Covidspring IV: The Cost of the CovidSpring
We could be paying for all this easily
Back in 1993 I was editing a journal called Contemporary Record: the Journal of the Institute of Contemporary British History with Anthony Seldon and Peter Catterall.
Edmund Dell who was the architect of the North Sea Oil taxation system wrote a wonderful article on the origins of the Petroleum Revenue Tax or PRT which appeared in the second issue of the year. He wrote a note with the MS and we chatted about it on a phone with a wire connection and rotating dialling disc. The office was in the Senate House building of the University of London on Russell Square and the telephone literally looked like this:
Either on the note, which I did not keep, or in our chat he said:
“Oh well, maybe we probably did it wrong but it was the best we could do”.
As we manage our lockdown I keep muttering: “Make do and mend”, and my wife, who is from Long Island, throws things at me when I do.
Peter Hennessy who ran the ICBH called one of his books: “Muddling Through”.
Now we are living through the consequences of the public policy decisions made by the Dad’s Army watching generation. They were not even in Dad’s army. The generation of politicians who have created the moribund decaying edifice of the modern UK, the architects of Brexit and cul-de sac of decline we call our current reality, only watched this stylised version of English failure, on perpetual repeats. As we did growing up. My father loved it. I hated it because from it came one of my childhood nicknames: “stupid boy”.
The 1974-79 Labour government’s utter failure of political imagination is encapsulated in the PRT. The failure to think about the long term in the way in which they introduced, structured and used the PRT. This must stand as one of the worst failures of the post Second World War period. Edmund was a lovely and a brilliant man and I do not intend to besmirch his memory because his assessment in the article was that this was the best they could do, seems to stand up. It was the best they could do because of a profound lack of political will, capital and imagination.
Will in the sense of the drive to force the oil companies to hand over a greater proportion of their profits in the short term for use in both current and capital expenditure. Current in the form of dealing with the immediate crisis of the mid-1970s and then cutting that back to allow for capital accumulation in the form of a sovereign wealth fund.
But there was also a lack of political capital. With no overall majority, an increasing polarised political landscape and deep financial problems with no existential cause like a virus, except perhaps OPEC generated inflation, they floundered. The Cabinet was deeply divided.
Meanwhile, Norway calmly created the hydrocarbon sovereign wealth fund that will see them through this crisis. Norway’s creation of that fund was based on thinking that is enabled by political imagination. It feels sometimes as if our political class are only capable of thinking about one thing at a time on a meta level. When they are thinking about what they are thinking about they are usually all thinking about the same thing. In the 1970s it was inflation or stagflation that permeated thinking to become the thing that all should be thinking about. This is a kind of path dependency in which by focusing on one thing public policy decisions become driven by that one thing. Until the Covidspring epidemic that one thing was Brexit. I want to come back to theme of political imagination in my next post.
My point is that we are at a moment of huge opportunity. Out of the darkest days of the Second World War there came the Beveridge Report which laid out the structure of the welfare state and the promise that the UK after the War would be a better place than before. That this time there would be homes fit for heroes. In 1945 the electorate voted overwhelmingly for that better world. The threat to the survival of the UK from the Nazis galvanized a response that described a future that people wanted.
The current UK government has a majority, it has an existential threat and it has a deep financial crisis. Black Gold is not the wealth creator of the future but technology is. Biotech, Fintech, Nanotech and AI all benefit from state education and subsidised universities to produce the talent that drives them. A technology revenue tax directly invested in a sovereign wealth fund and pitched at a small proportion of profit, would over decades, begin to create some kind of fund on which we might draw in the future. There may well be better ways of doing this that proper economists can devise, but this is the kind of thinking we need at this moment so we do not live in this moment again. It could support the payment of the universal income as has been introduced in Spain. Along with hypotheocation it could support the costs of social care. Others will have different and better ideas but this is the kind of debate and the kind of political thinking we need right now.