Friday, 25 November 2016

Austerity is stillborn

Yesterday, Chancellor of the Exchequer Philip Hammond delivered his first major fiscal presentation to parliament. Overall it was a somewhat underwhelming event, opting as he did for a 'steady as she goes' approach, rather than seizing the opportunities afforded to him by the referendum result. Nevertheless there were a few key areas that stood out.

Firstly, as has been leapt upon by some Remainers, are the OBR projections that the economy will be £122bn worse off compared to George Osborne's projections in March. They claim that this is proof of the damage the Brexit vote has done to the economy, but fail to take into account several factors. To begin with, the OBR attribute less than half of that extra borrowing, £58.7bn, directly to Brexit. But in doing so, the OBR have had to make several assumptions, namely that Brexit will lead to increased barriers to trade, lower productivity, and lower investment.

It's difficult to blame the OBR for making such assumptions, given the Government are still coming to grips with Brexit and formulating a plan for our withdrawal, but nevertheless, these are incredibly pessimistic assumptions based on a rough hard Brexit scenario. As this blog has argued repeatedly, such a scenario would be madness and is thus very unlikely to happen. Despite the panic induced by May's speech at the Tory party conference, there have been no indicators to suggest the government intends to press ahead with a hard Brexit.

Those assumptions were based on May's stated desire to limit immigration, and jumping to the wholly false conclusion that this cannot be achieved if the UK remains a member of the EEA. What's more, we're increasingly hearing reports of an interim deal, which would see the UK remain in the single market in the short to medium term. Given this, the barriers to trade the OBR assumes in it's forecasts will fail to materialise and thus investment and productivity will be unlikely to fall too. In fact, given the safeguarding of our single market participation, coupled with the opportunities Brexit will afford us globally, there is the distinct possibility of these increasing, rather than falling.

Even taking the OBR forecasts as read, they are still predicting economic growth, from 1.4% next year rising every year to 2.1% in 2020. This is hardly catastrophic and still a far cry from the 'instant recession' proclaimed prior to the referendum result. Most leavers acknowledged there may be a short term economic impact of leaving the EU. These projections show that, and also demonstrate that growth will return to normal after a couple of years. By then we'll be wondering what all the fuss was about.

The biggest takeaway from the chancellor's autumn statement though is that austerity has been stillborn. George Osborne painted himself as the man taking the tough decisions to get the country's finances back on track, yet his cuts amounted to just 0.2%, the national debt now stands at £1.7 trillion and he missed every single deficit reduction target.

Far from correcting this, Hammond has abandoned his predecessor's tentative plans to balance the books, announcing more spending and more borrowing. The jump will see the UK borrow £68bn in 2016/17, then £59bn, £46.5bn, £21.9bn, £20.7bn, and £17.2bn, with government spending representing, a still far too high, 40% of GDP. Moreover, the national debt will break an eye-watering 90% of GDP next year.

The chancellor needed to be far bolder in his approach to a post-Brexit UK. His abandonment of fiscal prudency means that we will run a current account deficit for 22 consecutive years, and will still be living beyond our means 13 years after the financial crash. This saddles future generations with higher debt and higher taxes.

His top down approach to dealing with economic uncertainty is a risky business. It would have been far better to implement tax cuts, rather than spending rises, to boost productivity. The continued freeze in fuel duty was welcome, as was going ahead with the reduction in corporation tax. But there was still a missed opportunity. A further reduction in corporation tax would send the message that the UK is truly open for business, and would help ease the inevitable uncertainty around Article 50 negotiations.

Similarly, the chancellor has taken the wrong approach to the nation's housing problem. Abolishing stamp duty, liberalising planning laws, and reclassifying small sections of the greenbelt would do far more to help those struggling to get onto the property ladder than his announced spending plans. As Hinkley Point and HS2 demonstrate, the Government is woeful at picking projects with decent benefit to cost ratios. Far better to make it easier for the private sector to invest that money where it would be more effective.

All in all, the Brexit costs are at worst, in line with what some Leavers said before the referendum, and still nowhere near the catastrophe predicted by Remainers. But the big take away is that between a far left Labour party and a Conservative party apparently fully wedded to Gordon Brown style 'investment', those voters who want simplified, low taxes, a vast reduction in state spending, and a fiscally prudent government, currently have nowhere to turn.

Saturday, 12 November 2016

Sorry Donald, but your victory is the antithesis of Brexit.

Donald Trump winning the US Presidential election is the biggest political upset since, well, only June as it happens. A completely unexpected result, Trump's victory has been likened to the UK vote to leave the EU on June 23, not least by the man himself, who earlier this week described the possibility of him winning as "Brexit plus plus plus."

There's no doubting that both results gave the establishment a bloody nose, but the comparisons between the Donald's rise to the White House and Brexit have been massively overblown. In fact, putting aside the rejection of the status quo, the two are practically antithetical.

For starters, Trump's platform railed against free trade. He constantly denounced NAFTA, and threatened to pull out of the agreement if Canada and Mexico were unwilling to renegotiate it. On top of this, Trump also threatened an all-out trade war with China, suggesting the introduction of tariffs, the bringing of trade cases against the country at the WTO, and labelling it as a currency manipulator.

Compare and contrast those protectionist instincts with the Leave campaign's message on trade. The cornerstone of the Brexiteer's message was the ability, freed from the EU's common external tariff, to sign our own trade deals with countries across the globe. Campaign literature, both official and otherwise, was awash with statistics showing where the current growth was in the world, which emerging economies would be the powerhouses of the future, and how our share of exports with the rest of the world was increasing, whilst that into the EU was in decline. Trump sought to be elected in order to make trade with China as difficult as possible. We voted to leave the EU in order to make it easier.

This isolationism can be found elsewhere in Trump's policies too. The president-elect has described NATO as 'obsolete', and has suggested he would look at pulling the United States out of the agreement. Compare and contrast, once again, with the Leave campaign. On security, one of the main tenants of the Leave position was that the EU's expansionist policies, and plans for an EU army, threatened to undermine NATO. When Remain supporters suggested that peace in Europe since the second world war had been secured by the EU, leavers pointed out that this had much more to do with the North Atlantic alliance than Brussel's bureaucracy. A desire to ensure NATO is maintained as the strongest military alliance in the world, not weaken it exponentially by pulling out of the agreement, was a core part of the Leave position.

Even on immigration Trump and Brexit are worlds apart. Yes, there was a strong part of the leave campaign that wished to control immigration, but the key word there is control. No-one on the leave side advocated closing the borders completely, but rather sought to ensure that the level of immigration into the country was manageable. Moreover, in the wake of the referendum result, Leavers have been just as aghast as Remain supporters at May's refusal to guarantee the rights of EU citizens currently in the UK to remain here. How diametrically opposed is this to Trump's call to deport 11 million people and ban all Muslims from entering the United States? The equivalency is a spectacularly false one.

There is no doubt that both Brexit and Trump were unquestionably votes against the status quo. Both campaigns rightly tapped into an anger at the ruling orthodoxy that for too long had been ambivalent about the concerns of ordinary voters. But that, bar the occasional appearance of Nigel Farage, is all the two events have in common. Trump is a bigoted isolationist, advocating the very worst forms of protectionism. Brexit on the other hand, was always about looking beyond the parochial borders of the EU, and engaging fully with the world, pursuing a free trading, global agenda, working constructively with our friends and allies, both in Europe and beyond. Far from Brexit plus plus plus, Trump is Brexit minus minus minus.

Wednesday, 9 November 2016

Dear Democrats, by all means denounce Trump, but respect his voters.

In the wake of the UK's referendum on EU membership, one would be forgiven, reading Facebook and Twitter, for thinking that the sky had fallen in. The outpouring of grief was spectacular, and what was most disconcerting was the way Leave voters were labelled by those who had not gotten the desired outcome.

Stupid, ignorant, racist, backwards, bigoted... all characteristics assumed by Remain supporters to be possessed by those who disagreed with them. Whilst no-one is suggesting there wasn't a minority element who did indeed vote to Leave the EU for those reasons, the overwhelming majority voted to leave because of concerns about sovereignty and democracy, and to embrace a more outward, globally free trading Britain than the protectionist EU would allow.

It was incredibly disheartening to see vocal Remainers lump in the vast majority of Leave voters with the few bigots who happened to vote in the same way.

And so, this morning, against all expectations, Donald Trump has been elected President of the United States. There is no denying he is thoroughly unsuitable for the job. A megalomaniacal, misogynistic, vacuous human being. But I would implore my American friends, and indeed everyone else, not to assume that the majority of your country is as bigoted as your president.

There will of course be some voters who opted for Trump because they are racist. But not all. There will be some who opted for Trump because they are misogynistic. But not all. There will be some who opted for Trump because they are ignorant. But not all.

Do not despair and denounce your fellow countrymen who may not have voted the same way as you. Whilst I'm of the opinion that she would have been the lesser of two evils (though Gary Johnson would have gotten my vote), there's no denying that Hillary had some spectacular shortcomings of her own. The fact that both of these candidates were far from ideal is reflected in the lowest vote turnout since 2000, with 18 million fewer people going to the polls than in 2012.

Trump's election is ultimately a rejection of business as usual. It's a shame that that message could not have been attached to a more pleasant individual, but that is the message nonetheless. So I urge you not to chastise, belittle and condescend those that voted against you. Don't assume that just because someone voted for Trump that they themselves are as backwards as the man himself.

In your visceral reaction to the election result, don't lose sight of the fact that the overwhelming majority of people are good, kind, and tolerant, regardless of whose name they might put a check mark next to. Alienating and belittling those who vote a different way to you only further entrenches division. The American Republic is designed so that it's democratic institutions act as a check on it's Commander in Chief. Work with your fellow countrymen, and practice the tolerance and humanity you preach.

Thursday, 3 November 2016

MPs should vote on Article 50, provided they represent their constituents

This piece also appeared on United Politics and Conservatives for Liberty.

Today's supreme court ruling that the government can't use royal prerogative to invoke Article 50 and instead must put it to parliament has, by and large, been met with consternation from Brexiteers. Given the outpouring since the result from Remain supporters for the result to be ignored or overturned, one can understand why Leavers are worried about this recent development.

There has been a worrying display of anti-democratic sentiment since June 23rd. From petitions calling for a second referendum, to public protests (neither of these garnering anything like enough numbers to match the 17.4m who voted to leave mind you), to outright defiance from MPs such as David Lammy, calling for the biggest vote for any one thing in British history to be ignored by those in power.

That said, the judgement this morning has been met with rather more hysteria from Brexiters than is warranted. Farage has donned the tin-foil head gear, claiming he fears 'a betrayal may be at hand', and the likes of Leave.EU are equally unhinged, with founder and UKIP financier Arron Banks stating "Why wouldn't unelected judges want to preserve an EU system where unelected elites like themselves are all-powerful?"

It's really quite spectacularly hysterical. Those 'unelected judges', as they've also been dubbed by David Davis, weren't upholding the EU system, but rather British constitutional democracy. Sure, it would've been nice if we'd had more of that when powers were being handed over to the EU in the first place, but it's good to see it's finally kicking in. The judgement today has not subverted democracy, overturned the referendum result, or said that we can't leave the EU.

The result means that MPs will vote on triggering Article 50. Or to put it another way, our elected representatives will be required to act out the will of the people. This, more than anything else, is precisely what Leavers voted to Leave for. I find myself siding with the remainer school of thought that it's ironic that those that campaigned for parliamentary sovereignty are apoplectic about a UK court ruling that parliament will be sovereign on this issue.

What’s more, the ruling means that government cannot and should not try to change domestic law without Parliamentary approval. This is a good and sensible conclusion, and one pointed out by Vote Leave’s Dominic Cummings. Those of us that saw Brexit as a step towards returning powers to the individual rather than a ruling elite should welcome the ruling. It allows us to keep our legislators in check via our elected representatives.

Now, there are of course an overwhelming majority of MPs who were in favour of Remain. But that doesn't mean that they will all be ignoring the referendum result, even if a few noisy ones wish to do exactly that. Former Conservative Party chairman Grant Shapps tweeted to say that, although he backed Remain, he wont be voting to frustrate the will of the British people or his constituents. Jeremy Corbyn too has reiterated that Labour respect the result of the referendum. It's likely both parties will whip in favour of triggering Article 50.

I have another proposal though. Each MP should do precisely what they were elected to do and represent their constituents. Any MP whose constituency voted to Remain in the EU should be given free reign to vote against triggering Article 50. But those MPs whose constituents voted to Leave the EU should acknowledge the instruction given to them by those who elected them, and vote in favour of the motion.

Unfortunately, the referendum result wasn't broken down according to Parliamentary constituency, but by local authority area. However some work has been done to extrapolate these results to parliamentary level, finding that of 574 English and Welsh constituencies, 421 probably voted to leave, and of those, 270 definitely did. Conversely, 152 voted to remain, with half (76) almost definitely voting to remain, The result hasn't been converted for Scotland, but let's throw Nicola Sturgeon a bone and suggest that all of Scotland's 59 constituencies voted to Remain. Thus, if MPs vote how their constituents did, as they should in a representative democracy, Article 50 gets triggered by a vote of 421 to 211.

Remainers get to be properly represented in parliament, Leavers get Article 50 triggered, and it's all done by a sovereign UK parliament according to British constitution. Sounds good to me.