Malcolm Blair-Robinson's Blog, page 110

The Falling Pound: A Bright Light

There is something of a fog wafting through international affairs at the moment;  the US election, Brexit, Syria, Globalization, Debt mountains, low growth etc. etc. What shines brightly in the gloom is the fall in sterling. Although this is causing anxiety among some parts of the global investment community, it is very good news for the UK. The former governor of the Bank of England, Mervyn (Lord) King gave a ringing endorsement from New York today. Of course there will be tears, because there has to be profound change in the shape of the UK economic model. The biggest argument in favour of Brexit (I voted Remain not for economic but for historical and political reasons) is that it forces major changes in economic policy. We are getting hints of these and will know more after the  chancellor’s November Statement, but they are unlikely to go far enough. To gain the main benefit of the fall in sterling requires a radical overhaul in fiscal and monetary policy as well as in the governance of both.

The money supply to the base of the economy should be expanded by Dynamic Quantitative Easing, the government must take back control of the levers of control of interest rates, the money supply and the means to influence the range within which sterling is traded, to make sure the devaluation is longer lasting. These are decisions with big political consequences and must be taken by elected politicians. There has to be huge public investment (£1trillion over a parliament) in the infrastructure weaknesses in transport, power generation and supply, information technology and social housing, to expand the ability of the private sector to generate new wealth rather than inflate fixed assets.

The financial sector is far too big, the taxation base is too small leading to starvation of essential public services, borrowing is far too high and too little real wealth is being created. Imports have to be cut, home manufacture of everything we use increased and exports expanded. A much more proactive approach to interest rates must boost saving, cut personal borrowing and control house prices so that they inflate in line with general inflation and not on a turbo charge of their own. The taxation structure is overdue for modernisation and reform, a process made easier by Brexit. The whole transformation will not be without pain, some wealth which was never really there will vanish, but in the end the result will be a game changer and the younger generation will at last have a decent future to look forward to.

We will know in November whether May’s new chancellor, Philip Hammond, is up to the challenge, or whether he will be a forecasting junkie who gets it all wrong like his predecessor.

Constitutional Brexit : Should Parliament Vote?

The Government has rejected increasingly strident calls from senior MPs from all parties that the House of Commons must have a vote about the basic elements of the government’s plans for Brexit. Downing Street asserts that, following the referendum result it is right and proper to proceed according to the mandate given by the people, using the royal prerogative. Thus parliament does not have to be consulted, although it will be kept informed. This is rejected by many because the referendum was advisory and has no legal force. At some point parliament will have to give it force. This could be with the putting into law by parliamentary majority of the Great Repeal Bill, but the argument now is about a vote before Article 50 is triggered.

This does not look as if it will go away. It will be a test of this government’s ability to give effect to its plans. The history of backtracking since May 2015 is pretty unprecedented. The issue is constitutionally complicated. Our unwritten constitution mostly relies on precedents, conventions and so on and this is a new experience. We joined the then Common Market with a parliamentary vote but no vote by the people. Brexiteers hope that we can leave on a vote by the people and not by parliament, because in both Houses the majority is for Remain. It is made even trickier by the fact that although the country (actually only England and Wales)  voted for Brexit, Brexit can come in many different forms and means different things to different people. On both sides.

Labour Right Wing: Enough Is Enough: It Is Over

The Parliamentary Labour Party, which its stalwarts claim nearly met its doom under the ultra left Michael Foot, is now having    tantrums about how the Shadow Cabinet was chosen and appointed. Never mind the detail; they are behaving like children. They mounted a rebellion and lost spectacularly and it is now time to knuckle down or get out. Michael Foot failed because during a time of change in the political weather when the centre moved sharply to the right, he took his party left. But now there is a change in the political weather again in full swing, with the centre moving sharply to the left. Although not in government Jeremy Corbyn is the leader of that shift in the UK and has attracted to the cause unprecedented numbers of young people, well educated and clever, who know and care nothing about Michael Foot, Trotsky et al, but who see clearly that the current economic model, which New Labour helped fashion, cannot sustain and is grossly unfair.

May, who turns out to be nobody’s fool, has followed Corbyn and moved the whole Tory party  to the left of anything ever thought of by Tony Blair. It is well to the left of the squawking right of the PLP. Utterly befuddled by the new political reality, these sad and sorry soundbite politicians of a yesterday now passed, call for ‘effective opposition’. They cannot see that Corbyn is more effective than any modern opposition leader. Not only has this 2015 Tory government had to abandon more legislation than any post WWII predecessor, it has had to completely reposition itself in the political spectrum. Because of a political agenda driven by Corbyn.

Trump In Hot Water

Or is he? There is universal condemnation, outrage and dismay about the groping tape. Trump is isolated without any defenders. He has come forward with a comprehensive apology. Things must be bad because that is new from him. And yet it seems always to be the case that he emerges from these terminal (for any normal politician) situations strengthened. Many think he is now too damaged to make it to the White House and Hilary is on a roll. Who can tell?

I can tell you this. If the sex tape does not sink his campaign and if he does not make a fool of himself on Sunday, he will win in November.

May Dumps Thatcherism

The last vestiges of Thatcherism have gone. The cult of the individual is over. Government is a good thing and will intervene to boost business if needed and punish it if it is naughty. Markets not working properly ‘will be repaired’. Monetary policy is not working for ordinary people. Interest rate policy is a fiasco, or words to that effect. Pumping assets has got to stop. She sees the vote for Brexit as a revolution and she is going to lead it. Wow. This blog has been saying these things for years and consequently, having been rather critical of her, thinks Theresa May is wonderful; well okay anyway. I don’t like her attitude to immigrants. And I want to see whether this speech becomes action by her government.

If it does, the impact of all this is potentially as seismic, perhaps more so, than Brexit itself. It is the biggest shift left for the Tory party since 1950, when Churchill decided to embrace  officially  the Welfare State, the nationalized utilities and everything he had previously opposed, because he saw that this was what people wanted and if he was going to be given another opportunity to lead them, he would have to do their bidding. Within a year he was back in Number 10. May has done her sums, she knows her government won the election with fewer votes than Churchill who lost in 1950, and to win again she has to attract support from those 5 million or so working class voters who currently stay at home. Corbyn is headed in the same direction.

The impact on the Tory Right will be like a cup of arsenic drunk at breakfast by mistake. But they are mostly old, nostalgic for the abandoned Thatcher, and shrinking in number. The impact on the the anti-Corbyn New Labour element of the PLP is calamitous. They are out in no man’s land on the wrong side of everything, somewhat to the right of the May government. They are all at risk of losing their seats as some of their  voters, denied a Corbynite to vote for, move left to UKIP if it survives, the news from that quarter is not good, or the reinvigorated left-leaning Lib Dems. Ed Balls will explain what happens next. Their only salvation lies in eating humble pie and following their leader, or crossing the floor and joining May.

At last we are moving back to politics about people, where politicians have visionary powers rather than soundbite skills. Whatever it is people want to do, if it is not for the public good it will not happen. Whichever party is in power. The future suddenly might get brighter.

Trump Is Still There

Even the fact that he never pays Federal Tax, which would have sunk any other presidential candidate, seems not to impact Trump badly, although the polls show Hilary pushing ahead again. Many people hate the Federal government and its taxes, so they agree with Trump when he says he is smart. The difficulty for pollsters and pundits is that this election is not about the presidency; it is about Trump.

People are either voting for him or against him. If they vote against him they will vote for Hilary unless they waste their ballot on some third party no hoper. Hillary has about 25% of potential voters  actually voting for her with enthusiasm. That cannot get her to the White House. Whether she does get back to her old home will depend on whether enough Trump haters want to stop him at any price. Hardly ideal for America whichever way it goes.

UKIP Implodes: Is It Over Now?

The resignation of the newly elected leader Diane James because she cannot gain control,  is a public declaration that the party for UKIP is all but over. It had a purpose and it fulfilled it. It was a platform for Nigel Farage. It achieved its goal. The UK is off out of the EU. Farage retires. Left behind is a collection of quarrelsome discontents who agree about nothing and who are hell bent on a path to self destruction. A huge shift in the political weather with the new interventionist, left moving, Tory party and the 21st century socialism of Corbyn’s Labour, will be for UKIP all but overwhelming. It probably makes no difference whoever is leader now.

Even if Nigel Farage comes back. Again.

Rejoice At The Fall Of Sterling

The record crash in the value of sterling is greeted with consternation by importers and retailers who import a high volume of the goods they sell. It is also tricky for supermarkets who import so much of our food and eventually all this will feed through in a rising cost of living.

But for manufacturers and exporters, this is the best possible news, reflected in record rises of production reported by the sector. The famous march of the makers which never happened might just be starting. It has been this blog’s stated view for years that sterling is historically overvalued and prevents reshaping of the economy away from debt financed consumption, underpinned by house price inflation, delivering low productivity and higher social inequality.

For new wealth to be distributed evenly through every level of society and in both the public and private sectors, it has to be created. You can make it, build it or pump it from the ground. And because GB has both the second highest overseas debt mountain  and the second highest trade deficit in the world it sure needs to create a lot of new wealth. It must make more of what it consumes and export more overseas. Simply put; import less and export more. More skilled jobs with a future, fewer zero hours contracts surviving day to day.

For that to happen sterling trading in a band form $.95 to $1.25 is a must. It is also an economic revolution and it may have started. Brexit without tears will depend on it.

Brexit: It is Going To Be Hard: Sorry Clean

May did well on Andrew Marr. She was assured and forthright about her ambitions. Of course, like all politicians, on the details she was either opaque or she waffled. The phrases about governing for all the people are the emotional cry of every new Prime Minister since Pitt the Younger. But she did convey the impression that she had a handle on everything and she knew where she was going. This was in the nick of time as people were beginning to wonder about her government ‘without policies’ as Ken Clarke had said (except for Grammar Schools).

We have learned a lot about Brexit, more than she actually intended. There is to be a Great Repeal Bill, in the Queen’s Speech, date not set, and Article 50 will be triggered before the end of March. The Repeal Act as it will become, if passed by both Houses and possibly with input from the Scottish and Welsh Assemblies for complex legal reasons as yet unclear, will transfer the sovereign authority for all European law enshrined in our own, from Brussels to London. It can then be modified where and when needed by parliament. This is all good sense and practical; the May touch. It sends a signal around the world and to every corner of the Kingdom that Brexit will happen and that is that.  There will be places where this will be greeted with glee, but elsewhere with consternation.

We also learned about two May red lines. She is quite clear the the majority of the British people have voted to take back control of our borders enabling us to restrict the influx of EU migrants. She was also satisfied they have voted too for absolute control of our laws by our parliament. There is just no way it will be politically possible for the EU to grant free access to the common market on those terms. Even if in some late night marathon of half demented negotiators suffering sleep deprivation agreed, it would never be ratified by all 27 of the member states and only one has to say no to kill the deal. So although it is not official, it will be a hard Brexit. May has prepared the ground by saying she preferred the term Clean Brexit.

There are two events which could change this. The first is, through a scheduled series of national elections in the EU in 2017, a kind of EU Spring political movement, anti Brussels and admiring of the Brits, takes hold, and the whole byzantine structure begins to topple. Or, since there is no majority in Parliament for Brexit, let alone a hard one, the Great Repeal Bill falls, May calls an election, loses it and is replaced by a government determined to scrap the whole thing. In other words having had fun the first time voting with their hearts, given a second chance the canny Brits vote with their heads. A returned UK would become instantly the most powerful country in a relieved and grateful EU and could inaugurate reforms of its choosing. Free movement et al.

Relief For The Chronically Sick

The news that the government is dumping the cruel and costly process of re-examine the validity of claims of those with long term conditions, likely to get worse rather than better, is very good news. Once the diagnosis has been confirmed it is just not right to force the most vulnerable to be endlessly re-tested; not only does it cause real stress to both the sufferer and those who may be helping to care for them or employ them, but it costs the authorities a fortune, which is entirely wasted. I suspect that this will be the first of several announcements during the Tory conference designed to move the Party to what might be called the soft left, designed to please the shrinking membership, while concealing from them frictions in a  Cabinet  drifting to a hard Brexit.