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Sensemaker: Tiers before Christmas

Friday 27 November 2020

What just happened


Long stories short

  • Trump said he would leave the White House but continued to insist the US election was a fraud.
  • Germany, France and Italy want all Europe’s ski resorts to stay closed over Christmas; Austria and Switzerland want to open theirs.
  • Tory MPs threatened to rebel against the UK government’s latest tiered Covid restrictions.

Tiers before Christmas

Except in Liverpool. Anxious not to gloss over the bad news that most of the UK faces continued tough Covid restrictions at least until January, Boris Johnson buried the only uplifting portion of his statement from Downing Street yesterday. Mass testing in Liverpool has worked. This has implications for policy but could prove awkward politically.

  • Voluntary free Covid tests with quick results, available to everyone, have helped bring Liverpool’s infection rate down by three quarters since mid-October, from 635 to 158 cases per 100,000 people. 
  • As a result, unlike most of the rest of the northwest, Liverpool will enter Tier 2 rather than Tier 3 next week. Its pubs and restaurants will be able to open subject to the same restrictions as in, say, London.
  • Similar mass testing is supposed to be available to everywhere going into Tier 3 “as soon as possible”.

Reality check. “As soon as possible” for Tier 3 areas is not the same as making good on Johnson’s moonshot pledge of mass testing for the whole country. Also: it is not true, as he says, that “testing on this scale is untried” and it is misleading to caveat its potential, as he does, with the words “if it works”. Mass testing has been tried (11 million tests in Wuhan, 9 million more recently in Qingdao) and everyone knows it works. It is the only way to map the spread of a virus spread by people with no symptoms. But better late than never. If it enabled Tier 3 areas to follow Liverpool quickly down to Tier 2 it would be worth doing. 

So why is mass testing not ready to roll out in Kent, Slough, Leicester and across Greater Manchester and the north east? That is a question likely to be asked repeatedly over the weekend as up to 70 Tory MPs consider whether to vote against their government when their support is sought for the new measures in a vote next Tuesday. 

Wherever Tier 3 looms there are good reasons for it – local NHS resources under particular strain in Kent, for example; a lot of multi-generational homes in Slough. But in every case mass testing offers an alternative to the blunt instrument of a de facto return to lockdown. Why isn’t it ready to go? Has the government wasted the past month? We’ll be asking the same question of the summer on day two of our Covid Inquiry today. Do join us.


Wealth investment, fairness, prosperity

Ma v Zhang
Xi Jinping has been extolling the public spirited patriotism of the great 19th century Chinese entrepreneur Zhang Jian. Which in a way is odd, because at other times the Chinese Communist Party has vilified Zhang as a bloodsucking capitalist and exploiter of the working class. The reason is simple, the FT explains in a worth-your-time long read (£). Xi wants a new role model for China’s business class to replace Jack Ma, whose latest stock market flotation he personally scuppered earlier this month. Ma cavorted with foreign plutocrats at Davos and dared to criticise Xi’s regulators. Zhang made nice with officialdom, made a fortune in textiles, and restricted his political ambitions to his hometown of Nantong – to which Xi recently paid an otherwise inexplicable visit nine days after instructing his enforcers to rap Ma’s knuckles. 


New things technology, science, engineering

China vaccinating already
China has already administered Covid vaccines to a million people – even though it hasn’t finished testing them yet. Three vaccines, produced by Chinese-owned companies Sinopharm and Sinovac, are in use among civilians as well as the military as part of an emergency-use campaign. All three are still undergoing phase 3 clinical trial tests for safety and efficacy. Despite promising results from earlier trial phases and assurances from company executives that no negative reactions have been reported since the start of the campaign, the choice to start vaccinating before safety tests are over is unorthodox and potentially risky. But the roll-out of a mass vaccination campaign does give the world an interesting test case, especially for Brazil, Turkey and Indonesia – which have pre-ordered millions of doses of these vaccines.


The 100-year life health, education, living, public policy

Oxford vaccine latest
AstraZeneca plans a new global trial of its Covid vaccine, deliberately using the low initial dose that it used by mistake on a small subgroup of its current phase 3 trial in Brazil. The idea is to find out whether the high efficacy shown in that subgroup was a fluke or real. Everyone in the group was under 55, so that may have been the reason. Equally, it could be real. Yesterday’s This Week in Virology podcast discussed the phenomenon of anti-adenovirus vector immunity, by which the body overreacts to the vector bringing the vaccine into the body rather than the vaccine itself. The Oxford-AstraZeneca vaccine uses a harmless form of a common cold virus taken from chimpanzees as its vector. A big early dose of that vector might have prompted a reaction that limited the immune response to the virus. If so, the mess that AstraZeneca’s interim results announcement has become could have a happy ending. 

Media note: the Mirror had the scoop on the original half-dose story, back in June


Our planet environment, natural resources, geopolitics

Drill, comrade, drill
Russia is planning an enormous push to extract oil (£) from its northernmost Arctic territory, heedless of climate change, international opinion or the fragility of the tundra that will be sacrificed in the process. To flag up the project, Putin has staged one of his trademark face-to-face meetings with a henchman-in-the-hot-seat, in this case Igor Sechin, his old friend from FSB days, who now runs the Rosneft national oil giant. Maps were spread between them of the Taimyr Peninsula, which reaches up towards the North Pole and provides a unique home for musk oxen, polar bears and reindeer. This is a strategic lunge for control of the Arctic, including its emerging shipping routes, as much as a bet on oil – but it’s certainly that too. 


Belonging identity, society, beliefs, countries

Supreme result
Late on Wednesday the evangelists who’ve held their noses and supported Trump in spite of everything got their reward: a 5-4 ruling in the US Supreme Court rejecting New York State’s efforts to keep places of worship closed during the pandemic to curb the spread of the virus. It’s virtually certain that if Ruth Bader Ginsburg were still alive and on the court, the outcome would have been a 5-4 vote the other way, prioritising public health over freedom of association. An expert on judicial prose told the NYT he reckoned the majority opinion was written by Ginsburg’s replacement, the avowed social conservative Amy Coney Barrett. Barrett is 48 and, if she wants, in post for life. 

opinion: Chris Cook

The hazards of moral hazard

The government may allow a council to fail to set an example to others. But this isn’t a time for setting examples

The London Borough of Croydon is bust. The town has issued a Section 114 notice, indicating that it cannot meet its commitments – and any spending not mandated by statute will need to be run past the town’s finance officer. This is a local failure, for sure. It is Croydon councillors who ignored warnings about the finances over several years. But it is also a national policy problem.

Croydon is, as it happens, where I grew up – and I have a long track record of complaining about how badly administered it is. The auditors’ notes reveal that the council forgot to keep up the paperwork for a little holding company through which it owned stakes in some local developments, and so the company was dissolved. I am not enormously surprised.

The proximate reason for the collapse was the pandemic. It is a dormitory town, a retail hub and a nest of large offices. But Croydon was also one of the councils nearest the end of the financial gangplank. The town budget had been run too hot coming into the crisis – it kept too little in reserve for rainy days. It is its own fault that it had so little slack to absorb a shock.

According to the auditors’ reports, the town’s spending on social care kept rising – and swamped the town’s budget. The auditors noted: “70 per cent of the Council’s spend is on demand-led services (children’s and adult social care) where the focus has been on improvements in service delivery without sufficient focus on controlling the related costs.” 

At the same time, the council held the equivalent of only 4 per cent of its annual income in reserve cash that could be spent without restrictions: “The Council has had the lowest level of all London Boroughs of General Fund and Earmarked General Fund Reserves as a percentage of net service revenue expenditure and the reported level of reserves has continued to decrease in each of the previous three years,” the auditors noted. Things were on the slide before the pandemic.

As Graham Atkins at the Institute for Government notes, the council’s decision to start buying up local commercial property also left it at risk. He notes that the town “had the sixth highest level of interest and investment income as a percentage of spending of any London council”. It is hard to put precise figures on this, but one measure implies that the council has spent around £200m in this area.

There are good reasons to be wary of listening to the pleading of a council with weak budget controls that has spent big on discretionary projects. That, indeed, is the central government’s starting point. It is almost an iron law of the British state that its first concern is moral hazard: “If we bail you out now, what example will that set?” But here is another rule: during a crisis that will not recur, moral hazard generally doesn’t matter. 

After all, it is unlikely that towns will start burning off their reserves to overspend on commercial projects or social care in the coming years in the hope of getting a bit of help with debt relief during a future global pandemic. You can probably be generous now knowing that people will not be expecting another year like 2020 any time soon. 

Indeed, there is a converse problem with financial contagion. Having seen that the government will let councils fall over during the crisis, the officers in other councils will be extremely brutal about their own financial situation. These are people taking a bigger role in contact-tracing; the people who run the care homes; the people who organise school transport for vulnerable families; the people who look after the most vulnerable. Do we want them to start cutting back? 

Croydon is planning to make savings on social workers to balance its budget during a pandemic. It might be that Croydon – and other boroughs – do need to sell off their investments to deleverage their balance sheets. But do we want them to do it now – in a mid-pandemic fire sale? 

Indeed, it is worth going back to first principles. The most important strategic priority is getting through the pandemic. It is not an endorsement of any town’s prior management to think this is the wrong time to have them recast their balance sheets and services. The Treasury should plug up more gaps now. We will have time to argue about what the operating surpluses should be in normal times when normal times return.

Thanks for reading, and do share this around. 

Giles Whittell
@GWhittell

Ella Hill
@_EllaHill