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Learn to love the deficit!
Lots of Lovely Money from the Bank of England.

It is widely believed that the substantial deficit incurred to keep the economy running must eventually be repaid.  It wasn’t repaid after the financial crisis in 2008 when £500 billion were given to the banks.  It doesn’t need repaying either once we get through the coronavirus pandemic to the tune of at least £300 billion.  It keeps the economy going and we must learn to love it dearly!

The government injected large sums of money into the economy to reduce substantially the effect of the pandemic on our economy.  So far it has been successful but it may well be necessary to do more, particularly if we have a secondary peak in infections with the winter approaching.  Current estimates suggest that it is likely to be at least £300 billion.

That money was basically provided by the Bank of England.  Many are worried that it will have to be repaid but that is not, in fact, true.  The Bank of England don’t particularly need it back because they’re not short of it anyway as they can print more should they need it, which they don’t and never will.  The consequence is that the total debt to the Bank of England will increase by about £300 billion to a total of around £800 billion.  That is a very large sum of money but you may have noticed that these numbers show a pre-existing debt of about £500 billion.  That was the quantitative easing (QE) that was deemed necessary to save the banks from collapse during the financial crisis in 2008.

That £500 billion sum has not been repaid and no one is suggesting it needs to be repaid by the banks who received it.  Not repaying this sum has not caused the sky to fall.  Similarly not repaying the latest £300 billion will not cause the sky to fall either.  For example should the Bank of England decide that all the loans it gave should be repaid in 50 or 100 years, and the interest rate should be very low indefinitely then no one needs to worry about it.  After the Second World War the vast debt incurred was basically left and has since evaporated because of general inflation since then.

That is not to say that the austerity/taxation question is dead.  We still need to balance the economy from day-to-day.  The likelihood is that taxation will be increased on investment/capital gains income which is currently taxed at about half the rate of hard-earned income, but that is another discussion for the future.

In short, we need to learn that this kind of deficit, caused by emergency funding to keep our economy going, does not require urgent repayment at all.  It has been of critical benefit for our economy and has been undoubtedly an important and the right thing to do.

An excellent book that explains this in much more detail is by Stephanie Kelton entitled “The Deficit Myth”. Strongly recommended, and just published.

The Greenest Economic Revival
A typical air source heat pump unit mounted outside with clear air access.

Summary: We must create large numbers of jobs quickly if we are to recover rapidly from the pandemic recession already underway.  Ideally these jobs should contribute substantially to our efforts to achieve zero carbon.  One very promising and highly practical approach is to upgrade homes from gas or oil powered heating to highly efficient electrical heating using air source heat pumps.  Such a move is essential if we are ever to achieve zero carbon.  The number of jobs that would be created to carry out such a program will be several hundred thousand, spread throughout the country.  With the prospect of 6 million unemployed in the near future in the UK such a program could help substantially to speed our recovery.

The British economy, like so many worldwide, has been greatly affected by the Covid-19 pandemic.  Projections for job losses in the UK are frighteningly high.  At present we have 9.3 million workers on furlough, 2.5 million self-employed on income support and just under 3 million unemployed and receiving benefits.  The total of around 15 million represents about 50% of our working population.  Many businesses will come back to life gradually over the next few months and hopefully by the end of the year things will be looking up.  However most projections suggest between 5 and 7 million as an unemployed baseline, in the region of 20% unemployment rate.

Not only is there a massive problem to face but we must not forget our other problem, climate change.  The UK is committed towards achieving net zero carbon consumption by 2050 and there are many pressures to achieve that even earlier.  The great part of our carbon consumption is from transport and from heating, both domestic and industrial.  Other PCs on this website have already looked at what we need to do to move away from fossil fuel transport to electric systems.  There needs to be an emphasis on reducing the weight and power demands of vehicles as we transition to all electric (non-hybrid) transport.  You can read more about that here: and here:  We will look here at what we might do to increase employment substantially as well as improving and reducing our carbon consumption.

Very often greening advocates emphasise home insulation as a highly desirable and straightforward way of improving domestic energy consumption.  Although attractive in some ways, I believe there are major issues here, firstly because it does not eliminate fossil fuel consumption, simply reduces it.  The houses that need most work are often occupied by less well-off families, and the work is typically some combination of cavity wall insulation, double glazing, roof insulation, boiler replacement etc. In many cases the cost of such work can be quite substantial, up to £20,000 per household.  The big problem with that sort of programme is that it can be a massive inconvenience and upheaval for the family.  It usually leaves the householder with a significant amount of remedial work such as redecoration to pay for.  Better off households are much more able to cope with this.  In practice a great deal will be achieved as buildings are replaced by modern better insulated designs using industrialised technologies.  You can read more about how we might do that here:

A rather different approach is to address directly the consumption of fossil fuel for heating.  The best technology for achieving this is the use of air source heat pumps.  These are driven by electricity and work rather like an air-conditioning unit in reverse, and indeed many can be driven in reverse to provide cooling in summer.  The pump uses cold external air.  A compressor then generates heat for the water/central heating supply.  Gas consumption is eliminated, and the electrical power needed is about one third of the power otherwise needed to heat the house with gas.  A number of manufacturers already offer such units but they can be expensive.  The total cost including installation (which is pretty simple) can be around £10,000 per property.  In principle they produce a significant saving in power costs although the current factor of 5 by which UK electricity costs exceed UK gas costs has to be resolved particularly as the wholesale price of electricity is now around £0.03/kwh.  Most UK customers are charged today at four or five times that price.

The number of properties that need updating from gas or oil to electricity in total is about 30 million.  If we allow ourselves to achieve that we are looking at replacing about 40,000 units per week every week throughout those 15 years.  If we are to reach zero net carbon this work is not optional.  It must be done.  However there is no doubt it can be done much more cheaply than at £10,000 per property in volume.

We have learned that engineers in companies and universities throughout the UK were able to entirely redesign the traditional ventilators used widely in intensive care units to treat most acutely ill.  This allowed the units to be produced much more efficiently and much more cheaply.  A similar effort working on the design of air source heat pumps could undoubtedly bring the price right down.  Domestic air-conditioning units are made in vast numbers and even quite substantial ones delivering 5 kW of cooling power are well under £1000.  A major re-engineering effort on air source heat pumps combined with a manufacturing facility to produce them in volume could give a great reduction in the unit cost, just has already been achieved with PV solar panels.

The effect of such a programme on employment will be very great.  Installation will require full-time jobs to be created throughout the country, not at all concentrated in the wealthier parts.  Engineers will be required to carry out this work and may be trained relatively easily to carry out the work.  These will not require lengthy training programs.  There will also be a requirement for maintenance engineers although these units are very reliable.  Prior to installation surveyors will be needed to discuss with the household where the units should be located (always on the outside of the house).  There will also be significant new jobs involved in manufacturing 2 million of these units per annum, including the creation of major manufacturing plants which could well be located anywhere in the country.  By emphasising installation in the poorer parts of the country first it will be clearer that it is everyone in the country who will benefit.

The net effect is that the programme to replace fossil fuel heating systems throughout the country would have a substantial effect on the carbon consumption in the UK.  Such a program would place the UK in a strong position to export air source heat pumps widely particularly once manufactured to a good low price.  The overall cost of such a program will be considerable but it is a straightforward investment in the UK infrastructure for the long-term benefit of the UK.  It is likely to cost a further £150-£200 billion paid for with deficit funding directly as was done after the great financial crash of 2008.  You can read more about why that is the right approach here:

Government Decision-Making: Often Badly Flawed.
Could this be us before long? From Huffington Post, 29 June 2020

Summary: it is difficult to exaggerate the malign influence that Dominic Cummings has had on this government.  The lack of intellectual firepower in the Cabinet has led to a range of bad decisions being made throughout the pandemic.  We have paid already through an enormous death toll and are continuing to pay.  The economic damage will take years to repair with projections of over 6 million unemployed by the end of this year.  If the Prime Minister cannot develop a more coherent plan he should move to let another takeover.

Running the country is not easy.  Everything is interconnected and government procurement programs often go badly wrong.  Examples are MoD procurement and the multiple computer systems contracts for the health service.

Problems start with the decision process in government.  Committees are formed to decide policy and then passed to more junior civil servants to implement the decision, an implementation which may not have been thought about much at all.  Committees love to be fully representative of all the stakeholders but tend not to have those with experience of delivering successful programs.  A Tory government is convinced that everything is better handled by a commercial contractor even if they have no relevant experience.

The present government is widely agreed to be rather third division made up of those blindingly devoted to Brexit, particularly Brexit with no deal.  A wider range of backgrounds and experience is sorely missing in the present cabinet.  This makes them even more likely to be affected by special advisers who happen present at critical meetings.  If a special adviser is notoriously difficult to deal with, argumentative and hectoring as well as being very certain that he is right then the committee will make bad decisions. 

Unfortunately our Prime Minister has got his own gollum hidden away in a deep sub-basement of number 10.  Because of his Rasputin -like grip on the mind of our nominal Prime Minister, and as all are certain that to cross him is to court an early departure from the corridors of power, his power is immense yet nobody really knows what is policies might be.  No one is given a chance to discuss it and policies appear and disappear without much explanation.  This is not helped by Dominic the Mad being well established on the autistic spectrum.  He is generally confident that you are not capable of understanding such matters and therefore can be safely ignored.

People like him are quite common in Cambridge where I have spent many years as a science researcher.  Like Dominic the Mad, they have an intellect the size of the planet yet are fundamentally quite stupid.  They will make decisions thinking that they are conscious of all the ramifications when they are not.  Loose ends are ignored and left to others to tidy up.

We don’t know, of course, where in particular this gollum has had an influence because although minutes of meetings may be published, attendance by “special advisers” is often conveniently omitted.  We can, however, be confident that he was present at many of the critical meetings throughout the management or at least mismanagement of the Covid-19 pandemic still currently raging around.

The initial decision was to preserve the Tory party at all costs by ensuring that whatever happened, the NHS survived.  This produced several fairly damaging policies.  By ignoring what was happening all around the world are government was very slow to regain consciousness after the excitement of BREXIT, the Prime Minister having a couple of weeks in Mustique and generally not wanting to stop any of the fun (the Tories had lots of funding from the racing fraternity so Cheltenham continued in full, and cancelling an international football match) meant that everything was left to slide.

One early decision they are now finding difficult was choosing a social distance of 2 m and not using facemasks when the world health organisation recommended 1 m and facemasks.  Other countries that went for 1 m have found it much easier coming out of lockdown.  This decision ensured facemasks were available for the NHS since of course nothing much had been ordered in advance despite important reviews by key committees months and years in advance drawing attention to our total lack of preparedness.  Not to mention waking up and realising what was going on around the world in the beginning of January.

And then there was the quite unbelievable decision to empty our hospitals of the elderly into care homes without any attempt at testing them.  It was known from the beginning that the elderly were particularly at risk from Covid 19 and to dump 25,000 untested elderly people into care homes without any attempt to provide tests for the refugees or their carers was tantamount to mass murder.

From the beginning it was accepted that testing was critical.  However despite many offers of existing testing and tracing operations in the UK, and from hospitals and laboratories throughout the country all of whom could have contributed to a serious programme of testing as they did in Germany meant that when we went into lockdown we were testing 1/20 of the number being tested in Germany at that time.  Not only did we not use our existing expertise we then gave massive contracts to companies with no experience in this such as Deloitte.  These mega testing centres are still barely working as they should, often taking 72 hours minimum for completing the test and often as long as a week by which time the patient has either recovered or died.  The performance of these centres and the way Public Health England dealt with them and they in turn dealt with the testing procedure is still not being handled properly and these failures will continue and worsen until they are sorted out properly.

Many of these decisions were made by committees with Dominic The Mad present.  We have no idea what his influence might have been but it is unlikely to have been helpful.

Boris Johnson’s government has succeeded in three months killing and injuring many more people than the Luftwaffe managed to kill and injure in five years of bombing.  Poor management and an indifference have delivered suffering on an extraordinary scale.  And now we have many years in which to manage the worst economic outcome of any Western economy all because of our own incompetence.

The only way out is to hope that the backbenchers of the Tory party realise that their legacy is becoming more toxic by the day and do something to change the leadership as well as getting rid of the gollum.

Otherwise, the challenges of these same individuals making key decisions about Brexit is pretty scary particularly when many more voters would now choose to Remain rather than to Leave.  And we also hear that Dominic the Mad is trying to pressurise the government into rolling back on its green new deal promises.  What is he trying to do and can he not explain it to us all?  If the Prime Minister cannot develop a programme for the government without his involvement he should move to one side unless another takeover.  It would be much better for the Tories and very much better for the country.

Testing: the Key to Escaping Lockdown.
Graphic from German Patent & Trademark Office.

Summary: We need to make intelligent decisions about what is the right strategy when we progressively soften or remove any of the current restrictions on our behaviour in the UK. We need to accumulate a comprehensive dataset of information about the behaviour patterns of each and every person who becomes infected. With 5000 new Covid-19 cases detected each day we will be able to generate a major statistical database. This would allow us to make intelligence-led decisions about how to manage our escape from Lockdown as quickly and efficiently as possible.

The UK government appear to be allergic to the idea of even talking about how we might ease and eventually leave Lockdown. Perhaps the main strategic error in the UK apart from just doing things far too late and slowly was the decision to abandon testing in place of hoping for herd immunity. All the evidence is that probably only 15% are immune which means that the rest of us still have it to live with or die with. The dangers we are faced with from Covid-19 are in no way diminished by spending many weeks in Lockdown. We have to decide how to manage intelligently the way forward. In another piece (see: we have discussed how different aspects of our containment might be relaxed. The problem is we have very little information about what is happening in the UK and where those infected caught the disease. Only by understanding in detail what aspects of our behaviour is leading to those individuals being infected can we make progress.

It does seem to be agreed fairly widely that any escape from Lockdown is going to depend on a much greater and more aggressive approach to testing for people who have the disease and later for those who may have had it in the past. However there is no point in mass testing until we have a clear idea of what we hope to get out of it. In the UK we have excellent capabilities in artificial intelligence combined with data mining particularly with heterogeneous data. A good example is the work that was being done a few years ago by Cambridge Analytica. There are many other organisations working with other equally complex datasets and we need to use their skills to guide what we do next. The suggestion that the new whizzy smartphone app will sort everything out for us is probably pretty naïve unless there is some considerable investment in analysing the data produced and reacting to it as a matter of urgency. If this is all underway good and well but it is difficult to believe it will be enough.

We still have nearly 5000 new cases of Covid 19 each and every day in the UK. We need to institute as a matter of urgency a serious attempt to find out more about each new case in order to develop a much better understanding of where the problem seems to be in our society. All the evidence is that the British public appear superficially to be respecting the Lockdown pretty rigorously and respectfully. City streets are deserted. Shops are closed. Places of entertainment, restaurants, cafés and bars are all closed. So where is this infection coming from? These apparently very basic questions are ones that we simply don’t seem to know the answer to.

It is important that everyone who is tested is asked all these questions. Honestly is critical and it must be made clear that there will be no penalty for admitting going outside the present lockdown rules. The range of questions that need to be asked has to be very comprehensive and should include:

  • Location and environment: Where do you live? Kind of home: house/flat/apartment? Size of home? Number of rooms? Number of people in lockdown in your own home? Any garden? Access to green spaces nearby?
  • Employment: What is your job? What is your position in the organisation? Where do you work? How do you get  to and from work? Private car, bicycle, walking or public transport? If public transport question is it crowded and how close do you find you are to other travellers? What is your precise job? How many people do you work with? Do you work in a relatively crowded environment where social distancing is difficult or impossible to maintain? What do your employers provide to ensure your own safety and allow you to follow social distancing rules?
  • Financial: What approximately is your current income now? How long has it been at that level? What was it before the pandemic force the Lockdown?  how do you feel you are managing now? What are your immediate expectations financially? Are you anxious, concerned or very apprehensive about the future? Has that been affecting your state of mind and potentially your health?
  • Family: Family disease history, colds or influenza or any other recent bugs? Has the patient or other family members any other medical conditions of any significance? Diabetes, heart disease, pulmonary problems or anything else? Allergies including hay-fever and asthma?
  • Close Family: Do you see or meet close family members? How careful are you to social distance yourself properly? Are they cautious and meticulous about keeping themselves safe? Do they have any potential problems with Covid-19 such as the elderly or frail? Should they be considered at risk because of your possible infection?
  • Managing Lockdown: How are you managing generally? Stress levels? Behavioural problems with other members of the household? Questions designed to tease out any suggestion of domestic abuse towards partners, children, parents or anyone else living with you? How do you contact people outside your home? Telephone or video such as Zoom? Do you have adequate  internet access?
  • Behaviour: Facemasks. Do you use them at all? Do you wear them whenever you go out of the house? When you go out for exercise? When you visit supermarkets?
  • Behaviour: Gloves. Do you use gloves at all to give you a degree of protection against contamination through touching? How meticulous and careful do you think you are about that?
  • Behaviour: Handwashing and use of hand sanitisers: how often do you thoroughly wash your hands? Whenever you come back from being outside? Or only when you come back from shops? Or after taking exercise?
  • Behaviour: Meeting other people: Do you ever see people you know apart from at work? Where do you meet them? Do they use facemasks? Do they social distance properly? Have any of them recently mentioned symptoms or just feeling slightly under the weather?
  • Behaviour: Exercise: How much do you take? How many times a day and how long do you exercise for?
  • Pets: do you have pets and if so what? do you take them out for exercise?

All these tiny pieces of information from one individual  will provide a single set of instances which will not, in itself, be significant. However combined with another 5000 that we already test each day we should expect to see significant correlations that build up in importance. They would tell us very early on, for example, whether people are more or less likely to be being infected at work or in shops, in the street or other places. We would know very quickly whether facemasks should be used much more widely and how important they might be for this.

Each questionnaire should be completed within 10 or 15 minutes while the patient’s test is being processed. These  questionnaire results are really important and it is essential that people are trained to carry them out effectively and reliably. Ideally questionnaire should be completed by an individual trained to do so and not necessarily a medical professional.

The results of such a survey have the potential to give us all the basic information we need about what aspects of British behaviour are likely to be more problematic. These are the areas which should not be relaxed and possibly addressed by stronger regulation. The results will also tell us what appears to be relatively harmless behaviour. This would allow some of the restrictions we have now to be dropped fairly quickly with relative confidence that that will have only a minor effect negative effect on infection.

Only by gathering this sort of information routinely can we expect to have any intelligence driving our escape from Lockdown. A good understanding of British behaviour today that is currently leading to additional infections has to be developed. In this way we might have an intelligence based route by which the UK might escape from Lockdown.