Saturday, September 10, 2016

Is Liam Fox Right?

Earlier this week the new International Trade Secretary, Liam Fox, made a rather unguarded comment at a reception for Conservative activists, accusing British businesses of being “too lazy and too fat” to be freewheeling free traders on the world stage.
Now while I am sure many people will debate the matter on both sides of the argument, there was one historical aspect I felt was worth exploring; the suggestion that British businesses were once much keener on exporting than is now the case.  Looking at recent history, we are not doing too badly:
This chart from the World Bank shows that while we are slightly below  the peaks in 1977 and 2011, we are well above the average since 1960.  Now, I am sure Dr Fox is harking back to a time well before 1960, but unfortunately economic data is rather sketchy for earlier years, so it is hard to either refute or indorse his position based on hard numbers.
However, I recently read an interesting observation in a book called The Rise of Merchant Banking (Stanley Chapman, 1984), which made a remarkably similar point in relation to the manufacturing businesses that were in the vanguard of the Industrial Revolution and the foundation of the British Empire’s economic hegemony. What it also highlighted however was the success of British merchants, entirely independent of the manufacturers, in selling those same industrial goods all around the world (not just within the Empire), based mainly in London and Liverpool with agents around the world.
So perhaps Dr Fox is both right and wrong; it is not that British industry is less focussed on exporting than in the past, but that we have lost that cadre of merchants and agents?  That it is not managing directors spending too much time on the golf course but that those hungry young men (and now women) who might have sought their fortunes selling goods around the world as commission agents in the past now find greater opportunities as City traders or tech start-ups?
Perhaps it is an activity that should now be revived; the British have after all always had a talent for being intermediaries?

Sunday, June 26, 2016

Let us have a less divisive European relationship in the future

Now that the European Union Referendum has been decided, it is important that the UK Parliament take the lead in guiding the future direction of our relationship with our European friends and neighbours.  The referendum was simply a question as to whether or not the UK should remain a member of the European Union ("EU"); we were not voting on the manifestos of the different campaigns.  The result was very close, and therefore I believe it is incumbent on our elected representatives to propose a post-EU relationship that meets the needs of the largest proportion of the population and creates the least disruption possible to our economy.
 In my opinion, this can best be achieved by the United Kingdom re-joining the European Free Trade Association ("EFTA") and retaining membership of the European Economic Area ("EEA").  This would have the following ten key benefits:
 No disruption to the UK's existing trading relationships in both goods and services in Europe;
  • No reduction in the social and employment protections that we already enjoy;
  • Regained control over our agricultural and fishing policies;
  • The ability to make trade agreements outside of the EU/EFTA with whoever we choose, in particular with our friends in the Commonwealth;
  • Sovereignty over all matters that are of real concern to people, but with the benefits of working to common standards on internal EEA trade and regional issues such as climate change and pollution;
  • Eliminating most of the issues that may cause problems with the border between Northern Ireland and the Republic of Ireland;
  • Largely satisfying the concerns of the people of London and Scotland in terms of their continuing connections with Europe for their vital financial services industries;
  • No engagement in EU monetary union, common foreign and security policies, and common justice and home affairs policies;
  • Outside the EU customs union and VAT common area, so the UK can set our own VAT and tariff rates for non EEA goods; and
  • Continued free movement of workers and students, but the ability to apply "breaks" to numbers if public services are put under pressure.
I believe this addresses the economic concerns of those from the "Remain" side of the recent referendum and the Sovereignty concerns of those of the "Leave" camp.  It also ensures that the UK remains an open and outward looking nation and does not alienate our many friends around the world.  Norway, the largest current EFTA/EEA member has one of the highest standards of living and quality of life in the world, is a close NATO ally and a leading participator in many international bodies, so I see no reason why the UK's economic and diplomatic position should be inhibited in any way.
 No solution is perfect, but of all those available that respect the democratic will of the UK electorate that was expressed on Thursday, I believe that this would find favour with the largest element of the population.
If you agree with me, please copy the above text and send it to your MP; this is now a matter that will be decided by the UK Parliament.  I have also started a petition to help spread the message that there is a compromise solution available to us:

Wednesday, June 22, 2016

Are our votes based on the right issues?

I have listened to many of the reasons that people wish to vote leave.  They are heartfelt, genuine and I do not believe driven by racism as some might suggest.  I do think however that many are driven by three factors which are unrelated as to whether we should in the EU or not, none of which have been addressed by either of the "official" sides in the debate:
  • The impacts of globalisation;
  • Many years of our domestic politicians rather conveniently blaming the EU for unpopular matters when the reality was rather closer to home; and
  • The impact of multiculturalism on communities.
The world has become difficult and less certain for many people over the last 50 years, especially those in "blue collar" and clerical jobs.  The post-WW2 economic consensus that started to unravel with Nixon taking the US dollar off the quasi-gold standard established at Bretton Woods (albeit in itself more a symptom rather than the underlying economic cause) in 1971 (the year of my birth - I am a child of globalisation!), saw the breaking down of traditional industries, not just in the UK, but across the traditional industrial economies of North America and Western Europe.  First with the rapid growth of Japan from 1955 to 1990, then the "Tiger" economies of Hong Kong, Singapore, South Korea and Taiwan, and finally with the re-emergence of China and India as great economic powers (I use the term re-emergence, as they are merely regaining there relative position in the world economy that existed prior to the Industrial Revolution) has seen a massive pivot to Asia in terms of industrial production, especially of goods that many people in Britain would have seen as "there's":
  • Shipbuilding;
  • Textiles;
  • Steel;
  • Coal;
  • Chemicals; and
  • Electrical goods.
Britain's membership of the EU (and its predecessor, the EEC) may have coincided with these changes, but they were not caused by the EU.  Look at the current US Presidential Campaign and the popularity of Donald Trump and Bernie Sanders; the very same issues are at the fore, while the USA has taken the type of approach to international trade and engagement that the "Leave" campaign is advocating.  Those traditional, well-paid, manual jobs will not return whatever route we take, although the production might return; this time it will just be done by robots, thus removing the labour cost advantages of Asian producers.
Globalisation has been accompanied by rising levels of inequality, reversing a trend that had lasted from the First World War to the mid to late-1970s across North America and Western Europe.  Increasing rewards have gone to those with higher educational levels and capital, and less to those without.  Ironically, the EU has long been seen as fighting a losing war against the tide of globalisation, while in this campaign it is seen as a creature of the same.  A non-EU Britain (well at least a non-Single Market Britain  - a move to the Norway model EFTA/EEA membership would make little difference) will more likely find itself on an accelerated path of globalisation; the "Leave" campaign's model for trading ( is not without economic merit, but it clearly involves the UK economy being at the cold, hard edge of globalisation.  This will not be a comfortable place for those who have found the last 50 years the most difficult.
Blame it on the EU
Domestic politicians of both major parties have, for as long as I can remember, used the EU as a convenient scapegoat for ducking difficult policy decisions, or for bringing in those that may not find favour.  The now widely argued about "workers' rights" have frequently been posted in the EU box, so Labour politicians can avoid being seen as anti-business and their Conservative equivalents can avoid blame for introducing "red tape" by the right of their party.  This is a situation that has been exacerbated by a number of newspapers, where "blame the EU" stories have become stock in trade alongside philandering footballers and badly behaved celebrities.  Considering the quality of coverage and debate, the position of many people is hardly surprising.  Let us take some examples:
  • "The EU makes us pay benefits to anybody" - EU rules just state you cannot discriminate between your own nationals and those of other EU members.  There is nothing to stop the UK having a welfare system where you have to contribute before you can take out, and in fact this was how the UK system worked until the mid-70s.  For example a system requiring 5 years of National Insurance contributions before tax credits, child benefit or unemployment benefits could be taken out is perfectly legal, and is in fact how most European systems work.
  • "EU migrants take our houses/school places/hospital beds/etc." - Any increase in population means you need more houses/school places/hospital beds/etc..  In the 1950s and 1960s we had a significant increase in population, and Britain built 300,000 houses a year and many schools and hospitals.  The people who are moving to the UK from other EU countries are coming to work, unemployment is low and workforce participation is high.  There is no reason why we should not build and we would get many benefits from doing so.  With interest rates at very low levels, such construction could be undertaken with low cost of finance.
  • "The EU is failing to deal with the migrant crisis" - The world is seeing an unparalleled  level of displaced people and refugees, estimated at 65m, primarily occurring in Africa, the Middle East and South Asia.  They are seeking to come to the EU (in particular the wealthier northern countries) as they see a much more pleasant place to live.  The EU hasn't caused these crises and nor can it stop them.  There are no easy answers, and our vote will not change in the slightest how many people cross the Mediterranean, or how many seek to move to the UK rather than Germany or Sweden.
Last but not least, we have the issue of multiculturalism, and the feeling held by many that the country has become "less British", or is "not the country I remember"; this is not a matter of race but a factor of difference.  The EU is identified with this process because these changes have occurred while we have been a member and its protections for minorities.  However, if we examine this closer, it is rarely to do with people who have come from the EU.  The cultures of other EU countries are fundamentally not that different from the UK, compared with say those of South Asia and West Africa, from where other large immigrant populations have arrived.  Again, this is not something that will change with an exit vote, but only through assimilation.  Those immigrants from within the EU tend to assimilate rather more quickly due to the cultural similarities; those from outside the EU rather longer.


Tuesday, June 21, 2016

What are we not voting about?

I am seeing quite a few comments about stories being kept out of the "mainstream media" which relate to crimes undertaken by immigrants (or descendants of recent immigrants) or of riots by migrants in other EU countries, notably around Calais, on the basis that this will have a negative impact on the "Remain" campaign.  As someone who both believes in free speech and will be voting remain, I thought I would help provide some coverage.

Firstly, there is the terrible case of child abuse in Yorkshire (  A gang of 15 men, all of south Asian heritage, have been sentenced to up to 25 years in jail for horrible crimes, but I am struggling to see the connection with the EU referendum.  None of those convicted appear to have any connection with EU migration, nor is there any suggestion that any European court will somehow stop them serving the sentence that the court in Leeds has passed.

The second involves the violence occurring in the migrants camps around Calais (  This is a long standing issue and seems like it is getting worse.  The French do seem to be struggling to deal with it, but again, I struggle to see what it has to do with the EU Referendum?  The people who are rioting are not from Greece or Portugal.  The reason they are in the camps in Calais is precisely because they do not have free movement rights; they wish to come to the UK but cannot.  People speculate that the French may become less diligent if the UK was to depart, but assuming they abide by their treaty obligations, nothing will change following a "leave" vote; they will remain in the camps and they will still wish to come to the UK.

The population flows from South Asia, the Middle East and Africa pose massive issues.  The recent report by the UN High Commissioner for Refugees ( shows migrants and displaced persons at record levels of 65m, greater than the population of the UK.  The last 2 years has seen governments both within the EU and outside struggle to find solutions, probably because there are no solutions that can be delivered easily, quickly or without significant costs.  Efforts to date have been a muddled mix of policies as politicians have tried to "do something" when they know they can do little beyond applying a sticking plaster to gaping wound.  Building a big wall or blowing boats out of the water will not stop the flows of people; it will just change the direction of travel.  Equally, letting unrestrained immigration into Europe will cause instability and tensions of a different kind.  Again however I ask the question, what is this to do with the EU and the desirability to stay in; those population flows will still happen.  Norway and Switzerland are outside the EU and face the same issues, and like them, a post-leave Britain would have to be involved in what is happening.

There are many arguments in both directions in regard the EU referendum; I happen to think we should remain, others for perfectly rational reasons think we should leave. But I do think it is dangerous to conflate a decision around economics, trade and sovereignty with one about refugees, none of which originate from countries within the EU. Wishing to restrict free movement of labour from EU countries is a valid economic and political objective, but there is no reason to connect that with flows of migration caused by war and famine from countries in the Middle East and Africa. Departing the EU cannot have any impact on such flows.  Are there refugees who are criminals? Of course there are. Will the barbarity of what they have gone through make them more inclined to criminality? Quite probably. But there are criminals in every population; being a bad person is not related race, religion or country of origin.  Just as the vast majority  England football fans are not violent, racist thugs, most refugees are not sex offenders, but in both cases there are some who are.

So if you think for reasons of sovereignty, economics and law making that Britain should leave the EU, then vote "Leave"; I don't agree with you, but that is what this referendum is about.  Don't however vote out because you are concerned about the refugee crisis around the Mediterranean; whichever way you  vote will not alter that in the slightest.


Sunday, June 19, 2016

Is there a referendum compromise?

The one thing that everybody involved or interested in the current EU Referendum debate can agree on is that the result is going to be close.  Like the referendum over Scottish independence in September 2014, this a is a matter that divides the electorate down the middle, and as with that situation and referenda in general, it provides for none of the compromise or negotiation that it is inherent in the general democratic process.
The reaction to such a close vote in the Scottish referendum was the provision of greater devolution, i.e. a compromise.  With a similar situation existing in relation to continued EU membership, perhaps it is time to look for a similar compromise; while theoretical democracy is about getting 50% plus one vote, a democratic society must aim for harmony among as wide an element of its population as possible.  Unless either side is able to gain 60% or greater of the votes this Thursday, then I would suggest that a compromise is needed to avoid disharmony, one where neither side can claim either victory or defeat.
So what might a compromise look like as regards EU membership where the numbers of parties involved are greater than those involved in the Scottish referendum?  Well luckily the structures already exist, making it considerably easier to implement; it is what has become to be known as the "Norway Option". 
First, a short history lesson……
When the original six members (Belgium, France, Italy, Luxembourg, Netherlands and West Germany) formed the European Coal and Steel Community in 1950, leading in turn in 1957 to the European Economic Community ("EEC"), the forerunner of the current European Union ("EU"), the UK stood back for a variety of reasons.  Instead, the UK sought to develop stronger trading links with the other developed European economies that were outside the Soviet Bloc.  In 1960 the European Free Trade Association ("EFTA") was formed, with Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the UK as the initial members, joined by Iceland in 1970.  EFTA was implemented on a rather loser basis that the EEC, focused on industrial trade, and excluding agriculture and fisheries.  Over time, EFTA faded in to the background as its members joined first the EEC, Denmark and the UK in 1973 (and Ireland, which although not a member of EFTA, had its own free trade agreement with the UK), and later the EU, Austria, Finland (which had become an EFTA member in 1986) and Sweden in 1995.   The two remaining major members of EFTA, Norway and Switzerland, had also been expected to join the EU in 1995, but their electorates rejected membership in referendums; in Norway's case, this was the second rejection, having previously sort entry to the EEC in 1973 alongside Denmark, Ireland and the UK.
Prior to the 1995 enlargement of the EU, the EU had agreed with EFTA the European Economic Area ("EEA"), which offered access to the then new European Single Market for EFTA members, and was implemented in 1994 after a 5 year period of negotiation.  The EEA has been seen as a "waiting room" for EU membership, and indeed was rejected in a referendum by Swiss voters in 1992 for exactly that reason, so Switzerland remained outside both the EEA and the EU.  However, with Norway's rejection of EU membership in 1994, but remaining in the EEA and Iceland's withdrawal of its EU application in 2013 but continuing with EEA membership, the EEA has now had 2 non-EU, EFTA members operating within it for over 20 years. 
So what exactly would leaving the EU, remaining in the EEA and re-joining EFTA, the "Norway Option", mean?  Well looking first at the EEA elements what is involved?  The following is taken from the EFTA website regarding the EEA:
"What is included in the EEA Agreement?
The EEA Agreement provides for the inclusion of EU legislation in all policy areas of the Single Market. This covers the four freedoms, i.e. the free movement of goods, services, persons and capital, as well as competition and state aid rules, but also the following horizontal policies: consumer protection, company law, environment, social policy, statistics. In addition, the EEA Agreement provides for cooperation in several flanking policies such as research and technological development, education, training and youth, employment, tourism, culture, civil protection, enterprise, entrepreneurship and small and medium-sized enterprises. The EEA Agreement guarantees equal rights and obligations within the Single Market for citizens and economic operators in the EEA. Through Article 6 of the EEA Agreement, the case law of the Court of Justice of the European Union is also of relevance to the EEA Agreement, as the provisions of the EEA Agreement shall be interpreted in conformity with the relevant rulings of the Court given prior to the date of signature (i.e. 2 May 1992).
What is not covered by the EEA Agreement?
The EEA Agreement does not cover the following EU policies: common agriculture and fisheries policies (although the EEA Agreement contains provisions on trade in agricultural and fish products); customs union; common trade policy; common foreign and security policy; justice and home affairs (the EEA EFTA States are however part of the Schengen area); direct and indirect taxation; or economic and monetary union."
In terms of the non-EEA aspects of EFTA, it also brings a series of free trade agreements with 24 countries, including major non-EU markets such as Canada, Mexico, South Korea and Turkey.
Winners and Losers?
So from a "Remain" perspective, access to the Single Market, the key element in their economic argument is retained, with the downside that any future changes in Single Market Rules will be made with the UK having only an ability to influence, but not vote on them.  It also should negate the primary issues around a second Scottish independence referendum and tensions in Northern Ireland that would likely occur on a full EU and EEA exit.
From a "Leave" perspective it returns sovereignty, bar for those matters around the Single Market, including the ability  for the UK to make its own international trade agreements and develop increased links with the Commonwealth.  However, this would come at the expense of retaining  free movement of labour, albeit with the ability to impose "emergency brakes", similar to those negotiated by David Cameron in February.  It also means a continued (but reduced) contribution to the EU budget (involving development funds for poorer members), but would remove any contingent liabilities to the European Central Bank or other EU bodies in the event of default.
Just a Compromise, or Maybe More?
While EFTA/EEA membership is at this time primarily a compromise, longer them it opens up new possibilities.  Firstly, the EU is changing, with the Eurozone countries necessarily integrating further around the Franco-German axis.  For those countries not in the Euro, this poses questions of a direction that they may not be comfortable with; former EFTA members Denmark and Sweden spring immediately to mind in this context.  A revitalised EFTA, with Britain back at its helm, combined with continued access to the Single Market may become attractive for the future.
Secondly, Britain has long acted as a connecting point between Europe, the Commonwealth and the USA.  While the complete exit from both the EU and EEA proposed by "Leave" would put this role at risk, a return to EFTA and retention of EEA membership will change but likely not impair this role.  In fact, with some countries it may even enhance the position, e.g . countries such as Australia and New Zealand with significant agricultural exports.
I will be voting "Remain" on Thursday, and I continue to hope that "Remain" wins by a convincing margin, in which case we continue with the modestly renegotiated EU arrangements agreed in February.  Similarly, a comprehensive victory for "Leave" and I will accept with a heavy heart that the people of Britain wish to head in a different direction.  If however the vote is close (definitely less than 5% victory margin, but I would suggest less than 10%), then EFTA/EEA membership may well provide a middle ground that the large majority of the country can coalesce around.


Tuesday, June 14, 2016

Leave or Remain - I vote "In"

Several people have asked me to lay out why I am positive about the EU and why I think it is a bad idea to exit.  I will divide it into 3 sections:
  • Sovereignty/democracy/identity
  • Economy
  • Immigration
I will try to be as neutral in my writing as possible, but like anybody, I am biased by my own opinions, so to make my position clear up front, I will be voting to remain in the EU, primarily as I believe the European Single Market is important to our future and I believe that Europe needs an "outer leader" to act as a counterweight to the "inner leader" roles played by Germany and France.  I am what most people would define as a liberal internationalist, and I believe Britain is at its best when it looks out to the wider world.
If you want an answer on how to vote that avoids all the hyperbole, I think it boils down to this:
  • Vote "in" if you want greater prosperity but accept that this comes with a higher population;
  • Vote "out" if you are willing to be less prosperous in return for having less growth in population.

I have grouped these together as they have tended to merge into one continuous argument during the current debate and beyond legal or dictionary definitions, I think most people see them as part of the same issue.  It is also the aspect of the debate where the "out" camp have the strongest argument - albeit one that is difficult to articulate to a mass audience beyond simplistic soundbites, so it has got somewhat lost behind the far more emotive issue of immigration - but it is also the aspect that the EU is probably having the most discussions about reforming right now, as this is clearly not a UK specific issue.
We are all used to laws and regulations being made by different institutions at different levels; it would probably be impossible to run a complex, modern and democratic society in any other way..  As a resident of Ilford in East London, I get to vote for five different levels of lawmaking administration:
  • Redbridge Borough Council;
  • Greater London Assembly;
  • Mayor of London;
  • House of Commons (Ilford South Constituency); and
  • European Parliament (London Region).
There are also hugely important elements of the legal and administrative system where none of the general public have any say in terms of their appointment:
  • Members of the House of Lords;
  • Members of the judiciary;
  • Members of the Civil Service or local government administration; and
  • The Governor of the Bank of England.
I say this not because I think they should be voted on, but rather that they work rather well.  They are all involve an appointments based system. It is about balance: too few elected politicians and you get dictatorship; too many and you get gridlock (USA anybody?).
I do not disagree that the members of the European Commission, the judges who sit in the European courts and the official of the European Central Bank are unelected, but so are their domestic equivalents.  I will grant you that the 28 European Commissioners (as opposed to the broader European Commission, which acts as the EU civil service) have executive powers that domestic civil servants do not have, but they are each appointed by the elected governments of their home states, and the legislation that they propose has be approved by the member governments at the Council of Ministers, much like the Chief Executive of a local council has to have matters approved by the elected councillors. 
This is essentially where democracy and sovereignty collide.  If the European Commission propose legislation and it is approved under Qualified Majority Voting (a complex type of super majority), the UK by itself cannot block its introduction by itself.  For example to block a spending measure beneficial to the poorer east or depressed south of Europe, the UK would need the support of other net contributors, e.g. Britain, Germany, Netherlands, Sweden and Austria could together block a measure.  I think it is hard to say this is not democratic, but it does mean that the UK has pooled certain aspects of its sovereignty. 
But what exactly is sovereignty and where do you draw the line of veto?  Humans have always grouped together, from family units to the United Nations, and at some point you have to accept that you do not always get your own way if the groupings are to last.  In 2005 Tony Blair won a third term in government, but Michael Howard's Conservative Party won the English popular vote; the people of England had to put up with policies they hadn't wanted because English sovereignty is pooled at a UK level.  In 2015 the population of London voted overwhelmingly for Labour, but it did not get the government it wants because its sovereignty is also pooled at a UK level.  Should London, with its disproportionately high level of both UK GDP and capital turn round to Wales and Northern Ireland and say " we are fed up with our money going to you to spend on things we don't agree with"? 
As a higher rate taxpayer living and working in London, I am in EU speak a "net contributor"; while I may grumble about the amount of tax I pay, I accept it is for the greater good.  However I ask myself if it is somehow wrong for me to be contributing for say the construction of a bridge in Bulgaria to help develop the economy, why is it right for me to be contributing for a road in the Rhonda for similar reasons?  And if the NHS is "overwhelmed" by people from the other EU countries living here, and it is right to exclude them, could not a similar argument be made against British smokers or the obese? 
Are matters decided at the right level?  Not always, but that is a charge at least as applicable within the UK as it is at a European level.  For example, the UK minimum wage goes a lot further in Wales than it does in London, so should it be set at a regional level?
The complaint is made that unelected Brussels bureaucrats spend UK taxpayers money, but that same taxpayers money that is spent domestically is equally spent by unelected bureaucrats; it is just they are in London, Edinburgh, Cardiff and various other locations.  Politicians may vote on laws, but it is civil servants who implement them.
So the UK has agreed to pool certain elements of sovereignty, just as the people of England and Scotland have pooled sovereignty (as an aside, I think it is rather ironic that among the most passionate to leave the EU are those who are equally as passionate about Scotland and Northern Ireland remaining in union with England and Wales), but what has it actually agreed to pool sovereignty on?  Let us start with what they don't involve:
  • Health system;
  • Pension system;
  • Benefits system;
  • Tax policies;
  • Foreign policy;
  • Defence policy;
  • Education policy;
  • Immigration from outside the EU; and
  • Policing.
Now if we were having a general election tomorrow, I would bet money those would make up the vast majority of top ten issues.
So if we have not pooled sovereignty on those matters, what have we done it on?  The primary ones are:
  • Agriculture;
  • Fisheries;
  • External trade to the EU; and (most substantially)
  • The Single Market.
I am slightly surprised that agriculture and fisheries have not been a larger element of the debate, as they are two areas where the EU can hang its head in shame, and why I have some sympathy with the so called "Norway option" of EFTA/EEA membership, which retains access to the Single Market but brings back home competency of the other three.  The agricultural policies make large farmers (both in the UK and the wider EU) rich on subsidies, but put tariff and nontariff barriers on agricultural products from developing countries, while the fisheries policies have seen disastrous reductions in fish stock levels in the waters around the UK.
External trade is a classic negotiation situation; both sides compromise in the hope that they gain something overall.  The downside of being in the EU on such matters is that it leads to a slow process because you are negotiating a very large block, however they are never quick.  For example the agreement between the EU and Canada took 10 years to negotiate, while that between the much smaller EFTA and Canada took 8 years.  The upside is that the EU remains the world's largest market, so its negotiating position is on a par with other behemoths such as the USA and China.
So that takes us to the largest element of pooled sovereignty, the Single Market.  The question I always ask people who wish to exit the EU "because of all these rules from Brussels", is which laws exactly they object to?  If they were those that I mentioned above that relate to agriculture and fisheries, as I said, I would have some sympathy, but invariably there is no answer, or at least none based on facts (the EU does not regulate the curvature of your bananas for example, much as the tabloids might suggest).  Is it the Prospectus Directive they object to?  How about the Markets in Financial Instruments Directive?  (Two I am personally familiar with).  Perhaps it is the one that sets drinking water standards or regulates the approval of prescription medicines?  The reality is that the Single Market is a vast set of standards to govern commercial activity within the EU.  I am not for one minute suggesting that the UK could not implement its own drinking water, prescription medicine or share prospectus standards; I am saying why would we want to?  Standards like this are there to make things safe, make things work and make it easier to trade.
If the Single Market had existed in the past, the UK would not have a different style of electrical plug from the continent and we would drive on the same side of the road.  Right hand drive is not better or worse than left hand drive, nor are continental European electricity plugs better or worse than those in the UK; they are just different and as a result different standards have to be used for no benefit.  My argument is not that EU regulations cannot be improved, like most things in life there is always room for improvement, but that the benefits of common rules and standards far outweigh any benefits that might be gained by changes specifically for the UK.  These rules may be agreed by compromise, but that is not necessarily a bad thing.
Which takes me finally for this section to identity.  Does the EU in some way dilute or Britishness?  We have better food than we did in the past, but does our consumption of French cheese or Italian salami make us less British?  I don't think so.  Has membership of the EU eliminated cricket because it is not a European pastime?  No.  I can't see how we have become less British just because we have also embraced Europe.  On the basis that having joined what was then the EEC in 1973, you would have to be over 60 to have been an adult before we joined, I don't see the working-age population of Britain as devoid of a British identity.

The only thing about economic forecasts that is certain is that they won't be right; if the economy could be accurately predicted then life would be much easier, so I am not going to say that the X economist is better than Y economist.  I find it pretty compelling that the vast majority of people whose job it is to look at the economy believe it would be better to remain, but I also accept that there are a significant minority that believe we would be better to be out.  So instead I will try to look at some key factors that are put forward as to why we should exit from the economic side of things.
Firstly the people leading the "leave" campaign from an economic perspective are not new and nor are their views; the likes of Patrick Minford, Roger Bootle, Liam Fox and John Redwood have been consistent and coherent on these matters (unlike some of their fellow campaigners) for a long time.  However, anybody who is planning to vote "out" because they feel the chill wind of globalisation, and believes that this will lead to a return of heavy industry and secure blue collar jobs, should look closer at their policies.  These are ardent free market supporters who are seeking to make the UK hypercompetitive in world markets by reducing regulations and barriers to trade and capital, while restricting free movement of labour as a countervailing force.  From an economic perspective this is probably the only logical alternative to the Single Market, and I don't argue that it could work, but it would be far more dog-eats-dog than is currently the position.  Turning the UK into an ultra-free market economy - a kind of colder and wetter version of Hong Kong - is on paper a viable option, but the reality is that the British population will not buy into such.  There were enough howls of protest over George Osborne's half-hearted attempts at austerity; a move to low tax and privatised welfare provision will not get support.  If they don't go this route, the alternative economic options look poor, and that is why the models run by the Bank of England, IMF, OECD etc. look so poor; bluntly, they do not anticipate a UK that is willing to change in the way that Minford and Bootle are proposing.
Secondly, the "leave" campaigners argue that there remain economic issues within the EU, that if they explode, it will be better to be out.  Again I would not argue that such issues remain.  While the Eurozone has emerged from the worst of its recession and is now growing faster than the UK, albeit still not that fast, it would be foolish to suggest all problems have been solved.  Greece continues to be a basket case (even the ECB now appears to accept the IMF argument that some degree of debt write off will be required in its 2017 refinancing) and youth unemployment remains horrendous across the so called "Club Med" countries (and would be worse without the release valve of UK jobs - just go round any London restaurant, bar or cafĂ© to see how many young Italian, French, Spanish and Portuguese staff there are).  However those issues will not cease if Britain leaves the EU - in fact they are likely to be exacerbated - and the impact on the UK will be just as severe in terms of reduced trade.  We are not in an economic union with the USA, but the whirlwind created by the subprime mortgage crisis hit just as hard.
Thirdly, we are told that the price of membership is too high.  Again, I don't propose to argue over the numbers on the side of the bus, but to put them into perspective in terms of what is a very large economy.  The total value of all UK economic output is £1,812bn.  Of this £716bn (39.5%) is paid to the UK government and in turn they spend £772bn (42.6%), the difference being the budget deficit and made up by borrowings.  The amount paid to the EU (gross contribution less rebate) is £13bn (0.7%) and the net contribution is £9bn (0.5%).  For comparison, £116bn (6.4%) is spent on the NHS and the current rate of economic growth is 2.0%, i.e. the UK's net contribution to the EU is equivalent to just one quarter's growth in the economy.  Now I don't for a minute think the UK economy would collapse into a Greece-style depression if we exited, but even a modest recession would wipe out any cost of membership.  The recession of the early 1990s, the most modest in the last 50 years, involved a 2.5% of GDP peak to trough loss.
Lastly there is the argument that the EU is less competitive in many areas of commerce than other parts of the world, and only by leaving can the UK gain competitive advantage.  But what exactly do they mean by "less competitive"?  It means that the EU has higher wages, greater employment rights, more holidays, safer, more pleasant working conditions and less pollution.  The other areas of competitive advantage such as quality of education, investment in skills and technology, certainty of law and free movement of goods, services, capital and labour are either matters unaffected by EU membership or would be impaired by exit.

Lastly we move to immigration, the factor that seems to be driving much of the "leave" vote.   Now I do not argue for one minute with the "leave" campaign's claim that exiting both the EU and the Single Market (and by default not joining Norway, Switzerland and Iceland in EFTA) would be a core element of reducing "net migration"  from last year's 333,000 people to the 30,000-50,000 per annum that Nigel Farage suggests is a reasonable level.  It would however need to be accompanied by a sharp reduction in non-EU immigration, where the net figure for 2015 was 188,000 (higher than net 145,000 from within the EU) including those seeking asylum (41,563 asylum applications received in 2015). 
Remaining in the EU (or in the Single Market) does involve free movement of people, but that is two way; there are about 1.5m Brits living in other parts of the EU and 3.0m other EU citizens in the UK.  On the basis that most of the 3m EU people in the UK are of working age and most of the 1.5m Brits in the EU are retired, it strikes me as a good deal from our side.  Will we continue see such large numbers of immigrants from the EU?  It really depends on how their economies progress.  Of those coming to the UK from other EU countries last year, roughly half were from "western" countries (mainly young people from France, Spain, Portugal and Italy where youth unemployment is very high) and half from "eastern" countries, your proverbial Polish plumber or Romanian farmworker.   
In simple terms, this is very much what the free movement provisions were designed to achieve; they provide labour from countries with high unemployment to those countries where unemployment is low, which in this case predominantly means the UK and Germany.  It should not be forgotten that the UK has the lowest rate of unemployment (5.1%)  it has had in 40 years (bar a spell in 2003-2005, at which point it did not get any lower than 4.7%) and its highest workforce participation rate since records began in 1971.  We are almost at full employment; 3% is accepted as just the natural "between jobs" rate, and much of the rest will be people who due to attitude and behaviour are going to be difficult to employ.  So immigrants are not "taking the jobs" that Brits would do, but filling gaps in the labour market.  We have relatively high minimum wage levels, so they cannot push wage rates down that far. 
Could we fill the demands of employers while reducing net migration to 30,000-50,000?  Not in the short term.  Closing this source of labour will likely push up prices as employers look for ways to compensate for attracting people from competitors or replace them with machines; there will be winners among some individual workers (especially in skilled trades such as electricians and plumbers), but overall we will be less well off as a country.  Longer term we would likely seek to automate more activities (which is the approach that Japan is taking), but this is not a route that is going to benefit those who feel they are in an uncompetitive position compared to migrant workers.
Does migration increase demand for housing and public services?  Off course it does.  Any increase in population does this, but that suggests that houses, hospitals, schools etc. cannot be built.  In the 1960s we had large increases in the population due to the so called "baby boom" and we built significant numbers of all these, far more than we currently achieve.  Rather than blame migrants for taking houses, school places and hospital beds, perhaps we should blame government and local authority policy for not building enough?


Monday, June 6, 2016

Andy Burnham and Manchester

Andy Burnham’s decision to run as Mayor of Manchester ( is an interesting move.  Like Sadiq Khan and his successful election as London Mayor, this would give Burnham a very high profile position in British politics and real executive experience at a time when Labour have been out of power.  When any party has been out of power for an extended time it is easy to wave the “no experience” card at them, but if you can say, “well we have been running London and Manchester”, that takes a lot of the sting out of that one.
I think it may also allow the likes of Burnham and Khan to cast a distinctive position away from the constraints of Westminster and 5 minute news cycles.  You may be high profile but you are dealing with more tangible matters such as bus fares and policing.  The more devolution that happens, the more that local politics becomes a sensible route into politics.  Perhaps our future leaders will no longer come from such a narrow base?
Could he use it as a springboard to Labour leadership ahead of 2020 if Corbyn does badly, say in the 2018 council elections (London Boroughs, Metropolitan Boroughs and many second tier cities like Cambridge and Norwich)?  Possibly, but he will be 1 year behind Khan and will be able to show little progress in such a short time.