Thursday, 4 May 2017

You can't trust Labour on the economy (Part 2)

One of the most often repeated claims you will hear from Conservative party supporters is that you can't trust Labour on the economy. It is a message that has been repeatedly pushed by large parts of the media for many years. In fact, it has been heard so often it sometimes seems like it as is obvious as gravity, Liverpool football club struggling against smaller teams or that you can't get a decent cup of tea in a coffee bar. If you missed the first half of this blog, it might be worth visiting ( http://unexpectedsocialist.blogspot.co.uk/2016/01/you-cant-trust-labour-on-economy.html ) - although I am not guaranteeing it is worth visiting. In that I set out 3 major tests of whether an economy is working - a good economy would be one where: 
  1. any growth in the economy benefits those who work for it;
  2. it provides opportunities for everyone to participate and add to the economy whilst;
  3. providing a reasonable level of protection from external shocks to the national economy and individual shocks through changes in circumstance
I also asked how we could know if we could trust a party to deliver either of those. To be as fair as possible, I have split this down into 3 governments we can compare - that of the previous New Labour administration, that of the current coalition & Tory government, and a future potential Corbyn government.

So going back to our central question - are the Conservatives any better than New Labour at getting people to participate in the economy? And would Corbyn be any better than that? 

Looking at the immediate headline statistics this seems obvious and clear cut. We are told every month now that employment figures are at a record high, unemployment at a record low. Obviously, the Tories win this hands down. But it doesn't take much scratching of the surface to get below that and see that it is not quite as it seems. 

The headline rate is shockingly good - 74.4% employment rate. This means that 74.4% of the people who could work are either employed or self employed. This is the highest since records of this sort began. Under the last Labour government, just before the global economic crash in 2008, the best they achieved was 73.0%. 

That 74.4% equates to (between 16 and 64) 30.67 million people either working or self employed. For the New Labour government, at it's highest point, this was 29.06 million. So there are 1.6 million more people employed compared to eight and a half years ago. But just being employed is not the entire picture. What is also important is how much you are earning for that employment. Because it is this - your income - that determines how much you can participate in the economy. In that case, we are doing slightly worse. In fact, average earnings (which excludes self employed people) are down by 3%. So more people are working, but earning less than before. 

What is causing this? Well, whilst it is hard to reach a really strong conclusion, there are some really good candidates for part of the explanation.

Firstly, the national minimum wage has not increased quickly enough. This had slowed down until then Chancellor George Osborne made some moves to re-dress the imbalance he had caused. Secondly, almost the entire public sector has had pay freezes or raises limited to 1% for 7 years. The public sector workers are carrying the rest of us through austerity. Third, there are more immigrants now in the country - willing to work for much lower wages - potentially around 800,000 in that period. Finally however, and this seems to have had the biggest effect, is the rise of the zero hours contract. 

Since the last Labour government 700,000 new jobs have been created where those people have no guarantee week to week, day to day, hour to hour. The number has gone from 200,000 to 900,000. What was once a flexible way for employers and employees to work where this arrangement suited both parties has become the standard operating model for hundreds of employers. The coalition and tory government have done nothing to stop this. If you aren't on one of those contracts - just imagine what that is like. You never know if you are going to eat or pay bills - and you can't work anywhere else. It is as close to modern day slavery as most of us will ever get. 

So whilst employment has gone up far fewer people are actually able to participate in the economy in a meaningful way. We all on average have less to contribute with. And the increase in employment figures can almost entirely be matched to inwards net immigration and zero hours contracts. So whilst we had increasing spending power and jobs under the Blair / Brown governments, we have not seen this under a tory government. But what would we see under a Corbyn government?

Well, that is hard to say. If we believe the promises made as part of his election campaign, there would be increases in the minimum wage, an end to zero hours contracts, pay rises for the public sector and real genuine investment by the government in major infrastructure projects - and the aim would be to increase employment rates through this. Of course the challenge for any future Corbyn government will be how to pay for these. This ties in to managing to deliver without destroying the economy and leaving it protected from shocks - but that will be part 3 of this blog.

Wednesday, 19 April 2017

The art of comedy? Timing

Well, unexpectedly the Prime Minister called a “snap” General Election yesterday. Unexpectedly because as recently as September 2016 she was quite clear in her refusal to do so “I am not going to be calling a snap election…we need a period of stability to be able to deal with the issues the country is facing”. So, why the sudden turnaround in that view? Has the Prime Minister decided we need less stability? Or that Brexit is actually much easier than she expected it to be? Or could there be another reason for it?

It all feels a bit strange, and for those people who are not engaged in politics, this must seem the worst possible outcome. After all we had the particularly nasty and bad tempered Scottish Independence referendum in 2014. Then a general election in 2015. Following on from that David Cameron decided he would shut up UKIP and the brexiteer side of his party by destroying them with ANOTHER referendum in 2016 (and that went so well for him) on EU membership. That was quickly followed up with wall to wall coverage of the US presidential elections (no genuinely, he actually won under their system).

Since then the Prime Minister has insisted that any referendum on Scottish Independence would be a distraction and the government must be entirely focussed on Brexit. In fact just 5 weeks ago, she said “Now is not the time. Just at this point all our energies should be focused on our negotiations with the European Union”.

So why have we had this sudden change of heart from the Prime Minister? There are a number of reasons that this may have taken place. Apparently it is to get a stronger hand for Brexit, and to do the right thing for the country. There are a number of other alternative theories too, so it seems only fair that we explore them all. And just for fun, let’s add a plausibility score out of ten – on whether it has directly impacted on the announcement at this time.  

Official explanation from the PM

Part1: The other parties and the Lords are trying to stop Brexit, and I need a larger majority to force it through.

An interesting statement really, and one that doesn’t hold up to scrutiny on any level. Firstly, the other political parties AND the Lords have had opportunities to delay and frustrate the process. These votes have been held. The opportunity to stop Brexit has been passed already. The votes are completed, and Brexit will happen. As Yvette Cooper pointed out today - 3/4 of MPs and 2/3 of Lords voted FOR Brexit when the vote was held. There is no opportunity of stopping Brexit now, unless there was a massive change in direction and views of the country. That would really require the PM herself to come back and say “we can’t achieve what we promised if we leave”. If that were really her fear she would have called a general election during the NINE MONTHS she has had before triggering Article 50.

Plausibility rating: I wouldn’t buy a used car from her.

Part 2: Negotiations will continue until just before the next General Election, and then you will be able to see what deal we have and start to feel it impacting you. The other countries will use that to drive a hard bargain.

There is probably more truth in this part of her statement. But there are some massive implicit promises in there that you are expected to miss out on. Firstly, it is an acceptance that we will not get everything we want from any negotiations. In fact, it is the first time publicly that any Conservative minister has admitted that the negotiations will be a 2-way street, and that there will be give and take depending on the political pressures the politicians feel at home. Secondly, there is an admission that ordinary people will feel the negative impacts of Brexit. Even those who voted for it and supported it will by then realise we have ended up with a potentially worse deal than we had.

Theresa May is terrified the government will be blamed for that. Perhaps, people may think, if they had spent more time negotiating the best deal and less time threatening war with Spain and coming up with catchy little phrases we wouldn’t be heading into a recession. I can understand Theresa May wanting to avoid that. After all, she was a Remain supporter, who never wanted to leave the EU. She can see closer and in much more detail how hard it will be. I wouldn’t want to be measured on the basis of how successful or painful it was in that situation.

Plausibility rating: More than a ring of truth about it.

It’s a snap annihilation of the Labour Party

Obviously, the staunch conservative voters and those who have wanted the left wing of the Labour party to fail since the election of Jeremy Corbyn are desperate to believe this is the reason for calling it now. Certainly, if you believe the polls (you know, the ones that showed us there would be no overall majority in the last election, that we would remain in the EU, and that Trump would lose) then this makes good political sense.

However, why now exactly? We have only 2 years to negotiate the exit from the EU, and this will take 7 weeks out of that timetable. Labour have been wallowing in the polls for about 18 months. Why not as soon as David Cameron resigned? Labour have said all along they will support it. So did this really make Theresa May directly contradict herself and break a promise she made publicly? Also, was the best time to launch it after Labour have had 2 weeks of announcing a number of incredibly popular policies – one a day – that have strong public support? Finally, if this IS the case, it is a clear admission that calling this election has nothing to do with the good of the country – just the good of the Tory party.

Plausibility rating: A consideration, and an expectation, but not the main reason.

Alleged Tory electoral fraud from 2015

There is still, hanging over the Tories, a police investigation into electoral fraud during the 2015 General Election. This arose because the Tories spent a lot of money in specific target seats that they claimed as central spending, when actually it directly related to the results in those seats, allegedly. A file of possible charges has been sent to the Crown Prosecution Service, and an announcement was expected THIS WEEK. Obviously, that announcement is now up for grabs.

Certainly, we can glean some clues to this – the fact that the CPS have confirmed they are still looking to continue this work suggests there is a case to at least be considered. If there is a fresh election, it means that this can be glossed over as having been solved at the Ballot Box instead of in the courts. Secondly, when the Prime Minister was asked, on the floor of the House of Commons whether she would allow anyone facing criminal or legal proceedings over this to stand, she said that she would support all Tory candidates to stand it begins to show the contempt that she feels towards free and fair elections. Obviously, this is not something that the PM would want to call an election for. But it may just be that this has been the final straw. And it is hard to argue against, given the rushed and surprise nature of it, the obvious U-turning and the fact she is now eating her own words on stability.

Plausability rating: Ticks the box for the timing aspect.


So, there we have it then. A lot of conjecture, and a lot of assumptions, and a lot of admittance on the part of the Government about how bad things are. The most likely scenario is that this is a government who are afraid of admitting the mess they are making of Brexit forced into this decision by the timing of CPS decisions. They are putting the needs of their party above your needs as citizens of this country. I would suggest you remember that, and don’t let them get away with it when you are in the polling station. 

Monday, 27 March 2017

Tragedy, and the human response to it

So, I guess that really we all knew this day would come again. Once again a terrorist attack has taken place in the UK. This time driven by someone who has taken extremist Islam as their reason for pointlessly murdering innocent people on our streets. It is truly terrible that 4 people who had no idea what was going to happen or choice that day had their lives taken by a coward who attacked them hoping he would never have to live with the consequences. 

There is no singular normal, typical or expected reaction to this sort of news. It is rightly so alien to us that we will all decide how to react - and it is not the right of society to enforce "norms" on us. That reaction is made up of our initial emotion, and then the judgements, conclusions and responses we then show. Many people have tried to use this attack as a weapon to whip up further hatred, anger and division. I want to consider whether this reaction stands up to close scrutiny. This is not to shame or insult people, but to offer them an alternative reflection to consider. 

We have had almost a full week since the terrible events that claimed the lives of a policeman and 3 random members of the public. Enough time for every possible shade and shape of human opinion (no matter how vile or incredible) to have made its way on to social media. Certainly an initial reaction from a lot of people (and we can't know if it is a majority, a large minority or simply the most vocal) was that this attack showed why we should "send them all home". Those angrily opposed to migration into the country certainly believed this was an opportunity to finally show how Muslims flooding into the country were a danger to our very lives. Of course, the problem with that was very quickly it was found out that the attacker was British born. 

But the leap from there having been an attack to this snap reaction is an obvious, if flawed one. If a Muslim coming into this country has carried out an attack, then there must be more coming in to do the same - this is finally the evidence of that. Of course, that sentence belies the incorrect thinking behind it - those people who are afraid that immigration makes us less secure ALREADY believed that before this attack. That the attacker was British born will do nothing to stop them thinking that. In many cases no amount of evidence will stop people thinking that. The term used by psychologists is "unsubstantiated conclusive" thinking - where you jump to a pre-determined conclusion irrespective of the evidence. It is easy to understand this thinking - particularly when it is reinforced and fuelled by so much of the media establishment in this country and parties like UKIP. 

From there, the next opinion or perception that came about was that actually all, or a large section, of the Muslim community in this country were dangerous. The proposed answer therefore is either to kick out all Muslims or to start a process for internment for them. Again, the logical flow behind this seems to be straight-forward. There is a danger from a particular community, we should therefore lock all or some of them up to keep everybody else safe. If you break that down, there are actually 3 separate ideas to consider. The first one is that there is a danger from an identifiable group (Muslims), we can spot those likely to be dangerous, and that internment will reduce the danger and make us safe. 

Well, if we take the first point, that there is a danger from an identifiable group (Muslims) then we have to look at the terrorist attacks in recent memory. The definition of a terrorist attack "means acts of persons acting on behalf of, or in connection with, any organisation which carries out activities directed towards the overthrowing or influencing, by force or violence, of Her Majesty's government in the United Kingdom". That would then seem to equally apply to 2 recent terrorist attacks - this one and the murder of Jo Cox MP. Jo Cox was killed by a man who had links to extremist organisations (the National Front, EDL and the National Alliance). Certainly 2 of those groups have openly tried to influence the government through violence. He was a lone attacker, who took inspiration from those groups without being directed by them to carry out an attack. He used weapons he had to hand to carry out a targeted but unsophisticated attack to create a feeling of terror in the political establishment. He had a troubled existence with a history of sporadic behaviours. All of those things apply equally to the recent attacker. 

There is one difference however, ISIL, following the attack claimed that Khalid Massood was now a soldier of ISIL. Many have hung their hats on this fact to differentiate the 2 events. However, that does not hold up. Khalid Massood, as far as we know at this point, had no contact or direction from them. To hang whether someone is guilty of a terrorist attack or not based on what somebody else does after the fact simply doesn't make sense. Equally, to the victims of the attack, I am sure they would have scant regard for this distinction. So we are left with not one group of terrorists to worry about, but 2 - Muslim fanatics and right-wing fanatics. 

If we look at the proposed solution to this, internment, then we would have to, from that, apply it equally to both of these groups. Of course, all of the available evidence, from whenever internment has been tried points to 2 very clear conclusions. Firstly, that it doesn't work and in many cases is counter-productive in that it acts as a recruiting sergeant for extremists. Secondly, that it will always lead to innocent people being unfairly imprisoned. These are clearly both very strong reasons to refuse to see internment as the answer. 

Clearly, this is not to say that nothing should be done to combat terrorist attacks. From every attack we need to learn what we can do to stop the next one. But currently, from what we are told, in this country we have been successful in stopping a number of attacks. To go further than we have so far we must challenge the radicalisation of any individuals in any group, ensure we have appropriate policing, security and intelligence strategies, and the tools and resources to carry them out. But internment is not one of those, and it never should be. Something must be done can not turn into the worst possible response must be done.

One of the very shameful events that cropped up in our reactions was that of the shaming of a Muslim woman, walking past an injured person being treated immediately after the attacks, ignoring what was going on and chatting on her mobile phone. For those that wanted yet further evidence of the inhumanity of Muslims, this seemed to be a "smoking gun". The picture very quickly spread across social media platforms - evidence (as if it was needed) that Muslims were against "us". When I initially saw it I too believed that it showed a woman on her phone near the scene of an atrocity. 

Again, we should break down the mindset that leads to this point. Firstly, we are attributing how somebody should react when something like that happens. Some people will rush to help, some will run away, and some people, in shock will try to pretend it hasn't happened. We can not judge how others react because we don't know what their reaction really says. Secondly, on the basis of a still photo shared on social media, this ladies actions and thoughts have been guessed at and then shared as if a clear and undeniable truth. If she was on her phone near the scene, could she not have been calling the emergency services? Telling her family what she had seen but that she was OK? Could she have been so wrapped up in her day she hadn't even realised what was happening? Anyone who has been to London will know that plenty of people in that city do walk around in that mode. Finally, there was a leap from her not reacting according to some decided norm, then on to her not caring or even being happy this had happened to that, somehow, being evidence that all Muslims are bad. I can't even believe I am writing this - but that is the logic that some bought into and shared - within 24 hours of the incident itself. 

Of course, the photo was then shown to be of something quite clearly different - the lady in question was not on her phone, but holding her face in shock and horror. But for people who wanted to believe the first interpretation because it supported their view - this wont matter. My point is that it is easy to be mistaken, or see one thing as something else. But we must be careful before being led to logical leaps and bounds by people on social media. It is natural (and uncontrollable) to have an emotional reaction when something like this happens. We all do it. It is easy to jump to conclusions - in fact in more dangerous times jumping to a snap decision is a survival strategy. But we should all be able to look at that conclusion, or flow of thought and ask ourselves - does my conclusion stack up - or does the conclusion have more to do with what I already believe? Because if we start making snap judgements on how our country protects itself, and treats us as citizens on the basis of our reactions - we bloody well have to get them right first. 

Tuesday, 7 March 2017

All we need now is Spandau Ballet

              I am sat writing this the evening before the first full budget of our 2nd Tory chancellor of the last 20 years, Philip Hammond MP. We have now had a full 6 years of Tory chancellors - even if for 5 of those they were supported in Parliament by a weak and ineffective coalition partner in the Lib Dems. So, it is probably worth looking at how well those Tory chancellors and governments have done for us. By us, I mean the great British working classes. I include in that those of us lucky enough to be working, and those of us who for whatever reason can't or aren't working at the moment. It is also right and fair to measure those chancellors against what they set out as their own priorities. After all, it is not fair to only measure them against things they never promised to do.

              Like most economists (and other political writers) it would be really easy for me to fall into jargon and measures that most people don't understand. Who really feels GDP, deficit, debt ratios? Whilst I want to steer clear of these as much as possible - they are necessary to consider. Mainly because these were the measures which George Osborne and then Philip Hammond have measured themselves against. But there are other measures that they feed into - and these do matter. These are how well-off we as individuals feel, and the future prospects for the economy. As well as these, there are other factors that matter - how well funded and effective our public services are; how much tax we pay and how many of us are in gainful employment.

              Coming into power in 2010 was never going to be easy for any government. The world was still reeling from a financial crisis, caused by global banks, that was as severe as The Great Depression. This was impacting pretty much every country - though some worse than others. In the UK because we had bailed out the banks here we had a massive public sector debt (the amount the government owes) that had risen from under 40% to around 65% a the time of the General Election. This was the worst of all worlds - it was driven by an increasing amount of debt from bailing out the banks, a shrinking economy and a growing deficit. The deficit or surplus is the difference between how much the government is earning (basically through taxation) compared to how much it spends (on services for the people). 

             So whichever Chancellor came in had to do one (or all) of 3 things - grow the economy, reduce the deficit and / or reduce the overall debt the government had. The prevailing idea from George Osborne (and presumably supported at that point by the public) was to reduce the deficit, within 5 years, and thereby start to pay down the debt levels. Surely we could return to surplus? After all, we had run a surplus for the overwhelming majority of the Blair years, after the deficit laden years of the Thatcher government. This therefore gave rise to the austerity agenda - the aim being to reduce how much the government spent to get in line with what they earned. 

             But the Tories also inherited a number of other problems and benefits at that time. For example, we had an NHS that was the best in the world, as proven by a number of international comparative studies. This was not only in terms of the service provided, but also how much it cost to provide. Gone were the days of waiting on trolleys in corridors. We had improved standards across schools. Whilst not all of the policies used were particularly popular, they were, mostly, working. Sure Start and EMA were supported by all parties as right and necessary because of the benefits to social well-being. The unemployment rate however had taken a marked increase - meaning fewer people were working - whilst this had stayed stable around the 5% mark for the majority of the Blair years this shot up as a result of the global banking crisis to 7.5%. This had been a massive improvement - during the Thatcher years it had been between 7.5% and 10% for almost the entire period. 

            So across those areas, how have the Tories done? Well, let's look at deficit and debt reduction, unemployment, amount we pay in tax, and those services mentioned above one at a time. 

Debt & Deficit

Since 2010, the debt as a share of GDP (the most reliable measure) has increased from 65% to 85%. In money terms, these 6 years have added £1trillion of debt. That is debt which our government must now pay back. More worryingly, the deficit is still at 3%. We were meant to be rid of both of those things by now. In fact, neither has been delivered on. We are worse off than we were. 

Unemployment

Here, it appears, we have good news. The unemployment rate has seen a steady downward trend. It has moved from a recent high of 8.5% to 4.8%. We should all be celebrating, shouldn't we? Well, it isn't quite so rosy. 700,000 of those new jobs are zero hours contracts. That is 700,000 people who don't know if they will have work from one day to the next. We may as well go back to the days of the Labour exchange. Workers earnings have not increased - which you would expect from high employment. More people can say they have a job, but more than ever don't have enough money coming in to actually survive. So we must remain cautious if we want to say this is good news.

Taxation

The level of government taxation - ie how much they take out of the economy each year to pay for public services has now increased back to levels last seen in 1986. So whilst they have spectacularly failed to reduce the deficit, they have done that whilst taking more of your money from you. Not only that, but the source of that tax has become far less friendly for you. Much less is being taken from big businesses and wealthy individuals. Instead, more tax is being taken from your wallet, by way of increases in VAT and Insurance Premium Tax. They have openly and actively taken from the poor to give to the rich. A true reverse Robin Hood. 

Public services

Well, Sure Start and EMA didn't survive the first year under the Tories. Our health service is once again falling apart. This winter we had the worst performance during the winter since we started measuring such things. Junior doctors went out on strike - previously unheard of. In education there are experts, councillors (of all parties), headteachers and MPs screaming at the government to address the lack of funding. What it the response of the current government? To instead set aside money for their pet project of grammar schools and free schools. Just consider that, any extra money they find is not going to your child's school - but to open a new one that you have no say over. Teachers are leaving the profession in droves, and recruitment of new ones is drying up. We are back to poor services where only the wealthy will be okay. 

                  So, it is amazing that we find ourselves here again. A government that can't get spending under control, where services are so poor they are a laughing stock, where only the wealthy are benefitting. Things haven't been this bad across so many measures since the early 1980s. Some would argue that there are other similarities - for example a Labour leader who is painted as a dangerous leftie by the media and who doesn't seem either willing or able to shake off the tag. What is worrying is that against this backdrop the Tories are still enjoying electoral success. This really should be a wake up call and warning to the Labour Party. The question is whether they are listening - or repeating the internal fights of the 1980s. Only time will tell. The problem is, how much of a country will we have left at the end of it?

Friday, 20 January 2017

Step right up, now everyone’s a winner, bargains galore.

Thank goodness for Donald Trump and Boris Johnson. There was I, worried that leaving the European Union might in some way be bad for our economy, workers’ rights and public sector, when they come along and show me that everything is going to be OK. Of course it is not just the US. Apparently, countries are queueing up to do trade deals with us. We now thankfully have some greater clarity on what Theresa May plans for her brexit strategy. So, what can we take from her announcement yesterday? And how bright is the future looking for us? Can we get ready for a massive influx of trade we don’t currently have? Is the prospect of a Global Britain better than the prospect of a “Shared Britain” (now removed) or a “Red, White and Blue Brexit” (now removed) or is it just another meaningless slogan?
Really, we need to understand from the speech what we are potentially losing compared to what we might gain. That is the only way we can judge whether we are looking at a net positive or a net negative. This was the most important speech that the Prime Minister has given since we voted for her to be our leader. Only joking of course, we live in a parliamentary democracy where elected representatives are chosen and entrusted to make our decisions for us. Well apart from THAT decision obviously. So, the most important speech since her party voted for her to be party leader and therefore Prime Minister. Only joking, there was no vote for her. So, the most important speech she has given since 35,000 in the borough of Maidenhead voted for her (that’s right Americans, you think you have problems).
I am going to focus purely on the aspects relating to trade and the economy. There was actually some good stuff in there, relating to how the process will run, and also massively important areas around immigration and nationality, borders and governance. But that will have to be part of another blog. So what did we learn? Well the key points were these:
·         All existing rules and regulations of the EU will become British Law and workers’ rights will be protected, then will “keep pace with the changing Labour Market”
·         We will leave the single market, and the customs union then “pursue a bold and ambitious Free Trade Agreement” with the EU
·         We might pay to be a part of “specific European programmes”
·         If we don’t get the deal we want with the EU, we will trade with them without a trade agreement
·         We will seek out new trade deals with other partners that we don’t currently have in place

Keeping existing rules and regulations, and workers protections

                So, depending on your point of view, keeping existing safety and consumer laws is a good thing or a bad thing. It will mean that we can continue to export to mainland Europe because our goods and services will be comparable. But it might also mean that we are held to a higher level of regulation than say US or Chinese manufacturers. Therefore, this could make our products uncompetitive on a global market. So this really depends on whether we get a trade agreement with the EU.
                More worryingly, is the specific language used around workers’ rights. This should be a massive big warning sign to everybody who is employed in the UK. Over the last 6 years the Tories (and their coalition partners) have overseen the stripping away of workers’ rights, and have resisted every opportunity to improve them. For example, even at the height of the furore over zero hours contracts, the government did nothing. Coupled with that our rights to strike have been eroded, weakening our bargaining power with companies. And senior members of the government are openly talking about banning the use of strikes across industries.
                Mrs May could have said that workers’ rights would be improved upon, or strengthened. But the language is purposefully specific. “Keeping pace with the changing Labour Market”. Well, if we look at how the Labour market is changing, more people are being put in to roles where their employers can pretend they are self-employed; employers can give up any sort of responsibility through the “gig” economy; zero hours contracts will become more prevalent; trade unions will be downgraded and weakened at every turn; pensions agreements will no longer be stuck to by employers whilst taxpayers bail out pensions funds. Basically, if you are employed, then this is the start of a bonfire of what rights you currently have. If you are applauding this speech, you are either an employer yourself, or not paying attention. Perhaps somebody could remind me, when we voted for the UK to leave the European Union, where we also voted to give up our working rights to Sir Philip Green and Mike Ashley? I obviously ticked that box without realising.

Leaving the Single Market and Customs Union, getting a trade deal with Europe instead, paying for access

                It is probably worth, as a starting point, understanding what our trade deal within Europe currently means. Firstly, it is worth stating that it is probably the most comprehensive, invasive and wide-ranging multi-lateral trade agreement in the world. It includes everything from free trade (meaning we trade our goods free from tariffs being applied by other countries), customs union (meaning we all apply the same tariffs to goods coming from outside our deal), free movement (of services, capital and resource ie people) and a level of political union too. It covers almost every aspect of trade and commerce, industry and services, import and export. The effort to split ourselves out from it is on a scale unprecedented and untried. It is not simply rhetoric to say it is of the scale that countries leaving the USSR and Eastern-bloc felt during the early 90s.
                So we would be leaving, with great difficulty and cost a free-trading bloc of 450 million people in 27 states (once you take us out of the official figures). It has GDP of US$13tn (again once you take us away from the published figures). It is 41km away from us at the closest point. Those are the really key considerations in any trading deal we want to do: how many individual consumers are there, how wealthy is it, how far away is it, and what tariffs would we expect. It is worth also stating that given the depth and breadth of the negotiations that will be needed, this will (you would hope) require a great deal of considered and careful negotiation. We currently have no experience of trade negotiations, given that we haven’t had to for about 40 years. It seems a reasonable assumption that what experience we can muster together will be focussed on this deal. Two years of effort to LEAVE that free trade deal.
                Of course, it is possible that we could end up with an even better trade deal. However, it is highly improbably. By its very nature, if we are choosing to say to a trading bloc that have grown together “we want to trade with you, but don’t wish to pay in to your structural costs” then it is only reasonable to assume we will get a worse deal than full membership. Even Theresa May accepts that. Hence why the Prime Minister and others have been warming us up to the idea that we will still have to pay something to continue to trade freely in certain markets. I think it is fair to assume this will include the Motor industry (if not, then what the hell have we promised Nissan?) and financial services (given it is our biggest single industry). Of course, that gives us the question of what will the cost be? How much will we have to pay for access? Not only that, does it mean any industry which isn’t beloved of the Tories (Steel, manufacturing, non-financial services) should now expect tariffs to start to affect their business. So there we have it, a deal where we still pay in (when it suits the Tories) and everybody else has their business negatively impacted.
                Not only that, but what if we start imposing our own tariffs on European goods? Well, that will lead to massive instantaneous inflation, whilst at the same time our economy is getting worse. We had this in the 1970s – and the term which was coined was stagflation – a stagnant economy whilst prices rise. It was a horrific time. If you are too young to remember it be grateful, then ask somebody who was around how it felt.

No deal is better than a bad deal, trade deals with other parties

                Of course, we could choose to have no trade deal at all with Europe. However, just the most cursory glance at this shows how completely stupid and damaging this would be. This would mean that we would immediately start trading with ALL of the European Union at WTO Tariff rates. In effect every single item that we export to Europe would immediately be less competitive, and therefore we would either have to sell less OR sell them more cheaply. The idea that no deal is better than a bad deal is complete hogwash – and everybody knows it. God even to export Oxygen to the EU we would have to pay a tariff of 5% - and they breath the bloody stuff (yes, I know, thanks). So this idea that we will go with No Deal is never going to happen. Besides which, in all honesty both parties want to get a deal. It is in their interest as well. It is entirely a PM trying to sound tough for the UKIP-leaning voters in her own party. It is simply within our interest to achieve some deal with Europe (popn 450m, GDP US$13tn, dist 40km) – and it is theirs to do a deal with us (popn 65m, GDP US$3tn, dist 40km).
                What about other deals? We are told by Boris Johnson that countries are “queueing up” to do a trade deal with us. Well, the first consideration is – why aren’t we trading with them currently? If these countries are so desperate to get a trade deal with us, why is that? Well, we already do trade with many of them. But it is at a lower level than perhaps we could. Therefore, any belief that this will lead to a massive influx of NEW trade is again erroneous. What it will do is make trade easier and therefore give some lift to our global trade levels. It might also (if we remove import tariffs) lead to consumers paying less for certain goods. It is way beyond me to be able to state with any certainty what scale the impact would be. But it would need to be very high indeed to offset any major losses of trade with the EU. I am going to leave the US to one side for a moment, but still, let’s pick out some of the options which do look like “live picks” ie countries that are talking about trading with us:
Country
Population
Size of economy
Distance
Comments
EU
450m
US$13.1tn
41km

Iceland
0.3m
US$0.016tn
1,894km

India
1,300m
US$8.72tn
7,194km

New Zealand
4.7m
US$0.174tn
18,500km

Australia
24m
US$1.2tn
17,000km

Canada
36m
US$1.5tn
5,700km

Ghana
27m
US$0.121bn
4,800km

Mexico
120m
US$2.2tn
9,000km

South Korea
50m
US$1.4tn
9,000km

Total
1,562m
US$15.3tn
9,136km average


                So, if the worst happened and we stopped all trade with the EU (which no-one is suggesting, to replace it we would need to trade with these 8 separate economies to get a trading block of the same size. Ignoring the fact that on average that would mean sending goods 45 times further on average to sell them.
                To put it another way, our trade with the EU accounts for 45% of our exports. If we lost a quarter of that export trade – on our doorstep – we would need to boost our sales internationally to non-EU countries by 11%. Unfortunately, our trade with international neighbours is already at record levels for us. What else are we going to sell – at a competitive price after sending it an extra 9,100 km? The very desperately sad thing is, we are already a successful trading nation. Is it really possible that not being part of a customs union with the EU is going to boost our trading with every we currently trade with across the board by over 10% BEFORE the end of the current deal with the EU in 2 years’ time?
                Who is going to negotiate these trade deals? Everyone with experience or knowledge will be working on the EU deal? Or should we leave that to Boris “let’s joke about the Nazis” Johnson? Genuinely? Of course, we have the trade deal to look forward to with the US. After all, we have been promised a trade deal by the President-Elect, a man who never goes back on what he says. Well, he has already threatened to pull out of NAFTA (a free trade deal), and put 35% import tariffs on goods from China and Mexico – 2 of their biggest trading partners and very strong economies. If Donald Trump is looking to trade on those terms with others, why would we believe we would get anything more beneficial?

Everything’s rosy


                There is no hard evidence to say that is all impossible. It may well be that against all odds the government manage to deliver. But for that to happen we would need a massive turnaround in fortunes, in abilities, in industry, in trade patterns and in the views of our own government. At the same time we would need the EU to be kind to us in any future trade deal. Put quite simply, the potential risks are much greater than the opportunities at the moment. I would love to be wrong about this – and I am often wrong. But I see no analysis which suggests anything other than this stark conclusion – by leaving the single market we are throwing away access to a strong market on a really good deal for the possibility of access to less accessible markets, with less good deals. This can only be bad for our economy. 52.1% of people voted for Brexit. But how many voted for an almost certain worsening of our economy, job losses, rights and protection losses, uncertainty and a weaker economy?

Tuesday, 8 November 2016

Some Leave voters have every right to be angry. They just need to work out who with.

So quite an extraordinary act took place last week. 3 judges from the High Court in London made a decision on a technical point of law and sent the news and the political sphere into overdrive. This doesn't happen very often, but given the topic they were ruling on this was hardly surprising. They were passing judgement on a case brought by a group of private citizens against the UK Government on the specific legal steps the government must take to invoke Article 50 of the EU - that is to start the formal process of Brexit.

This has been jumped on, by members of the public and experienced politicians alike as an attempt to derail the democratic will of the UK - that we want to leave the EU. The majority have spoken, and here are a bunch of bremoaners trying to stop that from happening. Is that the case though? Our democracy that has been hard won and hard protected now under attack? Certainly during the Leave campaign much was made of our governance, rights and democracy tying back to the Magna Carta and being uninterrupted since then. Is someone trying to run roughshod over that?
I believe the answer is an unequivocal yes. Should Leavers be angry? For some of them, I think they have every right to be.

Lots of leavers voted that way for lots of different reasons. I think it is a real shame that so many have wanted to tar them all as racists. Some Leavers had decided, long before any cases were put forward that they wanted to Vote Leave. That is absolutely fine. It is a democracy. We don't get a right to limit the vote to only people who consider issues in the way that we do. It is the system we have. But over the course of the referendum campaign, there were really 4 key issues that were used to push the Leave vote. Firstly, to take back control of unchecked immigration. Secondly, to take back control of our laws and rulings. Third, that we would be able to create new and better trading relationships with a wider range of partners. Finally, that we could save money paid in to the EU and use this, for example, to give the NHS an extra £350 million a week. 

These 4 issues, when combined and brought together, spoke to the very heart of the issues a large group of people care about. It spoke to our national pride and national strength. Anyone arguing against this could easily be derided as not patriotic (I know this, because I took this claim fairly regularly). But I can see the emotional flow of that argument. These claims were pushed very strongly, not just by the official campaign, but by UKIP and the majority of the British press too. 

It's quite easy to see, when someone is faced with this level of emotional argument, and see a set of factors that are so clearly wrong and unjust, that they expect everyone else to see it too. I actually wonder why there wasn't more aggression and violence. But also, if you have been given this story, you would assume that once through the referendum, this horrible situation would be remedied quickly. No more EU, no more money paid, no more immigration, control back in your hands.

Unfortunately, they have been both badly let down, and badly lied to. Firstly, David Cameron has let down not only Leavers but everybody in the country. This referendum was only ever meant to kill off UKIP. There was never any intention within government that Remain would actually lose. For this reason, there was never any clarity or honesty as to what would happen if they did. The government didn't even make contingency plans for that outcome. Just imagine that, a government not planning for a possible outcome of a binary referendum. Leave was never on the cards. Why else do you think the PM immediately resigned?

The other effect of this is that there was never any clarity given on how we would or could leave and what leaving would free us from. Had government departments been allowed to work on both outcomes then a clear option would have been given. Stay, and you get A. Leave and you get B. Unfortunately, this was taken away from the electorate. Instead, the Vote Leave campaign, UKIP and press barons were allowed to fill the void where official government guidance should have been. 

A really good example of this is shown by the reaction to the court case last week. The legislation which allowed the referendum was quite clear that it was advisory. Any decision was always going to be subject to British laws and British government - in the shape of the houses of parliament. But if you have been told for three months - you, personally - that you were taking back control, wouldn't you be shocked to now hear that? I would be. 

But this belief that people were given, came quite clearly from UKIP, Vote Leave and the press. It is therefore not at all surprising that all of those bodies have immediately come out and attacked the judges and the law of this country. Not because they ever believed it. But because the alternative is that this raw emotion they have unleashed turns on them to hold them to account for selling them a fairytale. 

Indeed, the judges had not made any ruling on whether we could or couldn't or even should or shouldn't leave the EU. They were purely ruling to say that British Law must be followed. However, social media and the mainstream media were awash with this attempt to stop Brexit by these judges. Never mind the fact that reading of it is completely untrue - UKIP, The Daily Mail, The Express all presented it as an attempt BY THE JUDGES to stop Brexit. In fact, in ever more dangerous behaviour Nigel Farage has called on people to march on the Supreme Court. Because nothing says respect for the rule of law like attempting to intimidate judges. 

Of course, this is just one example where a lack of planning and honesty is going to cause problems. There was never any decision or agreement on whether we would have any future relationship with Europe at all. This was not covered in the referendum. We were given a binary choice between the status quo and whatever the Leave campaign wanted to sell us. So it is far from certain whether our final leaving deal will include: Trade tariffs, freedom of movement, single market access, accepting some European rules. But the Leave camp have already sold all of these things. Given the level of emotion they have plumbed and brought to the surface, this could lead to even greater anger in the future. 

If you voted or now want to Leave, I would not expect any other outcome. But it is time to look at what you have been sold, and whether you actually want it. And if you do, what should it look like? The problem is that other Leavers might have a different view from you. There is no way you can all be kept happy. So, you have every right to be angry. But be angry with David Cameron for making a mess of such an important democratic process. Be angry with those who have lied to you. But don't be angry with the courts. Once this is all over, it is likely they will be the only ones left to us. Do you really want to damage them to the point that they can no longer hold the government to account?