Lockdown – Reflections at the end of week 35

One of the side effects of this year’s restrictions for many people has been a loss of the perception of the passing of time. Many of the regular markers such as school terms (initially), celebrations of birthdays, holidays, social and sporting events which provide the background rhythms to each year were lost or diminished. Notwithstanding the emergence of the Christmas set piece adverts, the screaming campaigns around Black Friday and the onset of the annual bombardment of celebrities with invertebrates, it has been hard to understand that Christmas isn’t very far away, so this morning’s frost came as a timely reminder.

With Christmas, it seems, will come the long awaited vaccines, and this week has seen successive positive reports about the various vaccines and their effectiveness. I know that there are reservations amongst a significant number of people about the safety of vaccines which have been tested over such a short space of time, but for most, including many people who are truly suffering from the absence of contact with their families and friends, they offer a hugely welcome way forward. Silver bullets, primarily around testing and tracing have been announced before and have invariably disappointed, but this one does seem to be the real thing.

It also seems likely that, although infection numbers are stabilising rather than tumbling, restrictions will be eased for a brief period over Christmas to allow families to get together. The news organisations seem to be in unison in reporting this, which tends to suggest that the government, notwithstanding recent personnel changes in the spinning department, is continuing its habit of trailing its Covid policy announcements through the media. If correct, it’s good news for families, good news for Amazon, but bad news for the traditional High Street and hospitality and entertainment sectors. Given the Covid numbers and the established faith of governments and their medical advisers across the world in social restrictions as the front line defence against the virus until immunisation can take a hold, this seems inevitable. Whilst retail sales have been boosted by early Christmas shopping, it would be nice to think that this year’s style of Christmas could in the long run re-focus Christmas onto people and away from the material clutter which can so mar it, but we’ll see.

The advent of the vaccine has also seemed to be the factor which has allowed the Treasury to reveal more of its thoughts on how the Covid bill (and increased defence spending) are going to be paid for. This morning’s story is of a three year public sector pay freeze, NHS workers excepted. Setting aside the inevitable protests from those representing other key workers in the public sector, and acknowledging that the chancellor’s got to find the cash from somewhere, this policy has its risks. Whilst there are well paid public sector workers (although Dominic Cummings and Priti Patel have done their bit, by one means or another, to reduce that bit of the public sector wage bill), many are low paid. The government is starting to make noises about healing the splits in a divided nation. However, in its handling of issues such as free school meals, it has shown that it doesn’t seem to understand poverty. It is a risk to place a disproportionate burden of the Covid bill onto those who are already financially disadvantaged. This issue will be exacerbated if a messy end to Brexit negotiations brings inflation with it, and in particular food inflation.

As budget planning goes on, it will also be interesting to see how some of the big winners of Covid will be dealt with from a tax perspective. There are domestic winners, such as the PPE suppliers who are much in the news this week, both as the recipients of large government contracts and as contributors to the congestion at the Port of Felixstowe. More difficult targets would be the multinational suppliers of, for example, IT services and kit and online retailing who have as a matter of custom and habit adopted transnational tax structures which have made the levying on and collection from them of UK tax as easy as nailing jelly to a wall.

Wagatha Christie apart, it’s been a pretty serious week. For many, including those likely to lose their jobs following the administration of Jaeger and Peacocks, it’s pretty tough out there, but a return to a level of normality is now in view which must give us all something to look forward to.

Enjoy the weekend.

Ian Waine
Senior Partner