Not a proper letter

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In ordinary times, the letter to the future ex-Prime Minister signed by the former Chancellor and 20 other Tory MPs, including a number who were in the cabinet until very recently and others of a senior stature in his party, would be seriously bad news.  Given that he has a theoretical majority of only 1, and is leading what is already, in relation to the most pressing issue of the day, a minority government, a list of 21 from his own side making threatening noises ought to be terminal for the policy if not for the individual pursuing it.

Fortunately, Jacob Rees-Mogg has given him a ‘get-out-of-jail’ card by issuing a style guide for letters and reports.  The silly would-be rebels have forgotten to put ‘Esq.’ after the names of those male MPs who are not Privy Councillors, which means that Rees-Mogg can legitimately advise the PM that it’s not a proper letter and can safely be ignored.  That’s a better explanation than anything we’ll get from Johnson.

Which wavelength is that, then?

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Apparently, Theresa May and Donald Trump are “on the same wavelength, I think on every respect”.  Or so said Trump yesterday after their meeting, so it must be true, at least until he says the opposite.  I’m not sure that May will be quite so comfortable with the idea, even if finding someone on the same wavelength as her might be something of a novel experience.  It’s certainly not one to which she is accustomed closer to home – in the cabinet for example.

Having slapped down the Foreign Secretary earlier this week, yesterday it was the turn of the Chancellor to have his words disowned by the boss for daring to express an opinion different from her own, even if she has been unable to articulate what it is that she actually does believe.  I thought that the point which Hammond made – which has provoked such a furious reaction from the Brexiteers on his own side – was an entirely sensible one.  The salient part for me was this:

“So instead of doing what we're normally doing in the trade negotiations - taking two divergent economies with low levels of trade and trying to bring them closer together to enhance that trade - we are taking two completely interconnected and aligned economies with high levels of trade between them, and selectively, moving them, hopefully very modestly, apart.”

The words which seem most to have inflamed feelings on his own side are the ones which I have highlighted, namely:  ‘selectively’, and ‘hopefully very modestly’.  Without those words, I can see nothing to which the Brexiteers could possible object.  It would be a simple statement of fact.  It does, though, state the fact in a way which exposes one of the big lies at the heart of the Brexiteers’ claim that the UK will be able to improve its trading position as a result of Brexit.

As Hammond says, one of the keys to the most successful trading agreements is bringing divergent economies together; but at the heart of the Brexit project is a desire to move convergent economies apart.  It is true, of course, that being out of the EU will allow the UK to negotiate its own agreements with non-EU countries, although such negotiations will inevitably require a seeking of convergence with those countries instead; that’s what agreements are about.  And it also overlooks the little fact that the EU is already seeking to expand its range of trade agreements with non-EU countries in a way from which the UK would also benefit if it were to remain a member of the EU, and using its greater power and leverage to secure, probably, a better deal than the UK alone is likely to achieve, involving more convergence.  But pretending that introducing deliberate divergence between the EU and the UK is a route to improving trading relationships is flying in the face of experience and logic.

I can understand why some might feel that it doesn’t matter if trade suffers a little (or perhaps even a lot) as a result of Brexit; because the key thing is that the UK will no longer have to share any of its sovereignty, and will have the absolute right to set its own rules.  It’s an argument which values that separateness, that specialness, over and above mere economic benefit.  And whilst I might take an opposite view, it’s also an honest argument, setting one ‘good’ against another.  The problem is, though, that it wasn’t what they told us at the time of the referendum, and it isn’t what they’re saying now.  They’re still trying to tell us that having greater divergence will lead to more trade.  The sort of honest assessment of reality put forward by the Chancellor yesterday is just ‘fake news’ to them.  Perhaps May is closer to Trump's wavelength than I thought.

Blaming the 'marginalised'

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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.

Identifying what's actually broken

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Yesterday’s news was full of accusations that the Chancellor broke an election promise by raising the level of National Insurance payments for self-employed people.  I think, though, that people are aiming at the wrong target.

In the Conservative Party, policy is made by the leader; the leader is ultimately responsible for the content of the manifesto; and the leader is responsible for keeping any promises.  So the ‘promise’ which Hammond broke yesterday wasn’t one made by him, nor by his boss, the Prime Minister.  It’s a promise made by a man who is no longer involved in politics and is in no position to either keep or break any promises he made.

Cameron may well have been elected on a manifesto containing the said promise, but we no longer have a Cameron government.  We’ve had a change of government, and under the UK system, it’s a fundamental principle that no government can be bound by its predecessor.  Neither can any Tory leader be bound by anything his or her predecessor may have said.  New leader = new government = new policies; any expectation to the contrary flies in the face of the whole history of the Conservative Party and the UK constitution.

Now some might object that all the Tory MPs were elected on the basis of that same manifesto and they should all be bound by it.  Actually, no they weren’t.  Under the UK constitution, people don’t vote for a party and they don’t vote for a set of policies.  They vote for one person in one constituency, and once elected, that person has the constitutional right to vote for or against any issue, solely as he or she pleases.

What’s my point?  This whole issue shows that something is indeed broken, but it isn’t a throwaway pre-election promise.  What’s broken is a constitution and electoral system which allows a change of personnel to become a change of government and a wholesale change of policy and direction with no elector input at all.  I’m not even sure that ‘broken’ is the right word for this – it was unfit for purpose in the first place.  Either way, in fairness to ‘Spreadsheet Phil’, he isn’t the one who broke it.  And I’m absolutely certain that hounding him for it isn’t the way to fix it either.  But then, who of those attacking him really wants to fix the underlying problem?