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Good Things Foundation: How much does it pay to be “tech savvy” now?

By Centre Write, Coronavirus, Data & Tech, Economy & Finance, Education, Politics, Towns & Devolution

Last time we were here, we were battling the first wave of Omicron. Since then the world around us has dramatically changed: a war, an economic crisis, unprecedented political upheaval – just to name a few.

However, the undisputable role of digital remains. From accessing essential services to booking a holiday, being able to confidently and safely operate the digital world is vital. And now we have updated evidence of its economic significance too – making the case for investment into digital inclusion as a result.

Having a basic level of digital skills impacts our economy in all sorts of ways. Take productivity as an example. There is a wage premium associated with having digital skills, and employee earnings are mostly related to their productivity. Employers will therefore pay more for productive staff and benefit from their increased output. Ensuring all UK adults learn basic digital skills therefore leads to a positive macroeconomic impact for productivity, employability and earnings.

Given society’s continued digitisation, it’s unsurprising that the economic impacts of digital inclusion make for a long list – from the advantages of online retail to more easily accessing online services. Understanding the scale of these benefits should be critical for those making decisions about policy and investment, at a national, regional and local level.

That’s why Good Things Foundation – the UK’s leading digital inclusion charity – partnered with Capita and Cebr to assess the economic impact of digital inclusion, in their report The Economic Impact of Digital Inclusion in the UK launched earlier this year.

So, what does the report find? What are these so-called economic gains? 

The headline is that for every £1 invested in interventions to help digitally excluded people to build their basic digital skills, a return of £9.48 is gained throughout the economy. 

Savings to the public purse are significant. Through efficiency savings alone, the Government is estimated to benefit by £1.4 billion over the next ten years, plus £483 million in increased tax revenue. The NHS is expected to save £899 million in addition.

A proportion of working-age adults still need digital skills support to gain work or better work. Meeting this need is estimated to generate £2.7 billion for organisations through filling basic digital skills vacancies over the coming decade. Furthermore, an estimated £586 million in increased earnings, £179 million in additional earnings from finding work, and £76 million in environmental benefits.

The cross-cutting, complex nature of digital inclusion requires a co-ordinated, well-funded and holistic approach to meaningful help those most excluded and to invigorate our economy. The most challenging stretch of the country’s digital inclusion journey lies ahead, and Good Things Foundation’s new strategic offer is ready to tackle it alongside others: working across sectors on our National Databank, National Device Bank and National Digital Inclusion Network initiatives.

If we are to achieve an inclusive recovery to Covid-19, combat the cost-of-living crisis, level up and ensure everyone can make the most of the digital world – we have to comprehend the economic advantages, step up, and invest in it.

The Good Things Foundation is a charity with the goal of fixing the digital divide. . Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: John Schnobrich]

Ralph Skan: Broken Strings — government policy and the music industry in 2021

By Centre Write, Coronavirus

The British music industry entered 2020 with a spring in its step. The previous year had seen its gross value added (GVA) to the UK economy rise by 11% to £5.8 billion; a record-breaking 33.7 million people had attended live events and spending from ‘music tourism’ had added a further £4.7 billion to the British purse

But what began as an exciting year for the sector quickly turned to one of its worst. Lockdowns made live music all but impossible, with online revenue for music events forecast to fall from £1.025 billion to just £440 million. The live music industry, previously valued at around £1.5 billion, lost an estimated £900 million, while many freelance musicians lost up to 75% of their income during consecutive lockdowns. 

Relative to society’s other sufferings at the hands of the pandemic, this may not look so exceptional, but the tragedy here is how avoidable many of the worst effects are. Amid the scramble to reach a deal with the EU in December, negotiations were too pressed to address the needs of the sector. Under the new deal, artists from Europe’s largest music industry, which is four times larger than our fishing industry, have lost their right to free movement around the EU, adding significant and, in many cases, insurmountable hurdles to touring the continent. Whilst the change won’t hugely impact the biggest artists, the financial and administrative burdens of navigating European visa and instrument import laws and costs country by country will stifle up and coming acts, hampering the industry in the long run. 

Furthermore, such an effective source of soft power could be protected better. British music has an annual export value of £2.9 billion and in 2020 two of the top five most streamed albums in the world stemmed from British artists. While the Cultural Recovery Fund that was unveiled in July provided some desperately needed relief, the economic devastation of the pandemic endures and the self-employed need ongoing support. However, in October Rishi Sunak set the limit of governmental support under the Self-Employment Income Support Scheme (SEISS) to just 20% of trading profits before raising it to 80% in the face of fierce protests. Such volatility has raised doubts among musicians’ organisations as to whether the level of support will remain the same for SEISS’ fourth term, from February to April. 

Nor have musicians seen much financial respite in the boom of music streaming throughout lockdown. Over the course of 2020, pent-up Brits racked up a record 139 billion streams, a 22% increase on 2019. But in the face of such impressive figures, it’s easy to overestimate the ability of musicians to negotiate. In October, an inquiry by the Digital, Culture, Media and Sport (DCMS) committee into the economics of music streaming found that artists in the UK usually receive as little as 16.5% of the revenue generated when one of their songs is played on a streaming service; for context, almost 40% is taken by the record label. 

Whilst the Government rightly has bigger and more urgent fish to fry at the moment, long-term legislative solutions to all of these issues exist and could be easily implemented. For starters, the Chancellor should consider continuing to support musicians financially until the pattern of lockdowns recedes for good. Regarding the digital realm, the introduction of a new system of Equitable Remuneration being proposed to the DCMS committee could promise artists a 33% increase in revenue from digital music streaming. Furthermore, a petition calling for a Europe-wide visa-free permit that would replicate the circumstances that artists thrived in before Brexit has received over 250,000 signatures, and the Government could revisit this issue to generate political as well as economic capital. 

History tells us that the industry has survived worse; after Cromwell came Purcell, from the trenches came The Planets; even Britpop eventually passed. But if the Government wants to maintain British music’s financial and international clout, these issues must not fall on deaf ears. 

Ralph is currently undertaking work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. 

Miatta Fahnbulleh: A radical overhaul of the welfare system is needed for the fallout from COVID

By Centre Write, Coronavirus, Welfare

The economic fallout from the pandemic is nothing short of grim: a projected 14% contraction in the economy this year; the deepest recession for 300 years and unemployment twice as high as before the crisis. 

Behind these headline numbers are millions of people who face a catastrophic hit to their livelihoods. We have yet to understand the full impact of this on ordinary people’s lives. The early warning signs are alarming: 2.9 million new applicants for Universal Credit between 1st March and 19th May of this year, an estimated three million people going without meals since the lockdown and an 81% increase in food bank usage in March compared to 2019. All of this points to the inescapable reality that many families across the country are facing real hardship.

This hardship is exposing the gaping holes in our social safety net. We entered this recession with one of the weakest social security safety nets – both among advanced economies and in our own post-war history. Total out-of-work payments received by UK employees are on average 34% of their previous in-work income – the third lowest among 35 OECD advanced economies. At the outset of the crisis, the main adult unemployment payment was worth less than 15% of average earnings, lower than at any time since the creation of the welfare state. While the £20 per week boost to Universal Credit and working tax credits since then was a small step in the right direction, it only reversed one fifth of the overall cuts to welfare seen since 2010. And at £94 a week, many people who never imagined they would ever be on welfare are struggling to cope with an income that is simply too inadequate to live on. However we look at it, our social security system has been denuded to a worrying degree.

For too long, we have swept the inadequacies of our social security system underneath the carpet — the pandemic has laid it bare for all to see. We will have to respond – if not now, then when the swelling numbers relying on this system begin to make their voices heard. In responding, we must rekindle the spirit behind Beveridge’s welfare state: the ambition to deliver a minimum standard of living ’below which no one should be allowed to fall’. This was a key plank of the social contract that dominated for much of the post-war period. A contract that has slowly been broken.

At the heart of our response should be a new minimum income guarantee. In the heat of the current crisis, when the priority is to get much needed income support to families quickly, this should take the form of a temporary, upfront, non-conditional payment of £221 per week to anyone that needs it. This would provide much needed relief to an estimated 5.6 million people who are at risk of losing their jobs or hours and falling through the cracks of the Government’s job retention and income support schemes – as well as for the millions more who may yet be left stranded as these schemes start to become unwound from August. The case for doing this to ease the hardship of those at the sharp end of this crisis is clear, but it also has the benefit of boosting spending and demand in the economy, which in turn has the power to create the jobs needed for recovery.

As we recover from this crisis, we should then enshrine this principle of a minimum income guarantee into a social security system that badly needs reform. Through a combination of universal payments – that benefits all those who pay into the system – and means tested support for those that need it most, we must create an income floor that ensures that everyone can afford the basics for a decent standard of life.

We must move beyond the welfare state of old that was there to catch us when we fell on hard times to a wellbeing state that aims to provide everyone with the building blocks they need to live decent, fulfilling, healthy lives. Alongside a minimum income guarantee should be access to well-funded education, childcare, health and social care and quality housing to everyone that needs it. This should form the basis of a new social settlement coming out of the pandemic to replace the one that has frayed.  If we get this right, we have the chance to build back better from this crisis.

Miatta Fahnbulleh is the Chief Executive of the New Economics Foundation. This article first appeared in our Centre Write magazine Family friendly?. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: J J Ellison]

Louise King: COVID-19 must not leave a lasting scar on our youngest generation

By Centre Write, Coronavirus

2020 has undoubtedly been a year like no other. The routines of our daily lives have been turned upside-down and many people have faced hardships and difficulties. Children have felt this disruption particularly acutely, with the closure of schools for most, the shutting of play parks and other leisure activities, and the removal of basic rights for some of our most vulnerable children – children in care and children in contact with the criminal justice system. A report published yesterday to mark Human Rights Day looks back at how well the UK Government has respected children’s rights since 2016, as part of the first step in its examination under the UN Convention of the Rights of the Child (CRC). Sadly, it concludes that children’s rights have regressed in many areas, with the COVID-19 pandemic exacerbating pre-existing issues even further.

The Civil Society submission to the UN Committee on the Rights of the Child, endorsed by 90 children’s charities and led by the Children’s Rights Alliance for England (CRAE), has found that despite some welcome developments to embed children’s rights across Government, children are still worryingly low on the political agenda. England is also lagging behind other parts of the UK –we’re concerned that there has been no progress in incorporating children’s rights into domestic law, as in Scotland, and there is currently no Cabinet Minister with responsibility for children’s rights. During the pandemic, we continued to see this lack of focus on children’s rights in important policy decisions where emergency legislation, regulations, and guidance affecting children were brought in without the usual parliamentary scrutiny, consultation period or consultation with the Children’s Commissioner. Regulations on children’s social care, for example, significantly watered-down legal protections and were recently found unlawful in Court. 

The report also highlights that 4.2 million children are already living in poverty in the UK and families are now living in deeper poverty than five years ago, despite rising employment before the pandemic. During COVID, there was no targeted financial support for families with children in poverty, except free school meal vouchers during lockdown and over the summer holidays, and some temporary funding to local authorities to help families in crisis. Given the impact of the pandemic on jobs and the wider economy, child poverty is expected to increase even further. We’ve also seen the number of homeless households with dependent children increase, as has the number of homeless families staying in completely unsuitable temporary accommodation. 

Unsurprisingly, our findings show that black children and Gypsy and Roma Traveller children have continued to suffer persistent discrimination across many aspects of their lives, including being disproportionately represented in school exclusions and across the criminal justice system. BAME children are also much more likely to experience the use of police force, be held overnight in police cells, and be remanded to unsafe child prisons.   Inequalities in children’s health outcomes, such as mortality and obesity, have also widened since 2016 for children in poverty and BAME children. The educational attainment gap has also increased further as a result of COVID-19, with children from disadvantaged and BAME backgrounds falling further behind their peers.  Despite the urgent need for a solution and numerous reviews, there is still no cross-government strategy for preventing and addressing systematic racism and race discrimination.

Additionally, we have found that suicide is among the leading causes of death for 5- to 19-year -olds, despite increased investment into mental health services. It is estimated that one in six (16%) 5- to 16-year -olds in England have a mental disorder, with recent studies showing that COVID-19 is worsening the mental health of young people even further. 

There have been some welcome developments to children’s social care legislation, but these have been undermined by the fact that funding for children’s and youth services has been decimated, whilst the numbers of children needing care or protection are rising, and with the pandemic putting additional pressure on services. 

Our bleak findings are the result of children’s rights not being prioritised by successive governments coupled with the impact of COVID-19. We hope it acts as a wake-up call. Despite the unprecedented challenges that have arisen during the pandemic, the Government must take urgent action so that COVID-19 doesn’t leave a lasting scar on our youngest generation. 

Louise King is Director of the Children’s Rights Alliance for England, part of Just for Kids Law. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: gratuit]

Sam Smethers: A post-COVID caring revolution

By Centre Write, Coronavirus

The COVID-19 crisis is having multiple and profound impacts on our lives, one of which is the way care is shared within households, but will it hasten us towards equality or further entrench traditional gender roles? Worryingly, the evidence suggests that we are going backwards, but this can be reversed with the right policy response from government.

The amount of time fathers spend per day caring for children has increased by 15-20 minutes per day each decade since the 1970s, but pre-COVID-19, inequality persisted. The UK Time Use Survey shows that mothers with children aged 16 or under spent on average 118 minutes per day doing childcare work, compared with 67 minutes per day for fathers. 

Since lockdown began, Cambridge academics found that mothers working from home were spending over 3.5 hours on childcare, compared with around 2.5 hours for men; while both mothers and fathers were spending around two hours on home-schooling, with mothers doing a little more. Overall this results in a 1.5-hour difference, suggesting a widening gap. 

We have also seen Institute for Fiscal Studies research which found that the time mothers spent on childcare had doubled when compared with 2014-15. Importantly, their time is more interrupted – they were combining paid work with other activities half the time, compared with a third for fathers. 

Other research shows that a third of mothers, compared to a quarter of fathers, report always feeling rushed and found that mothers’ time is more fragmented. Prior to the outbreak, research identified that women who worked from home tended to do more childcare, while men tended to do more overtime.

Fawcett’s own survey, in partnership with the Women’s Budget Group and academics from LSE and Queen Mary University, found that mothers in couples were over one-and-a-half times more likely than fathers to say that they were doing the majority of childcare during school and nurseries closures. 

This disparity rises between parents who work outside the home, suggesting that ‘key worker’ status does not alleviate women’s childcare workload. These inequalities also hold for other domestic work, with three quarters of mothers in couples and nine out of ten single mothers, compared with half of fathers in couples, agreeing that they were doing the majority of tasks.

There is no doubt that school and nursery closures have had a significant impact on how families are sharing care, with mothers feeling the impact more profoundly than fathers. Existing inequalities are driving couples’ responses to what is a period of stress. This is having an impact on maternal employment with early evidence suggesting mothers were more likely to have been furloughed and also more likely to have lost their jobs during the crisis.

As the furlough scheme ends and the Government tells us to get back to our workplaces it will disproportionately be mothers who feel unable to do that, potentially creating a two tier workforce. Employers are left in the invidious position of getting their businesses back to work, favouring those employees who can do that or supporting parents who find it difficult to return. 

As schools return it will disproportionately be mothers who will be expected to interrupt  their work when the suspected COVID-19 cases in school sends the whole class, or year  group, home. It took a whole 20 years to get maternal employment rates up from 66% to 75%. We are now reversing that in just a few months.

Embracing home and flexible working is at least part of the solution for many of us, although there will always be jobs which cannot be done from home.  Incidentally, those frontline jobs are also more likely to be done by women. I have long argued for default flexible working, the presumption that every job is a flexible one unless there is a business case for it not to be. COVID-19 has created that presumption for us.

If this crisis has illustrated anything, it demonstrates that we need to do much more to support couples to share care, enabling fathers to play a more active role in the first year of a child’s life. This means a longer, better paid period of leave for fathers which dads can afford to take, starting from a presumption of equal parenting responsibility. If we had introduced this policy ten years ago, perhaps we would be seeing a more equal sharing of care now, rather than the work still falling heavily on the mothers’ shoulders.  

Finally, we need a strategic investment in our childcare infrastructure, recognising that childcare is a vital part of the support system enabling parents to work. 

Pre-COVID-19 childcare provision was inadequate, with only 56% of local authorities providing sufficient childcare places for parents who work full-time. We expect to see provision decline significantly as a result of a drop in demand during the current COVID-19 crisis. Take up of early years places has fallen from 77% pre-COVID-19 to 37% during COVID-19. Many childcare providers simply won’t survive without additional government funding. 

This is economic madness and will undermine our recovery. Evidence shows that maternal employment can be boosted significantly with the availability of free, full-time childcare, particularly if provision is available for pre-school age children. This would boost our economic recovery and support maternal employment, helping to reverse current worrying trends which are taking us in the wrong direction.

The COVID-19 crisis, although unwelcome, presents us with the opportunity to finally get the sharing of care right and put the policy response in place which families, employers and the economy need. We have to seize that opportunity.

Sam Smethers is the Chief Executive of the Fawcett Society. This article first appeared in our Centre Write magazine Family friendly?. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Standsome Worklifestyle]

Izabela Zawartka: What the UK can learn from Australia’s Better Access to Mental Health Care Initiative

By Centre Write, Coronavirus

Beyond its immediate threat to physical health, the coronavirus pandemic puts a considerable strain on individuals’ mental wellbeing. Factors such as social isolation, financial stress, and mourning for the loss of loved ones have taken their toll; a survey conducted by the World Health Organisation (WHO) reveals that rising demand for professional help has caused a disruption in mental health services of 93% of countries worldwide. Addressing the widespread COVID-19-induced decline of mental health is of utmost urgency, and it should be made a public priority.

One example of a proactive response to this emerging crisis can be found in Australia, where the government announced on 9 October that it will expand the scope of its existing Better Access to Mental Health Care initiative. Operative since 2006, this scheme provides individuals with a GP, psychiatrist or pediatrician’s referral with Medicare support for up to 10 individual and 10 group therapy sessions per year. Under the recent reform, it has become even more powerful, granting those experiencing pandemic-related duress eligibility for up to 10 additional sessions per year until 30 June 2022. As a result, an unprecedented $5.7 billion has been dedicated to mental health spending in 2020-21 (1 Australian Dollar is roughly equal to 0.55 Pound sterling, i.e. around £3.1 billion).

Though the Better Access to Mental Health Care initiative faces criticism for having a negligible impact on the prevalence of psychological distress of the population as a whole, evidence suggests that those who have taken advantage of its services met with positive outcomes. Accordingly, it should not be entirely dismissed just because of its imperfections. With additional measures to overcome socioeconomic and geographical disparities, as well as targeted efforts to encourage uptake by those who need it, the scheme has great potential for ameliorating psychological hardships among the Australian population.

The UK can learn much from the Australian undertaking to enhance its own mental health services in the time of the COVID-19. According to an ongoing long-term study led by the Mental Health Foundation, high proportions of Britons have reported feelings of loneliness, anxiety, fear, and hopelessness since March, with young populations, the unemployed, and those with pre-existing mental or physical health conditions having been disproportionately affected. In a time of crisis, these issues, especially among those with pre-existing mental illness diagnoses, should be of immediate concern. Yet, a staggering press release from Mind UK revealed that, in May 2020, 22% of surveyed mental health patients had appointments cancelled, or faced difficulty getting through to their GP or Community Mental Health Teams. Nevermind those seeking to reach out for help for the first time.

Unfortunately, the reproachable state of mental health services at the peak of the first national lockdown is a thing of the past. Although it cannot be retrospectively addressed, it can and should be learned from. Today, with a clear anticipation of the ongoing influence of coronavirus on populations’ day-to-day lives, policy makers are in a position to combat the onset of its chronic effects, and prevent further deterioration of the conditions of those currently afflicted by mental illness. Offering heavily subsidised therapy sessions may be an excellent solution to accomplish this goal.

Though it may be expensive – considerably more so than in Australia, given the size of the UK’s population – reduced-cost therapy sessions will likely only be attended by those who really need them. The effort involved in obtaining a professional referral, as well as the time-intensive nature of psychologist appointments serve as a hefty deterrent to those who do not expect to extract at least some benefit from the use of mental health services. As demonstrated in Australia, provided that the sessions are up to standard, those who seek help have the opportunity to achieve mental relief. 

Treating mental illness, either through psychological or pharmacological means, is and will continue to be an expensive project. If not for the sake of alleviating suffering, there is an economic argument for providing high-quality mental health support. Beyond its toll on individual suffering, mental health problems create large costs for both affected individuals and broader society. As detailed by a Mental Health Foundation report, the provision of health and social care, lost employment, missed opportunities, and output losses takes a considerable toll on the UK’s economic performance. The NHS estimates that, in 2016, the total cost of mental health problems is roughly £105 billion.

The coronavirus pandemic has exacerbated the state of mental health worldwide; the fact that this matter demands prompt address is indisputable. Australia’s Better Access to Mental Health Care initiative, and even more so the recent announcement of its expansion, should serve as a guide for the UK Government moving forward.

Izabela is currently undertaking work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Benh LIEU SONG]

Eleonora Vassanelli: Why is Italy’s response to the second wave of COVID-19 better than the UK’s?

By Centre Write, Coronavirus

Last month, Prime Minister Boris Johnson commented on the UK’s ability to tackle the second wave of coronavirus, saying that countries like Italy and Germany have responded more effectively because Great Britain is a “freedom loving country”. This comment sparked debate about why countries like Italy, the first affected country in Europe, succeeded in diminishing daily cases to 6,000 compared with 17,000 in the UK.

Researchers have outlined that possible explanations for a second wave in the UK are linked to its moderate restrictions especially regarding face coverings that were implemented too late and too lightly. In England, face coverings only became mandatory for people visiting shops, supermarkets, and public transportation on the 24th of July 2020 with rules not applying to retail, supermarket and transportation staff. 

On the other hand, Italy implemented mask-wearing early on in the pandemic. During lockdown, masks had to be worn both indoors and outdoors with no possibility of exercising outdoors. Failure to do so could lead to €400 to 1000 fine

Even though the United Kingdom has implemented similar fines of £100, £50 if paid within 14 days, compliance is very low. Only 38% of British people wear masks in public places compared to 83% in Italy, according to You Gov. Why is compliance so low? 

Low compliance could in part be linked to major supermarkets chains in the UK such as Waitrose, Co-op, Sainsbury’s, and Asda refusing to enforce the rule despite police pleas. These companies urge shoppers to “play their part”, giving too much choice to its customers. This is increasingly problematic for the British Government which finds itself caught between a rock and a hard place. 

On the one hand Boris Johnson is historically inclined to emphasise personal freedom, and to shy away from authoritarian tendencies. On the other hand, the Prime Minister’s close personal brush with the virus, and the fact that cases continue to creep up, underline the fact that COVID-19 is a deadly threat which should not be underestimated. 

Meanwhile, in Italy, bars and restaurants are keen to enforce the rules as police checks are increasingly frequent. If a customer is found flouting a rule, like mask-wearing, then not only is the customer fined but so are staff and the owners of the establishment. This could be applied to the UK in pubs, restaurants, and supermarkets, enabling the shift of responsibility from the customer to the owners and staff. Retailers would be more incentivised to take a proactive attitude towards enforcing these rules. 

In addition, face-mask wearing should be extended to staff members working in an indoor environment in an attempt to legitimise their plea for their customers wearing one, together with higher fines. This incentivises companies to enforce the rules, refusing entry to those failing to wear a face mask and ensuring the safety of all its customers. 

One of the criticisms of these policies is the perception that civil liberties are being infringed upon. In July 2020, hundreds of people gathered in Hyde Park to protest against face masks having become mandatory. Further restrictions could potentially exacerbate the current situation and lead to rising numbers of protests. The use of masks, however, should not be seen as an infringement on personal liberty but rather as a collective, necessary precaution unique to this particular historical moment. 

Opponents to these measures state that there are too many economic downfalls in implementing harsher restrictions. However, according to one study, wearing face-masks could actually benefit the economy in the long run. These measures would help to control the spread of the virus, diminish its daily growth amongst the population of approximately 1.5%, and prevent a second round of lockdown measures that would otherwise hit GDP significantly. 

According to the data collected in the first lockdown by the Office of National Statistics, between March and April 2020, the UK faced a GDP fall of 20.4%, three times worse than the 2008 crisis. Moreover, the wide-spread use of masks could create reassurance in shoppers who are more willing to resume their normal shopping activities both in town centres and high streets. This will contribute to consumer consumption growth and stimulation of the economy. 

Therefore, compliance is tremendously important in controlling the virus and protecting the economy. Learning lessons from the Italian Government, the United Kingdom should start to adopt stricter regulations regarding face masks, which should include penalising the shops, restaurants and bars, and higher fines for transgressions. This could be the most pragmatic, economically-friendly way forward to deal with this complex crisis.

Eleonora is currently undertaking work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Nickolay Romensky]

Davide de Carle: How China turned crisis into opportunity in Italy

By Centre Write, Coronavirus, Foreign

Italy’s disapproval of the European Union during the COVID-19 pandemic has been sharp and prompt. 77% of Italians believe the EU will not help during the crisis and 72% say it has not helped. Given its status as the third-largest economy in the trading bloc, this presents a serious challenge to the integrity and cohesiveness of the Union’s wider security issues. Italy is, thus, seen as Europe’s ‘backdoor’, the continent’s corruptible doorman who, given the proper incentive, will allow Chinese and indeed Russian interests to pervade. 

“Italian parliament is afraid to talk about China at the moment, given Movimento 5 Stelle’s close ties with Peking” says Antonio Tajani, vice president of Forza Italia. Tajani is, of course, referring to Luigi Di Maio’s, Italian minister of foreign affairs, signing of the silk road agreement in late March 2019. Di Maio, then deputy Prime Minister and leader of the anti-establishment M5S party, defied the advice of his European allies and with the agreement, opened the door to a Chinese economic partnership. 

Pino Cabras, head of M5S has asserted that no superpower holds the key to hegemony yet so it is important for Italy to keep its doors open to everyone. The Italian public shares this sentiment and seems to have warmed up to China, particularly following the worst of the coronavirus pandemic. In a poll held in late April this year 52% of Italians voted China as Italy’s closest ally, a shocking figure given the 42 percentage point jump from 10% in last year’s poll. 

So, what has actually transpired between the two nations to make such a startlingly positive impression on the Italian public? The answer has partly to do with how little the European Union has done. At the height of the global pandemic, with a death toll in the tens of thousands, Italy’s emergency financial requests to the EU were initially rejected. The European Central Bank’s new head, Mario Draghi’s successor, Christine Lagarde, additionally made matters worse by issuing no promises to protect Europe’s most vulnerable economies, shattering Italian bonds in the process. The result was a state of bitter entrapment; Italy felt chained to a Union of pure pageantry, as when the time came for their closest allies and partners to extend a hand, they instead kept theirs firmly in their pockets. 

Chinese public relations in March and April focused entirely on changing the narrative on the pandemic, shifting its role from the country of origin to the country that came to everyone’s rescue. China magnified any PPE coming into Italy as a benefit of their privileged relationship under the Belt and Road Initiative, calling it the ‘health silk road’ and, wrongly, touting the shipments as aid when they had been paid for weeks prior by the Italian Civil Protection Department. The tactic appears to have worked despite the embarrassing efforts from China’s Global Times at the beginning of the pandemic to pin the blame on Italy for the outbreak, latching onto an interview given by Italian doctor Giuseppe Remuzzi. 

China was not alone in using benevolent disinformation during Italy’s outbreak. Russia too, flexed its soft power by sending a military convoy loaded with PPE through Italy’s Northern regions. Russia paid €200 to Italians willing to make videos of gratitude towards Putin, one of which was of an Italian man taking down an EU flag and replacing it with the Russian tricolour and a sign saying “thank you Putin”.

Despite its bombastic mask diplomacy, China still managed to sweeten perceptions. News of the West’s losing battle to hang onto a key NATO partner and EU member will almost certainly be disheartening to a US administration that poured $100 million into helping Italy through the crisis and Merkel’s Germany that provided Italy with the vast majority of its imported PPE. In contrast, China made sure no finger they lifted in helping Italy went unnoticed. Every box of PPE was labelled ‘the friendship road knows no borders’. Chinese twitter bots generated nearly half of all posts under the hashtag #forzacinaeitalia (come on China and Italy) and China’s Foreign Ministry Spokeswoman even posted a video on Twitter of Romans applauding on their balconies to a dubbed Chinese national anthem and insisting there were chants of “grazie Cina” (thank you China).

Nevertheless, the subject remains a precarious one to broach in Italian parliament, particularly as tensions between the US and China are mounting. One might expect Trump to adopt a Bush-era ultimatum on Chinese relations, calling upon his NATO allies to be either ‘with’ him or ‘against’ him in the near future, a decision which will surely test Italy’s resolve and true diplomatic intentions. Close relations with pro-US PM Conte will be critical in the months to come, particularly as the US and China engage in tit-for-tat diplomacy over the banning of Huawei 5G.

Davide is currently undertaking work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: COP PARIS]

Andrew Gibbons: Providing smart debt relief to developing countries to combat COVID-19

By Centre Write, Coronavirus

The COVID-19 pandemic is causing economic mayhem, reducing tax receipts just as increased calls on health and emergency spending occur. This threatens some countries’ ability to service their debts, prompting requests for relief, repayment holidays, or outright cancellation. There are serious obstacles to getting creditors to cooperate and borrowers to behave. Proposals for delivering debt relief need to address these issues to succeed.

All countries borrow for spending that produces future benefits. The unforeseen pandemic is causing or exacerbating financial problems from Argentina to Zimbabwe. In countries without adequate financial safety margins, urgent public spending increases and reduced tax revenues make debts unsustainable and insolvency likely. Sovereign debt defaults hamper future borrowing. 

Besides the world’s poorest nations, largely in sub-Saharan Africa, many others also have barely sustainable debt burdens and now need urgent help. The G20 has frozen bilateral loan repayments for 76 countries until the end of 2020. Some 165 low-income and emerging economies need at least $2.5 trillion, which is beyond the IMF’s capacity to provide.

In crises, the poorest and most marginalised people suffer most. Debt relief for low income countries to help weather the COVID-19 storm understandably appeals to liberal minds, recalling rockstar-led campaigns like Make Poverty History. Lenders want to ensure repayment, but there are layers of difficulty to be resolved.

First, there are three different types of lender, with different goals. The largest group are commercial investors who hold emerging market government bonds in their portfolios.  These private creditors account for most of the sovereign debt of middle income countries and also have some exposure to low income African nations. 

Multilateral financial institutions like the IMF and the development banks also provide loan facilities, often in contexts which market-led actors would avoid or with a concessionary element. 

Then there are bilateral lenders – countries. China is a major player: with conventional aid funding and the infrastructure focused Belt and Road Initiative it accounts for nearly one-fifth of African debt.

These groups’ goals range from commercial returns to philanthropic concern for citizens of recipient countries. Commercial lenders will want to secure their repayments and may hold out against conceding any losses.

Concessionary lenders will typically have multiple aims such as helping governments limit the spread of COVID-19, protecting the livelihoods of poor people threatened by lockdowns, and ensuring that money is not withdrawn from current development spending.

Despite their different objectives, commercial and official lenders’ interests may coincide in appropriate policy measures and concessions to reduce the pandemic’s impact. Preventing the worst disruptions to economic activity will sustain incomes, tax revenues and loan repayments.  

A key obstacle to debt relief is the need for collective action by all of a country’s creditors.  Otherwise, concessions by some lenders just release resources to repay others.  Only if all lenders agree some shared sacrifice can this prisoners’ dilemma be resolved.  

Getting all players to cooperate in orderly debt relief takes time, especially when some countries will have many debt instruments and hundreds or even thousands of individual lenders.

A second challenge, particularly for official lenders with humanitarian or development objectives, is deciding which of the countries lacking an adequate financial safety margin to help. Should the focus be on, say, the areas of greatest need or the greatest likelihood of success? Supporting a government does not necessarily help its most deserving citizens.  

COVID-19 related finance, like other funds, may be squandered, siphoned off by corrupt officials, diverted to inappropriate projects or may facilitate capital flight. Countries in the lower reaches of Transparency International’s Corruption Perceptions Index are not ideal welfare recipients, and offering help subject to intrusive conditions may not work.

Allocating a budget across different countries requires trade-offs between the risk of losing money and the likelihood of achieving objectives. For example, Zimbabwe has a record of poor governance, misuse of aid and a monetary policy manipulated to enrich those in power. Large payment arrears on official loans already preclude it from further multilateral funding, but COVID-19 coincides with a food crisis and is putting many livelihoods in danger.  Whether bilateral donors should direct scarce resources to Zimbabwe or address needs elsewhere is a tough call.

Thirdly, lenders supporting a borrower against the pandemic need to decide between many options for rescheduling interest and principal repayments. Leniency may be hard for commercial lenders if their own finances are under pressure, but the track record of the recipient and how far lenders need to retain control of the initiative will also affect the outcome.  

Making sure that resources are used as intended, a case of the principal-agent problem, is harder when institutions are weak. Releasing finance against performance milestones is one way of dealing with distrusted administrations. Others are providing budget support or aid in kind directly to governments, and cash transfers to families.

Incentives matter because they affect behaviour. If borrowers lacking an adequate financial safety margin know that they can escape the full consequences if things go wrong, a ‘moral hazard’, there is a perverse incentive to take risks. Previous debt relief initiatives have required countries to meet quality of governance targets to qualify for full benefits.  

Cooperation is certainly needed from the country in question.  Argentina for example is negotiating to restructure $83bn of commercial debt. The country has a terrible record of past defaults, so has a strong incentive to avoid another, as of course do its creditors. 

There is one proposal which might overcome many of these obstacles. The authors say it offers “a concrete roadmap to achieve an effective coordinated debt relief between the official and commercial sectors”.

A fund called a central credit facility (CCF) would be established for any country requesting debt relief, supervised by a multilateral financial institution. All debt interest due within a specified period, say the next year, would be paid into the CCF on schedule by the debtor country.  That money would then become emergency funding available for the country to use for monitored spending solely to counter the effects of the pandemic, mitigating the costs of disruption, social distancing and lost livelihoods for vulnerable people.

Repayments of debt principal falling due during the specified period would also be deferred, and there are various options for handling these. Creditors would receive stakes in the CCF equal to their diverted interest payments, which would be senior claims in any future debt restructuring. All creditors, official and commercial, would receive equal treatment.  

Such a scheme should reassure lenders on two counts. No payments would be going to other creditors, so no money would be diverted from countering COVID-19, and all spending would be authorised and monitored by the CCF. Furthermore, resources could be quickly directed towards urgent needs in the debtor country without the tortuous coalition building often seen among creditors.

This blueprint offers a potential solution to the problems of creditor coordination and borrower behaviour while making resources available promptly to countries facing the dual threat of economic harm and greater spending needs. Whether it will work in practice remains to be seen.

Andrew is a member of Bright Blue and a former UK Government economist. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Matt-80]

Carlo Moll: Germany should be the UK’s best friend on the continent

By Centre Write, Coronavirus

With Brexit an accomplished fact and ongoing negotiations over future relations between the UK and the EU reportedly hanging perilously in the balance, a series of questions concerning the future of Britain’s European policy and the nation’s wider geopolitical strategy arise

The Prime Minister has repeatedly stressed the UK’s will for continued partnership and friendship with its European neighbours. It is obvious, however, that should the European Union ever experience an even limited federalisation of an ‘inner core’ of member states, for example through a tightly integrated geopolitical cooperation of France and Germany as prepared in the Treaty of Aachen signed last year, it could become an even more formidable international competitor than it already is at the present moment. 

Influencing the course and extent of European integration in the interest of British competitiveness is an extremely complex task that will require supreme statesmanship, keen understanding of continental affairs and skilful diplomatic tact, from any British government. It will also require the cooperation of a reliable partner on the continent, which will be able to present British concerns in Brussels and take the UK’s sovereign interests into active consideration. This European partner should be Germany. 

Historically, Britain’s view on Germany has always vacillated between admiration and distrust, warm friendship and bitter hostility, alternating phases of war and peace, conflict and reconciliation. While the memory of the Second World War looms large in British public memory, Germany and the United Kingdom are today connected by liberal-democratic and humanitarian values; the cooperation in international organisations, such as NATO, UN, OECD, WHO; and diverse mutual interests, ranging from frictionless trade and the defence of international law to the combatting of existential threats to human life such as the current Covid-19 pandemic, climate change, the fight against international terrorism and the resolute struggle against transnational far right extremism. 

Germany is the nation’s second largest trading partner and an important market for British businesses, especially in the vital field of digitising key sectors of German economy, which has been declared a national priority by the Chancellery. British businesses engaged in software development and artificial intelligence research could and should profit from this national agenda by combining digital expertise developed in London, Oxford and Cambridge with Germany’s advanced technological skills and deep know-how in such critical areas of innovation as automation, medicine, biochemistry, transportation, robotics, clean energy and heavy industry. 

This could, for example, be achieved through the creation of Anglo-German tech clusters, favourable visa arrangements for entrepreneurs and businessmen, as well as regular exchanges between German and British start-up communities, investors and developers. At the moment, Germany is in the middle of a complex shifting of international priorities, in which it seeks to establish new security arrangements and alliances in the face of an American retreat from the global stage, a resurgent China and a geopolitically ambitious Russian Federation on NATO’s Eastern flank. 

In the EU, meanwhile, Germany will hold the presidency of the European Council in the second half of this year and will therefore be able to decisively shape Brexit negotiations and serve as a vital British ally on the continent, whose support will be critical in maintaining favourable cross-border trading conditions. 

On the issue of Brexit, Merkel has shown herself pragmatically appreciative of British concerns and has repeatedly sought to soften the blows of a potential no-deal scenario, which could be catastrophic for German industry, while the various candidates for the upcoming December elections for chairman of the ruling Christian Democratic Union (CDU), have generally shown themselves sympathetic to the UK’s position. 

Thus, the party’s conservative darling Friedrich Merz, who is the Brexit representative in the state of North Rhine-Westphalia (‘NRW’) has expressed his concern for the potential negative economic ramifications of a no-deal scenario, while his contender, NRW’s Prime Minister Armin Laschet has personally thanked the British government for its support in the creation of his state after the Second World War and affirmed his enduring commitment to Anglo-German friendship. 

Similarly, candidate Norbert Röttgen, the chair of Bundestag Foreign Affair Committee, and MP Tom Tugenthat have called for a friendship treaty between the UK and Germany post Brexit. On the level of the Länder (federal states), Bavaria’s popular conservative Prime Minister Markus Söder has already announced the opening of a dedicated Bavarian diplomatic representation in London in 2020, which will become an important additional communicative hub for the deepening of Anglo-German relations next to the existing German embassy in Belgrave Square.

The UK, on the other hand, could strengthen Germany’s position in the UN security council and serve as an important conduit between the EU and an increasingly isolationist and distrustful US. In the field of military cooperation and international security, the UK and Germany could also forge closer bilateral ties through intelligence-sharing agreements, as well as through the establishment of an Anglo-German Brigade (similar to the already existing Franco-German Brigade) to be deployed in NATO’s Enhanced Forward Presence in the Baltic states.   

A close Anglo-German alliance will not only be beneficial to both nations, as well as European welfare and security, but will also allow Britain to pursue its geopolitical ambitions without nurturing its historic fears about the rise of a hostile hegemonic power on the continent and assert a more pronounced global role with the support of a strong, friendly partner in the EU that shares its values, ideals and interests. 

To achieve this ambition, the UK will have to cultivate not only high-level contacts between Downing Street and the Chancellery in Berlin, but also crucially deepen relations with the government of the Länder, such as Bavaria, Saxony and North-Rhine Westphalia, whose regional economies will be the key to a successful Anglo-German relationship post Brexit. 

Carlo is currently undertaking work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Number 10]