Monday, 27 February 2017

Taking control

One of the arguments regularly used by independentistas who prefer not to talk about it is that the economic situation of Wales is too bad to allow independence at this stage.  It’s an argument that I understand, but I have never understood why, even if it were true, it means that the case in principle shouldn’t even be put.  Failure to make the case at all – even as a context for deciding which economic changes are required and in what timescale – looks more like electoral expedience than principled position.  It also gives the impression that we need ‘someone else’ to fix things for us first; and actually, that is a greater argument against independence than Wales’ undoubted economic problems.  A nation which needs ‘someone else’ to fix things for them doesn’t sound like a nation ready to take responsibility for its own affairs.
In any event, I’m far from convinced that our problems are as serious as they’re made out to be by a political class which actually seems to enjoy being in a state of dependence.  I’ve pointed out previously that on the most commonly accepted measure of prosperity, GDP per head, Wales is in fact one of the world’s richer nations.  And we are above the average for member states of the EU.  If those other countries can be successful member states, what stops Wales emulating them?  Why are we so ready to use only one single comparator – England – rather than taking a wider view?  It’s as though we’re so dazzled by our nearest neighbours that we’ve fallen into their habit of believing that the civilized world ends at Dover.
Would we need to make changes in order to cope with becoming an independent state?  Yes, of course we would; indeed, that’s the whole point.  And since even a positive vote for independence tomorrow would still lead to a transitional period before independence actually happened, the government of Wales would have time during that period to start that process.  Add to that the fact that there isn’t going to be a vote tomorrow – and since it appears unlikely that any party will even enter the 2021 Assembly elections with a promise to hold a vote, let alone win those elections and implement that promise, we can probably rule out a vote for at least ten years. 
I find it impossible to believe that any country with our level of GDP per head could not prepare itself adequately to take control of its own affairs in that timescale; and any political movement serious about achieving that aim would be setting out a route map towards that goal.  It isn’t a soft option; far from it.  It is a lot easier to whinge about other people letting us down than it is to take responsibility for putting things right ourselves.  But if that’s the best we can manage, then perhaps we really aren’t ready even to consider the idea.

Friday, 24 February 2017

Double-edged swords

One of the arguments often used by opponents of membership of the EU is that the UK could compete more successfully in the world if it was not subject to EU rules on issues such as employment law.  Flexibility in the field of employment, runs the argument, makes it easier to attract inward investment. 
Despite the harmonisation which has taken place, there are still differences in employment law even now; the UK labour market is more flexible than the labour market in say Germany or France.  Whether that’s a good thing or not is a matter of opinion, but I’ll accept that, when it comes to attracting inward investment, perceived flexibility is more advantageous than perceived inflexibility.  It’s a double-edged sword, though.  That which makes it easier to attract some types of investment also makes it easier for the same companies to disinvest. 
One very current real example is the proposed take-over of the European arm of General Motors by the parent company of Citroen and Peugeot.  It is likely to lead to a degree of rationalisation as the various parts of the company are brought together – and that may lead to redundancies or even plant closures.  For political reasons, they may not be immediate, but over the longer term, they are highly likely.  Faced with a choice of closing plants in Germany or the UK, which are most likely to close?  Well, one of the results of the UK’s much-vaunted ‘flexibility’ in the labour market is that it’s actually much easier and cheaper to sack workers here than it is to sack them in Germany.
More generally, whilst Germany has not been immune to the trend which has seen manufacturing jobs move overseas, it has been less badly impacted than the UK.  Whilst it would be a mistake to attribute the whole of this to a single factor, the relative ease with which manufacturing plants can be closed in the UK is undoubtedly one of the factors underlying that difference.
It would be over-simplistic to argue that continued membership of the EU per se is enough to provide job security for UK workers, although it is one of a number of cases where further harmonisation of rules across Europe would help.  But there is, after all, nothing to prevent a UK free of so-called ‘Brussels interference’ from implementing its own rules to protect UK jobs.  But it would be naïve to believe that that is the how the Brexiteers intend to operate their new-found ‘freedom’ to make our own rules.  Creation of an offshore tax haven has more to do with removing workers’ rights than enhancing them. 
When they come to write future history, people will surely marvel at how easy it was to persuade those who stood to lose most from deregulation to support it so enthusiastically.

Thursday, 23 February 2017

Selecting people for visas

I’ve long thought that the whole idea of the “Commonwealth of Nations” is a concept which is outdated now, and was probably outdated at the time that it was conceived.  It has always seemed like an attempt to somehow cling on to the imperial past, pretending from the UK perspective that those countries conquered, ruled, and exploited by one European power in particular must, as a result of that process, look up in awe to the ‘motherland’, whilst hoping, from the other perspective, for some sort of favourable treatment from the former colonists.
But ‘breaking ties with the commonwealth’ was one of the issues in the 1975 referendum on membership of the EEC, so it probably shouldn’t be a surprise that renewing and strengthening those ties would be an issue arising in the wake of the 2016 referendum, particularly for those with a yearning to dwell in the past.  It is in that context that 45 Tory MPs wrote to the Home Secretary just under a fortnight ago, advocating changes to visa rules for Commonwealth citizens.  The issue, it seems, is to be debated in parliament shortly.  (The report suggests 26th, but as far as I’m aware, parliament doesn’t hold debates on Sundays.)
As someone who supports the idea of free movement of people in principle, I welcome any moves to ease restrictions (although it would be better if the government would also give at least a passing thought to preparing for the consequences).  But restricting freedom of movement from Europe whilst loosening controls on those further afield seems bizarre to me.  Perhaps it doesn’t look the same to those who view the imperial past through rose-tinted spectacles.
I don’t know how broadly popular the idea of giving priority to the commonwealth will be; I’m afraid that I rather suspect that it depends on what image the word conjures up.  For me, it is of a widely dispersed territory most of the population of which lives in Africa or the sub-continent of India.  I wonder, though, whether for many the image is more one of ‘kith-and-kin’ in Canada, Australia, and New Zealand.  I’ll admit find it hard to believe that many of those who voted in the referendum thinking that they were going to put a stop to movement of people from the rest of the EU would really be delighted to see them replaced by more people from India or Pakistan.  Not for the first time, it suggests that immigration was merely an issue seized upon to achieve a result rather than a real concern for those leading the campaign.

Wednesday, 22 February 2017

Cunning subterfuge - or perhaps not

According to reports earlier this week, the UK Government is considering making aid payments to some of the poorer members of the EU, such as Poland, Hungary and the Baltic states in the hope that those countries will be more supportive of giving the UK a better deal over Brexit.  All of these independent countries are poorer than Wales of course which is why they're net recipients of EU funding.  But being independent states, they have more say than Wales does when it comes to the terms of Brexit.  Their votes count for more than anything Carwyn Jones says or does, and need to be bought.  Those who want to pursue this line are suggesting that the money should be diverted from the poorer countries in Asia and Africa where it is currently being spent as part of the overseas aid budget.
There is a ‘slight’ problem in that it would no longer count as foreign aid under OECD rules, so that the UK would then be failing to meet the international target of 0.7% of GDP, but I suppose that the Brexiteers would simply see that as another example of ‘taking back control’ from those foreign johnnies when it comes to spending ‘our’ money.  That seems to be the only obstacle that they perceive, but it isn’t the only one that strikes me.
Firstly, however such a proposal is dressed up, it’s a blatant piece of attempted bribery which in the commercial field would lead to politicians demanding an enquiry, a few rolled heads, and some lengthy terms of imprisonment.  I don't recall that bribery was one of those special 'British' values which the Prime Minister is always banging on about.  Perhaps it's one of those cases where some values are so obvious that they don't need to be spelled out.  It's also worthy of note, in passing at least, that one of the arguments of the Brexiteers was that we should opt out of being a net contributor to the EU, which can only mean ending those payments which find their way to the poorer parts of Europe.  I don't remember them saying that what they really meant was taking money away from even poorer countries in order to continue paying the poorer parts of Europe.

However the biggest problem that I foresee is that the politicians in the affected countries (and the rest of the EU) will be completely aware of what is being attempted.  Even if it weren’t being discussed in the media, any such move would be too obvious for them not to be.  But then, assuming that the other 27 members are stupid seems to be the basis of the UK’s whole negotiating position.  On the other hand, I suppose, they are foreigners after all…

Tuesday, 21 February 2017

Free - or Fair?

One of the mantras of the Brexiteers since the vote has been that we should negotiate ‘free trade’ deals with lots of other countries rather than restricting ourselves solely to those in the EU.  And one of their great hopes has been that there will be an early deal with the USA.  During his long and meandering ramble last week, Trump had something interesting to say about his approach to trade deals.  In his own (inimitable) words, he said this:
“Now look, fair trade.  Not free, fair.  If a country is taking advantage of us, not going to let that happen anymore.  Every country takes advantage of us almost.  I may be able to find a couple that don’t.  But for the most part, that would be a very tough job for me to do.”
It’s perfectly clear – well as clear as anything Trump says.  Whilst the UK government think they’re going to negotiate a free trade deal with the US, he is interested only in ‘fair’ trade.  He didn’t actually define what that means, but we can be sure that it isn’t what most of us mean when we think of the ‘FairTrade’ campaign.  I suspect that he means trade which has a favourable, or at least neutral, balance for the US.  On that criterion, the UK’s current trade surplus with the US amounts to “taking advantage” and his objective will be to end that.  I can certainly see why that would be in the interest of the US, but why would anyone think that it’s in the interest of the UK?
But then, I don’t think that the UK government has ever been concerned about the detail; they just want a deal, any deal, to show what ‘global Britain’ can achieve.  From that perspective, the existence of a deal with the US is more important than its content, however harmful the latter may be.

Monday, 20 February 2017

The Blair quandary

I agree with much of what Blair said last week – and there’s a sentence I never expected to write.  The response from the committed Brexiteers was entirely predictable, but he is right to say that in a democracy, people opposed to a decision, even one taken democratically, have every right to seek to change that decision, and to persuade others that they too should support a reconsideration of the question.
Given their professed great love for freedom and democracy, why are Brexiteers are so insistent in their demands that this one decision, uniquely, is something that can never ever be revisited?  I can only assume that it’s their fear of a different result.  I suspect that I’m not alone in thinking that one of the reasons that so many of them are keen on a quick exit and hang the consequences is that the longer the situation drags on the more obvious it will be that the outcome is not going to be the land of milk and honey that they promised us; and their real reasons for wanting Brexit had little to do with the promises which they made.
If the referendum decision had gone the other way, does anyone really believe that Duncan Smith, Farage and their ilk would have said “Oh well, that’s it then” and gone away to do something even less productive?  No, of course not – and it would be their right to continue making the case.  (In the same way, closer to home, those people opposed to the existence of the National Assembly – and indeed, in some cases, even to the existence of the Welsh nation itself – have every right to continue to campaign for its abolition.  I hope they fail, but I accept that the decision that Wales should become a political nation isn’t a once-and-for-ever decision; it’s something that we need to re-affirm continually.)
If, in either case – or indeed on any other issue – clear evidence emerges that public opinion has changed, then there is always a case for revisiting a decision.  And campaigning to bring about a change of opinion is a wholly legitimate form of political activity.  Blair wasn’t doing much more than making that simple point.  Merely asking for a second referendum with no evidence of a significant and sustained opinion shift seems to me to be futile; but working to bring about that shift is another matter entirely. 
On that point, it was obvious that Blair was deliberately avoiding the question of a second referendum - perhaps unwisely because it gave the impression that he believed the decision could somehow be changed without further reference to a democratic vote.  Whilst I too might prefer not to have referendums which reduce complex questions to a simple binary choice, in the case of Brexit that’s already been done and it is hard to see how those who voted to leave would consider a decision to remain after all to be legitimate without another vote.
Having said all of that, there is a problem with the personage of Blair.  I don’t understand how the man who took the UK to war in Iraq on the basis of an outright lie about weapons of mass destruction could stand there with a straight face and accuse the Brexiteers of having lied to get the result they wanted.  Pot, kettle, black – could he really not see the way that was going to be interpreted?  He has a serious credibility problem as a leader of any campaign given his history.
There is a ‘however’ to that, as well, though.  Given that the only debate which any of our mainstream politicians are prepared to engage in is about the nature of Brexit, who else is speaking out?  Most of the MPs who told us during the referendum campaign that Brexit would be a huge mistake for the UK have subsequently trooped through the division lobbies of the House of Commons in support of that which they told us would be a disaster.  And here in Wales, of the four party groups represented in the Assembly two are committed to full-on Brexit and the other two have decided to restrict themselves to whingeing about the detail.
So, this for me is the quandary.  For all my doubts about Blair as a leader of anything, who else is stepping up to the plate?  Is he really so toxic that it’s better to have no-one making the case than for him to do so?

Friday, 17 February 2017

Tax and migration

This story on ClickonWales yesterday did not provide a link to the report which formed the basis for it.  But it looks to me like the same report that I posted on last October.  And the detail is replete with all the occurrences of ‘may’, ‘could’, and ‘might’ that I noted at the time, all of which make it very non-robust as a basis for taking decisions on taxation.
One of the basic premises is that we can extrapolate the tendency of a difference in council tax rates to cause people to migrate between council areas to deduce the likely tendency of people to migrate between areas where different income tax regimes operate.  It requires some complex calculations about the differential impact of different taxes on a household, but in principle that premise seems to me to be reasonable.  However, it clearly requires a good understanding of the extent to which people move between council areas in response to different rates of council tax.  And their conclusions on that point seem to me to be a good deal less robust.
As I understand the methodology here, they’ve analysed large numbers of movements between different council areas, attempted to eliminate those which are due to other reasons which can be identified, and attributed the net remaining migration to the difference in council tax.  Have I oversimplified?  Yes, of course – but I believe that I’ve captured the essence of the approach.  For the purposes of academic research, it’s an entirely valid approach; without asking people why they chose to move, the reasons for that behaviour can only be deduced.  The problem is that such an approach does not provide hard evidence that all that migration was actually driven by council tax differentials.  I’d go further – it doesn’t provide hard evidence that any of the migration was actually driven by tax differentials.
Much of theoretical economics seems to be based on an assumption that human decisions are driven first and foremost by the perceived economic interests of those making them; that man is essentially an economic animal.  For the purposes of analysis and academic research, it’s a reasonable starting point, and it can produce some interesting results and hypotheses.  But one of the reasons why theoretical economics does not always accurately predict what actual people will do is that real living people take decisions based on a whole range of factors, not all of which are down to money.
I wouldn’t argue that ‘nobody’ will ever decide where to live based on the taxation regimes in operation.  Quite the reverse; we know that some very wealthy people choose to live in tax havens in order to maximise their own wealth.  But I suspect that the number is much more limited than a simple – or even a complex – economic model would predict.  One of the reasons for that is that single tax changes rarely apply in isolation; another is that what you get for your taxation varies as well.  So, whilst a lower income tax regime might attract some, a higher council tax regime in the same place, or a lower level of services supplied because of the lower tax revenues of the government, might offset that.
No doubt some will respond along the lines of, “yes, but what about the Laffer curve under which there comes a point where higher taxes become counter-productive and generate lower rather than higher revenue as the higher taxed seek ways to avoid paying their taxes.  The problem is that although the theory is clear and makes intuitive sense, hard evidence that it applies in practice is much harder to come by.  Academic theory isn’t always backed up by the actual behaviour of real people – some of the reasons for that have been touched on above.
The problem isn’t with the research and analysis itself; it’s useful and interesting in its own right.  No, the problem is when people attempt to use this sort of research as a justification for a particular tax regime which just happens to match their own ideological perspective.  In this case, it’s already been used by the Tories to justify their own predilection for low taxes.  And the article on ClickonWales sought to use it to justify opposition to further tax devolution.
There’s nothing wrong with arguing for low taxes as such, or even for a common taxation regime across different jurisdictions (although I wouldn’t agree); the problem comes when people start to argue that they don’t need to cut spending to pay for lower taxes because lower taxes will actually increase rather than reduce government revenue, or that differentials in tax rates will directly lead to migration, because the evidence offered in support of those positions is theoretical rather than based on hard facts.  We should always be wary of anyone offering us what looks like a free lunch.  And tax cuts with no matching spending cuts look a lot like a free lunch to me.

Thursday, 16 February 2017

Apologies and short memories

I’m not a fan of the current tendency for politicians to continually demand that other politicians apologise for anything and everything.  It makes for easy headlines, and it’s easier than putting problems right, but it’s all a bit pathetic really.  The latest example is the leader of the Tory Assembly group demanding that all of those who predicted economic collapse after Brexit should apologise because their predictions haven’t come true.
As it happens, I agree with him that many of the predictions were over-egged.  Worse, they failed to make any distinctions over timescales, and specifically, between what would happen after the vote, what would happen between the vote and actual exit from the EU, what would happen immediately after Brexit, and what would happen in the long term.  Whether the claims were more or less misleading than the statement of those promising a non-existent £350 million a week for the NHS is a moot point.  Two wrongs don’t make a right, and arguing over which side told the biggest lies seems to me almost as pointless as arguing over who should give the biggest apology.
But for what it’s worth, I understood (and I'm sure that many others did as well) most of the predictions to be referring to what would happen after Brexit, rather than what would happen immediately after the vote, and from that perspective what Davies seems not to be recognising here, in his desire for a quick headline, is that Brexit hasn’t actually happened yet.  That’s a pretty good ‘get-out-of-jail’ card for anyone who predicted disaster post-Brexit, quite apart from making Davies just look plain silly.  He’s probably hoping that two years is such a long time that, when the inevitable effects of Brexit do kick in, the voters will all have forgotten the detail and will blame something else.  I wish I could believe that that hope was as silly as his demand for an apology, not least because the likeliest outcome seems to be that many will simply think that Brexit wasn't Brexity enough, and didn't do enough to deal with those immigrants who apparently cause all our problems...

Wednesday, 15 February 2017

Who really benefits?

In yesterday’s post, I referred in passing to mathematically-challenged individuals who struggle to understand the difference between something which affects the average person and something which affects all people.  The context was assessing economic success, but that isn’t the only example that I can think of.  One which comes up regularly is the comparison of school spending per head between England and Wales.  It’s true that the ‘average’ gap is around £600 per head, but that gap is regularly misrepresented as meaning that all Welsh pupils are suffering because the expenditure on them is £600 less than it would be in England.
This story (which has appeared in a variety of publications in one form or another) shows another example of the same problem.  It is certainly true that, as people born in the ‘baby boom’ years (including myself, of course) reach retirement age, they are finding themselves better off, on average (that word again), than pensioners have ever been before.  And it seems that that means that the average (or more accurately in this case, ‘median’, which is not the same thing although the principle is much the same) pensioner income, after housing costs are stripped out (a far from insignificant adjustment, as the BBC Reality Check team notes, which appears to be being made in order to reach the desired conclusion) can outstrip that of working people.  That in turn has led to some people calling for either increased taxation on pensioners, or at the least, an end to the ‘triple lock’ basis for increasing pensions each year.
But ‘average’ and ‘median’ are not the same as ‘all’.  Whilst many newly-retiring people in the relevant age groups do indeed receive occupational pensions as well as the state pension, that isn’t true for all pensioners.  There are still plenty, even amongst those retiring now, for whom the state pension will be their only, or main, source of income post retirement.  And there are many still-living pensioners born before the relevant period who are still wholly dependent on their state pension.  Using an ‘average’ or a ‘median’ for the population as a whole in deciding the future of the triple lock would disproportionately impact those groups most dependent on the state pension.  It’s a poor basis for decision.  (And, as an aside, it’s also worth remembering that, because of the power of compounding over the long term, the chief beneficiaries of the triple lock aren’t today’s pensioners, but those who are yet to retire in the future – the very people who are being encouraged to oppose it.)
The organisation producing the latest report, the Resolution Foundation, describes itself as “a non-partisan and award-winning think-tank that works to improve the living standards of those in Britain on low to middle incomes”.  It’s a worthy aim in principle, but I wonder whether how genuine they are in that objective.  To me, an attempt to achieve that aim by reducing the rate of increase in the state pension looks like shifting income around between two groups of people in the low and middle income group, whilst ignoring the huge disparity between both of those groups, on the one hand, and the group with the highest incomes (regardless of age) on the other.  Whose interests are really served by encouraging low and middle earners in employment to think that their problem is caused by the share of income going to low and middle income pensioners rather than by the share going to the very rich?

Tuesday, 14 February 2017

Turbo-charged hyperbole

The gist of this story yesterday seems to be that if the UK Prime Minister continues to pursue the only realistic option for Brexit rather than attempt the impossible sort which the Brexiteers actually promised, then Plaid might have to start talking about independence for Wales.  The implicit corollary is that if she caves in and asks for the impossible instead, then Plaid will continue not talking about the question of independence.  Mrs May must be quaking in her (probably very expensive) boots.  Or perhaps not.
But what really interested me was the claim by an anonymous spokesperson for the Conservatives in Wales that independence would be “a break from the most successful economic union in the history of the world”.  Even in the sphere of political hyperbole, “the most successful … in the history of the world” is quite some claim to be making.  I bet that the individual who came up with that one is quite proud of the phrase, and never gave a moment’s thought to its veracity or provability.
The first question is what they mean by ‘economic union’.  Perhaps they are defining it so narrowly that there are no suitable comparators.  In that case, the statement would be ‘true’, naturally; but it would also mean that the converse would be true, because in a field of one, the most successful would also be the least successful.  But let’s assume that they’re not depending on that type of sophistry, then with whom exactly are they drawing the comparison?
Well, there’s the EU itself, of course.  Many would see that as a pretty successful economic union, but the Tories obviously don’t, or they wouldn’t be so gleefully taking us out of it.  Then, of course, most European states were formed by ‘union’ between smaller entities.  Some unions were the result of agreements, others by judicious marriages, but mostly – just like the UK – the result of military conquest of some parts by others.  So Germany, France, Italy – from any objective perspective (difficult for Tories, of course, for whom exceptionalism is the norm) these are all economic unions in the same way as the UK.  Or how about the USA – that looks like an economic union to me as well.  Is the UK really more successful than all of those?
But hold on – their jingoism isn’t time-delimited; the comparison wasn’t just with current states, it was with the whole of human history.  So – more successful than the Roman Empire or Imperial China as well.  To say it’s a ‘sweeping’ claim is more than mere understatement.  Although I should put a caveat here – it is entirely possible that for the Tories, ‘history’ only started with the British Empire.
Next up, we have to ask what we mean by ‘successful’.  Normally, when people like the Tories start talking about the ‘success’ of the UK, they have at least half an eye to the fighting and winning of wars; it’s an essential part of their view of what makes the UK what it is.  But since they were referring on this occasion to ‘economic union’, I suppose we should restrict ourselves to considering economic success.  If we measure economic success through GDP per head (a reasonable measure), then the UK sits somewhere between 13th and 16th in the ranking tables (depending on which measure is used).  And not all of those countries ahead of it in the tables could be described as ‘unions’, although several can.  So, I suppose that had they said ‘one of the most successful in recent history’, they might have been closer to a truth of some sort, although it doesn’t have the same ring to it.  (And it does give them another problem as well in using this argument against independence for Wales - insofar as logic is of any concern to them, of course.  There may be few ‘unions’ above the UK in the table, but there are quite a few small independent states...)
And finally, we have to ask ourselves another, slightly more subtle, question – success for whom?  Even were they not facing the problems outlined above in justifying their statement, there is still the major problem that success for the whole is not at all the same thing as success for all the parts.  For all the ‘success’ that they claim for the ‘economic union’ which constitutes the UK, that success has not been equally shared.  It has accrued overwhelmingly to one part of the union, whilst other parts, and especially Wales in this context, have been left behind.  Confusing ‘average’ with ‘all’ is a regular problem for mathematically-challenged politicians, but in this case, as so often, the difference is a key part of the argument.
Taking the Tories’ claim at face value, the big question that they have completely failed to answer is this – if the UK is such a successful economic union, why does it appear such a failure from a Welsh perspective?  And the fact that they are unable or unwilling either to answer the question or to do anything about it underlines why taking control of our own affairs ought to be on the table (regardless of the nature of Brexit).