The IRA couldn’t destroy the Mancunian spirit – and neither will the latest attack

Terrorism has carved out the modern city of Manchester. Twenty-one years ago, an IRA truck packed with 1,500kg of fertiliser turned a sizeable area of the city centre into a smoking wreck. It was 15 June 1996, my first day at work as a shop assistant in the grand old Kendals department store, just down the road from the bomb. We were gathered in a scruffy upstairs meeting room for a routine briefing by the head of security when it went off. 

We could hear the blast before it impacted, barrelling down Deansgate like an invisible tsunami. When we emerged (thankfully unscathed) onto the street for evacuation, the first thing we saw was that the shop’s ground-floor display windows had all been shattered and the fashion mannequins were lying half in and half out.

Monday night’s atrocity in the Manchester Arena is simultaneously less destructive and more so. Unlike in the IRA’s outrage, which caused upwards of £700m of damage, the direct destruction of physical property this time seems likely to be minimal. But the human cost this time is on a different scale of grief. 

There were some 220 injuries from the 1996 blast, some of them serious, but no fatalities, mainly because the IRA gave an hour’s warning. Suicide bombers, however, don’t give warnings. At the time of writing, 22 people are already dead and 59 injured. And the horror of the target this time – young people attending a pop concert – makes this feel like it belongs in a different category: a separate species of depravity.

Manchester’s modern economic renaissance arguably began with the 1996 bombing. The city responded to the devastation with an imaginative programme of urban regeneration. It has delivered new transport infrastructure, buildings, renovations, clean-ups and the fashioning of some wonderful public places. An extensive overhaul of the previously unlovely Victoria station, adjoined to the very Manchester Arena complex where Monday’s mass murder took place, was completed only two years ago.

Public investment has helped to uncork the animal spirits of the private sector. Thousands of new firms have come. International firms, from Adidas to Kellogg’s to Gazprom, have located their UK headquarters in the city. Chinese investment is flowing in. The BBC has a major presence in neighbouring Salford, with possibly more media companies to follow. My old employer Kendals must now contest the luxury retail market with southern titans such a Selfridges and Harvey Nichols.

Manchester shows that “post-industrial” can be a springboard, rather than a curse. Its industrial heritage is still all around in the shape of magnificent classical warehouses, built by Victorian cotton barons. But Manchester isn’t stuck in the past. It’s a services-based economy now: outward-looking and confident. The warehouses have been converted into flats. In the decade to 2011, the city centre’s population grew by almost a fifth, the biggest expansion of any UK city outside London. Manchester has cemented its position as the second most economically vibrant city in the UK. Northern Powerhouse indeed.

How will community relations in multicultural Manchester be affected by this atrocity now that Isis has claimed responsibility for the attack? How will Manchester’s services economy cope? What will befall its thronging retail and entertainment sectors? What will happen to investment? One suspects the city will manage in the same impressively resilient way that London has coped since the 7/7 suicide bombings on the capital’s transport system in 2005.

There’s no going back on the Mancunian diversity front. Manchester’s two huge universities mean that the city is stuffed with proud citizens of the world of all ethnicities and religions who come to study. And the students often stay after graduation. Manchester has long been a tolerant place – and that is most unlikely to change. Businesses will push on too. This economic snowball has too much momentum to be stopped by a maniac with a rucksack full of explosives and a head full of medieval bigotry.

Manchester’s capacity, its symbolism, its openness, its sheer importance, all made my home city a target for the merchants of hatred and violence back in 1996 and, it seems, in 2017. That openness, of course, is the city’s vulnerability. But, as with all great cities, its vulnerability is also the source of its strength. And that strength will, once again, show itself.

#IRA #Manchester #terrorism

Theresa May is right not to offer subsidised social care to well-off pensioners

It’s a strange world we live in where the Tory Prime Minister scraps a subsidy for wealthy families and Labour complains that it’s terribly unfair.

But that’s what has happened last week with the Tory manifesto’s unexpected move on social care, where Theresa May ditched the idea of capping the amounts an individual has to contribute before the state picks up the remaining tab.

It wasn’t just Labour that didn’t like it. Some Tory candidates are beginning to grumble, perhaps unsurprisingly given their natural support base. But the heavyweight intellectual opposition came from Sir Andrew Dilnot, the distinguished economist who chaired a major review of social care for the Coalition, who told the BBC that the removal of the cap means the system “is not providing insurance” and will “leave people helpless”.

Yet “insurance” here requires some definition. What Dilnot meant is that without a cap on out-of-pocket care costs it will prove impossible for private insurance firms to design a product which will enable individuals to insure themselves against the possibility they will require expensive care in old age.

However, another element of the Conservative proposals guarantees that at least £100,000 of an individual’s wealth will be ring-fenced from being used up in care charges. That seems a rather generous state insurance of assets, certainly relative to the existing effective protection of around £23,000.

The Conservative proposal may not be facilitating the type of insurance on individual care expenditure that Dilnot thinks is appropriate. But that’s a case to be made, not a conclusion to be simply asserted.

It helps to look at the numbers. Around one in 10 elderly people will need to spend more than £100,000 on their care costs, with some facing costs as high as £300,000. But the median wealth of people in their seventies, the age when they are most likely to need social care, is only around £150,000. Under the Conservative reforms, the majority of elderly people who need extensive care towards the end of their life would not face any significant out-of-pocket payments. The state would end up providing for them.

What Dilnot is lamenting is the dent to hopes of seeing the creation of a private insurance market that would primarily be of benefit to those with significant assets, mainly high-value houses in the South of England. One might wonder whether providing state-sponsored risk pooling for Home Counties pensioners ought to be a Government priority. But let’s imagine it was. Providing that support certainly wouldn’t be free.

Dilnot proposed a £35,000 cap on out-of-pocket costs that would have required around £2bn a year of additional taxpayer funding. The Dilnot Commission’s own estimates show that the biggest beneficiaries of the cap would be the wealthiest fifth of pensioners by income. 

But who would pay? Perhaps it might be funded by an increase in inheritance tax, as various think tanks have proposed. This would be socially equitable since the ones footing the bill – rich families in the South – would also be the beneficiaries of the social care reform. Remember, people cannot take their wealth with them when they die. The “insurance” we are talking about is, in the main, insurance of their children’s inheritances.

Yet political reality intrudes here. There’s nothing in the Conservative Party manifesto about inheritance tax. And new rules introduced by David Cameron and George Osborne mean that people will relatively soon be able to pass homes worth up to £1m to their children entirely tax-free. 

For all their redistributive fervour, there’s actually nothing in the Labour manifesto about inheritance tax either. It’s not on the political agenda. This is not an irrelevant detail. It has a direct bearing on the distributional impact of any government policy that subsidises social care for the better off.

Policies should not be evaluated in isolation. The bottom line is that socialisation of the risk of large care bills, as Dilnot is urging, in the absence of any increase in inheritance tax will mean larger inheritances: an increase in the flow of expensive homes passed down tax-free from parents to children.

A taxpayer-funded subsidy to the rich is objectionable enough. A subsidy that will have the effect of increasing already high levels of wealth inequality and which feeds our damaging national obsession with inherited property would be even more so. Unless she is going to reform inheritance tax, we should be relieved that May has chosen the less regressive option on social care.

#AndrewDilnot #inheritancetax #socialcare #TheresaMay

Labour’s costings, like the fiscal costings found in all party manifestos, are flaky. But there’s a

“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”

General elections tends to turn journalists and broadcasters into Dickens’s Mr Micawber, albeit without the charm. Do the promises of the parties add up? Is there a gap? Is there to be happiness or misery? The questions ring in our ears.

In many ways it’s a silly and unedifying spectacle. As the economist Chris Dillow has pointed out, it’s a sham to imply that such “costings” exercises can tell us anything about the how the public finances will evolve under any particular government.

That depends far more on the state of the economy. And to the extent that the costings obsession of journalists at election time distract attention from bigger questions of macroeconomic management, it’s harmful.

If growth is crushed because the government imposes excessive austerity while interest rates are still at rock bottom – something close to what we saw in 2010 under the Coalition – even the most honest of manifestos and most accurate of costings are not going to help the deficit.

In 2010 the Conservative manifesto pledged to eliminate “the bulk”of the current structural budget deficit by 2015. In fact it was still £45bn in that year, mainly because the economy performed so badly.

Yet at the same time, political parties should not be allowed to promise higher public spending or redistribution without acknowledging the costs and trade-offs. If that sounds like an anti-progressive conspiracy, consider how right-wingers are prone to making assertions about how cutting taxes will magically pay for themselves by turbo-charging growth. The fiscal credibility question cuts both ways. Or at least it ought to.

Labour’s tax costings today are a mixed bag. The income tax (£6.4bn) and corporation tax (£19.4bn) raising figures by 2021-22 look broadly reasonable because they are based on a HMRC “ready reckoner” document, which allows anyone to estimate what changing headline tax rates would mean for revenues.

But the assertion that Labour would bring in £6.4bn by clamping down on tax avoidance is simply a madeup number, in the sense that it’s an aspiration, rather than being based on any kind of programme that can be evaluated. We saw precisely the same made-up numbers in the 2015 manifestos from both Labour and the Conservatives.

Falling between those two extremes are Labour’s estimates that an “excessive pay levy” would raise £1.3bn or that introducing a new financial transactions tax would bring in £5.6bn, to take just two examples. This is speculative because we cannot say with any confidence how the public’s behaviour would change in response to the introduction of such new taxes because we have no history to go on.

Would firms simply soak up the new pay levy in the form of lower profits and carry on rewarding top staff in the same way? Or would they curb salaries, meaning the levy raised negligible amounts for the taxpayer? The same applies to the proposed transaction tax. Perhaps asset managers and financiers would trade less in response to the levy, meaning it doesn’t produce much money. Incidentally, given Labour regards both excessive pay and excessive financially trading as undesirable, it logically ought to welcome a strong behavioural response – although that would create a problem for its costings.

It’s true, of course, that new taxes are introduced by governments all the time. And governments, when they do this, always make an estimate of how much money it will end up raising, taking into account behavioural change. Yet there’s a check on over-optimism now in the shape of the Office for Budget Responsibility. The OBR tells the Treasury and HMRC to think again if it isn’t convinced by their estimates. And it highlights the uncertainty of particular costings.

The obvious and sensible solution to the issue of election manifesto costings is to allow the OBR to perform the exercise – applying the same uncertainty scale on individual tax proposals as it does at Budgets.

This isn’t a particularly radical suggestion. The OBR’s equivalent in the Netherlands already costs the manifestos of parties that submit their proposals to it in good time. And the head of the OBR, Robert Chote, has said his organisation is willing to do the job, provided its resources are significantly expanded.

The former Chancellor George Osborne deserves credit for establishing the OBR in 2010. The watchdog has helped restore credibility and transparency to Budgets. But Osborne turned down a proposal from Labour in 2014 to allow the OBR to cost all the party manifestos.

Whoever forms the next government would be wise to revisit this. The results for the voting public might not be Micawberite ecstasy, but we would certainly be better informed about the choices available to us than we are now.’

#GeorgeOsborne #Labour #manifestocosting #OfficeforBudgetResponsibility