Mrs May's Caps

Theresa May has been a lifelong fashionista who asked [on Desert Island Disks] for a lifetime subscription to Vogue: which makes it odd that she has chosen to wear for much of this election campaign tweedy jackets that hang oddly around her distinctive anatomy. She looks to me like a chargehand beater on some minor grouse moor; in which case a cloth cap would complete her ensemble perfectly.

Her election campaign has featured two very un-Tory caps: one on energy prices to households and the other on immigration to the post-Brexit UK.

Critics and commentators from the whole political spectrum have pointed out - as nauseam - that a cap on energy bills was one of the policies that vanished with the 'Ed stone' when Labour lost the last General Election. Mrs May has decided that it is an election winner. As I have mentioned in previous blogs, any change to the model of privatisation brings into question the rationality of the whole concept. To cap a major segment of the pricing structure is a fundamental move away from the Economists' model of privatisation: in the direction of arbitrary government interference that smacks more of a dictatorship than of a free market; or even a balanced mixed economy such as the UK enjoyed in the period 1950-70.

Electricity bills, in particular, are increased by the huge subsidies and tax reliefs that are given to windmills, solar panels and other forms of 'renewable' energy: at the expense of the customers. It is a result of government policy that these charges are loaded on the consumers, threatening household budgets and the future of energy-intensive industries, notably iron and steel. In these circumstances, it is simply silly to make another intervention and hand over the implementation of the idea to an 'economic regulator' that is meant to apply the nonsensical models that were fashionable in the 'eighties. No doubt Mrs May will win the election, and will have her way on electricity bills: and there will be plenty of time to rue the decision before the next General Election. Eventually, the whole idea of economic regulation of utilities will have to be stripped back to first principles and replaced.

Mrs May's other cap - on net immigration to the UK - has attracted a lot of comment on the assumption that there is almost certainly a deep psychological need for her to persist in this policy, which has featured in the last two Tory manifestos and fallen to her, as Home Secretary, to 'fail' to implement. I have been told by British-Asian friends that some of their communities voted for Brexit on the assumption that if European immigration was restricted there would be more room for greater Asian migration into the UK. The statistics of the last several years show that net migration from outside the European Economic Area into the UK exceeds EU citizens' immigration to the UK very significantly. So even an extremely 'hard' Brexit will not reduce immigration to anywhere near the level [less than 100,000 net per year] that Mrs May is proposing as the maximum. Her refusal to exclude international students from the tally is simply silly: damaging to university finances and to the balance of payments generally, and significantly weakening the talent pool within the country [if she can pull it off].

Industry and commerce are struggling to explain to this purblind person that the country unconditionally needs to call upon a wider pool of skills and talents than the UK itself is generating. As long as the austerity regime continues - especially if resources are being misdirected to harebrained schemes such as grammar schools - the British educational system will not produce the skills that are needed. Fake apprenticeships are an expensive travesty: they do not produce skilled workers, but young people who are even more sure that the system has cheated them. The immigration cap, if Mrs May actually tries to implement it, will poison the whole Brexit negotiation and cause deep anger among immigrant communities: as well as real detriment to the economy [not least, the creative industries]. There is a real peril in this crazy concept.

Six Days To go

After a nugatory meeting of the G20 Finance Ministers over the last weekend, the world economic community is still waiting for France and Germany to overcome their significant differences about how the Greek crisis can be solved in a way that will assure the future of the euro. European Ministers are to have a 'summit meeting' over the next weekend: meanwhile, as the US Treasury Secretary put it, France and Germany "have six days to save the world". That is no less than the truth, about 'the world as we know it' . It will be important to follow that key story as the days go by; but it is even more important to understand what other realities the world community should be facing up to, regardless of whether or not the euro can be nursed into some sort of health.

I have just spent a couple of days in the Derbyshire Peak District, and on my return to London I noticed a phenomenon that I have not seen before: the leaves in the south are going brown before those in the north: normally spring comes earlier in the south, and the leaves remain on the trees longer in the south than in the north. I assume that this year's deviation is a consequence of the unusually dry weather in the south and east of the country, which has left the trees exhausted and deprived of nutriments. Parts of Derbyshire have also been drier than usual in the past year, but not sufficiently to have a comparable effect on the trees. Crop yields in the south and east - Britain's heaviest agrarian regions - are down this year. As the global population trend is raising more awareness that countries [and economic communities, if they can survive] must become more nearly self-sufficient, given that that they must export surpluses of what they produce if they want to continue to be able to buy crops that their climate will not sustain. Meanwhile, if it is implemented, EU environmental legislation will massively reduce the rights of farmers to access rivers and ground water when rainfall is insufficient to support the growth of the crops, and will increase the charges that the government makes for the permitted abstractions: so food is likely to become both more scarce and more expensive.

Another key sign is exemplified today by the Prime Minister meeting the main gas and electricity suppliers to ask them to lower their charges, at least to 'vulnerable' customers: and this at a time when the government is pursuing environmental targets that will require the companies to invest massively in 'green' energy supplies. The cost of that capital spending can only be repaid from charges to customers in the future. So it is becoming dearer to heat as well as to eat, in response to deliberate government policy: and that is happening in more and more households across Britain this year, as real incomes fall.

It remains fashionable, almost compulsory, in journalistic circles and in academia to scoff at the few commentators who advance a worst-case Malthusian proposition that the world is close to the point where it cannot feed the population that will be born in the next few years. And even when the possibility of a crisis of overpopulation in some faraway countries is allowed, it is assumed that this will not affect the old advanced economies. Yet it is now speculated by demographers that the ageing of the indigenous European population will lead to massively increased immigration of culturally alien Africans and Asians. Japan has absolutely refused to allow immigration to dilute the racial structure; and Europeans are becoming increasingly resentful of immigrants who draw on the benefits system while they 'outbreed' the indigenous population. Opposition to immigration has usually been based on racial and/or religious grounds: which means that people have muted their expressions of concern because of the existence of laws against 'racial hatred' . Ambitious politicians will soon recognise that dependent immigrants will cost so much in benefits that the rate of benefit for all claimants - indigenous and immigrant - will be reduced [at least in real terms] and large immigrant families will be seen relatively to benefit. Then opposition to immigration will become 'economic' rather than 'racist', which will make it respectable.

As the economic squeeze intensifies, the date at which this grim forecast for socio-political consequences will be applicable comes closer. That gives increased importance to the downward revision of unprejudiced forecasts for the British economy: the announcement by the Item Club today is consistent with the worsening prospect.