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Boris Johnson’s push for mass testing is set for failure before it even gets off the grounds

Boris Johnson’s push for mass testing is set for failure before it even gets off the grounds

The campaign for regular, mass Covid testing has begun in earnest. From last Friday, everyone in England has been eligible to access lateral flow tests for free. The government would like people to test themselves twice a week.

Under the slogan “Hands, Face, Space, Fresh Air”, the public is being urged to use the NHS COVID-19 app when checking into outdoor hospitality, hairdressers and the like.

But just how effective will either of these be?

The NHS app does not have a good track record. True, it was downloaded some 21 million times last year, but the majority of these took place very shortly after its launch and it never obtained real traction.

The number of downloads seems impressive, but it is only around 40 per cent of the adult population. The low proportion has been driven by both social norms and deliberate choices by individuals.

The percentage of the population with the app never quite reached the critical point at which people felt obliged by peer pressure to download it themselves. Definite improvements have been made to it over time and there is little doubt the government is hoping that many more will take it up to facilitate entry into leisure and retail outlets.

However, the government’s own website makes clear that the option of simply leaving your details manually remains valid. Last year, there were a great deal of examples of people taking creative license with their name and contact details.

For many people, there was a positive disincentive to register on the app. You might have been on the other side of the pub or restaurant from an infected person, with very little chance of picking up the virus, but the app could still tell you to self-isolate by virtue of being in the same premises.

This disincentive still remains with the free lateral flow tests. Of course, the tests tell you not whether you merely might have it but that you probably do. But for those who are self-employed or who need to actually turn up to work to get paid, the immediate risk of losing out on a pay-cheque can feel greater than the reward.

The very success of the vaccines means there is much less incentive to have a test done. Even amongst the very elderly, the hospitalisation rate amongst those vaccinated appears, in real-life data not just in small-scale trials, to be essentially zero.

It also seems possible for people to fraudulently enter negative results in the app without ever taking a test. For some desperate to return to normality, the temptation might prove to great. There may be ways of checking up on this, but rather like the speed limit on unrestricted motorways, the chances of being caught seem slim.

The same system this time last year would have been introduced with massive popular relief and approval. Now, it seems unnecessary and costly. Cases, hospitalisations and deaths are so low, and vaccines so effective, the government would do better to follow the data and open up the country quickly.

As published in City AM Wednesday 14th April 2021
Image: Gustave.iii, CC BY-SA 4.0 via Wikimedia Commons
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Government scientists must be transparent about flawed Covid models

Government scientists must be transparent about flawed Covid models

The strength of the economic recovery as Britain emerges from lockdown is a hotly contested subject among economists. Some believe there will be a massive surge in demand as consumers celebrate their freedom, others argue it will take time to claw back confidence.

Economic forecasts are subject to the same faults as any projections, as we have seen over the pandemic, and will differ for two main reasons. The same model will give different outcomes depending on what assumptions are made about key variables, for example, how long it will take trade patterns with the EU to return to normal.

The other point of discrepancy is more fundamental: assumptions about how the economy actually works. Even with the same assumptions, different models will give different results.

At the moment, those who think inflation is primarily a monetary phenomenon are projecting quite sharp upturns in inflation not just in the UK but across the West as a whole.  Other economists place less weight on money as a cause of inflation and so see less of an increase.

Economists have appreciated this for a long time.  A substantial amount of research effort has been devoted to comparing different models so that the differences between them can be better understood. The first systematic steps on this were taken as long ago as the 1970s.

In just the same way that economic forecasts differ, the pandemic has revealed that different groups of epidemiological modellers also produce varying forecasts about how many cases of Covid there will be, the rate of hospitalisations, and the number of deaths.

What is missing in the countless scientific models used to justify decision making during the pandemic is transparency over how heavily ministers are relying on any particular model.

For example, at the end of October 2020 Patrick Vallance, the government’s chief scientist, predicted there would be 4,000 deaths a day by the end of the year.  At the same time, other modelling groups were projecting daily numbers of between 1,000 and 2,000.

As it happens, they were all too pessimistic. Even though the new virulent Kent variant had taken hold, which the forecasts made in October may well have not taken into account, the highest rate was observed on New Year’s Eve itself, with some 750 deaths.

This is by no means the only example of substantially inaccurate forecasts made by epidemiologists during the pandemic.

But the point here is not the forecasting errors made by epidemiologists.  It is that their forecasts differ for exactly the same reasons as economic ones.  Different groups both have different models and make different assumptions, such as the effectiveness of vaccines.

Epidemiology is not like Newtonian physics applied to straightforward everyday problems.  With the latter, all physicists will give the same answer to a question. The model is agreed upon, and has been subjected to stringent empirical tests of validation.  This is not the case with epidemiological models.

There is an important policy implication which follows from this.  When politicians say they will “follow the science”, the question is: which science. Which model, and which set of assumptions will be followed?

Economists have already set the example. We need a proper audit of the epidemiological models. Their black boxes need to be opened so that the “science” behind which they have sheltered can be made public.

As published in City AM Wednesday 31th March 2021
Image: Chris Whitty via Flickr
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The Great Frost of Covid-19 will pass – and Britain’s economy will heat up

The Great Frost of Covid-19 will pass – and Britain’s economy will heat up

The Great Frost of 1709 has been in the news this week, quite possibly for the first time since 1709 itself.

According to Bank of England estimates, this was the last time that GDP fell by more in a single year than it did in the Covid year we have just had.

The Office for National Statistics published its first estimate of GDP for 2020, showing a year-on-year fall of 9.9 per cent.

During the financial crisis of the late 2000s, for example, the drop was quite a lot less. UK output fell by a total of just 5 per cent in the two years 2008 and 2009 combined.

Despite the severity of this recession, the Bank’s Chief Economist, Andy Haldane, issued a very optimistic statement. The UK economy, he said, was like a coiled spring, waiting to rebound strongly.

But could the sheer scale of economic disruption which has happened put a damper on this?

Companies worried about survival, individuals worried about their jobs – these might depress confidence and mean that spending will be held back even once the restrictions are lifted.

Economist Angus Maddison spent a lifetime constructing meticulous estimates of economic data in the past. In his final work, he even put together data on the size of the world economy over the past 2,000 years.

His most famous data set – famous within economics that is – contains estimates of GDP in all the Western economies ever since they became industrialised. For some, such as Japan and Sweden, that was quite a bit later than the UK. So Maddison’s data here starts in 1870.

There are getting on for 300 separate examples of economic recessions in his data, years in which GDP growth in any particular country fell below zero.

The striking feature is the resilience of the Western economies. They recover quickly from most shocks. Two-thirds of all recessions only lasted a single year. And nearly 90 per cent had ended after two years. In other words, positive growth has usually been resumed very quickly.

At the end of the Second World War, for example, the defeated countries such as Germany, Austria, Italy and Japan experienced catastrophic economic collapses.

Overrun by enemy armies, relentlessly bombed, their economies almost ceased to function. Yet by 1947 they were roaring away, recording positive GDP growth of over 10 per cent a year for several years.

The impact of Covid on the economy has been grim. But is not quite the same as being attacked with atomic bombs, as Japan was in 1945.

Growth resumed in 2010 after the financial crisis of late 2008/09. It has since been rather anaemic, but it has been positive nevertheless.

The only time the developed world has experienced a prolonged recession was during the truly major financial crisis of the 1930s and its aftermath.  America did not regain its 1929 level of output until 1939.

If we can rely on the experience of history, we are indeed in line for a big bounce back once lockdown is lifted.

As published in City AM Wednesday 17th February 2021
Image: London under snow via Flickr by Jessica Mulley CC BY-NC-ND 2.0
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Burnley and Asda are unlikely warnings of debt-driven troubles

Burnley and Asda are unlikely warnings of debt-driven troubles

It has been a week of mixed messages. Not just on the release from lockdown, but on the economy.

The Bank of England indicated that banks have been given six months to prepare for negative interest rates.

The Monetary Policy Committee was quick to clarify that this did not mean that they would necessarily cut their 0.1 per cent interest rate. It was just that, well, it sort of might be needed if the economy remained in recession. It was that kind of clarification.

Almost in the next breath, the Bank’s Governor, Andrew Bailey, opened up the vision of an economic boom as consumers emerge from lockdown.

Households have accumulated some £125 billion in extra savings during the lockdowns.  If this is translated into spending, the economy will roar away. The Bank will be looking at higher interest rates to cope with the inflationary pressures this would create.

The unlikely setting of Turf Moor, home to Burnley football club, shines a light on the future direction of interest rates.

Burnley, an isolated town in North East Lancashire, maintains a club in the Premier League.  Only a few weeks ago, they achieved a notable victory at Anfield, the home of Liverpool.

Since its inception in 1882, the club has been owned solely by local businessmen and Burnley supported.  Until the end of last year.

In its most recent published accounts, to June 2019, the club had no borrowings and £42 million in the bank.  But no longer.

An American consortium, ALK Capital, has bought the club and appears to have loaded it with debt. The precise details have not been made clear. But it seems that a loan has been taken out to pay off the previous shareholders, and secured on the stadium and the club itself.

On a far bigger scale, the tremendously successful Issa brothers, from nearby Blackburn as it happens, have revealed this past week that debt will be the principal instrument to finance their takeover of Asda.

Starting with just a single garage 20 years ago, they have built a huge and flourishing business empire and are shining examples of entrepreneurial success.

The details of the £6.8 billion acquisition of the supermarket chain are complicated. But they are in the public domain. Essentially, they involve raising debt and carrying out a sale and leaseback of some of the company’s assets.

So here are two newsworthy company acquisitions basically financed by debt.

For reasons which are perfectly understandable, central banks in the West have presided for years over a regime of very easy money.

It is now accepted much more widely than it was at the time that high and rising debt levels were the principal cause of the financial crisis of the late 2000s.

We are still a long way from this. But history tells us that a rising trend of debt-financed corporate acquisitions is not a good sign.

Once the recovery from the Covid crisis becomes established, the Bank needs to act to damp this down. And higher interest rates have to be part of the plan.

As published in City AM Wednesday 10th February 2021
Image: Asda Blackburn by Hassan Jawad via Geograph CC BY-SA 2.0
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Beware those who’d lock us down and throw away the key

Beware those who’d lock us down and throw away the key

Rather like dedicated Remainers, pro-lockdown enthusiasts never seem to give up.

Their ardour will have been fuelled by leaks over the weekend of results from the epidemiological models.

Apparently, even though quite soon all the over-70s will have been jabbed, lifting restrictions before the summer would lead to a massive third wave of the virus.  Daily death rates would once again soar over 1,000.

The SAGE modellers seem to have arrived at a totally different view to that of the Chief Executive of the NHS, Simon Stephens.  He told a House of Commons committee last week that Covid would soon become a much more treatable disease.  We can look forward, he said, to a “much more normal future” over the course of the next year.

Instead of wallowing in gloom, we might usefully look at Sweden.  The country has not just the prospect of a normal future but the actual reality of a normal past and present.  In Stockholm today, for example, you can walk up to the bar and order a beer.

In terms of economic outcomes, Sweden has performed better.  In 2020, output in the UK fell by over 10 per cent, and by just over 3 per cent in Sweden. The UK is running a public sector deficit of over 13 per cent of GDP, getting on for £400 billion. The comparable figure in Sweden is 4 per cent.

The Covid death rate in Sweden is rather high, at 1144 per million people.  But in the UK, it is 35 per cent higher, at 1550.

Currently, and adjusting both rates to the UK population size, the daily death rate in Sweden is around 100, and more than 1000 here.

Could a policy of very few restrictions have worked in the UK?

The virus spreads more easily in dense populations.

Much of Sweden is essentially completely uninhabited. In fact, slightly more Swedes live in urban areas than do Brits, 87 per cent compared to 83. So no difference there.

The Swedes are definitely less fat. Just under 20 per cent of them are clinically obese compared to 28 per cent of the UK population. Obesity is a key determinant of serious illness and death in Covid cases. But even adjusting for this, Swedish death rates are hardly likely to have exceeded those of the UK.

No politician would dare as to even hint at this. But could it be that the Swedes are, well, more sensible than we are?

They could be trusted to behave in ways which did not lead to the virus getting out of control.  The epidemiological models do not in general include the possibility of people adjusting behaviour in the face of a pandemic.

Overall, compared to the UK and many other Western European countries, Sweden, with virtually no lockdown restrictions, has had a good crisis.  Behavioural changes can make a massive and sustained difference to outcomes.

With only minor modifications of behaviour and armed with the new vaccines, it seems that Simon Stephens’ vision of a return to normality is close to being realised.

As published in City AM Wednesday 3rd February 2021
Image: Socialising in Sweden by Johan Anglemark  via Wikimedia CC BY-SA 2.0
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Hurrah for a vaccine — but was lockdown actually worth it?

Hurrah for a vaccine — but was lockdown actually worth it?

The development of the vaccines has changed many things.

It has even influenced the opinion of the Prince of Lockdown himself, health secretary Matt Hancock. Life, he pronounced at the weekend, would be back to normal by the spring and the “blasted regulations” abolished.

But one thing has remained constant: the government’s continued refusal to publish a proper cost-benefit analysis of lockdowns.

A perfectly standard methodology exists to do this. It is used not just by our own National Institute for Health Care and Excellence (NICE), but across the western world.

In essence, this involves placing a monetary value on a human life.

Many may see this as a sinister and macabre thing to even ask. But it is, regrettably, something which has to be done.

To illustrate this, imagine a purely hypothetical scenario. Two people suffer from a very rare disease from which they will die within a month. Only one dose of the cure exists, but it is guaranteed to save the life of whichever gets it. One of the patients is 100, and the other is an otherwise healthy 20-year-old.

Who should get the medicine? For most, this choice would be obvious.

This is the quandary in its most basic and understandable form. Of course, people in health systems have to make much more complex decisions on which drugs should be bought and how many people can get a particular treatment all the time.

The key concept is what is known in the jargon as “quality-adjusted life years” (QALYs). Analysts then consider how many of these QALYs would be saved were a given amount of money spent in a particular way.

Like many policy-oriented metrics developed by economists (GDP, for example), the concept of QALYs is not without its critics. But, again like GDP, it is a useful and practical tool. We need a way to determine whether it is worth spending the money available on a particular course of action, and the only way to do that is with a metric to measure benefits against costs.

Armed with the concept of QALYs, it is easy to see why estimates of the benefits of lockdown do not yield huge numbers.

Many of those who have died from Covid-19 are very old — the average age of a coronavirus victim in the UK is over 80. Around 95 per cent of people who have died of Covid have had some serious underlying health condition, so the quality of their remaining life was not high.

In contrast, the costs of lockdown are massive, and impact everyone in the country. Just for starters, Rishi Sunak presented a plausible estimate of a loss of output in 2020 of over £200bn — nearly £3,000 per man, woman and child in the UK.

That is to say nothing of the economic impact of missed education, long-term unemployment, and negative mental health effects caused by lockdown policies.

The government refuses to crunch the numbers. But economists and medics have done it for them using the same approach that the NHS already relies on.

In June, David Miles of Imperial College, a former member of the Monetary Policy Committee, concluded that “the costs of continuing severe restrictions in the UK are so great relative to likely benefits that a substantial easing in restrictions is now warranted”.  In October, Barry McCormick, a former chief economist at the Department of Health, also showed that the benefits of lockdowns are greatly exceeded by the costs they create.

Hopefully the health secretary is correct and the problem will soon vanish as the vaccine is rolled out. But the government must be kept under pressure at every stage of the reviews of both Tiers themselves and the restriction system as a whole.

A well-established methodology, already used in our health service, shows the costs of lockdown far outweigh the benefits.

As published in City AM Wednesday 9th December 2020
Image: Nightingale Hospital  CC BY-SA 2.0 via Wikimedia 
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