Tragedy in London

The tragedy at Grenfell Tower is rapidly turning into a political football, that will inevitably result in the real lessons being missed and it being turned into a Dangerous Dogs Act-like knee jerk reaction that fails the people.  Construction of this tower started 45 years ago and the problems have not happened overnight; so those on both sides of the political aisle should look at themselves in the mirror and ask if they could have done something better rather than attempt to just pass the blame on to others.

While we have seen acts of heroism from the emergency services and great generosity and energy from the volunteers working to help the victims, we have seen sniping from the gutter of social media from  nasty people on both sides, such as disrespecting the great work of the Red Cross or snide comments about the effects of multiculturalism and politically correct interviews.  Shame on you all.

What went wrong? We can't answer the technical reasons now (was it the wrong cladding, would sprinklers have stopped the fire etc.), but two matters stand out for me:

1. The people living in places like Grenfell Tower are low priority for politicians in all parties, no doubt because they are too busy getting on with life to make much of a fuss.  They are the people serving your coffee, delivering your parcels, cleaning your offices and working in your hospitals, among many other roles.  Decisions regarding the residents are deemed acceptable that would not be in other contexts. Question 1 - would someone seeking to refurbish an apartment block for private occupation be allowed to operate in the same way?
2. I work in a 200 year old building with significant planning restrictions, yet we have fire escapes, loud fire alarms and we have been retrofitted for air conditioning and modern systems wiring.  Question 2 - why are the places we work covered by so much greater fire regulations than where we live?  While some workplaces may have particular fire risks (commercial kitchens, some factories etc.), but an office surely has no greater fire risk than a home?

Nick

A Euro Time-bomb Ticking

Brexit has been dominant topic of conversation surrounding the EU in recent months, but I read a rather interesting article this morning that hints at a bigger problem, especially in the context of Greece's latest bailout negotiations and the troubled Italian banking system.

Mario Draghi, head of the European Central Bank commented recently on the liabilities that would become payable on any departure from the Euro, and this was picked up by the POLITICO news site. “If a country were to leave the Eurosystem, its national central bank’s claims on or liabilities to the ECB would need to be settled in full,” Draghi said in a letter to two members of the European Parliament published by the ECB late on Friday. He was referring specifically to claims and liabilities of the so-called target2 system, used to settle cross-border transaction within the eurozone.

For instance, Italy would have to pay the biggest amount if it opted to leave the common currency, ECB data reflecting end-November balances show. It would have to transfer €358.6 billion, or about 22 percent of its GDP. Greece would have to pay €71.8 billion, just over 40 percent of its GDP. Germany could claim €754.1 billion, almost a quarter of its 2015 economic output.  So bluntly Italy and Greece are stuck in a long cycle of structural adjustment and austerity, whether their citizens like it or not, as they cannot afford to buy themselves out of the Euro.  I doubt this will end well.

Nick

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.

BBC News Link

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?

Nick

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:

Petition on Change.Org

Nick

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.

Globalisation

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 (http://www.economistsforbrexit.co.uk/publications/) 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.

Multiculturalism

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.

Nick

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 (http://www.bbc.co.uk/news/uk-england-leeds-36559092).  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 (http://www.telegraph.co.uk/news/2016/06/21/british-tourist-captures-dramatic-footage-of-calais-police-clash/).  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 (http://www.unhcr.org/uk/news/latest/2016/6/5763b65a4/global-forced-displacement-hits-record-high.html) 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.

Nick

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.

Nick