Highlighting the difference

Some people are being jolly unfair to the government, mocking their obsession with the colour of the UK passport.  Of course it’s true that they could have changed the colour at any time, regardless of Brexit, but why did they need to?  After all, whilst the UK remains a member of the EU, passport holders enjoy the same rights as other EU citizens.  But now we’re leaving, and are going to ‘enjoy’ reduced rights of travel across the EU, there are practical considerations.  A different colour will assist passport authorities in the rest of the EU by drawing attention to those travellers who have fewer rights so that we can be monitored more closely.  That is what Farage and others wanted and are now celebrating, isn’t it?  The only problem I see is that dark blue isn’t really distinctive enough – why couldn’t they have chosen a nice bright fluorescent colour to make our possession of reduced rights even more obvious?

It's not over yet

The result of the elections in Catalunya is very similar to the result of the previous elections.  Pro-independence parties have a narrow majority of seats but a little less than 50% of the popular vote.  All other things being equal, the democratic outcome would be a government very similar to that which was deposed by the Spanish state which would lead to a return to the confrontation between the Spanish nationalists and the regional government over the status and degree of autonomy of the region.

All other things aren’t quite equal, though.  With some of those elected being currently incarcerated and others in exile (and likely to be jailed the minute they re-enter Catalonia), the Spanish nationalists may have a de facto majority – with 70 pro-independence members out of 135, it only needs a handful to be ‘unavailable to vote’ when or if the Catalan parliament is reconvened.  And unless the legal proceedings against former ministers are halted, the number of elected members imprisoned, in exile, or currently out on bail and likely to be imprisoned or disqualified at the end of those proceedings is a significant proportion of the total.

Common sense, a respect for democracy, and a desire to find a negotiated way forward would all suggest that the best approach would be for the Spanish government to ensure that all those elected to the parliament are free to take their seats and participate in discussions.  Unfortunately, none of those three characteristics immediately spring to mind when I look at the Spanish central government.  What I see are people who are determined to ‘win’ – by which I mean crush Catalan aspirations once and for all – and it’s far from certain that they won’t seek to hide behind ‘the rule of law’ and take advantage of the situation to install a government more to their liking.  In a parallel of sorts with the UK, when it comes to the question of independence, the Spanish equivalents of the Labour, Tory, and Lib Dem parties have far more in common than they like people to think.

Proving the wrong point by accident

That strange fellow Nathan Gill kindly sent me a leaflet through the post this week.  Well, I say ‘sent me’, but I’m guessing that ‘he’ has gone to the enormous expense of sending this to every household in Wales.  But more of that a little later.

The leaflet purports to tell us why the single market is a poor idea, and how we voted to leave it last June, but it’s packed full of statements which are, to say the least, ‘contentious’.  It would take too long to deal with all of them here, but I’ll pick on two in particular:

He tells us categorically that “The UK Government will match £3bn subsidies [for farmers] after Brexit.”  Really?  Has that been confirmed by the government yet?  Because I rather thought that the Leave campaign had told us that all the money we send to Brussels was going to be diverted to the NHS after Brexit.  Perhaps the lettering on the side of that infamous bus was just so small that I read it incorrectly.

“Both Leave and Remain said that leaving the EU meant leaving the Single Market.”  Now, if he’d said that campaigners (i.e. some campaigners, not all campaigners) on both sides of the debate had said that, then he’d be telling the truth, albeit not the whole truth.  But claiming in a blanket fashion that both campaigns said it is a long way from the truth, because I could point to campaigners (on both sides) who said the precise opposite.  I actually agree that leaving the EU whilst remaining in the single market isn’t really leaving (BINO, it’s now apparently being called by some: Brexit In Name Only) – it’s just not what many of them said at the time.

But anyway, back to the munificence of Mr Gill and ‘his’ funding of this little leaflet.  Although the UKIP logo appears at the bottom, the main logo on the leaflet is that of the EFDD group in the European Parliament.  And my guess is that it is that group, funded by the EU itself (out of our contributions), which has paid to send this missive to around 1.3 million households in Wales.  Still, in a rather curious way, I suppose that for the EU to fund a leaflet containing what is, shall we say, ‘misleading’ information about itself does in some small way support the UKIP critique of wasteful spending of the money which we pay in by some of the politicians in the EU parliament.  I’m sure that isn’t quite what Mr Gill intended to demonstrate though.

The fudge won't last forever

One of the things which guarantees that phase 2 of the Brexit talks will be even harder than phase 1 is the continuing failure of the Brexiteers to face up to the simple reality that their determination to scrap EU rules is what guarantees the imposition of a hard border somewhere, the only question being where.  This blog post sums up very simply the factors that lead to the requirement for a hard border, noting that:

There are essentially 3 reasons why customs borders exist:

1.    To impose tariffs and quotas;

2.    To confirm the imports’ countries of origin;

3.    To ensure compliance with regulations and standards.

A free trade agreement with the EU would only get us over the first of these. To avoid the second would require continued membership of the EU Customs Union (or the negotiation of something similar). To avoid the third we would need to stay in the European Economic Area and abide by the rules of the single market.

Whether because they don’t understand that very simple explanation, or because they’re being deliberately dishonest, the Brexiteers continue to insist that the EU27 will allow the free movement of goods and services across its boundaries from a country which no longer follows the same regulatory regime.  In their dreams, they fondly believe that they can scrap employees’ rights (such as the Working Time Directive), reduce environmental controls, scrap any EU rules that they don’t like, hand UK companies, as a result, a trading advantage in that they can produce goods and services with fewer constraints, and that the EU27 will simply allow a lower-regulation country to undercut their own companies on price.  Why?  Well, because they need us more than we need them, obviously.  And because the UK is very, very special.

Calling those who question the logic of all this traitors who are undermining the glorious charge into certain defeat may make them feel better, but it doesn’t alter the underlying logic, which is, at its simplest, that there is no way in which the EU27 are deliberately going to put their own businesses at a competitive disadvantage.  And that means, at its very simplest, that regulatory divergence mandates border controls.

The Brexit secretary talks blithely about Canada plus, plus, plus.  But Whilst the Canada agreement removes almost all tariffs and quotas, it does not do away with the need for customs controls for the other two reasons.  And as the EU’s website makes clear, “All imports from Canada have to meet EU rules and regulations on technical standards, consumer safety, environmental protection, animal or plant health and food safety (including rules on GMO's).”.  The goods sold by Canada to third parties (or in their own internal market) do not need to meet EU standards, but those sold to the EU do.  How many companies selling into the EU market from Canada will really decide to produce their products to two different regulatory regimes – that of the EU and that of Canada itself?  My guess is very few; most businesses will attempt to produce their products to a set of standards which meets the requirements of both regulatory regimes.  Exactly the same would be true for the UK.

It doesn’t matter how many pluses Davis adds to the word Canada, UK companies selling into the EU market will still need to meet all EU standards, as well as any different ones set by the UK government, and will therefore, in effect, see an increase, not a decrease, in regulatory requirements.  It is only those UK companies which either do not export at all, or which only export to less-regulated markets than the EU that will see any ‘benefit’ from regulatory divergence.  And that’s a rather smaller subset of the UK economy than the Brexiteers would have us believe.  And of course, as soon as the UK’s standards diverge, there would need to be border checks to ensure that only goods meeting EU standards and covered by the free trade agreement were crossing.  That in turn means that there is a basic, fundamental contradiction between the desire for regulatory divergence and the commitment to avoid a hard border across Ireland.

It’s a contradiction which they show no sign of even understanding let alone getting to grips with.  Some of them seem seriously to believe that the Irish Republic will shortly see the error of its ways, recognise the folly of independence, and beg to re-join Wales and Scotland under benign English dominance.  Others positively relish the thought of returning to what they see as the past glories of an island nation standing alone, based on a view of history which owes as little to fact as the case that they made for Brexit itself. 

(As an aside, every time they use the word ‘buccaneering spirit’ I find myself wondering if they really understand what the word means.  There may be a certain romanticism to murder, pillage and piracy – and licensed pirates are what buccaneers were – but trying to take whatever we want by force, deceit, and trickery doesn’t look like a particularly promising future for a middle-ranking European country in the 21^st century.)

I’ve argued before that the Brexiteers’ position makes little sense if Brexit is seen in isolation; it makes sense only as the first move in destroying the single market and the EU with it.  In that sense, their view of European diplomacy and the UK’s objectives in it have changed little over two centuries – sow division and make sure that no other country can achieve dominance.  The future is essentially unknowable, and they may even be proved right in time.  I have to say, though, that the evidence to date is not very supportive of that outcome.  So far they’ve managed to build more unity in the EU than we’ve ever seen before, and what they’ve sown in European minds to date looks more like bewilderment than division to me.

Differences between theory and practice

In recent days, the Welsh Government has been busily producing economic strategy documents.  Some of what they say is a welcome change, some rather less so.  The original idea of having specific target sectors for economic development was basically sound, but undermined by the peculiar Welsh insistence on leaving nobody out, which meant that all sectors were target sectors.  And, as the old saying goes, if you have more than two priorities, then effectively you have none.

The bigger problem than the content of the strategy however is whether any strategy is actually deliverable in practice.  The record is not good; fine-sounding words rarely get translated into effective action.  No doubt at least some of those in the Assembly would argue that it’s a question of powers – the Assembly / Welsh Government simply don’t have control over the main economic levers and their influence is therefore limited.  I agree with that, but if it’s true, then what exactly is the point of spending time and effort on producing strategies which you know you can’t implement?

The question of the extent of devolved powers isn’t the only issue though.  In theory, all those missing powers reside in Westminster, but the record of effectively setting an economic strategy isn’t much better.  The real powers over the economy don’t reside with government at all – in Cardiff or in London – they have been outsourced to the owners and managers of capital.  And unless governments are prepared to tackle that stranglehold of economic power, they will continue to have minimal influence on the real economy.

And there are those who even challenge whether the government should be making any attempt to spread prosperity more evenly.  This report suggests that if the goal is to improve productivity in the economy, then investment should be chanelled to those areas where the wealth already resides.  I don’t like the conclusions; such an approach leads to a concentration of investment and growth in some areas at the expense of others which simply provide the labour force and suffer the loss of young people stemming from that.  But if the objective is to improve the overall productivity of the country as a whole, and the overall average GDP per head, then I tend to agree that it’s the most effective strategy.

That is, though, a very big ‘if’.  For those of us who believe that the success of economic policy should be about more than overall averages, there is a trade-off here.  Increasing the average in this way might look like ‘success’, but it is success bought at the expense of increasing inequality and deliberate abandonment of more rural and far-flung areas.  The problem is that, for all the fine words from the Welsh government about strategies for spreading growth across Wales, their actions look more like implementing the approach laid out by the iea author – concentrating investment and growth in the south-east of Wales.  Actions speak louder than words.

Business and circuses

The early invitation by May for Trump to make a State Visit to the UK looked pretty silly at the time.  The more time passes, the more reason he gives people for demanding that it be cancelled.  If I thought that anything he said was thought out before he pressed finger to keyboard, I’d almost be tempted to suggest that it was entirely deliberate – he wants it to be cancelled.  Not only would that spare him the prospect of protests against his presence, it would also fuel his claim to be willing to stand up for America in the light of all criticism.

It seems unlikely that the invitation will actually be rescinded, though.  It’s more likely to sit behind the clock on the White House mantelpiece gathering dust in the vain hope that all concerned will simply forget about it.  The UK Government responds to every call for the visit to be cancelled with a resounding ‘no’.  Whether the messages being delivered privately by diplomats are any different is another question, but I doubt it for two reasons.  The first is that if any different message had been passed on quietly, Trump would surely have tweeted about it.  He struggles to keep quiet about anything, and certainly not any suggestion of a slight to himself.  And secondly, there is the long history of the UK according official state visits to a succession of tyrants, dictators, and crooks.

There are reasons aplenty to withdraw Trump’s invite; I don’t think I even need to spell them out.  But can it really be said that he is a less worthy invitee than many of those already on the list?  Turning the issue into a question of whether or not one person should come is to avoid the real underlying issue, which is the willingness of the UK state to welcome all manner of undesirables to these shores in the hope of economic advantage, lavishing them with honour in the process.  The best way to stop Trump’s visit is to abolish the whole business of state visits, which are anachronistic and irrelevant, a throwback to a Ruritanian past.

Economically and politically, we have little choice but to deal with the world as it is, and that sometimes means dealing with some very unpleasant people whose values few of us share.  But we don’t have to fete them in the process.

Progress?

Today’s news about an apparent ‘breakthrough’ in talks over Brexit is better than many of us had expected, although whether it’s much more than a form of words to enable the next stage to commence remains to be seen.  The wording looks like a bit of a fudge; something which can be interpreted in more than one way in order to satisfy multiple audiences, but which will need to become a lot clearer than that over the coming months.

The statement that "the UK will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all island economy and the protection of the 1998 Agreement” seems to avoid both a hard border across Ireland and the imposition of a hard border in the middle of the Irish Sea, but the devil will be lurking, as ever, in the detail.  How will they determine which areas of ‘alignment’ are the ones which support ‘North-South co-operation’, for instance? 

There was talk, in advance, of effectively remaining in the single market for some sectors but not others, but regulating that produces immense challenges.  It could mean, for example, that lorries containing agricultural produce will flow freely but those containing widgets won’t.  It doesn’t take a genius to work out that the implication of that is that those claiming to be carrying meat might just need to be checked to make sure that there are no hidden widgets – which brings us straight back to the hard border issue.  The simple, practical, cheap, and effective way of determining in which areas alignment should be maintained is not to bother – this agreement looks to me like the first step towards tearing up another of the government’s red lines and remaining in the single market.  It’ll take a few more months of drama and crisis to reach that point, though.

I thought that yesterday’s remarks by the Chancellor, that any suggestion Britain might walk away from talks without paying off its obligations to the EU was “not a credible scenario.  That is not the kind of country we are.  Frankly, it would not make us a credible partner for future international agreements” was one of his more sensible pronouncements.  The fact that he was so roundly ‘corrected’ by Number 10 within hours by a spokesperson for the Prime Minister saying that honouring our debts was “dependent on us forging that deep and special future relationship” makes it clear that reality is dawning on May only slowly, and only one step at a time.

The end state – something which the Cabinet have not even felt it necessary to discuss yet, apparently, probably because thy know that they won’t agree – looks increasingly like being membership of the single market and customs union, no independently-negotiated trade deals, a continuing role for the European Court of Justice, continuing payments to the EU’s funds, and acceptance of EU rules with no input to their drafting.  Brexit means anything but Brexit.  No wonder the Brexit ideologues are getting increasingly restless.

Blaming the 'marginalised'

The offensiveness and insensitivity of the remarks made by the Chancellor to the Treasury Select Committee yesterday mean that an important point about the way in which productivity is measured and its importance to the economy is in danger of being lost in a barrage of wholly justified criticism of Hammond’s choice of words.  Describing the disabled as a marginal group in society was an open invitation for the attacks to concentrate on the man rather than the message.

Productivity is a simple enough concept at the level of any individual enterprise – it’s a mathematical calculation of output divided by input, or in practice the value of the goods or services produced divided by the number of hours worked by employees to produce that output.  That doesn’t necessarily match what many might think of though.  Certainly it means that ‘productivity’ can be increased if the same output can be produced with half the workforce; but it also means that ‘productivity’ can be increased by simply upping the price of the product, as long as the labour costs remain the same.  But does that really mean (in terms that most of us can relate to) that the workers have suddenly become more productive?

Using the same measure scaled up for the economy as a whole brings other problems.  Dividing the GDP of the UK by the number of hours worked by all employees of all organisations certainly provides a ready measure of something, and if all countries are measured in the same way, it provides a handy basis for comparison.  But it does also mean that an economy which adds lots of jobs at low pay rates for small increases in overall GDP will appear to be losing productivity compared to other economies which do not follow that path.  It doesn’t matter that the overall GDP of the country has increased, whether measured in absolute terms or in terms of GDP per head. 

On this measure, it doesn’t matter that there are more people in work and fewer on benefits; a measure of productivity per hour worked will react in the ‘wrong’ way to an increase in employment in jobs which only add marginally to overall GDP.  Note that – and this is why the Chancellor was so wrong in the way he made his remarks – it doesn’t matter who the people doing those jobs are; it’s not that the people doing the work are in marginal groups, it’s the low-paid low-output nature of the jobs which are being created which is the problem. 

More important still is how we respond to the situation.  If productivity as currently measured is the prime driver, then it could actually be improved by closing down marginal enterprises, and cutting the numbers employed in the less marginal enterprises.  Total GDP would fall, and GDP per head in the economy would fall, but ‘productivity’ would apparently increase.  That merely underlines the fact that ‘productivity’ as currently measured is a poor tool for judging overall economic success.  None of that means that the low level of productivity in the UK economy compared to others isn’t a problem.  It means, rather, that we need to look at what else can be done to improve the situation, rather than blaming marginal groups or even marginal enterprises.  It's a question about what sort of economy we want.

We could start by looking at the performance of those companies which are sitting on large sums of cash rather then investing them.  I’m sure that some of them would argue that the uncertainty caused by Brexit is a reason to hold back on investment.  They’d be right up to a point – but this is a phenomenon which long preceded Brexit.  It’s a failure of capitalism to serve the needs of the community as a whole rather than the greed of the few.  But it’s much easier for a Tory Chancellor to blame those he regards as ‘marginal’ than to look a lot closer to home.

Border myopia

I don’t really expect ministers of the Crown to understand the entirety of their briefs; that would be too much for people who are generally little more than political figureheads.  So the fact that one former Northern Ireland Secretary, Owen Patterson, managed to get his figures wrong in relation to cross-border trade is probably just the result of him being a ‘former’ minister and no longer having civil servants loyally hanging around ready to ‘clarify’ what he really meant.  The point that he was trying to make, as I understood it, was that because trade levels are so low, the existence of – or nature of – a border really isn’t that important.

Much more worrying than his lack of grasp of the figures is that a spell in the Northern Ireland office has done nothing to open his eyes to the fact that borders are about more than trade and economics.  There are few borders, anywhere in the world, which are as highly charged as that on the island of Ireland, and the fact that he still thinks it’s all about trade shows the power of a financial-based ideology to blind its holders to all other factors.

It does, though, provide a good insight into all that’s gone wrong with the Brexit process and negotiations from the outset.  Other borders within Europe may not be as sensitive as that between the Republic and the North, but the continental approach to borders and the European project has always been imbued with a significance which goes well beyond trade and economics.  The UK position, on the other hand, has always been driven by the ideologues who see humans as little more than economic animals, driven solely by pursuit of their own best financial interest, at the expense of others whenever necessary.

It is the same blindness to the non-economic factors which led the Brexiteers to tell us that German carmakers, backed up by Italian Prosecco producers, would force Merkel and the others to give us a better deal outside the EU than we get inside.  It was that attitude which led to talk of the deal being the “easiest in human history” (© Liam Fox).  And it was that attitude which led to the “they need us more than we need them” approach to the possession and consumption of cake.

But if a spell presiding over the Northern Ireland office, dealing with one of the most emotionally-charged borders in the world, can’t reduce this myopia, then what can?  After the events of this week, I suspect that the answer is ‘nothing’.  The gulf in perception of what opening borders is about remains as great – perhaps even greater – now than it was at the outset.  And one of the worst aspects of all of this is that I see little by way of a better understanding on the opposition benches.  The opposition parties seem almost as fixated by the economics as the government.

Accidentally cancelling Brexit?

Unsurprisingly, the Brexit fanatics are taking their ire out on the Republic of Ireland over the issue of a border across the island.  For those who have never really understood, let alone accepted, the idea that the Republic is an independent state rather than still part of, or a vassal to, the UK, this is only to be expected.  It overlooks the fact, however, that there is a sense in which what is being presented as an ‘Irish problem’ is only the specific and obvious example of what is in fact a generic issue.  That issue is, as Ian Dunt puts it here, that a divergence of regulatory regimes means that “you need to check that goods and services are of the required regulatory standard, that the correct tariffs have been paid and that products originated where they say they have”.  It only looks like a specific ‘Irish’ problem because it’s only in Ireland that there is a land border between the EU and the UK.

The solution proposed by May, guaranteeing no regulatory divergence between the North and the Republic, is a neat solution to the specific, but it does nothing to resolve the generic.  It merely shifts the issue from a line drawn across an island to a line drawn in the sea – it is the Brexiteers’ desire to opt out of the EU regulatory regime which causes the problem, not the Irish Government.  The only thing surprising about the opposition of the DUP to anything which effectively puts the North outside the UK regulatory regime – which is the apparently inevitable consequence of what the proposed agreement said – is that it did, indeed, seem to come as a surprise to May.

The call from Scotland, Wales and London to be given the same deal as Northern Ireland makes eminent sense politically.  As Nicola Sturgeon put it, “If one part of UK can retain regulatory alignment with EU and effectively stay in the single market (which is the right solution for Northern Ireland) there is surely no good practical reason why others can’t.”  Whilst I wholly agree with the sentiment, I don’t agree with the bit about there being ‘no good practical reason’.  For the reasons referred to above, putting Wales or Scotland in a different regulatory regime from that operating in England requires borders between those countries; and doing the same for London requires a border around that city.  Theresa May – or any other UK Prime Minister – is not going to ‘solve’ the problem of the Irish border by creating three new borders within the island of Great Britain.

There was one phrase in the proposed agreement which has received scant attention, and that was that the continued regulatory alignment would happen only "in the absence of agreed solutions".  I’m sure that May thought that would be enough of a fudge to be able to move on to the next phase, during which she and her team still fondly believe that they can negotiate a deal which gives the UK all the advantages of, and access to, the single market without being a member.  If they could pull that off, then of course the deal that she almost agreed to yesterday would become irrelevant; there would be no need for a border at all.  It would probably signal the end of the single market and possibly the EU itself (why would anyone want to remain a member if they can get as good a deal outside?) and for that reason alone it won’t happen.

There is, though, one other way in which May could honour the agreement she so nearly made yesterday, and that is to retain regulatory alignment with the EU for the whole of the UK – to remain a member of the single market and the customs union, cancelling Brexit "in all but name".  Did she effectively, albeit accidentally, come close to committing to that yesterday?

That, apparently, is not what he meant...

I’m not exactly the biggest fan of the idea of designating a particular city as the Capital of Culture for a period.  It does seem to bring some economic benefits to the areas concerned, but I wonder how long-lived they are, and how well - and fairly - the benefits are spread amongst the wider community.  I suspect that there might be other ways of spending the same amount of money for better outcomes.  Whatever, the competitions exist, and as long as they do, I cannot fault those cities which do their best to get whatever investment is available, from whatever source.

One of the competitions is the ‘European Capitals of Culture’ Programme.  It’s run by the EU and the funding comes from the EU’s budget, but is not only open to EU countries; it is also open to EEA/EFTA countries, as well as candidate and potential candidate EU members.  And it was supposed to be the UK’s turn to have one of its cities nominated for 2023 under the rules of the scheme.  However, the EU Commission has, not at all surprisingly, pointed out that after March 2019, as a result of the Brexit referendum and the government’s hard line decision to refuse membership of the EEA/EFTA as well as of the EU, the country will no longer fall into any of the eligible categories, and cannot therefore nominate a city for 2023. 

It’s an entirely reasonable and logical conclusion – unless you’re a Brexiteer, in which case it is “a pathetically childish act” according to Leave.EU, and has been described by various commenters as an example of the EU’s bullying approach, or another reason why the UK is right to leave.   Even Nigel Farage is apparently sad about it.  Yes, that’s right – people who think we should walk away without paying a penny more into EU funds really are arguing that the funds to which we are no longer contributing (and this funding would come after the period covered by the misnamed divorce bill) should still be available to the UK.  Or even that the fact that the funds to which we currently have no commitment and to which we will not be contributing are not available to us is a good reason or not paying for anything to which we have committed.

As one of the more rational commenters put it: “Don't think you quite understand how this Brexit thing works do ya?”.  But then, who can be bothered with mere facts?