Exminster.

It was revealed on Wednesday that Exeter has the third highest infection rate in England.

According to data from the PA news agency, based on Public Health England data from 3 August, the case numbers have increased from 484 positive tests to 712 in just one week.

To paint an accurate reflection across the 315 local areas in England, PA has calculated the case rate to show how many people would have coronavirus if there were 100,000 people living in the city.

In Exeter, there are the equivalent to 541.8 cases per 100,000 of the population, sitting slightly below Lincoln with 717 and Middlesbrough with 550.4.

Plymouth has the tenth highest Covid-19 infection rate in the country – although the city’s infection rate did fall in the latest set of data.

In the Torbay area, the council’s director of public health confirmed multiple care homes have been reporting Covid infections.

Dr Lincoln Sergeant said that 17 residents and six staff in local care homes recently tested positive for the virus, with nine cases in one home alone.

The premises involved have not been revealed by the health director.

One unvaccinated resident was taken to hospital, although no deaths have been reported as a result of the outbreak.

Last month, infections in Torbay reached their highest recorded level since the pandemic began, with 960 cases in the week commencing 11 July.

Since then rates have fallen, with 564 new cases recorded in the week commencing 25 July. You can read more about this here.

Taylor Wimpey profits show what a waste Sunak’s stamp duty giveaway was

From where Rishi Sunak sits, he might regard Taylor Wimpey’s bumper set of first-half figures as a triumph of policymaking. 

Nils Pratley 

The chancellor threw subsidies at the housing market during the pandemic in the form of stamp duty holidays and probably hoped to see what has now materialised: record house completions and the UK’s third largest builder talking about profit upgrades and “excellent momentum into the medium term”.

From a policy perspective, though, the proper way to look at events is the precise opposite: the stamp duty giveaway was a waste of public money.

The savings inevitably cling to the seller as much as the buyer, and, as should now be clear, the big housebuilders did not need a helping hand to get through lockdown.

The boom would have happened anyway because the basic ingredients of a helpful trading backdrop were in place. Interest rates were at rock-bottom, mortgage availability was good and pent-up post-Brexit demand was still being released.

At a push, one could argue that the initial holiday, announced early in the pandemic, helped to create a little confidence in a sensitive corner of the UK economy.

But the extension, announced by Sunak in his budget in March this year, was indefensible. By then, take-off had happened and the housebuilders were busy buying land again. Indeed, Taylor Wimpey, wisely, had raised £500m from investors in mid-2020 to get ahead of the rush.

The company was never a member of the industry chorus intimidating Sunak with talk of a “cliff edge” if the holiday wasn’t extended, it should be said. Others were, though, and the chancellor should have ignored them and looked instead at how fat 20% profit margins (more in some cases) were coming back.

The net cost of the extension was put at £1.3bn by the Treasury in the current tax year. That’s small beer in the context of the overall Covid support package for business, but it is still money that could have been directed at sectors genuinely in need. Sunak was naive.

Taylor Wimpey lifts profit target after building record number of homes

Taylor Wimpey, one of the UK’s biggest housebuilders, has returned to profit and upgraded its earnings targets after building a record number of homes in the first six months of the year.

Jillian Ambrose 

The High Wycombe-based firm built more than 7,300 homes in the first half of 2021, almost all of which have been pre-sold, allowing the company to lock in the benefit of soaring house prices triggered by cheap loans, the government’s stamp duty holiday and a pandemic-driven preference for larger houses.

The FTSE 100 housebuilder reported a pre-tax profit of £287.5m for the six months to early July after a £40m loss in the same period last year in the wake of the coronavirus pandemic.

Pete Redfern, Taylor Wimpey’s chief executive, said the company expects to complete between 13,200 and 14,000 houses in 2021, and reach an operating profit for the year of about £820m.

“We have a clear purpose to deliver high-quality homes and create thriving communities and a strategy to ensure the long-term sustainability of the business,” he said.

Taylor Wimpey’s housebuilding rivals Barratt Developments and Persimmon last month predicted that the strong demand for housing would continue even after the government’s stamp duty holiday on property purchases ends in September.

In an interview with the BBC, Redfern dismissed fears that the UK faces a house price bubble and downplayed comparisons between the current housing market surge and the 2007 boom, which led to a crash in property prices and played a key role in triggering the 2008 financial crisis.

“I think we’ve seen a short-term reaction to the pandemic but an underlying stable and healthy housing market,” Redfern said.

“The number of investors buying homes [in 2007] was a very significant part of the market, particularly in the US – but also in the UK, the number of apartments being bought in markets that haven’t traditionally sustained apartments was very high, mortgage lending was significantly laxer than it is today. And also, we’d seen five years of house price growth well above inflation levels. None of those things are true today.

“We are seeing a return of second-time buyers to the market, having had several years following the financial crash where that market has been very subdued, and I think the pandemic has changed people’s mindsets and moved things along.”

Shares in Taylor Wimpey had risen 2.5% in afternoon trading at 169p.

Converted offices pose ‘deadly risk’ in heatwaves, experts warn

The conversion of offices into flats in urban centres poses a “potentially deadly risk” to occupants as the intensity of heatwaves rises, experts have warned.

Damian Carrington 

Further relaxation of planning rules from Sunday mean even more commercial premises can be converted into homes without planning permission. But a failure to provide vital cooling features would make some uninhabitable as the climate crisis worsens, the experts said.

More than 64,000 flats have been built in former offices in the past five years and the rise of home-working during the pandemic is expected to lead to a surge in conversions. The latest government data show a 28% rise in applications since last year.

Permitted development rights (PDR) allow the use of a building to change without planning permission and already applied to offices, but from Sunday they are expanded to cover commercial premises, such as vacant shops, restaurants and gyms. A report commissioned by the government concluded in July 2020 that PDR conversions “create worse quality residential environments in relation to a number of factors widely linked to the health, wellbeing and quality of life of future occupiers”.

The Climate Change Committee, the government’s official advisers, estimates that one in five UK homes already overheat. In 2020, summer heatwaves in England caused 2,556 deaths, and the CCC projects such deaths to triple by 2040 if no action is taken.

Ministers rejected CCC advice in 2015 to bring in new heat-proofing regulations. The CCC repeated its warning in 2019 and said the UK’s lack of plans to protect people from climate crisis was “shocking”. In July, it said it was “absolutely illogical” not to tackle the risks of heatwaves.

“While we recognise the need for more affordable housing, we have concerns about the standard of some homes built under PDR,” said Paul Redington at insurer Zurich UK. “In particular, overheating is emerging as a potentially deadly risk.”

The Royal Institution of Chartered Surveyors and the Chartered Institute of Building share the concerns. Eddie Tuttle at the CIOB said: “There is clear evidence that homes built using PDR has led to spaces detrimental to the health, wellbeing and quality of life of future occupants. Ministers must address these concerns as a matter of urgency.”

He added that PDR conversions had few checks on some aspects of quality, including ventilation and energy efficiency: “Deregulation is part of the problem – what you have to do is regulate sensibly.”

The danger of deadly heat is greatest in small flats and particularly those with only south-facing windows that suffer the full glare of the sun. In some flats, residents may be reluctant to open the windows due to security risks or air pollution.

“Many of these buildings are in city and town centres, which by definition already suffer from the urban heat island effect,” said Redington. Developers could be required to improve cooling by installing shutters on windows, using reflective surfaces and ceiling fans, he said.

“These shocking [PDR conversion] figures are a further damning indicator of the government’s failure to take the threat of heatwaves seriously,” said Bob Ward, of the Grantham Research Institute on Climate Change at the London School of Economics. “Badly designed homes that overheat can be lethal to the occupants in hot weather, particularly if they have underlying health conditions. The government must urgently create and implement a national heat risk strategy.”

A spokesman at the Ministry of Housing, Communities and Local Government said: “Our reforms will transform unused buildings into much-needed new homes, and all new homes must be of high quality and meet national space standards and building regulations – including ventilation requirements.” He said any claim that PDR homes were necessarily of worse quality was unfounded.

A quarter of donations to the Tory party since Boris Johnson became prime minister in July 2019 has come from donors with property interests, the Financial Times revealed last week.

Reddington also said water leaks were disproportionately frequent in converted flats, due to inadequate plumbing for residential use. One London office block converted into 400 flats saw a leak in one ninth-floor home cause £1.5m of damage and forced 36 families in other flats to move out for many months. He said measures to avoid leaks, overheating and fires should be installed during conversion, to avoid expensive retrofits later.

Covid contracts: minister replaced phone before it could be searched

Labour has called for an inquiry into the use of WhatsApp within the government, after it emerged a health minister replaced his mobile phone before it could be searched for information relevant to £85m of deals that are subject to a legal challenge.

Rowena Mason 

James Bethell, who oversaw the award of Covid contracts, is one of those under scrutiny over the way deals for personal protective equipment (PPE) and tests were allocated at the height of the pandemic.

As part of legal proceedings issued by the Good Law Project, the government is expected to disclose Lord Bethell’s correspondence including by email, WhatsApp and SMS relating to the award of £85m of contracts for antibody tests to Abingdon Health.

The secretary of state has a responsibility to preserve and search documents for information relevant to the case from the point at which judicial review proceedings were issued in late 2020, under the government’s “duty of candour”.

However, a witness statement from a government lawyer revealed Bethell replaced his phone in early 2021 and it may no longer be possible to retrieve the information about his dealings with Abingdon, although efforts are being made to recover them from his mobile phone provider.

The statement said Bethell had used his official email account as well as his private email account to send and receive emails relevant to the contracts, and that he had also used his mobile phone for SMS and WhatsApp messages. But it said Bethell had confirmed that about six months ago his phone was broken and replaced and that his new phone did not contain the phone data.

Government lawyers revealed Bethell had not been issued with a “preservation notice” requiring him to save documents because ministers’ official correspondence was routinely saved as a matter of course. However, this did not cover government business conducted by private means.

Bethell is already under investigation by the Information Commissioner’s Office (ICO) over the use of private emails for government business, prompted by revelations that his former boss Matt Hancock was using a private account at the height of the pandemic.

Labour called on the information commissioner to widen the scope of her investigation to cover discussions via instant messaging platforms such as WhatsApp.

The party’s deputy leader, Angela Rayner, said: “If ministers and their advisers really have nothing to hide then they will have no problem handing over the emails and messages showing what government business was being conducted in secret, so the public know how their money was spent and these messages are secured for the long-promised public inquiry.”

The Department of Health and Social Care (DHSC) did not respond to two requests for comment.

Downing Street admitted in July that Bethell had used private emails for government business despite denying it 24 hours earlier, but said he had abided by the guidance on copying in official accounts.

Bethell, a close ally of Hancock’s, told the House of Lords at the time: “In terms of the use of private email can I just reassure members that I have read the ministerial code, I have signed the ministerial code and I seek to uphold it in everything I do.”

He has also been criticised for failing to declare meetings with PPE suppliers that were awarded contracts and is facing a separate inquiry by the Lords standards watchdog over his sponsorship of a parliamentary pass for Gina Coladangelo, the aide Hancock had a relationship with in breach of Covid rules.

Bethell has written to the standards watchdog saying Coladangelo provided “unpaid parliamentary research support, helping me to draft speeches, engaging with stakeholders and assisting with my communications”. The DHSC blamed the failure to declare meetings on an “administrative error”.

The ICO is investigating the use of all private correspondence channels used by ministers – which could include tools such as WhatsApp – after concerns were raised about the former health secretary’s email, as well as private emails from Bethell.

The former health secretary resigned for breaching social distancing guidelines. His use of emails will form part of the investigation.

Bethell previously faced calls for his resignation after the Guardian revealed that a number of emails had been copied into his private email account. His address was copied into at least four official exchanges relating to a businessman who was attempting to get government contracts during the pandemic.

Elizabeth Denham, the information commissioner, has said the use of private channels to conduct government business was “a concerning one” and could lead people to feel there was “a loss of transparency about decisions affecting them and their loved ones”.

She said the effects of decisions taken by government especially during the past 18 months would continue for years to come. “It is through transparency and explaining these decisions that people can understand and trust them,” she added.

The ICO has said the use of private correspondence channels does not in itself break freedom of information or data protection rules. But Denham said she was concerned information in private email accounts or messaging services was forgotten, overlooked, auto-deleted or otherwise not available when a freedom of information request was later made.

“This frustrates the freedom of information process, and puts at risk the preservation of official records of decision-making. I also worry that emails containing personal detail are not properly secured in people’s personal email accounts.”

Multiple Devon care homes hit with covid cases

Multiple Torbay care homes have been reporting Covid infections, the council’s director of public health has confirmed.

Edward Oldfield

Speaking this week, Dr Lincoln Sergeant said that 17 residents and six staff in Torbay’s care homes have recently tested positive for the virus, with nine cases in one home alone.

The premises involved have not been revealed by the health director.

Dr Sergeant does not believe the break outs are because of poor infection control.

He said: “What we think is happening is that the homes are being bombarded by the higher background rate [of infections] for quite some time.”

He argues it is unlikely that a single breakout event has occurred and more probable that separate instances of infection entering the homes are happening, such as residents receiving visits from people with Covid.

Dr Sergeant said: “It just shows that when the background rates are high it’s very very difficult to prevent infections from getting in.

“Even doing the right things you will get the occasional breakthrough.”

One unvaccinated resident was taken to hospital, although no deaths have been reported as a result of the outbreak.

“The majority appear to be recovering nicely. We hope that situation holds into the future,” Dr Sergeant said.

Last month, infections in Torbay reached their highest recorded level since the pandemic began, with 960 cases in the week commencing 11 July.

Since then rates have fallen, with 564 new cases recorded in the week commencing 25 July.

During an outbreak in Torbay’s care homes in March, 11 residents and 20 staff tested positive.

Another outbreak happened in care homes in the Bay in late May.

Younger adults are now more likely to come down with the virus in Torbay.

As of 28 July, the weekly figure for people testing positive aged under 60 in the area was 532 people per 100,000, compared with just 102 per 100,000 for older people.