IPR Blog

Expert analysis, debates and comments on topical policy-relevant issues

Topic: Brexit

Brexit Likely to Increase Modern Slavery in the UK

📥  Brexit, International relations, labour market

Professor Andrew Crane is Professor of Business and Society and Director of the Centre for Business, Organisations and Society at the University of Bath.

Theresa May’s historic signing of Article 50 looks set to be her lasting legacy as Prime Minister. Unfortunately, it is also likely to derail her other signature policy on modern slavery. Our research suggests Brexit could increase modern slavery in the UK.

The signing of Article 50 marks the point of no return for the UK’s exit from the European Union. Although she inherited the Brexit decision, Theresa May’s political legacy will stand and fall on how successfully she manages to steer the country through the turmoil.

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Without a doubt, Article 50 will bring untold changes to the political, economic and cultural landscape of the country. One change that will certainly be high on May’s radar is its effect on modern slavery in the UK.

Modern slavery has been May’s signature policy since she was Home Secretary. She introduced the landmark Modern Slavery Act in 2015 prior to becoming PM, and has since continued to champion the cause. In announcing a ramping up of Government efforts to improve enforcement last year, she identified modern slavery as “the great human rights issue of our time” and heralded the UK as leading the way in defeating it.

While the Act is far from perfect, it has certainly focused increased attention and resources on modern slavery. Prosecution levels also appear to be improving. This was most recently illustrated by the sentencing of the Markowski brothers to six years in prison for trafficking and then exploiting 18 people from Poland, who they brought to the UK to work in a Sports Direct warehouse.

The problem is that, despite the advances gradually being made in addressing modern slavery in the UK, the signing of Article 50 is likely to worsen the problem. As May is probably acutely aware (but is so far not saying), Brexit may well undermine the progress she has made to date. It is a case of two steps forward, one step back.

According to research I conducted with an international team of colleagues looking at forced labour in the UK (initially funded by the Joseph Rowntree Foundation), four main problems are evident.

1.      Brexit will increase the demand for modern slavery

The Brexit vote has already created uncertainty among the legions of poorly paid but legal migrant workers from Eastern Europe that are employed in the UK’s low-wage economy. Signing Article 50 may ultimately help stem the flow of workers into the country as intended. But who is going to replace them? Domestic workers will fill some of the gaps but companies are unlikely to be willing to improve wages and conditions to attract them in sufficient numbers. So there will be greater opportunities for unscrupulous middlemen to traffic in workers from overseas or prey on vulnerable UK citizens to force them into exploitative situations. Forced labour flourishes where local, low-skilled labour is in short supply.

2.      Brexit will facilitate exploitation

Modern slavery often occurs when workers do not fully understand their legal rights and status. Our research uncovered various examples of migrant workers being exploited because those exploiting them misled them into the belief that they were working illegally. Perpetrators would also wait for or deliberately engineer changes in workers’ immigration status in order to exploit them. The point is that Brexit will create a period of increased uncertainty around legal status that will be a significant boon to exploiters.

3.      Brexit will increase the supply of modern slavery

Modern slavery occurs when people are vulnerable, either because of legal status, poverty, mental health, or drug and alcohol problems. In our research, the most common victims were those from countries such as Romania and Bulgaria who, at the time, were able to enter the country but were unable to work legally. This vulnerability was exploited by perpetrators who were able to coerce them into working in highly exploitative situations. The more the UK puts up barriers to people entering the country legally, the higher the risk of traffickers bringing them in illegally and pushing them into debt. Once workers are in debt, perpetrators are adept at escalating their indebtedness and creating situations of debt bondage.

4.      Brexit will turn victims into criminals

Our research found that many victims of forced labour in the UK were prosecuted under immigration offences rather than being identified as victims. The Modern Slavery Act has improved this situation but as the UK moves towards Brexit, the chances of this happening will increase because policing around immigration status is likely to intensify far more than around modern slavery.

May claims that under her leadership, “Britain will once again lead the way in defeating modern slavery”. But the bottom line is that by triggering Brexit, May will be left trying to solve a problem that she is helping to create.

This post first appeared on the Bath Business and Society blog.

 

The Hard Brexit road to Indyref2

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📥  Brexit, EU membership

Of all the political parties in the United Kingdom, the Scottish National Party is the most consistently strategic. That it lost a referendum on Scottish independence in 2014 and barely three years later is in a position to call another one is testament to its strategic acumen. It turns heated internal arguments into clear external purpose, executed with discipline. Yesterday, the Prime Minister accused it of treating politics as a game. She could hardly have chosen a less appropriate attack.

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Calling a second referendum is high risk. If it is lost, as Quebecois nationalists know, the chances of striking it lucky third time are remote. The economic arguments against independence remain formidable, and would be further complicated, not resolved, by a parting of the ways between Scotland and the rest of the United Kingdom over membership of the European Union.

Two factors explain Nicola Sturgeon’s decision: the intransigence of Conservative-Unionism and the weakness of the Labour Party. Intransigence is in part an artifact of the Prime Minister’s governing style, which combines “personal animus and political diligence”, as David Runciman has written. She sticks to a position doggedly and keeps things close to her in No10. She is capable of ruthless revenge, to the point of petulance, as Michael Heseltine recently discovered. It is a statecraft that has served her well until now. It is not one that is suited to sharing power in a process of negotiation and compromise across a fractured union.

Her choice of the hard route to Brexit has also narrowed her scope for flexibility. Taking Britain out of the EU single market and customs union is the proximate cause of Scotland’s discontent. It is also the source of mounting opposition to Brexit in Northern Ireland. There would be no possibility of a hard border in Ireland if the government had not chosen a Hard Brexit. And it is primarily because the government wants to negotiate a comprehensive free trade agreement with the EU, and to strike its own trade deals with the rest of the world, that is resisting the devolution to Scotland of the powers over agriculture and fisheries that will be repatriated from Brussels. (What’s more, if Britain leaves the EU without a deal, and unilaterally removes all tariffs in order to smooth its path to the WTO, the impact would be disproportionately felt by Scotland’s manufacturers, farmers, and distilleries). The logic of Hard Brexit is Conservative-Unionist, when to meet the aspirations of its constituent nations, and to hold itself together, Britain needs a flexible, federalist approach.

History is in danger of repeating itself. The last time the United Kingdom was challenged by the aspirations for greater self-determination of a significant proportion of one its nations was during the long struggle for Irish Home Rule. Conservative-Unionists met that challenge by suppression, not accommodation. It didn’t end well.

The second factor is the decline of the Labour Party. It has been widely remarked that the SNP will use Labour’s electoral weaknesses to present the referendum as a choice between independence and indefinite Conservative government at Westminster. But a near-term calculation is at work here too: Labour’s decline means that the referendum campaign itself will be fought between the SNP and the Conservatives. Labour will not carry the banner of unionism – the very term is now toxic for the party in Scotland – and while its UK leader cannot even stick to an agreed script, it will be incapable of marshalling anti-nationalist forces, as it once did. The referendum will become the straight fight with the Conservatives that the SNP has always wanted.

Labour’s vacillation on Europe means that it is currently largely voiceless in the national debate on Brexit. It is shedding votes to the Liberal Democrats as a consequence. It fears a further loss of support to UKIP and the Conservatives if it backs membership of the single market and customs union in the Brexit negotiations. But the prospect of the breakup of the UK, the unstitching of the Northern Irish settlement, and economic decline in its heartlands should give it cause to consider the national interest, not just the party interest. Labour could make itself politically relevant to the future of the UK, and to the Brexit negotiations, if it changed tack and support continued membership of the EU single market, as well as a new (quasi) federal constitutional settlement for the UK (perhaps even creating an English Labour Party in the process). Perhaps this is unthinkable, even for a desperate party. But without such a change, there is no prospect of a parliamentary bloc that unites pro-European Conservatives with Labour, the Liberal Democrats, the SNP and other parties in meaningful opposition to the government. And without that, there is every prospect of a Hard Brexit and the breakup of the United Kingdom.

Awkward to the last: Britain and the EU

📥  Brexit, EU Referendum, voting

Professor David Galbreath is Professor of International Security and Dean of the University of Bath’s Department of Social and Policy Sciences

Following the Supreme Court ruling on the UK Government’s plans to trigger Article 50 of the Lisbon Treaty, Theresa May delivered a 1-page draft bill to Parliament which purposed ‘to confer power on the Prime Minister to notify, under Article 50(2) of the Treaty on European Union, the United Kingdom’s intention to withdraw from the EU’. What will most likely become the European Union Act of 2017 signals the beginning of the end for UK membership of the most economically and politically powerful trading bloc in history.

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In his book An Awkward Partner, Professor Stephen George set out to characterise the British role in the EU, stating that while the UK became a member of what was then the European Communities in 1973, it was never all the way in. For European integrationists, the UK was a regular break from ‘an ever-deeper partnership’ – while for European federalists, the UK encouraged state sovereignty that allowed for ‘variable speeds’ of integration. In other words, the UK became a sui generis member of a sui generis institution.

Author of Article 50 of the Lisbon Treaty when he was Secretary-General of the EU Convention in 2002-03, Lord Kerr set out in a recent talk just how ‘awkward’ and ‘sui generis’ the UK would continue to be – even through the act of withdrawal from membership of the EU. Entitled “Brexit: Will Divorce be damaging, and could it be amicable?”, Lord Kerr’s public lecture – which was hosted by the Institute for Policy Research on campus at the University of Bath – evidenced the argument that in addition to being damaging, Brexit would be very unlikely to be amicable either at home or in Europe.

Lord Kerr reminded us that it was Margaret Thatcher who made the strongest argument for UK membership of the EU. The UK was “stronger in Washington because we were seen to be strong in Brussels, and stronger in Brussels because we were seen to be strong in Washington.” Furthermore, the country was comfortable to assume an identity that was both British and European at that time, which followed the post-war settlement, the major political movements in the region and the quick turnaround in trade after the 1973 accession. Thatcher knew that Britain had an awkward role in the EU, but that it was a role which suited Britain in terms of where it wanted to be in Europe and the world.

Prime Ministers John Major and Tony Blair followed suit with a vision for Britain that was both strongly European and Atlanticist. Even more, both Major and Blair sought to enlarge the EU so that it would include more states which were like the UK, and would seek a federal rather than integrated Europe. Denmark, which joined at the same time as the UK and was similarly inclined towards Brussels, was joined by Finland and Sweden in 1995. Following this, the augmentation of the bloc continued with the 2004 Enlargement, which brought 10 new member states (Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia); further enlargements in 2007 to include Bulgaria and Romania; and the 2013 accession of Croatia. Successive British prime ministers saw this as a way to slow down European integration – and, to all intents and purposes, it worked.

Yet even before the 2004 enlargement the UK (as well as Ireland and Sweden) had opened its economy to EU accession state populations, with the greatest EU migration to the UK being in the years prior to their home country’s inclusion in the bloc.

While EU migration has continued to decline, especially following the 2007-2012 financial crisis, the impact of EU and world immigration to the UK has had identifiable impacts on many communities across the UK – especially in areas that voted to remain in the EU, an irony not lost on remainers. Whereas net migration from the EU has declined over time, the percentage of the population that was not born in the UK has increased. The view on immigration was the single most important indicator for voting to remain or leave the EU in the 23 July 2016 referendum.

The cost of ‘divorce’ is high, and Lord Kerr laid out well the negotiations that will have to go on around trade, industries, banking, and the atomic energy sector – not to mention the status of UK citizens throughout the EU, as well as the EU citizen in the UK. Controlling immigration may give a sense of power to many communities, but it will not solve the problems that existed before the referendum and, in some cases, will be exacerbated by it.

The mistake that the UK government is making is assuming that British industry and products (though not labour) will be needed in Europe going forward, despite the fact that in a globalised world there are many economies that will thrive on being an alternative to the UK in European trade and finance. Already Germany and the Netherlands are receiving marked increases in business and capital that previously would have gone to the UK, and from those that would have invested in the UK but will not following the triggering of Article 50.

To say that Donald Trump and Vladimir Putin are the only winners in this situation gives the European economies too little credit and discounts the power of new regional economic blocs that just might use this opportunity to build a real alternative to Europe and the UK as a whole. Now that would be awkward.

This post was inspired by a recent IPR Public Lecture given by Lord Kerr of Kinlochard, author of Article 50. You can read more about the lecture, and find links to the video and podcast, here.

 

The empire strikes back: How the Brexit vote has reopened deep wounds of empire and belonging, and challenged the future of the United Kingdom

📥  Anglosphere, Brexit

This piece originally appeared in New Statesman

Joseph Chamberlain, it has been widely remarked, serves as an inspiration for Theresa May’s premiership. The great municipal reformer and champion of imperial protectionism bestrode the politics of late-Victorian and Edwardian Britain. He was a social reformer, a keen ­unionist and an advocate for the industrial as well as the national interest – all values espoused by the Prime Minister.

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Less noticed, however, is that May’s excavation of Chamberlain’s legacy is a symptom of two larger historical dynamics that have been exposed by the vote for Brexit. The first is the reopening on the British body politic of deep wounds of race, citizenship and belonging, issues that home rule for Ireland, and then the end of empire, followed by immigration from the former colonies, made central to British politics during the 20th century. Over the course of the century, the imperial subjects of the queen-empress became British and Irish nationals, citizens of the Commonwealth and finally citizens of a multicultural country in the European Union. The long arc of this history has left scars that do not appear to have healed fully.

The second dynamic is the renewal of patterns of disagreement over free trade and social reform that shaped profound divisions roughly a century ago. Specifically, the rivalry was between a vision of Britain as the free-trade “world island”, supported by the City of London and most of the country’s governing elite, and the protectionist project, or “imperial preference”, articulated by Chamberlain, which sought to bind together the British empire in a new imperial tariff union, laying the foundations for industrial renewal, social progress and national security. The roots of these commitments lay in his career as a self-made businessman and reforming mayor of Birmingham. A leading Liberal politician, Chamberlain broke with his own party over home rule for Ireland and, with a small group of Liberal Unionists, joined Lord Salisbury’s Conservative government of 1895, becoming colonial secretary. He subsequently resigned in 1903 to campaign on the question of imperial preference.

The fault lines in contemporary political economy that Brexit has starkly exposed mimic those first staked out in the early part of the 20th century, which lie at the heart of Chamberlain’s career: industry v finance, London v the nations and regions, intervention v free trade. This time, however, these divides are refracted through the politics of Britain’s relationship with Europe, producing new economic interests and political ­alliances. What’s more, the City now serves the European economy, not just Britain and her former colonies.

Chamberlain is the junction between these two critical dynamics, where race and political economy interweave, because of his advocacy of “Greater Britain” – the late-Victorian idea that the white settler colonies of Canada, Australia, New Zealand and South Africa should be joined with the mother country, in ties of “kith-and-kin” solidarity, or more ambitiously in a new imperial federation. Greater Britain owed much to the Anglo-Saxonism of Victorian historians and politicians, and was as much a Liberal as a Conservative idea. Greater Britain was a new way of imagining the English race – a ten-million-strong, worldwide realm dispersed across the “white” colonies. It was a global commonwealth, but emphatically not one composed of rootless cosmopolitans. Deep ties, fostered by trade and migration, held what the historian James Belich calls “the Anglo-world” together. It helped equip the English with an account of their place in the world that would survive at least until the 1956 Suez crisis, and it was plundered again by latter-day Eurosceptics as they developed a vision of the UK as an integral part, not of the EU, but of an “Anglosphere”, the liberal, free-market, parliamentary democracies of the English-speaking world.

Greater Britain carried deep contradictions within itself, however. Because it was associated with notions of racial membership and, more specifically, with Protestantism, it could not readily accommodate divisions within the UK itself. The political realignment triggered by Chamberlain’s split with Gladstone over Irish home rule, which set one of the most enduring and intractable political divides of the era, was symptomatic of this. For Chamberlain, Irish home rule would have entailed Protestant Ireland being dominated by people of “another race and religion”. Unless there could be “home rule all round” and a new imperial parliament, he preferred an alliance with “English gentlemen” in the Tory party to deals with Charles Stewart Parnell, the leader of Ireland’s constitutional nationalists.

The failure of Chamberlain’s kith-and-kin federalism, and the long struggle of nationalist Ireland to leave the UK, left a bitter legacy in the form of partition and a border that threatens once again, after Brexit, to disrupt British politics. But it also left less visible marks. On Ireland becoming a republic, its citizens retained rights to travel, settle and vote in the UK. The Ireland Act 1949 that followed hard on the Irish Free State’s exit from the Commonwealth defined Irish citizens as “non-foreign”.

A common travel area between the two countries was maintained, and when immigration legislation restricted rights to enter and reside in the UK in the 1960s and 1970s, Irish citizens were almost wholly exempted. By the early 1970s, nearly a million Irish people had taken up their rights to work and settle in the UK – more than all of those who had come to Britain from the Caribbean and south Asia combined. Even after the Republic of Ireland followed the UK into the European common market, its citizens retained rights that were stronger than those given to other European nationals.

In 1998, the Good Friday Agreement went a step further. It recognised the birthright of all the people of Northern Ireland to hold both British and Irish citizenship. Common EU citizenship north and south of the border made this relatively straightforward. But under a “hard Brexit”, Britain may be asked to treat Irish citizens just like other EU citizens. And so, unless it can secure a bilateral deal with the Republic of Ireland, the UK will be forced to reinvent or annul the common travel area, reintroducing border and customs controls and unstitching this important aspect of its post-imperial, 20th-century settlement. Will Ireland and its people remain “non-foreign”, or is the past now another country?

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Today’s equivalent of 19th-century Irish nationalism is Scottish national sentiment. Like Gladstone and his successors, Theresa May is faced with the question of how to accommodate the distinct, and politically powerful, aspirations of a constituent nation of the United Kingdom within the unsteady framework associated with the coexistence of parliamentary sovereignty and ongoing devolution. Scotland’s independence referendum bestowed a sovereign power on its people that cannot be set aside in the Brexit negotiations. The demand for a “flexible Brexit” that would allow Scotland to stay in the European single market is also, in practice, a demand for a federal settlement in the UK: a constitutional recognition that Scotland wants a different relationship to the EU from that of England and Wales.

If this is not couched in explicitly federal terms, it takes the unitary nature of the UK to its outer limits. Hard Brexit is, by contrast, a settlement defined in the old Conservative-Unionist terms.

Unionism and federalism both failed as projects in Ireland. Chamberlain and the Conservative Unionists preferred suppression to accommodation, a stance that ended in a war that their heirs ultimately lost.
Similarly, the federal solution of Irish home rule never made it off the parchment of the parliamentary legislation on which it was drafted. The federalist tradition is weak in British politics for various reasons, one of which is the disproportionate size of England within the kingdom. Yet devising a more federal arrangement may now be the only means of holding the UK together. May’s unionism – symbolised by her visit to Edinburgh to meet Scotland’s First Minister, Nicola Sturgeon, in the first days of her premiership – will be enormously tested by a hard Brexit that cannot accommodate Scottish claims for retention of single-market status or something close to it. Separation, difficult as this may be for the Scottish National Party to secure, may follow.

The idea of Greater Britain also left behind it a complex and contentious politics of citizenship. As colonial secretary at the end for 19th century, Chamberlain faced demands for political equality of the subjects of the crown in the empire; Indians, in particular, were discriminated against in the white settler colonies. He strongly resisted colour codes or bars against any of the queen’s subjects but allowed the settler colonies to adopt educational qualifications for their immigration laws that laid the foundation for the racial discrimination of “White Australia”, as well as Canadian immigration and settlement policies, and later, of course, the apartheid regime in South Africa.

Nonetheless, these inequalities were not formally written into imperial citizenship. The British subject was a national of the empire, which was held together by a common code of citizenship. That unity started to unravel as the colonies became independent. Specifically, a trigger point was reached when, in 1946, the Canadian government legislated to create a new national status, separate and distinct from the common code of imperial citizenship hitherto embodied in the status of the British subject.

The Attlee government responded with the watershed British Nationality Act 1948. This created a new form of citizenship for the UK and the colonies under its direct rule, while conferring the status of British subject or Commonwealth citizen on the peoples of the former countries of empire that had become independent. It was this that has made the act so controversial: as the historian Andrew Roberts has argued, it “gave over 800 million Commonwealth citizens the perfectly legal right to reside in the United Kingdom”.

This criticism of the act echoed through the postwar decades as immigration into the UK from its former empire increased. Yet it is historically misplaced. The right to move to the UK without immigration control had always existed for British subjects; the new law merely codified it. (Indeed, the Empire Windrush, which brought British subjects from the Caribbean to London in June 1948, docked at Tilbury even before the act had received royal assent.)

At the time, ironically, it was for precisely opposite reasons that Conservative critics attacked the legislation. They argued that it splintered the subjects of empire and denied them their rights: “. . . we deprecate any tendency to differentiate between different types of British subjects in the United Kingdom . . . We must maintain our great metropolitan tradition of hospitality to everyone from every part of our empire,” argued Sir David Maxwell Fyfe, the Tory shadow minister of labour and future home secretary.

As the empire withered away in the postwar period, some Conservatives started to change their minds. Enoch Powell, once a staunch imperialist, came to believe that the idea of the Commonwealth as a political community jeopardised the unity of allegiance to the crown, and so was a sham. The citizens of the Commonwealth truly were “citizens of nowhere”, as Theresa May recently put it. As Powell said of the 1948 act: “It recognised a citizenship to which no nation of even the most shadowy and vestigial character corresponded; and conversely, it still continued not to recognise the nationhood of the United Kingdom.”

Once the British empire was finished, its core Anglo-Saxon populace needed to come back, he believed, to find their national mission again, to what he viewed as their English home – in reality, the unitary state of the UK – rather than pretend that something of imperialism still survived. On England’s soil, they would remake a genuine political community, under the sovereignty of the Crown-in-Parliament. If Greater Britain could not exist as an imperial political community, and the Commonwealth was a fiction, then the kith and kin had to live among themselves, in the nation’s homeland.

Contemporary politicians no longer fuse “race” and citizenship in this way, even if in recent years racist discourses have found their way back into mainstream politics in advanced democracies, Britain included. However, the legacies of exclusivist accounts of nationality persist, and not merely on the populist right. British politics today is dominated by claims about an irreconcilable division between the attitudes and national sentiments of the white working classes, on the one hand, and the cosmopolitanism of metropolitan liberals, on the other.

But thinking and speaking across this artificial divide is imperative in both political and civic terms. Many Remainers have the same uncertainties over identity and political community as commentators have identified with those who supported Brexit; and the forms of patriotism exhibited across the UK are not necessarily incompatible with wider commitments and plural identities. Above all, it is vital to challenge the assumption that a regressive “whiteness” defines the content of political Englishness.

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Brexit thus forces us once again to confront questions about our citizenship, and the question of who is included in the nation. In an ironic twist of fate, however, it will deprive the least cosmopolitan of us, who do not live in Northern Ireland, or claim Irish descent, or hold existing citizenship of another EU country, of the European citizenship we have hitherto enjoyed. Conversely it also leaves a question mark over the status of EU nationals who live and work in the UK but do not hold British nationality. The government’s failure to give guarantees to these EU nationals that they will be allowed to remain in the UK has become a matter of deep controversy, on both sides of the Brexit divide.

As only England and Wales voted for it, Brexit has also exposed the emergence once again of distinct identities in the constituent nations of the UK. Although Scottish nationalism has been the most politically powerful expression of this trend, Englishness has been growing in salience as a cultural and, increasingly, as a political identity, and an insistent English dimension has become a feature of British politics. Although talk of a mass English nationalism is misplaced – it can scarcely be claimed that nationalism alone explains the complex mix of anxiety and anger, hostility to large-scale immigration and desire for greater self-government that motivated English voters who favoured Brexit – it is clear that identity and belonging now shape and configure political arguments and culture in England.

Yet, with a handful of notable exceptions, the rise in political Englishness is being given expression only on the right, by Eurosceptics and nationalists. The left is significantly inhibited by the dearth of serious attempts to reimagine England and different English futures, whether culturally or democratically.

It is not just the deep politics of the Union and its different peoples that Brexit has revived. The divisions over Britain’s economy that were opened up and positioned during the Edwardian era have also returned to the centre of political debate. Though as yet this is more apparent in her rhetoric than in her practice, Theresa May seems drawn to the project of reviving the Chamberlainite economic and social agendas: using Brexit to underpin arguments for an industrial strategy, a soft economic nationalism and social reform for the “just about managing” classes. She has created a new department responsible for industrial strategy and advocated places for workers on company boards (before watering down this commitment) as well as increased scrutiny of foreign takeovers of British firms. Housing policy is to be refocused away from subsidising home ownership and directed towards building homes and supporting private renters. Fiscal policy has been relaxed, with increased infrastructure investment promised. The coalition that delivered Brexit – made up of struggling working-class voters and middle-class older voters (or the “excluded and the insulated”, as the Tory peer David Willetts puts it) – is seen as the ballast for a new Conservative hegemony.

Presentationally, May’s vision of Brexit Britain’s political economy is more Chamberlainite than Thatcherite, a shift that has been obscured in Brexit-related debates about migration and tariff-free access to the European single market. Her economic utterances are edged with a national, if not nationalist, framing and an economic interventionism more commonly associated with the Heseltinian, pro-European wing of her party. In a calculated move replete with symbolism, she launched her economic prospectus for the Tory leadership in Birmingham, advertising her commitment to the regions and their industries, rather than the City of London and the financial interest.

It is therefore possible that May’s project might turn into an attempt to decouple Conservative Euroscepticism from Thatcherism, creating a new fusion with Tory “One Nation” economic and social traditions. It is this realignment that has left the Chancellor, Philip Hammond, often exposed in recent months, since the Treasury is institutionally hostile both to economic interventionism and to withdrawal from the single market. Hence his recent threat to the European Union that if Britain cannot secure a decent Brexit deal, it will need to become a deregulated, low-tax, Dubai-style “world island” to remain competitive. He cannot envisage another route to economic prosperity outside the European Union.

It also leaves those on the Thatcherite right somewhat uncertain about May. For while she has sanctioned a hard Brexit, in crucial respects she appears to demur from their political economy, hence the discontent over the government’s deal to secure Nissan’s investment in Sunderland. As her Lancaster House speech made clear, she envisages Brexit in terms of economically illiberal goals, such as the restriction of immigration, which she believes can be combined with the achievement of the new free trade deals that are totemic for her party’s Eurosceptics.

In practice, the Prime Minister’s willingness to endorse Hammond’s negotiating bluster about corporate tax cuts and deregulation shows that she is anything but secure in her Chamberlainite orientation towards industrial strategy and social reform. Her policy positions are shot through with the strategic tension between an offshore, “global Britain” tax haven and her rhetoric of a “shared society”, which will be difficult to resolve. May has embraced hard (she prefers “clean”) Brexit, but a transformation of the axes of conservative politics will only take place if she combines Euroscepticism with a return to pre-Thatcherite economic and social traditions. This would make her party into an even more potent political force. The recent shift of the Ukip vote into the Tory bloc and the notable weakening of Labour’s working-class support suggest what might now be possible. This is the domestic politics of Chamberlain’s social imperialism shorn of empire and tariff – only this time with better electoral prospects.

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There are some big pieces of 20th-century political history missing from this jigsaw, however. In the 1930s, Chamberlain’s son Neville succeeded where his father had failed in introducing a modest version of tariff reform, and trade within the empire rebounded. Britain abandoned the gold standard in 1931 and cheap money revived the national economy. The collectivism of the wartime command economy and the postwar Keynesian settlement followed. New forms of economic strategy, industrial policy and social reform were pioneered, and the Treasury beliefs in limited state intervention, “sound money” and free trade that had defined the first decades of the 20th century were defeated.

This era was brought to an end by the election of Margaret Thatcher in 1979. Her government smashed the industrial pillars and the class compromises that had underpinned the postwar world. The ensuing “New Labour” governments inherited a transformed political economy and, in turn, sought to fuse liberal with collectivist strands in a new settlement for the post-industrial economy. What many now view as the end of the neoliberal consensus is, therefore, better seen as the revival of patterns of thinking that pre-date Thatcherism. This tells us much about the persistent and deep problems of Britain’s open economic model and the continuing, unresolved conflict between finance and parts of industry, as well as London and the regions.

Brexit brings these tensions back to the surface of British politics, because it requires the construction of a completely new national economic and political settlement – one that will be thrashed out between the social classes, the leading sectors of the economy, and the nations and regions of the United Kingdom.

Few peacetime prime ministers have confronted the scale and kinds of challenge that Brexit will throw up: holding together the UK, revitalising our industrial base, delivering shared prosperity to working people and renegotiating Britain’s place in Europe and the wider world. This is the most formidable list of challenges. Lesser ones, we should recall, defeated Joe Chamberlain.

Michael Kenny is the inaugural director of the Mile End Institute policy centre, based at Queen Mary University of London

Nick Pearce is professor of public policy at the University of Bath 

 

Brexit Redux

📥  Anglosphere, Brexit

If only Alan Milward were still alive. Our foremost historian of Britain’s relationship with Europe, and author of the first volume of the official history of the United Kingdom and the European Community, would have brought the full force of his intellect and scrupulous scholarship to bear on the prospectus the Prime Minister has set out for the Brexit negotiations.

Why, he asked, did our first attempt to join the EEC fail in 1963, and our national strategy collapse?  “Britain’s weakness in the negotiations did not spring from its tactics”, he wrote in his official history, “but from the direct conflict between its own worldwide strategy, which in the Conservative Party still had powerful adherents, and that of France.  It was not a part of the United Kingdom’s strategy to base its economic or political future on European preferences. France, however, would accept nothing less and the outcome was de Gaulle’s veto.” (Milward, A., The Rise and Fall of a National Strategy 1945-1963, 2020 p483).

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That history seems wearily prescient now. Should we learn any lessons from it? Contemporary eurosceptics, whose number must now be taken to include the UK government, would doubtless retort that leaving is not the same as joining: we are not petitioning for entry, but quitting. “No deal is better than a bad deal”, as the Prime Minister put it in her Lancaster House speech. Unfortunately, we have been given to such hubris before and it has not served us well. Britain has now played the key cards in its negotiating hand: to leave the single market and the customs union, and end free movement. It is left with the threat of imposing retaliatory tariffs on incoming EU goods and turning Britain into a corporate tax haven – the United Kingdom offshoring itself into one of its own dependent territories. These do not look like strong bargaining chips, even if they weren’t so patently undesirable in their own terms. And, just as in the early 1960s, we are bringing perspectives to bear that are shrouded in the mists of our national history, not the realities of contemporary European diplomacy.

Britain sought entry to the EEC when it became undeniably clear that our post-war economic performance was vastly inferior to that of the six EEC countries.    Between 1950 and 1960, GDP grew at an annual average of 2.7% in the UK, compared to 7.75% in West Germany, 5.85% in Italy and 4.6% in France. By the early 1960s, productivity levels in West Germany and France overhauled those in the UK, and have remained higher ever since. Unlike continental Europe, the UK did not successfully integrate commercial and industrial policy in the 1950s. It preferred, as Milward put it,  “nebulous rhetoric about global competition”. Thus, “while British diplomats and civil servants, pushed into action by the Bank and the financial interests it represented, argued for a “one world system” in which British industry might well in reality have been at a serious disadvantage compared to its competitors, their European counterparts kept their eyes on the finer details of the relationship between industry and trade. All of them were rewarded by higher rates of growth of productivity in manufacturing than in Britain.” (Milward A, The European Rescue of the Nation-State, 1992, p393).

The post-war regime of fixed exchange rates meant that this loss of economic competitiveness showed up in recurrent balance of payments crises and pressure on sterling reserves. Policymakers were forced to address underlying weaknesses in our economy and direct national resources towards exporting sectors. This drove the change in Britain’s strategy towards the EEC – instead of standing aside, we sought to join the new, burgeoning European market, opening up our manufacturers to the competitive pressures it would bring, as well as to its consumers. The 1960s saw the development of a new industrial strategy to support this economic reorientation. It led to massive investment in our infrastructure, a new regional policy and a huge expansion of further and higher education opportunities.

Today, a floating exchange rate means that sterling bears the weight of adjustment. Our loss of competitiveness is signalled in a weakening pound. It is just that the markets decide its level, not Prime Ministers or Chancellors.  They are absolved from addressing the root causes of our current account deficit, as and until inflation eats deeply into living standards or foreign direct investment dries up. When faced with the prospect of a bad Brexit deal and further relative economic decline, our current Chancellor and Prime Minister argue for tax cuts and deregulation, not industrial strategy, capital investment and stronger public services.

In the early 1960s, it was our failure to resolve our relationship with the Commonwealth, and what entry to the EEC would mean for their critical exports to the UK, that sunk our negotiations. But more than that, what the EEC negotiations forced the UK to confront was the accumulated geopolitical and economic problems of the post-war era; not just our relative economic decline or our trading relationship with the old, “white settler” Anglosphere commonwealth, but the economic development needs of India and Pakistan, the political demands for decolonization in Africa, the status of three European territories (Malta, Gibraltar and Cyprus) and the meaning of our Atlantic defence and security relationship after the Suez crisis. As Milward put it, the “cumulative problems of 250 years of British rule” were “all gathered together in one negotiation.” (Rise and Fall p370).

Today that list would read rather differently. But Brexit will still be a prism through which a profound set of national challenges will be refracted. Inter alia, these include: the future of the United Kingdom itself, given Scotland’s vote to stay in the EU and the positions taken by the elected SNP government; Northern Ireland’s relationship to the Republic of Ireland, given our impending departure from the single market and customs union; the balance of economic and social class interests within the economy and political system of the country, and the weight given to the regions and manufacturing vs London and the City; and, most of all, our ability to pay our way in the world, given our longstanding trade deficits. All of this takes place against the radical uncertainty introduced into global politics by the election of Donald Trump. It is a formidable challenge.

Future historians will have to rise to the task of explaining how a marginal political preference that was largely (if not entirely) the preserve of the Eurosceptic right in British politics became the official position of the UK government.  We can be pretty sure that the answers will not be found in the Whitehall archives, as they were for Milward. Brexit has become a deeply political process, inside the Conservative Party, and outside it. Official histories will only tell us half the story. But as the negotiations with the European Union get underway, we would do well to learn from our past.

 

Liberalism can survive but it has to renew its social traditions

📥  Brexit, Liberalism, Trump

I wrote this for the Financial Times yesterday on the breadth and resilience of liberalism and how it can be renewed by reaching back to the social liberal tradition.

As 2016 comes to an end, liberalism will be given a place on the roster of the year’s notable deaths, slotted in somewhere between Harper Lee and Muhammad Ali. In the year of Brexit, Donald Trump and Vladimir Putin, liberalism has been declared dead and buried. “The liberal pageant is fading,” writes John Gray, the dystopian philosopher, and “all that really remains of liberalism is fear of the future.” He is not alone. All around us, a “post-liberal” era is being announced.

European liberalism joined forces with nationalism in the 19th century to give political expression to demands for autonomy and self-rule. Today, the two have mostly parted company, save where civic nationalists still seek liberation from larger nation states, as in Scotland and Catalonia. Nationalism now wears an illiberal face and it does so with pride. Authoritarian, conservative nationalists govern much of the world, including swaths of eastern Europe. Liberal politics is in retreat.
Yet the rush to read the funeral rites of liberalism is premature. It is a capacious and tenacious ideology with a rich, diverse history. The concept of liberty always at its core, it has worn numerous political and intellectual guises — from the classical defence of property rights and restraints on arbitrary power, to the expansive social liberalism that gave birth to the British welfare state, and also the emancipatory liberalism of civil rights movements worldwide. Even when politically weak, it has lent its ideas and energy to other movements. John Maynard Keynes and William Beveridge gave the UK Labour party the intellectual tools with which to build Jerusalem after the second world war.

Nordic social democracy can be readily assimilated to the social liberal tradition, as can Rooseveltian American liberalism. Even continental liberalism can lay claim to its part in the success of postwar Christian Democracy. With an ideological lineage of such range and influence, liberalism will not be so easily consigned to oblivion. But to thrive again it needs rescuing from its friends as much as its enemies.

In recent decades, it has been stripped of its philosophical and political power. In the quest for robust theories of social justice, liberal political philosophy grew ever more removed from daily struggles for improvement in the human condition. Liberalism lost sight of its insurgent roots in the fight against established orders and lost ground as politics focused after the financial crisis on questions of jobs, security and identity.
Meanwhile, the decline of the social liberal tradition left the field open for colonisation of liberal language by the Thatcherite right, which used it to pioneer the extension of markets, competition and new managerial regimes of regulation into public life and social relationships. Benthamite utilitarian liberalism has been recently revived but as a “science of happiness”, less often to liberate humans than to devise new means of governing them, furnishing justification for technologies to monitor moods and behaviour, corporate HR strategies and government by technocratic nudge.

Little wonder that, when they finally acquired some power by joining the UK coalition government, the Liberal Democrats were reduced to an agenda of softening the edges of public spending cuts and constraining conservative Euroscepticism. Theirs was a besieged version of liberalism, for which a heavy price was paid at the ballot box last year.

The renewal of liberalism will start with resistance. Already in eastern Europe a liberal rearguard is being fought to defend democratic and constitutional rights, from Poland to Hungary. We can expect American liberalism, at its radical and rumbustious best, to stand its ground against attacks on constitutional norms, environmental degradation and incursions into the rights of minorities. In the UK, liberals of all parties are at the heart of opposition to hard Brexit. In these battles, particular as they are to different national political arenas, liberalism can throw off the caricature of unpatriotic rootlessness and self-righteous political correctness.

But liberalism will fail if protest is all it can muster. It needs to renew its social traditions and the alliances once forged with the working classes — to rediscover social liberalism’s emphasis on the interdependence of individual and community, the pursuit of human flourishing and the economic radicalism with which to shape capitalism in the common good. It must play its part in constructing a liberal politics of community to compete with that offered by nationalists: one that responds to demands for good jobs, decent housing and social respect, and which appeals to voters outside the cosmopolitan cities.

These are big tasks, made harder by the political weakness of the UK Labour party and its centre-left sister parties elsewhere in the world. But liberalism is a resilient, adaptive creed. We should not pronounce it dead yet.

 

How the left should respond to the steady march of nationalism

📥  Brexit, future, International relations, Trump

Published in The New Statesman, December 2017

The new wave of nationalism is a reminder of the contingent, if not cyclical, nature of history. The liberal left cannot retreat to the comforts of moral outrage.

“Their world is collapsing. Ours is being built,” remarked ­Florian Philippot, the chief strategist of France’s Front National, after Donald Trump’s victory. Trump’s election to the presidency of the United States has consolidated a global shift towards nationalism that has been under way since the 2008 financial crisis. The steady march of nationalist politics has swept up swaths of the world’s population: Russia and Turkey are governed by authoritarian, ethno-religious regimes; eastern Europe is criss-crossed by illiberal, nationalist governments; and western Europe is now home to virulent, far-right movements and large, electorally competitive political parties, such as the Front National and the Freiheitliche Partei Österreichs (Freedom Party) in Austria, which have made their way into the democratic mainstream. Japan and India are governed by democratic, conservative nationalists, while in China an emergent strongman, Xi Jinping, has been newly designated as the “core” of the Communist Party leadership.

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Until recently, the Anglosphere countries had largely bucked these trends. Centrist conservative dominance in England, Justin Trudeau’s victory in the 2015 Canadian general election and the likelihood that the Democrats would retain the White House promised to build a liberal firewall against the nationalist ascendancy. Brexit and Trump upended those assumptions. The nationalist virus has infected the body politic of Burkean Anglo-America.

A focus on populism – in policy, rhetoric and political style – obscures the asymmetry of this shift along the left/right axis. Contemporary nationalism is almost wholly conservative or authoritarian, and sometimes avowedly fascist. It is only civic or leftist in the case of political movements seeking liberation from existing nation states, as with Scottish or Catalan nationalism. Its ascendancy is therefore another marker of the electoral weakness of the contemporary centre left.

But it is also highly differentiated. In the UK, Theresa May’s government represents an attempt to reconcile post-Thatcherism with a soft economic nationalism and renewed social conservatism. Its bedrock is an older, security-conscious electorate that is sceptical of immigration and hostile to elites. This is a far cry from the nativist and fascist movements of the European mainland, which draw energy from youthful extremists as well as the post-industrial dispossessed, and which direct unstinting fire at migrant populations and the EU project.

European nationalism, in turn, cannot supply the conceptual frameworks with which to understand Prime Minister Narendra Modi’s business-friendly Hindu identity politics in India, nor, in Turkey, President Recep Tayyip Erdogan’s Islamist, anti-Kurdish authoritarianism, which seeks to wrench Turkish nationalism out of its 20th-century secular, Kemalist frame. These have their own origins and trajectories. For its part, China maintains a political order that is highly ethnocentric, built around the dominant identity of the Han Chinese, and its leadership is increasingly centralised. But China is committed to the rule-bound, liberal global economic order on which its economic growth critically depends, and shows no interest in the military adventurism of its Russian neighbour.

This suggests that talk of a nationalist ­revolt against globalisation offers too simple an account of a complex picture. The new wave of nationalism has been incubated in the era of global integration, but it will not bring it to a close. Global supply chains, foreign direct investment, cross-border lending and the political institutions of managed trade all inhibit a reversion to autarky, imperial blocs or high tariff walls.

Global trade has fallen because of weak demand and the slowing of China’s growth, not protectionist sentiment, and although new multilateral deals with the Americans may now be off the cards, the cost of the US launching punitive tariff wars will be punishingly high. Trump’s election signifies an end to the signature trade agreements of the Obama era, and his narcissism and volatility introduce a deep uncertainty into global politics, particularly in the handling of relations with China, as the storm over Taiwan has shown. But regional trade blocs such as the North American Free Trade Agreement and the European single market are unlikely to collapse, and the integration into the global economy of the huge working populations of Asia will continue, not unwind.

Still, such are the howls of protest from the rust belts of advanced economies, the surge of discontent among debt-laden, college-educated young people who have been locked in to low salaries and priced out of housing markets, and the political shocks administered by Trump and Ukip, that austerity in Europe and inequality in the US will come under renewed pressure. A “reactionary Keynesianism” of tax cuts for the rich, increased military spending and infrastructure credits will form the core of Trump’s economic strategy as he seeks to repay his base. He will be inaugurated at a time of rising wages, and as long as inflation is held in check, American workers will feel their pay cheques swell throughout his first term. In the UK, the rhetoric of delivering for the “just about managing” classes will outpace reality, but, like their Republican counterparts, the Conservatives will seek to lock down the electoral allegiances of working-class voters.

The eurozone is more uncertain. A victory for Marine Le Pen would be a cataclysmic defeat for European liberalism, but even if her Front National doesn’t manage to emulate Trump, the size of its popular support, the pressure of left-wing opponents of austerity in southern Europe, and the electoral threat posed by reactionaries in Germany may yet force Angela Merkel to abandon the self-defeating straitjacket of EU-wide austerity and weaken the mercantilism of the country’s export sectors. By dint of history and conviction, Germany’s leaders remain deeply committed to the European project; they will not let it disintegrate easily.

Some reshaping of the global security order is likely, in which tacit co-operation between the main military powers returns, retrospectively endorsing Vladimir Putin’s land-grabs and power plays in the Middle East. With the US, Japan and France pivoting towards more Russia-friendly postures, and Britain detached from European security diplomacy by Brexit, the stage is set for a new rapprochement with Putin. The EU is likely to expend more effort in defending the Paris climate-change agreement and the Iranian nuclear deal than in contesting Crimea or Aleppo, despite the fears of the Baltic states. China has already indicated that its priorities for dealing with a Trump presidency will be resisting protectionism and any backsliding on climate change.

The electoral success of nationalist and conservative authoritarian governments also masks the continued strength of liberalism’s social and economic redoubts. Cosmopolitan liberalism is not rootless: it is founded on large and growing university-educated, ethnically diverse urban populations. In recent electoral contests, this bloc has roughly matched those of the conservatives and nationalists. It has suffered narrow defeats, not decisive ones. It will now dig in to defend its social gains and to resist encroachments on civil rights and liberal constitutionalism. This resistance is already facing down authoritarianism in central and eastern Europe, and will put up a fight against evangelical-inspired culture wars, environmental degradation and attacks on minority rights. The politics of constitutional patriotism, often restricted to a “kissing the typewriter” liberalism of procedural justice, will, for once, attract passion and anger.

The new wave of nationalism is a reminder of the contingent, if not cyclical, nature of history. It is unlikely to usher in a post-liberal order, let alone foreshadow the end of capitalism, though one cannot discount increased violence and repression of minority communities. The space for a broad alliance of liberal, centrist, social-democratic and green politics remains wide – but it will need to find a way of articulating working-class interests, economic as well as cultural, and to find a more expressive, emotional and compelling register for its politics.

The liberal left cannot retreat to the comforts of moral outrage and political protest. The new times demand a progressive engagement with the politics of identity and belonging, as well as renewed radicalism on economic policy and social protection. “You have made yourself the trustee for those in every country who seek to mend the evils of our condition by reasoned experiment within the framework of the existing social system,” Keynes wrote to Roosevelt in December 1933. If the era of nationalists and authoritarians is to pass, this kind of leadership will be needed again.

 

 

Shared prosperity and protest

📥  Brexit, development, EU Referendum, Trump

Professor James Copestake is Professor of International Development at the University of Bath, as well as being a member of the IPR Central Team and Director of Studies for the Professional Doctorate Programme (DPRP).

Donald Trump’s victory in the USA earlier this month coincided with a campus lecture here at Bath from Kaushik Basu, who played a leading role in the World Bank’s decision to add shared prosperity to its mission statement alongside the already established goal of absolute poverty reduction. Defined as growth in the income of the poorest 40%, shared prosperity is not in itself a measure of inequality – but it does invite comparisons with how their income growth compares with that of others in society. It also echoes the attention being paid under the UN’s new Sustainable Development Goals for 2030 to “ensuring that no one is left behind’ (the Republic of Uganda, for example).

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That said, many people living towards the bottom of the economic pyramid are likely to regard such worthy statements as at best irrelevant, and at worst fodder for the expensive bureaucratic ‘system’ for centralising power and promoting the global free markets through which they were marginalised in the first place. This takes us back to Trump, to Brexit and, most likely, to further political protest movements and ‘surprise’ votes. If so, then rising demand for better evidence of who is benefitting most from economic growth looks set to continue. Here are three examples of literature to watch.

First, there are 'Kakner-Milanovic global growth incidence curves', also known as Elephant Diagrams. Integrated global versions reveal rising shares of growth among world income deciles from 0% to 60%, high growth for the top 1%, and a stagnant trough of disaffected poor-to-middle class voters in between, mostly living in richer countries. This suggests that we should not be surprised to see more news stories that reverse the polarity of neo-liberal versus protectionist debate between the global north and south.

Second, there is the P20 initiative to monitor the poorest 20% of the world’s population: who they are, how they are doing, and where they are. Three-quarters of them currently live in just nine countries – India, China, Bangladesh, Nigeria, Indonesia, DR Congo, Ethiopia, Pakistan and Tanzania. Hoy and Sumner argue that other people in these same countries are now rich enough to transfer the simplistic sums necessary to eliminate this poverty – through a mix of higher taxes and shifts in funding from military spending and regressive fossil-fuel subsidies, for example. This is likely, in turn, to fuel renewed demand for incorporating estimates of countries’ relative tax effort into aid allocation.

Third, there is more nuanced political economy analysis of the causes and consequences of unequal shares in income growth. Take Ethiopia. Its government has been impressively successful over the last two decades in both promoting economic growth and channelling it into poverty-oriented activities, including rural roads, agriculture and social protection programmes. A symbol of its economic success is the construction boom in Addis Ababa and other prospering centres, and the rising property prices and rents anyone fortunate enough to own or acquire land there can enjoy. But investor confidence behind this model is threatened by protests linked to perceived horizontal inequality of access to these windfalls between different regional/linguistic groups. In short, if economic growth leads to rising inequality, political intolerance of the same will sooner or later threaten to hold it back.

All this suggests that indicators of shared prosperity (equitable or otherwise) are of interest not only to academics, researchers and development bureaucrats, but also to politicians, investors and activists – particularly to the extent that they can be disaggregated not only by income but also by class, ethnicity, gender, region, religion, disability, age and their intersections.

You can read more about Kaushik Basu's visit, his lecture and the conferment of his honorary degree here.

 

 

Abolishing the Autumn Statement, Sticking with the Treasury View

📥  Brexit, Economy

If the Autumn Statement was meant to deliver on the Prime Minister’s Chamberlainite ambitions for improving working class living standards while intervening to restructure the economy towards higher productivity, investment and exports, it has disappointed. Post-Brexit referendum downgrades to growth forecasts have increased borrowing and forced the Chancellor to push deficit reduction further out into the future. But there was very little in the way of extra support for low-income families and no increase in planned public spending on the NHS, social care or childcare. Meanwhile, tax changes – increases in the Personal Tax Allowance and higher rate income tax threshold – favour households in the top half of the income distribution.

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The new National Productivity Investment Fund is the biggest spending item in the Autumn Statement, but at less than an average £5 billion a year, it is small beer when compared to the scale of the challenges the UK faces. The UK’s business investment is falling, productivity is catastrophically low, and we are not paying our way in the world. Huge regional disparities persist.

This is what the Office for Budget Responsibility report has to say on a number of these key issues. On business investment:

“The latest data show that business investment in the first half of 2016 was down 1.4 per cent on a year earlier. We expect that weakness to continue, with heightened uncertainty following the EU referendum causing investment to fall further in the second half of 2016 and for growth to remain subdued in 2017. Overall, we expect business investment to fall 2.2 per cent in 2016 and 0.3 per cent in 2017, before annual growth returns in 2018.”

On productivity:

“In March we revised down our productivity growth assumption, as we put slightly more weight on the post-crisis period of weak productivity growth relative to the pre-crisis historical average. Nothing in the recent data would lead us to change that judgement about the rate of trend productivity growth that the economy can ultimately return to. But we do expect uncertainty to reduce investment and productivity growth in the run-up to – and in the transition phase after – the UK’s exit from the EU. We have therefore made a further downward adjustment to trend productivity growth over the next five years.”

On the UK’s twin deficits:

“the concurrence of large fiscal and current account deficits has been a feature of the UK economy in recent years. This means that overseas investors are ultimately – if not directly – financing the UK’s budget deficit. This could pose risks if those investors’ confidence in the UK economy was damaged by uncertainty or changes in policy. That could lead to a sharper fall in sterling and a more abrupt demand-led narrowing of the current account deficit”

On household deficits:

“The persistence of a household deficit of the magnitude implied by our forecast would be unprecedented in the latest available historical data, which extend back to 1987. Other datasets extending back to 1963 also suggest little evidence of large and persistent household deficits, with the household surplus negative in only one year between 1963 and 1987. A household deficit of the size and persistence we expect over the forecast period might be considered consistent with the unprecedented scale of the fiscal consolidation and the extremely accommodative monetary policy upon which our forecast is conditioned. It nevertheless demonstrates that the adjustment to the fiscal consolidation is subject to very significant uncertainty, and alternative adjustment paths are quite possible.”

The Brexit vote could have led to a more substantial reckoning with these persistent weaknesses in the British economy. So far, it has not done so. A slow decline, rather than a sudden crisis, means that dominant orthodoxies in the Treasury have not been dislodged. The Chancellor may have abolished the Autumn Statement, but he has not changed the Treasury view.

 

Some thoughts on Article 50 and the High Court Ruling

📥  Anglosphere, Brexit, EU Referendum, Euroscepticism

There can be little doubt that the government lost its case over the exercise of prerogative power to trigger notification of Article 50 (the mechanism by which the UK begins the process of leaving the European Union) very badly in the High Court. The court’s ruling is comprehensive - and damning.

As public law experts have noted, the government’s legal case would have been stronger if it had conceded that withdrawal from the European Union is not inevitable after Article 50 has been triggered. Lord Kerr, the British diplomat who authored Article 50, has argued that the process is reversible; that the withdrawal can itself be withdrawn.  That seems to be perfectly consistent with the text of Article 50, precisely because it is notably silent on this point – it doesn’t specify anything about revoking the notification, and the history of the European Union is replete with creative political use of the silences, blank spaces and inconsistencies in European law. (Indeed, when the founders of the European Coal and Steel Community signed the Treaty of Paris in 1951, the paper itself was blank: they had been negotiating so extensively over its terms that a final text was not ready for the official signing ceremony. “Europe started as a blank page”, the Dutch political theorist Luuk Van Middelaar once wrote).

The confidence of the High Court’s ruling on this point would therefore appear misplaced. It asserted that the notification of Article 50 would trigger the irreversible loss of the claimants’ rights. But that interpretation can be challenged in law, and in practice it cannot be certain that Article 50 is irrevocable, given the political contingencies. Yet for obvious political reasons, the government considered it untenable to concede that Article 50, once invoked, could be reversed.

It seems unlikely that the government will change its stance and decide to argue that Article 50 is revocable when the case comes before the Supreme Court in December. In addition to the political hit it would take, the government would then be in disagreement with the claimants over the interpretation of Article 50, which is a piece of EU law. And in that instance, the Supreme Court would have to refer the case to the European Court of Justice. As one leading European law expert, George Peretz QC put it, "if there is a question of European Union law [in a Supreme Court case] they have to refer it to the ECJ, unless the answer is obvious. That's a basic principle of EU law."

So the government will be back to arguing that prerogative power does indeed apply to Article 50, on which the High Court’s ruling was clear and decisive. It will likely lose. Then the focus will shift back to Parliament.

If legislation, rather than a substantive motion, is required to give effect to the courts’ ruling, then it will be a very short bill, as Hannah White at the Institute for Government has argued. The government will not want a Christmas tree on which pro-Europeans can hang all sorts of amendments. Instead, the opposition parties, and Remain Conservatives, are likely to try to amend the legislation, as White notes, “to place conditions on the Government before it can trigger Article 50. These could take the form of timing or process requirements – for example, a requirement on the Government to provide Parliament with information about its negotiating position before triggering Article 50.”  This also makes it very unlikely that MPs will be able to insert a clause in the Bill requiring a second referendum on the terms of Brexit, as Owen Smith MP wants to do. Parliamentary clerks would rule such amendments inadmissible. But it is not obvious that the legislation will take such a long time to get through Parliament that the timetable for triggering Article 50 before the end of March 2017 will slip. Governments can strip the legislative barnacles off the boat and clear the path for an emergency bill relatively easily if they need to, and this legislation will take precedence over everything else. Pro-European MPs will extract a price from the government, but they will not vote to stop Article 50 being triggered.

Nicola Sturgeon has given notice, however, that the SNP will use the legal opening provided by the High Court to open up new flanks of attack on the government. This will bring the tensions between the constituent nations of the UK, and an emerging soft federalist vs unionist hard Brexit, fully into view.

A detour into history may help explain this. One of Lord Kerr’s namesakes is Philip Kerr, later Lord Lothian. Each man was once the UK’s ambassador to the USA  - the latter during the early days of World War Two, when he gathered support in Washington for the British war effort, before dying of exhaustion. He was also, earlier in his life, a leading figure in Milner’s Kindergarten, a group of young men who served Lord Milner as High Commissioner in South Africa at the turn of the twentieth century. They would become ardent imperialists and advocates of Imperial Federation between Great Britain and its settler colonies. In their writings, one can trace the antecedents of the Eurosceptic idea of the Anglosphere that figures such as Dan Hannan have done so much to popularize. And yet towards the ends of their careers, Kerr and his peers, like the tireless Lionel Curtis, would come to favour Western European federation, as a step towards a larger, multinational federation of the liberal democracies. Federation was vital to the prevention of war, and they had seen too much war in their lives.

This federalist tradition was lost after World War Two, but it was influential on continental thinkers framing the emerging European Union. It has resurfaced as the United Kingdom grapples with its own internal relations, as well as its place in the world, as a consequence of Brexit. Gordon Brown has made the case for a federalist Brexit in forceful terms today, and if the United Kingdom pursues a flexible Brexit – or “flexit” - it will be a federalist one.  MPs from the SNP and SDLP, and some Liberal Democrat and Labour MPs, are likely to support distinct arrangements for the constituent nations of the UK. The legislation to authorize the notification of Article 50 will give them an opportunity to make their case. This will enlarge our democracy, not diminish it.