Wednesday, 18 January 2017

May's Brexit plan is ambitious if nothing else

This article originally appeared on United Politics on 17/01/2017

Well there’s no need to speculate any further, Britain will be leaving both the EU and the single market. Theresa May’s Lancaster House speech this afternoon, in which she set out the government’s plans for leaving the European Union, was ambitious if nothing else.

Eschewing the option of remaining party to the EEA agreement, May has stated that we will not be seeking continued membership of the single market. Instead, she aims to conclude a bespoke “comprehensive and ambitious free trade agreement” with the European Union, ending European Court of Justice jurisdiction, contributions to the EU budget, and controlling the number of migrants entering the country from europe.

The fact that all of these things can actually be achieved by remaining an EEA member apparently is of little consequence. The plan is to skip over an interim arrangement and go straight to the final deal. Given the EU’s historical lethargy in completing bespoke free trade arrangements, one has to wonder whether May has bitten off more than she can chew in pursuing one within a two year time period.

There are a vast range of areas that will need to be covered. Passporting rights for financial services, customs operations, mutual recognition agreements, government procurement, intellectual properties, dispute settlement, and so on and so on.

There is a mechanism within Article 50 for extending the two year negotiation period, but it requires the unanimous approval of all 27 remaining member states. And whilst we are admittedly not starting from scratch, the pursuit of a bespoke arrangement in such a timeframe is a big stretch.

May’s plan to avoid the cliff-edge is for a phased implementation of this deal. What exactly that means is anyone’s guess, but it would still seem to suggest that the deal itself will be concluded within two years. This does nothing to increase the distance between us and the rocks below.

Encouragingly though there was an acknowledgement that in order to fully grasp the opportunities that Brexit affords us, we need to be out of both the Common External Tariff and the Common Commercial Policy. It’s the first time we’ve heard a prominent politician actually acknowledge the difference between these areas of the European Union treaties and the customs union as it is widely interpreted. That level of detail will be essential in the negotiations.

Overall it was a rather emphatic speech. The tone of friendship and conciliation with Europe ran right throughout it, and the emphasis on leaving the EU not a being a rejection of our friends on the continent or the values we share with them was a welcome one.

Several times the PM used the word ‘partnership’ to describe her vision of our future relationship with the EU. Working with the EU as equals, rather than subordinates, is precisely what Brexiters want.

The emphasis on a global, outward looking Britain building relationships “with old friends and new allies alike” should finally lay to bed any notion that the Brexit vote was the UK retreating from the world, and May was keen to stress the UK’s historical internationalist outlook, and it’s racial and cultural diversity.

The emphasis on reconciliation was applied to the domestic arena too, with an assurance that powers reclaimed from Brussels wouldn’t stop at Westminster, but passed further down the chain to the devolved governments of the UK. Though there was a warning to Nicola Sturgeon in her emphasis on maintaining common trading standards across Britain that Scotland won’t be able to stay in the single market on it’s own, even if that were remotely possible.

May acknowledged that the referendum had been divisive, but the acknowledgement that Leave voters did so with their eyes open, accepting that there would be uncertain times ahead was a welcome change to the patronisation heaped on them by some in the remain camp.

Equally, Remainers will be pleased to hear that both houses of parliament will get a vote on the final Brexit deal. What happens should Parliament reject that deal though, is still unclear.

Ultimately, the speech will have pleased hard brexiters the most. Those leave voters who saw an interim EEA arrangement as the safest option will be a little concerned, and the assertion that ‘no deal is better than a bad deal’ is complete and utter nonsense. Relying on WTO arrangements only would be catastrophic.

The insistence that a good deal is in the best interests of both the UK and the EU, coupled with the themes of co-operation and friendship though, should mean that that is unlikely.

The indication that, were the EU to play hardball, the UK would position itself as the singapore of europe, with incredibly competitive tax rates was an interesting one. It is in fact, arguably something we should look to do anyway once we’ve left the EU, to really help us flourish at a global level.

Chancellor Philip Hammond, in an interview with German newspaper Die Welt this past week, suggested something similar. A Britain with competitive tax rates pursuing global trading arrangements and acting as a beacon of free trade is one many would like to see.

So it turns out brexit really does mean brexit. May’s speech was assured and statesmanlike, and her vision for Britain and it’s future relationship with the EU is admirable. Whether or not it’s achievable though, remains to be seen.

Monday, 16 January 2017

Corbyn's maximum wage cap exemplifies his ignorance

This article originally appeared on United Politics on 16/01/2017

Nobel prize winning economist Friedrich Von Hayek once famously remarked 'if socialists understood economics, they wouldn't be socialists', a point Jeremy Corbyn took it upon himself to demonstrate this week when calling for a maximum earnings cap.

During a media blitz ostensibly to 'relaunch' his opposition, he appeared on Radio 4's Today Programme, ostensibly to talk about Brexit and immigration. After taking almost the complete opposite position to what had been briefed on those issues the day before, he then made an offhand comment about imposing a maximum earnings cap in the name of equality.

"I would like there to be some kind of high earnings cap, quite honestly. I can't put a figure on it and I don't want to" he told Today. "I would to like to see a maximum earnings limit, quite honestly, because I think that would be a fairer thing to do."

Needless to say, this became the headline of the day, and dominated his subsequent media appearances. And for good reason too, a maximum earnings cap would have profound effects on our economy.

If you limit the amount people can earn, you immediately put a limit on their productivity. If there is no incentive to work beyond a certain point then people will cease to do so. Why would anyone currently earning £10m do the same work for £1m? They'll either do 10% of the work, or go elsewhere where their efforts are rewarded.

The argument seems to go that nobody is worth that sort of money. But that assertion is not backed up by reality. For example, Steve Jobs' death wiped $17.5bn off of Apple's share price. The value a competent CEO can add to a firm is why shareholders are happy to pay them such high sums.

This is a point seemingly lost on Corbyn. During an interview with Laura Kuenssberg on the BBC he referred to the lower levels of employees as "those that are actually doing the work" belying a belief that CEOs don't actually do all that much bar, well, smoking cigars and diving into swimming pools full of gold coins presumably.

Despite Corbyn's assertion that income inequality is running rampant, the statistics show otherwise. The crash of 2008 made us all poorer, but it also made us more equal. Data from the ONS shows that income inequality, far from being on the rise, is at it's lowest point in 30 years.

Regardless, his pursuit of egalitarianism within company ranks is, and I struggle to find a diplomatic way to put this, sheer idiocy. For example, he proclaimed his disgust at the high wages earned by CEOs compared to 'shopworkers' et al.

I'm sure many people have sampled the delights of retail work at some point in their lives, this writer included. But the idea that my 8 hours a day stacking shelves, ordering stock and serving customers required the same level of skill and attention to detail (or indeed the same level of giving a toss) as the CEO is ludicrous.

Moreover I'd wager you'd be hard pushed to find a shop worker who knows what their company bigwigs are paid, much less care. Their concern is for themselves and that they're being paid fairly for the work they carry out. If they feel that isn't the case, they seek employment elsewhere. Such is life.

But, as much of a cliche as it is, Corbyn's wage cap is the politics of envy encapsulated. This is not even a Robin Hood approach, where 'excess' earnings are redistributed. Just a straight up, 'no, you can't earn that much, it's not allowed.' It is spectacularly authoritarian, born out of the fallacy of the fixed pie.

Of course, if Corbyn actually means to confiscate any and all earnings above a certain level then we're now talking about an income tax level of 100%. The fact this is being suggested by the leader of the opposition on national radio and not by a pimply sixth former in a debating society shows just how devoid of serious thinking Labour have become.

Inequality doesn't matter. What does matter is overall poverty levels. If the poorest man is getting richer then it is of little consequence that the richest man gets richer still. In fact, some research suggests that growth occurs more readily when there is more inequality.

A rising tide lifts all ships, but Corbyn's approach would drain the ocean. A cap of the likes he advocates would see a mass exodus of talent, and thus tax revenue from this country. The public services, and public sector employees, who's funding and wages rely on those tax revenues would soon find themselves without income.

Not only would it strangle economic growth, it would also halt progress. Why would the tech wunderkind with a killer app bother to pursue the idea if the fruits of his labour and rewards for his ingenuity are destined to be disposed of by the state?

It is incredible that such an ill-conceived idea has been seriously suggested by a prominent UK political figure. It's closer to communism than socialism. The most surprising thing of all though, is that Corbyn can still surprise us with his ignorance.