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Friday, 25 August 2017

Straws in the Wind

The extreme Tory Brexiteers are not quite so thick that they all fail to realise that once the nation understands the extent of the damage that a 'hard Brexit' will do to the economy, the government will have to back away from that option. So their tactic has been to push as hard as possible for the government to adopt positions from which a complete retreat would be impossible.

As the government has started to publish slightly more precise position papers as a basis for negotiations with the extremely well-prepared team around M Barnier it is clear than common sense is still present in most of the arguments and suggestions that are appearing. And while this moderate position is developing, so the events in the economy - and the predictions to which they trend - show that the UK would be ruined to an incalculable extent if it withdrew from the European Free Trade Area. Mrs May has made sticking-points [or 'red lines'] on immigration and the the ECJ [the European Court of Justice]. The immigration issue has been somewhat clarified by the discovery that the number of international students remaining in the UK when their visas expire each year is certainly less than 20,000: not the hundred thousand of the May myth. Also, the largest flows of immigrants by country of origin are India, Poland and Pakistan: the immigration that has been unaffected by the European policy of freedom of movement - that has always been under British control - is massive; and it is that migration that is of most concern to many people. On the issue of the European Court it is evident that some compromise will be made, that allows the ECJ a role in Britain that is not 'above' the British courts.

Meanwhile, the economic data stack up against the idiotic assertion that the UK can survive as an economic power, and maintain the people's living standards, outside the cocoon of the European Economic Area. Britain's growth is lowest among the G8, productivity is not improving, the decline of the pound [now 18% against the euro, since the referendum] more than offsets any benefit that the UK gets from its exports seeming cheaper in other countries; and government policy continues to be hurtful to firms and their capacity to invest. Today the Chambers of Commerce point out that three policy initiatives that lie within Mrs May's concept of a caring society are laying a heavy toll on business and on employment. The living wage has been increased, while the productivity of labour generally is not increasing. Mandatory workplace pensions are part payable by employers, and employees who have their share of the contribution to pay are seeking wage increases to pay it, so it is a double-whammy for employers. And in addition, the introduction of the apprenticeship levy on firms [according to the number of people they employ] will better educate those who could well become unemployed in coming years, as technological change makes the skill that the apprentices acquire become redundant]. An economy that should be training the young in the mathematics and in the principles of engineering and coding that support IT and AI [artificial intelligence] is instead preparing young people for jobs whose obsolescence is virtually inevitable.

The economy's capability to employ the whole available population increasingly depends on investment, adaptation and the rising productiveness of industry and commerce, on which productivity improvements depend. Living standards are now falling, and people are feeling it. Real wages are still lower than before the crash of 2008; and although the USA has begun to rein in Quantitative Easing and raise interest rates, and the European Central Bank is expected to so the same soon [it may announce steps in that direction at Jackson Hole this weekend] there is no sign that the Bank of England under Mr Carney - who is to be absent from Jackson Hole - has the opportunity of the bottle to do similar things.

As the extreme fragility of the British economy becomes more apparent, the idiocy of the Cameron-Clegg-Osborne gang and of their 'project fear' becomes more obvious. One can have slender sympathy for Mrs May as the inheritor of the mess and the inheritor of Brexiteer bullying, but not very much. She is grown up, and should be able to recognise the weakness of her negotiating stance. If she does not act on that basis, she will attract odium even greater than that which has settled in the Cameron clique.

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