The View From St Albans

Johnson's Mandate To Leave The EU

2019-12-15T10:42:00.000+00:00

There can be no doubting the mandate given to Boris Johnson to take the UK out of the EU and, barring some kind of divine intervention, we will be leaving on Jan 31st. We on the liberal left fought a strong, democratic, fact-based battle for the last 3 years for the country to think again - which it had the chance to do on Thursday but sadly the country confirmed the decision to leave.
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Honour the result? Yes - but which one?

2019-11-26T12:55:00.000+00:00

I recently had a conversation over a beer with a Brexit-supporting friend (yes I do have them) which caused me to think about the mandate conferred by the 2016 referendum in a way I had not previously considered.

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Sterling's Demise

2019-07-29T23:25:00.000+01:00

If you have been paying attention to the currency markets today - and to be honest this is the the only time of year that many people actually do - you may have noticed the pound sliding towards a 35 year low versus the dollar. It's currently fallen to $1.22 and is clinging on to the cliff face.
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Where Are We Now?

2019-05-27T16:03:00.000+01:00

The most persistent cry from Brexit supporters recently has been that this parliament is failing to implement the Will Of The People. This begs the questions - what is the will of the people is, and is it Parliament's job to blindly implement it?
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Unfinished Business

2018-10-26T02:53:00.000+01:00

We don't respect democracy or the will of the people, apparently.

Over 700,000 of the people whose will we don't respect turned out to march on Saturday in support of a People's Vote on the deal that Theresa May finally brings back from Brussels - the deal, or no deal, that will determine the terms on which we are due to leave the EU on March 29th.

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Day Of The Dead

2018-09-21T21:42:00.001+01:00

"March the 29th 2019 shall be renamed The Day Of The Dead for on that day they shall rise up and once again rule this cursed isle" as someone spooky should have said of Brexit Day, but didn't. Or to put it another way why is Theresa May prioritising the votes of the dead over the Will Of The (living) People?
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Remainers - relax, it's not going to happen!

2018-09-16T13:40:00.000+01:00

Remainers should take a deep breath, breathe out and relax - I have news - Brexit won't happen.

Having called the 2015 General Election correctly against the odds (The 2015 General Election is far from over) back in 2013, and the EU referendum the same year (Cameron's place in history) I am on a hat-trick of correct predictions. For the country's sake I hope I have read the runes correctly.

Here's how I think it will play out.

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Thick As Mince?

2017-09-10T14:41:00.000+01:00

In the interest of balance I read this article from CNN a couple of weeks ago - straight from the horse's mouth - http://edition.cnn.com/2017/09/01/opinions/uk-us-brexit-david-davis-oped/index.html. Dominic Cummings described David Davis as "thick as mince"; on this evidence it's hard to disagree.

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Why I'm Voting For Daisy Cooper

2017-06-08T10:13:00.002+01:00

A short video on why Daisy has my vote - Go on - watch it - it's only 60 seconds! Enjoy!

I'm Voting For Daisy!

I Don't Want Labour To Win This Time

2017-06-07T23:44:00.001+01:00

[typo correction 16/09/18]

Truth be told I'd rather Labour lost this election. Fortunately that is the most likely outcome despite the surprisingly good campaign the Party has run. The polling firms that place the parties neck and neck (Survation and YouGov) use a higher weighting for the likelihood that young voters will actually get out and vote - so unless something remarkable happens I can't see anything other than a Tory majority (though under 30's break 70:30 in Labour's favour so there is still an outside chance).

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The Reports Of Europe's Death Have Been Greatly Exaggerated

2017-05-07T20:56:00.001+01:00

Shouldn't Europe have fallen apart by now? Europe has had three vitally important elections (Austria, Holland, France) since Britain voted to leave the EU and in each case the pro-EU parties have triumphed. So much for the gleeful predictions by the doom-mongers that the EU would fall apart once Britain leaves. The only thing that will fall apart when Britain leaves the EU is Britain.

I guess they had not taken into account the extent to which Europeans realise that despite all it's faults the EU is still a force for unity and peace on a continent that has been wracked by war for centuries. That failure of comprehension is of a piece with the standard British arrogance implicit in the "they need us more than we need them" argument wheeled out during the referendum campaign. It turns out they don't need us after all.

Meanwhile, quietly and largely unremarked, the EU is continuing a period of sustained growth while Britain is heading toward Brexit-induced recession. The British economy is entering a long-anticipated downturn triggered by Sterling's 20% slide since the referendum - prices are up, wages are down, the savings ratio is at its lowest since the financial crisis and the level of private debt is at its highest. House prices in the UK are now at their highest in relation to average income since before the financial crisis, which lest we forget was caused by bad mortgage debt and over-leverage.

The economy has been kept afloat since the referendum by consumer spending but with inflation now outstripping wage rises and savings running down only resorting to more borrowing can keep the spending binge going at its previous level. With interest rates likely to be heading up that is not a good place to be. I fear we are heading for a hard landing in the next couple of years. If the Tories do, as seems certain, get their majority and their mandate to go ahead and implement their long-sought Brexit they will truly own the economic mess that unfolds. This will be hung around their necks like a millstone at every election for a generation. We still talk about the Winter Of Discontent, the Poll Tax, the Financial Crisis. The Tories will own Brexit and it will sink them.

Sadly the Labour Party has not had the foresight to oppose Brexit - it has meekly fallen into line behind the Tories. More fool them. Claiming that they are "accepting the will of the people" is a lame excuse - I have had conversations with people on the doorstep saying that they voted Remain but now back Brexit because "that's democracy". Well, no, it isn't. Political parties are frequently given a mandate at General Elections to implement truly wrong-headed policies; that does not preclude HM Opposition from pointing out that however democratically arrived at the policy is still wrong. They don't have to suddenly agree with everything in the governing party's manifesto simply because they lost the election. Those same wrong-headed policies are subsequently reversed when they prove to be have been a mistake. Take the Poll Tax as an example - an overweening Government with a large majority forced through a policy which half the country thought was wrong. Subsequently pretty much the whole country realised it was in fact a huge mistake and it was abandoned, having taken the Prime Minister with it. The same applies here - Brexit is wrong, a mistake, an enormous miscalculation; it can, should and will be reversed once the full repercussions become clear to all.

So while Europe continues to flourish as Britain sinks - falling behind the EU in the queue for that trade deal with the US, losing our European financial supremacy to Paris, Dublin and Frankfurt, incomes falling as WTO tariffs eat into wages - we will have the opportunity to realise our own stupidity and at some point, maybe 2022, maybe beyond, to elect a Government that pledges to rejoin the single market and put an end to the madness.

It's not over yet ...

2017-04-18T11:39:00.003+01:00

I have always said that the fight to prevent Brexit is not yet over and that we would get a chance to overturn it - either via a second referendum during the transition phase or via the 2020 General Election falling during that transition. Instead it has arrived early in the form of a snap General Election in June. This is great news and I salute Theresa May's courage in allowing the voting public a second chance having seen the disaster unfolding before us. She has seen the divisions the vote has created and the fact that in contrast to the opinions of the 'they need us more than we need them' brigade the EU is going to ensure the UK is worse off outside the EU than in.

This is the chance to decide whether this is still a country worth living in or actually a xenophobic little island off the coast of Europe spending its time looking back to the 1950's through sepia-tinted spectacles.

It is also a gift horse for those (like me) who want to get rid of Jeremy Corbyn as leader of the Labour Party. It's nothing personal - he seems like a great bloke and all those who meet him say the same - but he is not a leader and he is not a winner in the eyes of the voters. I would urge everyone - Labour, Green, Tories - who wants to remain in the EU or at least the single market to follow Tim Farron's lead and vote for the Lib Dems as the only party to categorically state that its objective is to keep us in the EU. The Lib Dems are standing up for the 48% - let's give them our backing.

Now, time to find out who is the Lib Dem candidate for St Albans ...

Article 50

2017-03-31T18:22:00.000+01:00

Article 50 has been triggered and so now begins the inevitable process of realisation by Paul Nutty and his jubilant UKIPs that their dreams of control over immigration or even, amongst their more extreme supporters, repatriation of non-UK nationals are just pie in the sky. UKIP doesn't live in the real world, but then Nutty himself comes across as just a slightly dim Scouser with a penchant for exaggeration, which doesn't say much for the sharpness of the rest of the party that chose him as leader.

I am not sure whether in their blind obsession the UKIPs realised that the majority of immigration into the UK comes from non-EU countries; maybe it passed them by. Non-EU migration is managed by a visa system - the same sort of visa system which the Government will now extend to EU citizens. So - just to spell it out for those of UKIP-level intelligence - the visa system which is supposed to control future EU immigration has been in use for all the time that the Conservative government(s) were pledged to reduce migration to the 10's of thousands and has manifestly failed to make a dent in the largest element of our total inward migration. The Government had the tools and the opportunity to more than halve net migration but failed to do so; UKIP need to ask themselves why that is. Is it possible that the levels of immigration we have seen are actually driven by business need rather than the mythical benefit tourism? Could it be that immigrants have been coming here to work rather than to scrounge? And is it remotely realistic to expect any government of any hue (other than perhaps a proto-fascist UKIP government - God forbid) to actually restrict immigration when they known that it will harm UK businesses? Of course it's not; it won't happen.

Immigration will not be reduced by our exiting the EU. The UKIPs will no doubt shout and wail and stamp their little feet but the Government will merely point out that they have fulfilled their promise to 'take back control' of immigration and don't plan to actually reduce it. Oh what fun we are going to have when those poor deluded muppets realise they have been conned. No doubt there'll be protests; Nigel Farage will most likely become UKIP leader, again, to lead some kind of citizens popular uprising of the sort he threatened shortly after the referendum when he thought things were not going his way. Maybe there'll be pogroms? Vigilantes to hunt down 'illegals'?

You may think this is a flippant post, but when I listen to intelligent, mainstream Conservatives (not yet an oxymoron) like Nicky Morgan, Anna Soubry, Michael Heseltine and Spreadsheet Phil who understand the importance of immigration and the Single Market to the UK economy it throws into stark relief the extent to which the Tory Party and the political agenda in general has been hijacked by lunatic Brexiters. If anyone thinks those protectionist, anti-business ideologues are going to improve the lives of the down-trodden workers of the UK they are deluded.

Article 50 has been triggered and we are leaving the EU. I hope the UKIPs are braced for the slap in the face they are about to receive over immigration.

http://www.migrationwatchuk.org/statistics-net-migration-statistics

Patriotism

2017-02-12T15:57:00.000+00:00

I couldn't resist publishing these quotes from Samuel Johnson (he of the Dictionary fame) c 1770, given the pseudo-patriotic tub-thumping rubbish spouted by crypto-fascists like Farage and Trump:

"A man sometimes starts up a patriot, only by disseminating discontent, and propagating reports of secret influence, of dangerous counsels, of violated rights, and encroaching usurpation. This practice is no certain note of patriotism. To instigate the populace with rage beyond the provocation, is to suspend public happiness, if not to destroy it. He is no lover of his country, that unnecessarily disturbs its peace. Few errors and few faults of government, can justify an appeal to the rabble; who ought not to judge of what they cannot understand, and whose opinions are not propagated by reason, but caught by contagion."

... quite. ie. Don't incite the mob by spreading alarmist falsehoods eg. to denigrate minorities - Germany 1930s, Britain/USA 2016.

"It is the quality of patriotism to be jealous and watchful, to observe all secret machinations, and to see public dangers at a distance. The true lover of his country is ready to communicate his fears, and to sound the alarm, whenever he perceives the approach of mischief. But he sounds no alarm, when there is no enemy; he never terrifies his countrymen till he is terrified himself. The patriotism, therefore, may be justly doubted of him, who professes to be disturbed by incredibilities..."

... does that sound a little like "70 million Turks planning to head to Britain"?

"Let us take a patriot, where we can meet him; and, that we may not flatter ourselves by false appearances, distinguish those marks which are certain, from those which may deceive; for a man may have the external appearance of a patriot, without the constituent qualities; as false coins have often lustre, though they want weight."

... could be either of Farage and Trump.

And finally, as (mis-)quoted by Bob Dylan in "Sweetheart Like You" - "Patriotism is the last refuge to which a scoundrel clings."

Who is really to blame for Brexit?

2017-01-31T20:04:00.001+00:00

Since the vote to leave the EU, 'Remainers' such as I have been told repeatedly that "we just don't get it". That the 'Leavers' are sick of "being told what to think by a metropolitan liberal elite". You cannot be serious ...

The theory goes that the Leavers in the main come from communities 'left behind' by the rapid pace of global economic change. They see changes happening around them over which they feel they have no control - their communities changing due to immigration from within and without the EU, their wages stagnating, the economic divide between London and the rest of the country widening. They feel that their elected representatives don't actually represent them at all; that they are all cut from the same cloth - a CV that reads public school, Oxbridge, Special Advisor, Member of Parliament. We are told that people are rebelling against "politics as usual" and political party manifestos with barely a cigarette paper between them, that people want a change of government to mean something. Sound familiar? Well it should do - we have heard it ad infinitum. The problem is that this has nothing to do with political correctness ("gone mad"), or the machinations of a cross-party liberal elite and everything to do with the economics we have voted for at every General Election since 1979.

Put simply, placing the blame for the current wave of discontent on a liberal elite is nonsense because for the last 40 years we have got the politicians and the politics we deserve. Since 1979 we have been subject to an economic orthodoxy which holds that small-state, low-tax economies will grow faster and create more wealth, and that this wealth will trickle down from the risk-takers to the rest of society. This neo-liberal economic agenda was combined with aggressive globalisation - barriers to trade and to movements of capital were removed to expose business to the rigours of international competition in order to drive down costs, to create efficiencies and to allow the invisible hand of the market to find the true value of any commodity - be it labour, finished goods, raw materials, or currencies. This globalisation pits workers in the UK against workers anywhere else in the world in terms of competing for work - if workers in the UK are too expensive they will very quickly find themselves out of work.

Neo-liberalism has become the de-facto 'normal' economic and political model of our times. This has forced all mainstream politicians to accept it as the basis of their manifesto for government. No UK government has challenged this orthodoxy since 1979 and whenever the Labour Party put a more interventionist, higher-tax, larger-state proposal to the country it got crucified - 1983, 1987, 1992, 2015. This is the political choice we have made. The electorate have repeatedly rejected the option of voting-in a liberal/left-wing Government that may have redistributed wealth more fairly and may have actively supported communities left behind by the pace of globalisation. The only occasions on which the Labour Party won power in the last 40 years it did so by enthusiastically embracing neo-liberalism and being "intensely relaxed" about people becoming filthy rich. When Margaret Thatcher was asked what was her greatest legacy she answered "New Labour", which perfectly sums it up - no party aspiring to govern has dared to stand on anything other than a neo-liberal platform.

The electoral playbook since 1979 has therefore been lower taxes, smaller state, emaciation of public services. We were told that any country failing to comply with the new economic order would become uncompetitive, that anything more than just basic public services were unaffordable, that any increases in taxation and state spending would weaken the economy, that privatisation of state assets would make them run more efficiently. It is this neo-liberalism that has decimated communities, created the wealth gap between north and south and between rich and poor, caused wages to stagnate and eviscerated the services on which people rely. It has nothing whatsoever to do with our membership of the EU or with immigration. The kind of state intervention that could have helped the former industrial towns in Wales, the Midlands and the North in coping with a shrinking share of world trade, eg. by investing in new industries and new skills, were not allowed to form any part of government policy - in the Tory Party due to ideological dogma, and in the Labour Party due to the fear of succumbing yet again to electoral oblivion.

The Tory-voting South of England has done very well out of neo-liberalism due to its proximity to London and the global markets it represents, but the further away from London you go the less this is the case. The split between Labour and Tory voters broadly mirrored a north/south and city/rural divide and it has largely been the South of England's Tory voters, assisted by a rabid press, that have kept the political agenda firmly set against any kind of wealth redistribution or regional aid.

So, who is to blame for the Brexit debacle? Certainly not "political correctness gone mad" or some mythical liberal elite. The people to blame are we, the electorate of the last 40 years. By consistently electing centre-right governments of all parties we have given ourselves identikit politicians with little to choose between them on policy. We, the electorate, are the authors of our own circumstances - had we ignored the siren voices in the media and instead allowed our politicians to propose more state intervention, more wealth redistribution, more public ownership of essential utilities and services instead of slavishly following the free-market doctrine pushed at us by the Tory Party we may not have seen the current wave of political unrest and we may still be in the EU. In short, we have only ourselves to blame.

The costs of Brexit are gradually becoming clear

2017-01-28T18:19:00.005+00:00

After weeks of those gnawingly bland "Brexit means Brexit" assurances Theresa May finally caved in to the growing pressure last week and set out to clarify the Government's position. We now know that the UK will be leaving the Single Market, putting to an end to the hope that 'passporting rights' for banking services could be retained after Brexit. Since then most large banks have gone public with the worst-kept secret in the Square Mile - namely that they have been scouting various EU cities in the hunt for new locations in which to headquarter their European operations ("Citi plans Brexit job move", "Banks plan Brexit exodus", "City banks warn of Brexit job moves").

While there will not be many people shedding tears over the likelihood that tens of thousands of banking jobs may disappear from the City of London over the next decade, the loss of tax revenues should certainly concern them. The City contributes £60bn a year in tax revenues to the UK Treasury (11% of the overall tax take); the net cost to the UK of EU membership is £8-9bn annually. If HMRC were to lose only 15% of that £60bn tax revenue then the act of leaving the EU will come with a net cost attached. So much for £350m a week extra to spend on the NHS.

To look at the specifics, according to this article from the Daily Mail - "Anger over £250,000 average wage at investment bank Goldman Sachs" the average pay at Goldman Sachs is £250,000 per year. Now it's probably safe to assume that the Daily Fail has manipulated the figures somewhat for the purposes of the article, as is it's wont - so let's assume the average is closer to £200k. Someone earning 200k per year will be paying around £83000 per year in tax and national insurance contributions. By contrast, someone on the average UK salary will pay only around £5500 in tax and NI. So for every job permanently lost from the City, the UK will need to create 15 at the national average wage simply to replace the lost tax revenue. That's a lot of extra jobs to create in an as yet unspecified booming area of growth. And that does not even take into account the collective demand that the individuals occupying those new positions will place upon the national infrastructure - one taxpayer vs fifteen taxpayers, one taxpayer's children vs 15 taxpayers' children, one pensioner vs fifteen pensioners.

There is also the unanswered question of where the employees to occupy these replacement roles will come from - we are clamping down on immigration apparently, so are these roles to go unfilled, as we are already close to full employment? Will the hit to the Treasury's revenues therefore be permanent and, if so, which services will be cut as a consequence? Or is Theresa May going to have to renege on the promises made on immigration by Leavers during the campaign?

With each passing day, as more details of the post-Brexit landscape emerge, it is looking more and more as though we have taken a foolhardy gamble.

Idiocracy

2017-01-22T12:30:00.000+00:00

So the Idiocracy has started [https://en.wikipedia.org/wiki/Idiocracy]. The worst choice in history for President of the USA has been sworn into office. The electorate set aside all the norms that should have prevented the election of a man who is a sexist, a misogynist, a racist, a fantasist, a conspiracy theorist, a liar, a bully, an utter ignoramus, and an overgrown child, and they voted him in anyway. And in the UK in March the Brexit process will be triggered - the biggest mistake the country has made in the last century, and one which will make it permanently poorer and less influential. In each case - Brexit and Trump - the 'shock' outcomes have been portrayed as a kick back against the political class and/or a metropolitan liberal elite by those 'left behind' by the march of globalisation. The warnings of the professional politicians and commentators were simply ignored and the maverick candidates were elected anyway seemingly on the basis that if your life is already crap, how much more crap can it get?

It is deeply depressing, but we are now in what has been called the post-truth era, where facts and evidence are irrelevant if they don't fit with preconceived opinions. I prefer to call it the era of wilful ignorance - rather than thinking through highly complex, nuanced issues with numerous shades of grey people choose instead to portray the same issues in simplistic black and white terms and propose blunt instruments as solutions. Professionals who spend their working lives getting to grips with these complexities are dismissed as bloated bureaucrats, experts and academics are denounced as parties to some unfeasibly wide and deep web of left-liberal conspiracists, and the entertainment of ideas is dismissed as ivory-towered elitism. The red-top electorate doesn't want to go to the effort of analysing anything longer than a headline so populist politicians gleefully offer up easy solutions rooted in misinformation.

The problem we will face in 2017 and beyond is that the 'populists' have been elected but they will be unable to deliver. The world is not black and white; it is painted in infinite shades of grey. Simple solutions inevitably fail in the real world; if the simple solutions worked they would have been tried already. Brexit will not reduce immigration, or if it does it will be at the expense of higher unemployment and a shrinking economy. Trump will not build his wall or lock up Hilary. Brexit will not result in an extra £350m a week being spent on the NHS, rather it will result in less money being available for the NHS and all other spending priorities. Trump will not be able to cut taxes and reduce borrowing and rebuild the nation's infrastructure - that circle cannot be squared. Brexit will not lead to a democratic renewal in the UK - we get the politicians and policies we vote for and for the last 40 years that has meant various shades of neo-liberalism. Trump won't quit NATO or start an arms race with China. Neither will he be able to improve the economic circumstances of the 'left-behinds' that voted for him - if he retreats into protectionism he will just make them worse off.

My concern is what happens when the populist politicians fail, which they will. Will they then swing further to the right and start another hunt for minorities to blame? Will they propose deportations as the next solution to their perceived 'problem'? Or will the electorates in the UK and the US realise they voted for a lie and that it is the system that is at fault - that neo-liberalism is to blame for the growing wealth gap and economic stagnation experienced by the majority of the population. Will they finally realise that the only way to truly address the cause of these frustrations is to continue to embrace openness and globalisation but to distribute the proceeds of the resulting national wealth more fairly - through wealth taxes, higher income tax for top earners, and the reduction or abolition of indirect taxes.

Improvements in the quality of people's lives will only come through investment in the services that the majority of us use and rely on (health, education, emergency services, childcare, social care, roads, railways, etc), through increased social housing provision, through subsidised public transport, through subsidised clean energy, through a genuine living wage or a universal basic income. It's not rocket science and I desperately hope the electorates on both sides of the Atlantic experience some sort of epiphany but I am not holding my breath - history leads me to believe we will simply double down on the collective madness that has led us to our current position.

Free Movement Of Labour

2016-12-31T12:22:00.001+00:00

There has been a lot of debate prior to and since the Brexit vote around whether or not the EU's insistence on maintaining the right to free movement is a help or a hindrance to the further development of the EU. Farage and others blame free movement for forcing down wages though survey after survey show that it actually has negligible impact [Prime Economics - EU membership impact on wages]. Though it doesn't force wages down I believe it helps to restrain wage rises beyond what the market can bear and actually has the effect of pushing wages up on average throughout the EU, and is therefore a good thing.

So, how can Farage have got this so wrong? The reason is that he is focusing only on the local effects in the wealthier countries that have been the recipients of large number of Eastern European migrants and then putting the cart before the horse. If you take the EU as a whole, free movement ensures that the working population in each country is not geographically constrained. Being constrained in such a way would make the workforce exploitable by corporations/employers playing off one country against another in order to force down wages, or working conditions, or environmental protections, etc. The EU has a common set of laws in place to prevent these practices that would otherwise occur in the pursuit of the maximum return on capital. The fact that the workforce can relocate means that firms competing for labour in the countries vacated by economic migrants have to put wages up to retain the best staff - the ones that have a choice about where they work. This has the effect of raising the spending power of those citizens that stay-put and is a catalyst towards the re-balancing of the economies of the EU and standards of living across the EU. Firms will initially invest in those countries because they are cheap, and wages will rise to keep the best staff in those countries. This is a good thing - it means that on average free movement pushes wages up amongst skilled workers across the EU.

But how about in the countries that are the destinations of economic migrants - surely an influx of job-seekers will lead to more competition for jobs and therefore force down wages? As the referenced surveys have shown, this is not the case. Intuitively it is apparent that the vast majority of migrants relocate in order to find work so will target those economies that are growing, creating jobs and already have skills shortages. They are unlikely to target regions that have high unemployment or under-performing economies - to do so would just not make any sense. In migrating to countries that already have skill shortages they will certainly have the effect of constraining the growth of wages beyond a level that is competitive, which would normally be the consequence of a shortage of labour, but again this is a good thing as it holds down inflation and keeps the economies of the EU competitive. The idea that freedom of movement of people forces down wages simply does not fly - they would have to migrate to destinations that already have a surplus of labour and no minimum wage if they were to have the effect of reducing wages.

How about the fruit and veg pickers of East Anglia? Despite these workers not falling into the 'skilled workers' categorisation, the same analysis applies. Farmers consistently tell us that they hire migrant labour because they cannot get locals to do the work ie. the jobs already exist and the farmers are facing the same shortages in filling them. The wages they are offering must already be competitive across the EU as a whole, even if they are low, otherwise people wouldn't travel from the EU to the UK to fill them. Hence the wages for fruit pickers in East Anglia are already amongst the highest rates for the job in the EU. Preventing free movement will mean that farmers have to raise those already (relatively) high wages and will therefore become less competitive. Once we are outside the EU those farmers are going to have to put up wages to attract local workers and will require significant subsidies or else tariffs on fruit and veg imports from the EU if they are to remain in business. Or we continue to allow migration to fill these vacancies; ipso facto, Farage has sold the public a con - again.

Interesting refs:
Prime Economics - EU membership impact on wages
NIESR - Impact of immigration
Economics Help - The 'lump of labour' fallacy
Impact of EU migration
EU migration — the effects on UK jobs and wages

Will the last person able to leave Britain please turn out the light.

2016-10-22T10:59:00.001+01:00

I felt compelled to write this post because amongst all the emotion and rhetoric of the Brexit debate the rationale behind the most contentious of the four freedoms on which the EU is founded - the free movement of people - seemed to get lost along the way. Of the four freedoms, I imagine that the free movement of goods and free movement of services are fairly well understood in general - they are designed to provide a more competitive single market with firms across the EU competing on a level playing field in order to drive out inefficiencies and increase productivity. Free movement of capital is also pretty straightforward - it aims to ensure that capital is deployed where it can be the most efficiently used and where it can find the appropriate balance between risk and return - this ensures that more investment funds are made available for business start-ups or for capital projects for expansion.

These three freedoms have a significant impact on EU citizens lives - they combine to make businesses in the EU more efficient, more entrepreneurial and more competitive. They have a significant impact but they do so invisibly - people are not particularly aware day-to-day of their effects and do not see any physical manifestation of those effects. Free movement of people on the other hand could not be more obvious to people - which is why it receives the attention it does and also why it is not always fully understood. So what benefit does free movement of people offer? Well firstly from a corporate point of view it allows firms within the EU to draw on a greater pool of labour which reduces supply-side constraints on the growth of their businesses. Obviously that's great for those firms as it allows them to grow faster than they may otherwise have done, and at a lower cost, but what does it do to benefit the people of the EU? Let me explain by way of a hypothetical example ....

Imagine there are two countries within the EU one of which has free movement of labour but no free movement of capital (country 'A') and the other which enjoys free movement of capital but no free movement of labour (country 'B'). For country 'B', it's capital is free to move in or out of the country depending on whether or not it can get a better return elsewhere. Therefore in order to retain it's existing capital base and to attract more investment to its shores country 'B' needs to ensure that it is always minimising the costs to capital. This can be achieved by cutting wages, cutting environmental protections, removing health and safety guarantees, etc - to any extent it pleases as the workforce is unable to leave. Capital put to work in country 'B' has a captive workforce that cannot vote with its feet by going elsewhere to look for work and which is therefore ripe for exploitation.

On the other hand country 'A' has captive capital which cannot be redeployed elsewhere - it must work to generate a return within the country it finds itself in. In order to generate a return it will require a workforce to add value and generate exports. Those exports will bring money into the country and so generate the required return. The capital in country 'A' must compete with other countries in the EU to attract that workforce to come and sell their labour - and it must keep winning that competition in order to keep generating a return. So given that capital cannot move and the workforce can, what does it need to do in order to attract that workforce to its shores? The answer is plainly the polar opposite of the situation in country 'B' ie. it needs higher wages, better working conditions, shorter hours, etc. But it also means more infrastructure - schools, hospitals, housing, etc as that is what people come to expect as compensation for their labour.

Given the two situations described above it is self-evident that free movement of capital within the EU without the corresponding free movement of people is a flawed position to adopt and is why all four freedoms are so fiercely defended by the remaining EU members. They are right to defend them - free movement of capital without free movement of labour would simply mean a race to the bottom between countries trying to out do each other in minimising the cost to capital of their populations.

Unfortunately the people of Britain have just voted to put themselves in the position of country 'B' ie. a captive workforce with no right to leave the country to seek work elsewhere and with no restrictions on the movement of capital in or out of the country. I fear that those who voted the most fervently for Brexit (the unskilled) will ultimately be the victims of Brexit as a race to the bottom begins - the minority that do have sufficient qualifications and experience that they are able to get visas or work permits to work abroad may begin to leave the country and those who are not qualified will be left to scrape a living in a low-wage economy. The process of impoverishment has already begun with sterling's devaluation leaving Britons between ten and twenty percent poorer.

Of course, it could be argued that this is too simplistic and Britain could instead become a high-skill, high-wage economy. Unfortunately not only would this require massive and continuous investment in increased education and training (our productivity is currently woeful when compared to, for example, France or Germany) it is also irrelevant. Whether skilled or unskilled, any fungible worker will command a lower wage when his/her movement is constrained than when it is not - we may earn higher wages if we are skilled than if we are not but it is still less than we would earn with free movement in place ie. we have still managed to shoot ourselves in the foot.

I fear that what lies in store for Britain over the next decade or so is the gradual return of the 'brain drain' so damaging to Britain's economy in the 1960s and 70s.

"We just want our country back"

2016-06-16T22:32:00.000+01:00

Supporters of Brexit cite a wide variety of reasons to explain their views. These range from Brussels' alleged "meddling" in their affairs, to an objection to the size of the UK's contribution (almost always misrepresented in size and purpose), to the supposedly undemocratic nature of the Commission, and finally to the utterly feeble excuse of last resort which is emblazoned on their bus - "We want our country back".

Now I fully accept that some Brexit supporters use this slogan in the context of repatriating democratic powers lost to Brussels, as they see it, but for a significant proportion it is just a poorly disguised call to racism. Couched in terms of innocent, inoffensive simplicity it is actually just the opposite - it is in fact the secessionists' argument for withdrawal from the modern world. What they "want back" is not a place but a time. What they want back is the time before globalisation, before the Empire Windrush docked at Tilbury, before Idi Amin expelled the Ugandan Asians, before the fall of the Berlin Wall, and before the world shrank around them.

Today's world is characterised by technology that brings us all closer together and gives us far greater knowledge of foreign countries and cultures than previous generations ever had access to. It is also characterised by increased travel for recreation and for work. Wherever you settle in the world today you will hear all sorts of different languages and accents - this is a good thing as it reduces the fear of the unknown that people have about other nations and other cultures. Unfortunately it seems to upset Nigel Farage.

In the past fears and demonisation of foreigners and of religions have allowed corrupt leaders to plunge their countries into the most horrendous of wars. The sheer volume of travel and of cultural interaction today makes wars on such a scale less likely. But pulling up the drawbridge and hiding behind the curtains will not stop this interaction from continuing in the rest of the world outside the UK. It will however make the UK less relevant to and less engaged with the rest of the world.

UKIP-ers would like us to return to the Britain of the 1950s. This is plainly not going to happen - the world has moved on, but it appears to have left UKIP behind.

More Farage Nonsense

2016-06-09T22:08:00.002+01:00

Another of Nigel Farage's ridiculous claims on the ITV debate on Tuesday night was that the fact that the average worker in the UK has had a poor deal over the last ten years with wages stagnating or falling was entirely the fault of immigration. He neglected to mention that in those ten years the UK has been through the worst financial crisis in over a century, two recessions and the largest fiscal consolidation in it's history, including a multi-year public sector pay freeze. This of itself accounted for a significant proportion of the real-terms drop in income for most of the workforce.

He also forgot to mention that the UK is not alone in this - for example, the median male income in the USA is now lower in real-terms than it was in the 1970's. This has nothing to do with immigration. The main driver of wage stagnation in recent decades has been globalisation, increased competition and the growing income inequality between rich and poor. This is an inevitable consequence of capitalism and is not a bad thing so long as governments are willing and able to intervene to redistribute income and to put a legally enforceable floor under wages.

Unfortunately the UK government since 2010 has done a poor job in this regard. It has cut taxes for the rich instead of which it should have raised them. It continues to allow the super-rich to avoid taxes through their use of tax havens. It fails to collect anywhere close to the appropriate level of taxes on the UK operations of global corporations. It has slashed corporation taxes, further contributing to an international race to the bottom, despite there being no evidence it will result in the higher overall tax take claimed. In combination with the above it has also removed a significant number of the transfers (benefits and tax credits) that previously helped to redistribute income. These transfers should not be considered as the drag on economic performance portrayed by the government but as a social necessity which ensures that the nation's income is shared fairly.

The government may have failed the public on taxes and redistribution but, worse, it has conned them with its 'living wage'. The real living wage as calculated by the Living Wage Foundation (http://www.livingwage.org.uk/) is predicated on previously-existing in-work benefits remaining in place and is also set at a higher level than the government's measure; as those benefits have now been abolished, the governments living wage is nothing more than a gimmicky rebadge of the minimum wage.

So I agree with Farage that Britain deserves a pay rise but his analysis is completely dishonest. The British public deserve better than to have to listen to any more of Farage's nonsense - rejecting it on June 23rd, then campaigning to have the UK Government collect more taxes and to introduce a real living wage would be a good start.

Giving Farage his dues

2016-06-08T21:17:00.000+01:00

On Tuesday night's ITV debate on the UK's membership of the EU, Nigel Farage admitted that the Leave campaign's policy of reducing net immigration would lead to a lower UK GDP and a lower standard of living. To his credit he has always been consistent on this - he has stuck to the line that "GDP isn't everything".

Farage's argument is that immigration increases competition for employment and therefore exerts a downward pressure on wages. So, his theory goes, reducing immigration will allow wages to rise again. This may well be true in the short term however the flip-side to this is that those short-term wage rises will cause output prices to rise and therefore sales to fall, and so will result in longer-term job losses and unemployment. An increase in unemployment will in turn cause wages to fall back again, resulting in lower pay, lower GDP and permanently higher unemployment.

There are two ways to constrain output price rises - either by increasing productivity (output per capita) or else by restricting wage growth. For Farage's wage increases to persist rather than resulting in unemployment would require permanent increases in productivity. This would be reliant on investment in skills and in infrastructure, which would require money to be spent. That extra spending would be at the cost of other spending priorities or else taxes would need to rise. Unfortunately Farage didn't get around to explaining that part - "Vote Leave, pay higher taxes".

Without productivity improvements there will always need to be competition for employment in order for the UK to remain competitive. That competition is created either through immigration or through the laws of supply and demand via the mechanism of unemployment; it is unavoidable and slamming the doors shut won't prevent it. I would prefer to see full employment with immigration than no immigration and permanently higher levels of unemployment.

Allowing free movement is the free-market solution - the laws of supply and demand will determine where people choose to migrate to. To all intents and purposes there is currently zero unemployment in the UK which is why people come here; if unemployment were to increase in the UK (eg. if productivity increased more rapidly in other EU countries than it did here) people would naturally stop coming here to look for work. The Eastern Bloc have far lower wages than the UK and as their infrastructure develops and more businesses choose to locate themselves there the flow of migrant labour will reduce and may even reverse - anyone remember 'Auf Wiedersehen Pet' and all the British brickies who moved to Germany looking for work in the 1980's ? We seem to have developed short memories since then ...

So to give Farage his due he has been consistent in arguing for higher unemployment and a lower standard of living, it's just that he chose not to phrase it quite like that.

The Brexit Debate

2016-06-06T23:28:00.001+01:00

One of the most puzzling refrains heard throughout this seemingly endless referendum campaign is 'no-one is just giving us the facts'. Seriously? Is that maybe because it is impossible to predict the future with any degree of certainty? There are plenty of statistics and data out there if people care to look but Remain or Leave, it doesn't matter - both choices rely on a degree of guesswork as to what the impact will be. It is however possible to state where we are now and how we got here; so here are some of the aspects of the 'debate' that concern me and the conclusions/questions I draw from them ...

1) Britain contributes £350 million per week to the EU budget. Britain receives £190 million per week from the EU in agricultural subsidies, research grants, development grants and the like. The net contribution is therefore around £160 million per week, or less than 0.5% of GDP. Not a huge price to pay for access to an economy the same size as that of the USA and more than 500 million consumers. Would we get a deal at that price outside the EU ? We just don't know. ...

2) Britain joined the EU in 1973 when it's economy was known for being 'the sick man of Europe' with high unemployment, high inflation, falling exports, and failing industries. Since then, while inside the EU, the economy has recovered and is now the 5th largest in the world, behind only USA, China, Japan and Germany. We can't know how Britain would have fared if it had remained outside the EU or how Britain will fare if it leaves but purely in terms of population size it is unlikely that Britain would have or will overtake any of these apart from possibly Germany. So I am unsure why Brexitters consider EU membership to be a hindrance. Will our economy be any further up the league table in 10 years time if we are outside the EU? Unlikely - it is more likely to shrink in relative terms.

3) Because Britain has close to zero unemployment, inward migration is driven by continuing demand for additional labour from businesses. Cutting off this source of labour, as Brexitters intend, implies wage rises to compete for a smaller pool of labour, which ultimately will make UK-plc less competitive and cause unemployment to rise. This will have the effect of reducing wages again until they settle at an equilibrium point with a lower GDP as a result of there being fewer people in work and at lower wages. Either that or the Brexitters' wishes on immigration have to be ignored, even if they win the referendum, in order to keep the UK competitive.

4) Only a half our current net annual inward migration figure of 330,000 comes from EU countries. Leaving the EU is unlikely to put a halt to immigration, due to point 3 above - in fact it is likely to mean that immigration from poorer, non-EU, countries increases to meet the needs of business and of public services. If Brexitters are concerned about cultural dilution it is only going to get worse if we leave the EU - we have more in common with our Eastern European neighbours than we do with those from outside Europe.

5) From WWII to the collapse of the Berlin Wall and the Warsaw Pact countries in 1989 the UK lived under the constant and imminent threat of conflict with the USSR. Since then it has been the West's objective to encourage the former Eastern Bloc countries to convert into liberal democracies with market economies - welcoming them into the EU was a part of that process. Many Brexitters aspire not just to leave the EU but to see it's break-up. If that were to happen the Eastern Bloc countries are more likely to fall back under Russia's suffocating influence - or, worse, to see occupation/annexation as has occurred in Ukraine and the Crimea. Without European solidarity in the form of the EU how would Europe coordinate any kind of response amongst 28 countries living at different degrees of proximity to the Russian threat? Or are Brexitters relying on NATO for any such response, and if so don't they think that would represent a major escalation of tensions? Personally I feel we should show more solidarity with these nascent European democracies and keep the EU together.

For the record, and as I have blogged repeatedly since the referendum was announced in 2013, I think the Brexitters will win but I think it will be the most short-sighted and depressing decision this country has ever made. My wife and kids, luckily for them, are entitled to Irish passports so once free movement is abolished they can still tootle through passport control while I have to faff about with immigration/visas. Or maybe once people realise what a pain travelling in Europe is without free movement it will be reintroduced - in which case, what was the point?

Will Brexit succeed in reducing immigration?

2016-04-19T20:49:00.001+01:00

One of the many justifications offered by advocates of Brexit is that it will allow the UK to "regain control of it's borders". I am doubtful that this is the case; it may do so, but if so it will come at a price.

Following Brexit, should that be the electorate's verdict, supporters and opponents alike will be hoping that the UK's economy continues to grow (as measured by GDP - the sum total of the nation's economic output). For a nation's GDP to grow either the existing workforce needs to become more productive (generate more output, in terms of goods and services, at a lower unit cost) or the workforce needs to grow. In the UK over the last 20 years or so, this demand for more labour has been met by immigration. The UK's unemployment rate currently stands at 5.1%. In such a low unemployment environment if a company wants to expand it's business but access to immigrant labour has been removed it will need to raise wages in order to hire more people - to poach them away from other employers. This may appear superficially attractive, giving workers a pay rise, but in the long run it is bad news. The UK has a long running productivity problem (currently worse than France's), which makes our exports relatively expensive. This has led to us having the worst trade deficit in our history - we import massively more goods and services than we export. If wages rise we become more unproductive and the deficit becomes worse - a situation which in the long run is not sustainable.

So, post-Brexit, wages will tend to stabilise at a level at which our productivity does not worsen and as a nation we are able to continue to compete. Competition for employment is what constrains wage growth - when we no longer have immigration to provide that competition it will be provided instead by an increase in unemployment. The market will drive up our productivity through the mechanism of falling exports leading to higher unemployment. The final result of a Brexit followed by closing the borders will be a shrinking GDP, falling wages and higher unemployment. That increase in unemployment has associated welfare costs which will have to come out of a smaller tax take due to the smaller size of our economy.

Overall post-Brexit Britain is not an attractive prospect, which is why I think those who vote for Brexit in order to reduce immigration will find themselves disappointed. No government wants to preside over a shrinking economy, permanent recession and falling living standards - for this reason I believe Governments will continue to listen to the demands of business and the borders will remain open. Globally, mass immigration is here to stay and our time would be better spent in finding ways to live with it.

Election 2015 - It's grim for Labour

2015-05-08T12:20:00.002+01:00

Originally published May 2015.

Well what a depressing result that was. It is of little consolation but I called the result almost exactly back in March 2013 - http://theviewfromstalbans.blogspot.co.uk/2013/02/the-2015-general-election-is-far-from.html - I should have had the confidence of my own predictions to back it with money. Even Nate Silver got it wrong this time. What an opportunity missed!

So what of the future? We now have 2 years of uncertainty while the Tory party debates with itself over our future relationship with Europe; Labour's position is clear, as is that of the SNP, the Greens, the rump of Lib-Dems and of UKIP - it is only the Tory party that doesn't yet know where it stands on this key issue. In 2017 we could face the situation where the UK as a whole votes to leave the EU while Scotland wishes to remain in; that will be the final nail in the coffin for the Union - as the SNP will certainly demand another referendum at that point.

I see two major issues on the economic front - the first being the UK's continuing productivity puzzle and the second the build-up of private debt. Since 2010 wages have stagnated, though they are starting to rise again now, but our GDP per capita has not improved - our productivity is still awful (we are still behind France on this score). This harms our exports which is partly why we currently have the worst trade deficit ever recorded. This needs to be addressed by investment in infrastructure and by improved education and training to up-skill the workforce; the alternative is a low-wage economy which continues to drive wages down. But given that pressure on pay is now upwards, our productivity and exports may just get worse. Osborne needs to do what Labour proposed which is to allow himself to borrow for investment where the investment can be shown to have a positive impact on productivity; unfortunately this has been ruled out so he would need to break an election pledge to do this - but seeing as the Tories happily abandoned pledges made in 2010 when it suited them (no increases in VAT, no top-down NHS reorganisations, eliminating the deficit, reducing the debt, reducing immigration, rebalancing the economy, etc), I look forward to seeing Osborne wriggle his way out of this one too.

However, a bigger issue is the nature of the current 'recovery'. Thus far it has been driven by consumption paid for by a build up of private debt - the UK has the largest private-debt-to-GDP ratio on the planet, bar Japan. It is now back to pre-crisis levels. When interest rates start to rise this debt will become unaffordable and we will start to see defaults - just as we did in 2007-8. House prices will fall and the Banks' balance sheets will be impacted - we may we well see bank failures and the need for bailouts once again. The situation may be made worse by an additional surge of unsustainable pseudo-growth fuelled by people bringing forward their pension savings spending and a subsequent collapse in demand further down the line. We'll know whether this has been the case in a few years' time.

Another concern is for the future of the NHS. There is a financial crisis building, with 98 trusts thought to be close to insolvency. I fear that the Tories will use this as an excuse to privatise large parts of the service to reward the healthcare firms that have helped to bankroll their election campaign. This will be a disaster for the future of the service as study after study has shown that outsourcing to the private sector consistently provides worse value for money. Numerous studies show that our NHS as currently constituted is one of the most efficient and best value for money in the world. Outsourcing will therefore lead to less money begin available for front-line services, but on this point the Tories' policy decisions are likely to be ideologically-driven rather than evidence-based - a large proportion of the party has long wanted to privatise the health service in the name of shrinking the state. I fear for the future of our NHS.

So the banks and hedge funds got the government they wanted but I look forward to seeing how the Government now attempts to square the circle of their contradictory electoral pledges - slashing welfare while protecting the vulnerable, child benefit and pensions, achieving a budget surplus while cutting taxes, cutting immigration while remaining in the EU, growing the economy without immigration and without investment to boost productivity, keeping Britain open for business and investment with one foot in the door out of Europe - the list goes on and on. There'll be plenty to write about.