Hard Brexit or Soft Brexit; What’s the Difference?

The media seem to be fixating on the question of a hard Brexit or soft Brexit. But how real is this apparent conflict?

The Conservative and Labour Parties accounted for around 83% of the popular vote at the last election and the polls suggest that public opinion remains at similar levels today. Both parties contain a majority of MPs that were on the side of “Remain” during the 2016 referendum; both parties accepted the result of the referendum; and both parties are now committed to leaving the EU in April 2019. So, one way or another, it seems likely to happen.

The essential difference between a hard and soft Brexit is whether we leave both the “Single Market” and the “Customs Union”. The hard Brexit outcome would mean leaving both; the soft Brexit outcome would mean remaining in both.

The single market requires the free movement from one EU member country to another of goods, people, services and capital (the four freedoms). It removes barriers to trade and harmonises or unifies national rules at EU level.

For the UK to remain in the single market, it would require either the EU to agree that the UK could dispense with the requirement for the free movement of people; or for the UK to agree to retain the free movement of people. Realistically, neither of these is going to happen. The free movement of people is one of the prime founding principles of the EU, which is bound by those principles. For the UK the free movement of people was one of the main reasons for the Brexit vote winning the referendum. So there is a complete impasse.

The customs union states that all trade in goods between EU countries must be free of customs duties and that member states must apply a common customs tariff for goods imported from outside the EU. For the UK to remain in the customs union would require either the EU to agree that the UK could negotiate it’s own trade agreements with countries outside the EU; or for the UK to accept that is couldn’t. Again, neither is going to happen. The EU has no incentive whatsoever to agree that the UK should be free to negotiate its own trade arrangements with countries outside the customs union. On the other hand, for the UK, the ability to negotiate its own trade agreements outside the customs union is essential, if it is to develop its international trade throughout the world. So, once again there is a complete impasse.

Whether we like it or not, the simple facts of life are that the choice we have is to remain in the EU, as we are now or leave the EU and this means leaving the single market and the customs union. Leaving the EU and remaining in the single market and customs union isn’t a realistic option. However, that doesn’t mean we can’t negotiate a non tariff trade agreement with the EU; and it doesn’t mean we’ll need to establish customs controls at borders because we already have them, as we’re not part of the Schengen Agreement. Although we will need to find a solution for the border between Ireland and Northern Ireland.

Realistically, the argument over a hard or soft Brexit is meaningless. The real argument is between those who support Brexit and those who oppose it. We live in a democracy and those who oppose Brexit have every right to do so and every right to campaign for their views to prevail. However, by campaigning for a so called soft Brexit, they are campaigning for something that can’t happen and undermining the government’s position in the process. They should be honest and campaign for NO Brexit. We must remember that we are still in the EU; so no Brexit means no change and that seems much more realistic than campaigning for a change that can never happen.

 

 

By Europe Divided

I’m a Baby Boomer, born in 1948 and, in my nearly seventy years of life, as a British subject, I can’t remember a time when our nation was so divided. The issue of Europe and our membership of the EU has pitted young against old, cosmopolitan against rural and region against region. It’s fractured families, friendships and communities; and has created monumental splits within both of our two largest political parties.

Many people are critical of the Cameron government’s decision to hold a referendum in the first place, accusing it of pandering to it’s right wing and hard core Brexiteers. But this is too simplistic because it ignores the considerable anti EU views that have existed within the wider British population, since we joined, what was then, the Common Market in 1973; but particularly since the Maastricht treaty of 1992, which projected the EU towards ever closer political union.

The emergence of UKIP has also been extremely influential. Whilst it has failed to gain a significant parliamentary presence, it has gathered a groundswell of support as a single issue political party.

The problem for the government of the day was that this groundswell has been growing rapidly and, as we now know, it hasn’t been coming from just traditional Tory voters, it has as much, if not more, support from within the ranks of traditional Labour voters. You could argue that Cameron was the unlucky Prime Minister, who happened to be in office when it all came to a head. But in truth, if Cameron hadn’t called the referendum, when he did, it would only have delayed it; and a future government, of whatever political persuasion, would have had its hand forced, within a comparatively short time.

This anti EU feeling isn’t unique to the UK. Many other European countries have a growing level of discontent with the EU. The UK is merely the first to bring that discontent to a head.

The EU has worked extremely well for some people in most member countries but it has not worked at all well for others and this is at the route of the problem. The EU bureaucracy and individual country Governments have ignored those people, for whom the EU hasn’t worked. Throughout Europe and North America, we have seen the rise of an intellectual liberal elite that has permeated the upper echelons of politics, public services, financial services and business and commerce. Overwhelming, these are decent people working incredibly hard in very difficult and challenging roles. They do a huge amount of good work, from which we all benefit enormously. However, they have become too detached from the wider populous and imbued with a certain arrogance that says, “we know better than you what is best for you; therefore, we don’t need to listen to you”. As a result huge swathes of people feel ignored, disenfranchised and powerless to do anything to put matters right.

The rise of Donald Trump in The US and the success of Jeremy Corbyn in the UK have happened because they are talking to the people that the establishment has ignored. It’s interesting that Trump is from the far right and Corbyn the far left. There have been all sorts of complex and convoluted reasons put forward for their success; but actually it’s very simple and they both know it. They offer hope to those, who feel disenfranchised and have no hope.

Based on past experience, it seems unlikely that either the far right or the far left are capable of delivering the kind of society that most of us want. Most of us in the western democracies gravitate from centre right to centre left. In the UK that could be described as One Nation Tories to Social Democrats. But the detachment of the Liberal Elite is creating fertile conditions for more extreme politics.

Getting back to the EU issue, we’re not in a good place at the moment. The divisions between us are creating an almost impossible position for any Government to resolve. This is probably the most serious threat to our nation since the second world war and, unless we start to come together and unite, the UK will enter a period of very serious decline. In principle, the UK could almost certainly look forward to a great future either inside or outside the EU. We are an industrious and innovative nation that has been a world leader for centuries because of our ability to adapt. But if we keep fighting between ourselves, there is only one outcome possible, namely serious national decline.

Given where we are, it seems inevitable that we will leave the EU. But there needs to be compromise. No one will get everything they want but we’ll all get some of the things we want.

It’s time for the silent majority from One Nation Tories to Social Democrats to make its collective voice heard and to unite so that we can achieve an outcome that enables our country to thrive.

The treat this nation faces, is the greatest since the second world war. In those far off days, my parent’s generation put aside their differences and united. Their fortitude and determination won through and secured a future for those of us alive today. We owe it to them and we owe it to our children and grandchildren to do the same now.

The current government may not be everyone’s choice. It may have lost the confidence of many of our people through its botched general election. But it is the government and it faces a massive challenge. We must put aside our differences and support it rather than continually undermining everything it tries to do. When Brexit is complete and our country is secure, we can return to our tribal politics just as my parents’ generation did in 1945. If we don’t do that, our future will be bleak, whoever holds the key to number 10.

 

 

Corbyn’s Car Crash

The current state of British politics is on a knife edge. The smaller parties have crashed and we’re back to the Conservatives and Labour with virtually 85% of the popular vote between them. Despite all the spin and jockeying for position, both parties gained a substantial number of votes at the recent election; and both gained a significant share of the vote, on a significantly higher turnout. But the idiosyncrasies of our electoral system have lead to a hung parliament. Theresa May’s gamble failed, despite her gaining many more votes. So where does all this lead us?

The Conservatives prime focus has been on deficit reduction and Brexit. But despite the need to eliminate the deficit and to address the problem of the spiraling national debt, people have become tired of public sector pay freezes, cuts to many of our public services and the failure to increase funding for health, social care and education in line with demand.

Whether we like it or not, the hard facts of life are that the only way we can address these financial challenges is to expand our economy at a faster rate than the rate at which we wish to expand public spending. Higher tax rates and more borrowing won’t work and will ultimately make the situation worse. Unfortunately, the Conservatives have turned out to be administrators, who are simply juggling the resources they’ve got. They lack any real vision for how this country can develop and grow; how our industry and commerce can become stronger and more successful in world markets and how we can punch above our weight in world affairs. Without a vision, they have no strategy. Furthermore, they have no passion, with which they can enthuse the British public. In this situation, it’s very difficult to see how a minority Conservative government can survive for a full five year term and it’s difficult to see how the result of the next election, whenever it comes, will be anything other than a majority Labour government. So what can we expect from Labour?

Labour has a vision; or at least Jeremy Corbyn has a vision. And there’s no doubt that he has enthused younger voters. He’s promising to end austerity and pump huge additional sums into the economy to increase funding for a whole range of public services. He’s also promising to nationalise the railways and public utilities, with the objective of achieving better services at lower costs to the public. All this will be funded through extra taxes on the rich and increased borrowing. It all sounds good and, in the absence of any competing vision from the Conservatives, it will win votes and probably get him into No 10. But what will happen then?

History tells us that these policies will not only not work but will make matters considerably worse. Nationalisation, in the post war period was a disaster. There is not a single example of a nationalised industry that was a success. They became moribund by bureaucracy. Governments interfered because they constantly sought political outcomes rather than outcomes that benefited customers. The entire management process become completely dysfunctional. Huge losses built up. Governments struggled to fund those losses and consequently cut capital investment. As a result the businesses concerned went into a long term decline. Some like ship building and steel virtually disappeared. Others like the railways were brought back to life through privatisation.

The tax and spend policies of the Attlee Governments from 1945 to 1951 and the Wilson Governments from 1964 to 1970 were equally disastrous. Even then, high rates of tax failed to provide the tax revenue that they were designed to achieve because people and organisations changed their behavior patterns. Borrowing went out of control; the pound was devalued, interest rates went up, inflation went up and economic growth stalled. This all culminated in James Callaghan’s Labour Government (1976 to 1979), having to take loans from the IMF and being forced to make the most drastic cuts in public spending that there have been this side of the second world war. It was a national humiliation and created huge hardship for many people.

I can well understand why younger generations might be attracted by Corbyn’s vision. They don’t remember the carnage and chaos that these policies caused between 1945 and 1976; and, in the absence of any vision from the Conservatives, they offer a welcome change from the austerity of the last nine years. However, before Jeremy Corbyn is given the chance to repeat the mistakes of the past, we urgently need a meaningful debate.

The Conservatives need to challenge Corbyn’s policies, pointing out the likely consequences, if they are implemented. This shouldn’t be in the form of personal attacks on Jeremy Corbyn; it should be a robust rebuttal of his policies, evidence based and delivered with passion. They should also be offering a realistic alternative that can bring real prosperity to everyone.

Labour, on the other hand, must explain why they believe that the policies they are proposing will work today, when similar policies between 1945 and 1976 were such a disaster. At the moment, their head of steam is largely as a result of the Conservatives offering no meaningful challenge and younger people being unaware of the risks that these policies present.

Personally, I think it’s probably too late. The Conservative party contains too many people, who believe in some sort of divine right to rule. They probably need a period in opposition to get rid of the dead wood and to reinvent themselves as a vibrant political force with a strong and exciting vision for the future. In the meantime, Corbyn is set to take us back to the austerity of the post war period. It’s a car crash waiting to happen.

 

 

 

Labour’s Manifesto of Madness

When the Labour Party’s draft manifesto was leaked last week, I hoped I was having a bad dream; but today’s publication of the real thing has has left me incredulous.

My concern is not about the policies. Depending on your point of view, they may or may not be very desirable. My despair is due to the Labour Party’s apparent lack of any real understanding of economics and finance.

Labour’s plan involves raising and extra £48 billions each year to fund £48 billions of extra spending.

Even with the help of the treasury, government spending forecasts invariably under state actual costs. Forecasts from opposition parties are even less realistic. So, Labour’s programme will almost certainly exceed it’s projected £48 billions, by a considerable margin.

On the income side, it will be impossible to raise the additional £48 billions of extra tax revenue. It doesn’t matter who Labour tax, what they tax or how they tax, nothing will raise that additional amount. There is a limit to how much tax can be taken out of any economy; and there is a threshold, beyond which higher taxation rates deliver less tax. The UK economy is on or around that threshold now.

Should Messrs Corbyn and McDonnell find themselves in numbers 10 and 11 Downing Street on the 9th June, the spending programme will no doubt begin. However, it will take a while before it becomes apparent that the additional tax revenue isn’t being generated and that the costs are escalating. By this time, our economy will be in very serious trouble and the austerity strategies of the last few years will pale into insignificance, compared with what will be needed, when  the Corbyn bubble bursts.

None of this includes the uncosted plans for Labour’s nationalisation programme, which they plan to fund through extra borrowing. This would add significantly to the national debt, which is currently heading towards £2 trillions and incurring annual interest charges that already exceed the entire defence budget. This manifesto is economic madness.

Many people will, of course, see through it. But many others, and particularly more vulnerable people, won’t. They’ll believe it and believe that their lives will improve because of it. But when the bubble bursts, it’s these same people, who will pay the biggest price.