Friday 29 May 2020
Wednesday 27 May 2020
Privatisation is at the heart of the UK's disastrous coronavirus response
George Monbiot in The Guardian
Amid the smog of lies and contradictions, there is one question we should never stop asking: why has the government of the United Kingdom so spectacularly failed to defend people’s lives? Why has “this fortress built by Nature for herself against infection”, as Shakespeare described our islands, succumbed to a greater extent than any other European nation to a foreseeable and containable pandemic?
Part of the answer is that the government knowingly and deliberately stood down crucial parts of its emergency response system. Another part is that, when it did at last seek to mobilise the system, crucial bits of the machine immediately fell off. There is a consistent reason for the multiple, systemic failures the pandemic has exposed: the intrusion of corporate power into public policy. Privatisation, commercialisation, outsourcing and offshoring have severely compromised the UK’s ability to respond to a crisis.
Take, for example, the lethal failures to provide protective clothing, masks and other equipment (PPE) to health workers. A report by the campaigning group We Own It seeks to explain why so many doctors, nurses and other hospital workers have died unnecessarily of Covid-19. It describes a system built around the needs not of health workers or patients, but of corporations and commercial contracts: a system that could scarcely be better designed for failure.
Four layers of commercial contractors, each rich with opportunities for profit-making, stand between doctors and nurses and the equipment they need. These layers are then fragmented into 11 tottering, uncoordinated supply chains, creating an almost perfect formula for chaos. Among the many weak links in these chains are consultancy companies like Deloitte, whose farcical attempts to procure emergency supplies of PPE have been fiercely criticised by both manufacturers and health workers.
At the end of the chains are manufacturing companies, some of which have mysteriously been granted monopolies on the supply of essential equipment. These private monopolies have either failed to meet their contracts, or provided defective gear to the entire NHS, like the 15m protective goggles and the planeload of useless surgical gowns that had to be recalled.
Instead of stockpiling supplies, as emergency preparedness demands, companies in these chains have been using just-in-time production systems, whose purpose is to cut their costs by minimising stocks. Their minimised systems could not be scaled up fast enough to meet the shortfall. Where there should be a smooth, coordinated, accountable programme, there’s opacity, byzantine complexity and total chaos. So much for the efficiencies of privatisation.
The pandemic has also exposed the privatised care system as catastrophically unfit and ill-prepared. In 1993, 95% of care at home was provided publicly by local authorities. Now, almost all of it – and almost all residential care – is provided by private companies. Even before the pandemic, the system was falling apart, as many care companies, unable to balance the needs of their patients with the demands of their shareholders, collapsed, often with disastrous consequences.
Now we discover just how dangerous their commercial imperatives have become, as the drive to make care profitable has created a fragmented, incoherent system, answerable sometimes to offshore owners, that fails to meet basic standards, and employs harassed workers on zero-hour contracts. If there is one thing we have learnt from this pandemic, it’s the need for a publicly owned, publicly run National Care Service – the care equivalent of the NHS.
It could all become much worse, due to another effect of corporate power. A report by the Corporate Europe Observatory shows how law firms are exploring the possibility of suing governments for the measures they have taken to stop the pandemic. Many trade treaties contain a provision called “investor state dispute settlement”. This enables corporations to sue governments in opaque offshore tribunals, for any policies that might affect their “future anticipated profits”.
So when governments, in response to coronavirus, have imposed travel restrictions, or requisitioned hotels, or instructed companies to produce medical equipment or limit the price of drugs, the companies could sue them for the loss of the money they might otherwise have made. When the UK government commandeers private hospitals or the Spanish government prevents evictions by landlords, and stops water and electricity companies from cutting off destitute customers, they could be open to international legal challenge. These measures, which override democracy, have already hampered attempts by many governments, particularly of poorer nations, to protect their people from disasters. They urgently need to be rescinded.
The effectiveness of our health system is also threatened by the trade treaty the UK government hopes to sign with the US. The Conservatives promised in their manifesto that “the NHS is not on the table” in the trade talks. But they have already broken their accompanying promise, “we will not compromise on our high environmental protection, animal welfare and food standards”. Earlier this month, they voted that measure out of the agriculture bill. US companies are aggressively demanding access to the NHS. The talks will be extremely complex and incomprehensible to almost everyone. There will be plenty of opportunities to give them what they want while fooling voters.
Boris Johnson’s central mission, overseen by Dominic Cummings, is to break down all barriers between government and the power of money. It is to allow private interests to intrude into the very heart of government, while marginalising the civil service. This helps to explain why Johnson is so reluctant to let Cummings go. The disasters of the past few weeks hint at the likely results.
Amid the smog of lies and contradictions, there is one question we should never stop asking: why has the government of the United Kingdom so spectacularly failed to defend people’s lives? Why has “this fortress built by Nature for herself against infection”, as Shakespeare described our islands, succumbed to a greater extent than any other European nation to a foreseeable and containable pandemic?
Part of the answer is that the government knowingly and deliberately stood down crucial parts of its emergency response system. Another part is that, when it did at last seek to mobilise the system, crucial bits of the machine immediately fell off. There is a consistent reason for the multiple, systemic failures the pandemic has exposed: the intrusion of corporate power into public policy. Privatisation, commercialisation, outsourcing and offshoring have severely compromised the UK’s ability to respond to a crisis.
Take, for example, the lethal failures to provide protective clothing, masks and other equipment (PPE) to health workers. A report by the campaigning group We Own It seeks to explain why so many doctors, nurses and other hospital workers have died unnecessarily of Covid-19. It describes a system built around the needs not of health workers or patients, but of corporations and commercial contracts: a system that could scarcely be better designed for failure.
Four layers of commercial contractors, each rich with opportunities for profit-making, stand between doctors and nurses and the equipment they need. These layers are then fragmented into 11 tottering, uncoordinated supply chains, creating an almost perfect formula for chaos. Among the many weak links in these chains are consultancy companies like Deloitte, whose farcical attempts to procure emergency supplies of PPE have been fiercely criticised by both manufacturers and health workers.
At the end of the chains are manufacturing companies, some of which have mysteriously been granted monopolies on the supply of essential equipment. These private monopolies have either failed to meet their contracts, or provided defective gear to the entire NHS, like the 15m protective goggles and the planeload of useless surgical gowns that had to be recalled.
Instead of stockpiling supplies, as emergency preparedness demands, companies in these chains have been using just-in-time production systems, whose purpose is to cut their costs by minimising stocks. Their minimised systems could not be scaled up fast enough to meet the shortfall. Where there should be a smooth, coordinated, accountable programme, there’s opacity, byzantine complexity and total chaos. So much for the efficiencies of privatisation.
The pandemic has also exposed the privatised care system as catastrophically unfit and ill-prepared. In 1993, 95% of care at home was provided publicly by local authorities. Now, almost all of it – and almost all residential care – is provided by private companies. Even before the pandemic, the system was falling apart, as many care companies, unable to balance the needs of their patients with the demands of their shareholders, collapsed, often with disastrous consequences.
Now we discover just how dangerous their commercial imperatives have become, as the drive to make care profitable has created a fragmented, incoherent system, answerable sometimes to offshore owners, that fails to meet basic standards, and employs harassed workers on zero-hour contracts. If there is one thing we have learnt from this pandemic, it’s the need for a publicly owned, publicly run National Care Service – the care equivalent of the NHS.
It could all become much worse, due to another effect of corporate power. A report by the Corporate Europe Observatory shows how law firms are exploring the possibility of suing governments for the measures they have taken to stop the pandemic. Many trade treaties contain a provision called “investor state dispute settlement”. This enables corporations to sue governments in opaque offshore tribunals, for any policies that might affect their “future anticipated profits”.
So when governments, in response to coronavirus, have imposed travel restrictions, or requisitioned hotels, or instructed companies to produce medical equipment or limit the price of drugs, the companies could sue them for the loss of the money they might otherwise have made. When the UK government commandeers private hospitals or the Spanish government prevents evictions by landlords, and stops water and electricity companies from cutting off destitute customers, they could be open to international legal challenge. These measures, which override democracy, have already hampered attempts by many governments, particularly of poorer nations, to protect their people from disasters. They urgently need to be rescinded.
The effectiveness of our health system is also threatened by the trade treaty the UK government hopes to sign with the US. The Conservatives promised in their manifesto that “the NHS is not on the table” in the trade talks. But they have already broken their accompanying promise, “we will not compromise on our high environmental protection, animal welfare and food standards”. Earlier this month, they voted that measure out of the agriculture bill. US companies are aggressively demanding access to the NHS. The talks will be extremely complex and incomprehensible to almost everyone. There will be plenty of opportunities to give them what they want while fooling voters.
Boris Johnson’s central mission, overseen by Dominic Cummings, is to break down all barriers between government and the power of money. It is to allow private interests to intrude into the very heart of government, while marginalising the civil service. This helps to explain why Johnson is so reluctant to let Cummings go. The disasters of the past few weeks hint at the likely results.
Monday 25 May 2020
Sunday 24 May 2020
Most ingredients are in place for a property crash later this year
Rising unemployment is toxic for the property market and low interest rates may not be enough writes Larry Elliott in The Guardian
Spring is usually the time when the property market comes out of hibernation. Photograph: lucemac/GuardianWitness
This weekend marks the start of a truncated summer house buying season, the moment the residential property market comes out of hibernation.
Normally this happens at Easter but, for obvious reasons, that has not been possible in 2020. Estate agents have been shuttered along with almost every other business, waiting impatiently for the lifting of the lockdown. This bank holiday weekend, with fine weather forecast, provides a chance to make up for lost time.
Well, perhaps. Britain’s love affair with rising house prices borders on the pathological so a mini boom can’t entirely be ruled out. The government did its best last week to give the market a boost by extending its mortgage holiday for the financially distressed for a further three months. That means those having trouble keeping up with their home loans won’t have to make a repayment until at least September.
That said, the notion that this is going to be a year of high turnover and rising house prices is wide of the mark. All the ingredients, bar one, is in place for a crash later in the year.
Let’s start with the obvious: the economy has been poleaxed by the Covid-19 pandemic. The official jobless figures – showing a rise to 2.1 million in claimant count unemployment – provide only a hint of the damage that has been caused to the labour market by the lockdown. A truer picture comes from the number of jobs furloughed under the Treasury’s wage subsidy scheme, which stands at 8m and counting.
Not every one of those furloughed workers is going to end up jobless, but some of them will. The number will depend, crucially, on how long it takes for the economy to return to something like normal. The slower the process the more businesses will close permanently.
Rishi Sunak announced earlier this month that the furloughing scheme will be kept going until the end of October, but from the start of August employers will be asked to foot part of the wage bill themselves. At present, the government is paying 80% of wages up to a monthly maximum of £2,500, an expensive commitment that helps explain why the state borrowed almost as much in April (£62bn) as in the whole of the last financial year.
The chancellor will announce in the next few days how big a contribution employers will need to make, but at a minimum they can expect to pay 20% of an employee’s wages. This will be the moment of truth for many businesses.
Rising unemployment is toxic for the property market. If people struggle to find another job quickly after losing their job they fall into mortgage arrears and eventually have their homes repossessed. That happened in the early 1990s and is one reason why a mortgage holiday has been introduced this time.
Hansen Lu, property economist at Capital Economics, has shown how a moratorium on home loan payments saves someone paying 2.5% on a £200,000 mortgage £5,400 over a six-month period. That’s quite a financial cushion because although the lender eventually has to be paid back, it means subsequent mortgage payments go up by about £30 a month.
Again, everything depends on the state of the labour market this autumn. The mortgage holiday will end at the same time as the furlough scheme, and already there will be many households who will be wondering how they will manage at that point.
Buying a house is the single biggest financial commitment most of us ever make. When people are deciding whether to buy or not, they think hard about whether they are going to be able to keep up the monthly payments. It is not just being unemployed that matters; it is the threat of unemployment. Surveys suggest, hardly surprisingly, that consumers are extremely wary of committing to big-ticket items.
Only one thing is missing from a perfect storm: sharply rising interest rates. A doubling of official interest rates was the trigger for recession and record home repossessions in the early 1990s, but there is not the slightest prospect of that happening this time. The Bank of England has cut interest rates to 0.1% and is debating whether to take them negative.
There are economists – the monetarist Tim Congdon, for example – who believe that the vast quantities of money the Bank is chucking at the economy will eventually lead to much higher inflation. In those circumstances Threadneedle Street would have a choice: raise interest rates aggressively to hit the government’s 2% inflation target and guarantee deep recession in the process; or go easy. If it chooses the first option the housing market will collapse because many owner occupiers can only service the debts they have had to to incur to afford expensive real estate if interest rates remain at historically low levels.
So here’s how things stack up. On the one hand, the economy has collapsed and is recovering only falteringly; unemployment, whether real or hidden by the furlough, is rocketing; incomes are being squeezed; consumer confidence is at a low ebb; and the ratio of house prices to earnings is high. On the other hand, interest rates are low and will stay low for some time. In the jargon of the economics profession, there are more downside than upside risks.
But let me personalise things a bit. A relative for whom I hold power of attorney is about to have his house put on the market to fund his care home fees. My intention is to take the first halfway decent offer that’s received, because my sense is that prices are heading lower. In the past I haven’t heeded my own advice and lived to regret it. Not this time, though.
This weekend marks the start of a truncated summer house buying season, the moment the residential property market comes out of hibernation.
Normally this happens at Easter but, for obvious reasons, that has not been possible in 2020. Estate agents have been shuttered along with almost every other business, waiting impatiently for the lifting of the lockdown. This bank holiday weekend, with fine weather forecast, provides a chance to make up for lost time.
Well, perhaps. Britain’s love affair with rising house prices borders on the pathological so a mini boom can’t entirely be ruled out. The government did its best last week to give the market a boost by extending its mortgage holiday for the financially distressed for a further three months. That means those having trouble keeping up with their home loans won’t have to make a repayment until at least September.
That said, the notion that this is going to be a year of high turnover and rising house prices is wide of the mark. All the ingredients, bar one, is in place for a crash later in the year.
Let’s start with the obvious: the economy has been poleaxed by the Covid-19 pandemic. The official jobless figures – showing a rise to 2.1 million in claimant count unemployment – provide only a hint of the damage that has been caused to the labour market by the lockdown. A truer picture comes from the number of jobs furloughed under the Treasury’s wage subsidy scheme, which stands at 8m and counting.
Not every one of those furloughed workers is going to end up jobless, but some of them will. The number will depend, crucially, on how long it takes for the economy to return to something like normal. The slower the process the more businesses will close permanently.
Rishi Sunak announced earlier this month that the furloughing scheme will be kept going until the end of October, but from the start of August employers will be asked to foot part of the wage bill themselves. At present, the government is paying 80% of wages up to a monthly maximum of £2,500, an expensive commitment that helps explain why the state borrowed almost as much in April (£62bn) as in the whole of the last financial year.
The chancellor will announce in the next few days how big a contribution employers will need to make, but at a minimum they can expect to pay 20% of an employee’s wages. This will be the moment of truth for many businesses.
Rising unemployment is toxic for the property market. If people struggle to find another job quickly after losing their job they fall into mortgage arrears and eventually have their homes repossessed. That happened in the early 1990s and is one reason why a mortgage holiday has been introduced this time.
Hansen Lu, property economist at Capital Economics, has shown how a moratorium on home loan payments saves someone paying 2.5% on a £200,000 mortgage £5,400 over a six-month period. That’s quite a financial cushion because although the lender eventually has to be paid back, it means subsequent mortgage payments go up by about £30 a month.
Again, everything depends on the state of the labour market this autumn. The mortgage holiday will end at the same time as the furlough scheme, and already there will be many households who will be wondering how they will manage at that point.
Buying a house is the single biggest financial commitment most of us ever make. When people are deciding whether to buy or not, they think hard about whether they are going to be able to keep up the monthly payments. It is not just being unemployed that matters; it is the threat of unemployment. Surveys suggest, hardly surprisingly, that consumers are extremely wary of committing to big-ticket items.
Only one thing is missing from a perfect storm: sharply rising interest rates. A doubling of official interest rates was the trigger for recession and record home repossessions in the early 1990s, but there is not the slightest prospect of that happening this time. The Bank of England has cut interest rates to 0.1% and is debating whether to take them negative.
There are economists – the monetarist Tim Congdon, for example – who believe that the vast quantities of money the Bank is chucking at the economy will eventually lead to much higher inflation. In those circumstances Threadneedle Street would have a choice: raise interest rates aggressively to hit the government’s 2% inflation target and guarantee deep recession in the process; or go easy. If it chooses the first option the housing market will collapse because many owner occupiers can only service the debts they have had to to incur to afford expensive real estate if interest rates remain at historically low levels.
So here’s how things stack up. On the one hand, the economy has collapsed and is recovering only falteringly; unemployment, whether real or hidden by the furlough, is rocketing; incomes are being squeezed; consumer confidence is at a low ebb; and the ratio of house prices to earnings is high. On the other hand, interest rates are low and will stay low for some time. In the jargon of the economics profession, there are more downside than upside risks.
But let me personalise things a bit. A relative for whom I hold power of attorney is about to have his house put on the market to fund his care home fees. My intention is to take the first halfway decent offer that’s received, because my sense is that prices are heading lower. In the past I haven’t heeded my own advice and lived to regret it. Not this time, though.
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