The move of McDonald's HQ to the UK suggests the limit of the government's ambition for Brexit. It looks increasingly likely that their plan is to turn the UK into a tax haven. And that means the only people likely to benefit from their vision for Brexit are the best off and those working in banking, accountancy and law firms: what Prem Sikka has for a long time called the Pinstripe Mafia.
I have made my position on Brexit clear: I think it a straightforward mistake for this country. Since, however, I have little way of preventing Brexit happening now the fair question I have asked myself is what I would expect of any politician on this issue.
This needs to be set in the context of what the UK really needs right now. I know we could all come up with a long list of what that might be, but a focus on priorities is key when deciding on this issue. In that case I suggest there are three priorities.
The first is new investment in infrastructure. I published data yesterday showing how bad the UK is on this: we have been up to 7% of GDP short of investment compared with international averages for maybe 20 years. This is no trifling sum: in the current year it amounts to a shortfall of about £125 billion. This is a sum that would be transformational in terms of the UK economy.
Second, we are short of secure employment with prospects. Of course people want good pay as well. I am well aware of that. But security and skills are essential parts of the platform on which good pay is built, and I'll go for the foundations of prosperity first.
Third, we need to build strong economic relationships based on sustainable foundations. Our trade deficit is a real issue, unlike our government deficit, which is just a matter of book-keeping.
I accept when saying these things we also need strong public services, education, health care, and much more. I ignore them here because that would be the case Brexit or not.
How then are these three core requirements that can build a post-Brexit UK to be delivered? In answering I am assuming the UK will have a hard Brexit: the end to the free movement of people that appears to be the UK's only negotiating red line guarantees that in my opinion. We will be beyond EU rules in that case.
The opportunities are more plentiful than the demands. First, the requirement for QE disappears if we are not in the EU. We can simply fund any government deficit by the Bank of England making direct loans to the Treasury if it wishes. The first opportunity Brexit provides is to abandon the deficit paranoia which is implicitly required by EU membership.
Second, when out of the EU the UK government will be allowed to have an interventionist industrial policy and so support essential new industries for this country by direct intervention from a National Investment Bank that will, I am quite sure, have no problem selling its bonds. The interventions have to build on strengths. We do have some. Biotech is one. Fintech may be another. And we are seemingly quite good in some technology areas. We could be a world beater on sustainability. And let's not forget services: our universities are getting cheaper after Brexit and we should be understanding that they are both major employers and exporters for this country. I'm not pretending I know all the answers here: I am suggesting that they exist.
Third, we need to get on with out next industrial revolution. This is the transformation to a sustainable basis for living. The payback on investment in sustainable energy is incredibly high: the industry could create jobs in every UK constituency and durable jobs for vast numbers who want them.
Fourth, we have to replace EU labour rights with better UK labour rights. The failure of globalisation to deliver has been the result of the emasculation of trade unions and the resulting loss of reward to working people. So in post-Brexit Britain trade union rights have to be reinforced.
Fifth, in point Brexit Britain we have to get banking right. Firstly, we have to recognise that banking as most people think of it is a service which makes almost no money for banks right now. So we need to sort out a national banking system which exposes the state to little risk to ensure that this essential public service exists quite apart from financial speculation. And if that requires a national (or a series of regional banks) to achieve the goal, so be it. If other banks then complain, again so be it: EU competition law will not apply. Next we have to realise that most of the rest of banking is about making money from home loans. This is the job for a revitalised building society sector: only savings with them should qualify for savings tax reliefs post Brexit. And third, all the rest that banks do is peripheral, often rigged and of little identifiable benefit to society at large unlike, say, the insurance sector. Of course banks that do not engage with publicly deposited funds can engage in these markets if they wish, but not without the risk falling wholly on their shareholders. The state and depositors should not in post-Brexit Britain subsidise speculation. And last, I have no problem with selling financial services, but make it ones worth selling. Advice, insurance and efficient market support is fine: let's find ways to delive them without risk.
Sixth, we need housing. Let's undertake one of the reforms I have long suggested: one quarter of all funds invested in pension funds each year should be directed towards public investment in return for the tax relief pension fund saving enjoys. This would deliver £20 billion a year for house building and provide the chosen investment in property most seem to desire for their old age.
Seventh, let's clean up our economy. Let's close the tax gap and rid the UK of its rotten secret companies. Then honest small business will have the basis on which it can compete fairly. It hasn't got it now. Nothing might do more good for both UK business and the public finances at the same time. And if we have to employ more public servants to achieve this goal, good! What's wrong with doing the right thing for British business, which is what this would be?
Eighth, let's keep our doors open for the workforce we need. I accept that a policy of bias in employment, so that it would be necessary to try to recruit UK workers before migrant employees may be appropriate in some areas. But let's be wholly realistic that we need the skills many people bring to the UK right now and we cannot build the economy we want without them.
And last, on this list? Let's unashamedly admit we will subsidise British business if we need to do so to build the future opportunities we need. It is what we did in the past. It is how technological change is protected to ensure it can get onto its own two feet.
These are things Brexit could do, but no one talks about them. Why not? Why has no one got a positive image of the post-Brexit UK economy? I am sure my suggestions are incomplete and could be improved. But for heaven's sake, let's have the debate whether we want Brexit or not. Ir is likely to happen. Failing to plan for it would be another disaster for the left.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Thanks for this and your suggestions. On the meta-topic, I agree, and wrote my own take on it here: http://www.hughbarnard.org/content/great-conversation simply, that we should now have a broad dialogue about the ‘shape’ of the UK (or, worst case, England) post-Brexit. It’s about time we stopped fixating on (discredited by so many economists, now) ‘austerity’ and ‘least worst’ and became more visionary and optimistic.
As Alan Kay:https://en.wikipedia.org/wiki/Alan_Kay said, ‘The best way to predict the future is to invent it’.
Thanks
And I agree with that sentiment which is why I want to do just that
Excellent list Richard, but I’d add a ninth: If we’re intent on restricting the free-movement of labour, then let’s support long-term and sustainable investment with intelligent capital controls. You’ve commented a lot on this in the past – it’s something that needs a great deal more consideration now.
Fair point
And to add to this, ban banks from lending to currency speculators.
I suspect you know that everything on your list would be anathema to a Tory government, Richard. That would not have been the case pre 1979 but it certainly is now and particularly for one as right wing, and neoliberal, as we now have.
I was going to make a list of where we will actually be heading, starting with your suggestion in another blog: that under the banner of tax competition we become a tax haven on a par with all those ex-colonial outposts we’ve supported and harboured for years. This is absolutely inevitable given the power and influence of the City of London
Beyond that there’s no real point in making a list as all you need do is look at your suggestions and then consider what the exact opposite would be. Thus, as we see from Trump in the US, environmental protection will be sacrificed in the name of econimic growth, as will sustainability and anything else where regulation is required (this is in fact not that far from much of what was contained in legislation passed under the Cameron government). In short, there will be little or no regulation as it will be argued that this stifles our ability to compete in the “free trade” world into which we are headed.
In terms of most citizens of the UK, the costs will be severe – nothing less than a return to the economic and social standards that prevailed before the 1st World War and in many case continued until the 1950s. But as we see from the US, after 30 years of falling living standards for many the only escape route on offer was to elect a rogue who claims to be on their side but will in fact deliver the exact opposite.
The options are no better here. Leaving aside the increasing uselessness of the Labour Party, we also live in a slightly different form of managed democracy to that which applies to the US (Russia being another variant, and the EU a multi-state model), but one that is, nevertheless, bought and paid for by a coalition of big business and finance and the wealthy.
Many of my fellow citizens voted to leave the EU to weaken the power of this elite. But sadly the result will be the exact reverse as the government – any government – is even more in thrawl to this group as they need them to use their wealth and influence in whatever way they wish to ameliorate the downside of Brexit (witness the deal done with Nissan – the first of many), and provide at least some semblance of a situation where future governments can claim Brexit a success, regardless of the reality for the many.
To this end the elite and their captive governments will be aided endlessly by the bulk of the press and media, not least because leaving their relationship to the elite aside, they cannot report that the positive Brexit outcomes they banged on about for years failed to materialise. Hence an Orwellian form of Newspeak will become the norm (again, not that far removed from the situation we have today). This is our fate.
All so true Ivan
I am afraid that I have to agree with your assessment of the likely course of events if the right is not stopped. I think you have accurately assessed the motives of their leaders and the tactics they are employing. You are also right in your description of the political weakness of what should be the main opposition party. If only more people could see the situation as clearly as this we might be in a better place.
I suspect you take no more pleasure in this than I do and I write party to “congratulate ” you (not sure if that is the right term) on your analysis but mainly to enter two reservations about both what you and Richard have written and which I hope may take the discussion forward a bit.
Certainly Richard and , I think you , are assuming a “hard” Brexit by which I would mean Britain entering a kind of economic war with Europe (undercutting them on taxes and environmental protection and offering soft trade deals to third parties while maintaining tariffs on EU goods at WTO maxima). the other kay feature of this kind of Brexit would be a deal with Trump , obviously on terms very favourable to US big business , and perhaps binding on future UK Governments.
I simply do not accept that this is inevitable and in my view all our energy should go into resisting it. At the end of the day there is very little public support for it , which is why the Brexiteers had to lie to win the referendum.
There are some signs that there may be enough MPs with the vision and courage to resist and , at the very least, to force the issue to another election. as time goes on it will become clearer to everyone what the right are really after by way of Brexit.
My second reservation is perhaps more about what Richard wrote. I agreed with much of it but the glaring absence was the political force that might bring it about. There is not much sign of it at the minute and , if the right push through their coup to the end (the hard Brexit as defined earlier) it will even harder to achieve politically. That is why I do not believe that we should give up the struggle now.
I will oppose Brexit, and especially hard Brexit
But it is also negligent to think what it might mean in 2020
Keith, you are correct, the assumption on which I based my argument was of hard Brexit. And I admit that is not inevitable and in my limited way I will do all I can to steer things in that direction. I am not hopeful, however, given the forces pushing for hard Brexit, and, perhaps as importantly, the ignorance of many people as to what the outcome will be.
This is not difficult to understand given the majority of the media that most people engage with are hell bent on not reporting anything negative – which goes back to the point I make in my original comment. So, (as Richard will know) I frequently use what I hear at my barbers each month as a barometer of what many of my (male) fellow citizens in my (suburban) part of Nottingham are thinking. And I can tell you that they are overwhelmingly of the view that we should go now and f— the consequences. On my latest visit I did have a bash at posing the question as to what might happen to people working in factories like Toyota just outside Derby where the supply chain crosses back and forth across the EU. To paraphrase, the response was, when push comes to shove “they” will sort it out. There’s no wish or willingness to think more deeply than that.
Finally, I also note that the attitude of my “focus group” has hardened considerably over the past few months, again not unrelated to what they read in the press – The Sun and Express being the staple newspapers at my barbers, as they are in many similar establishements. So, the outcome is not inevitable – nothing much ever is apart from death – but being a realist I’d say prepare for the worst.
I use such research techniques as well: haircut due tomorrow. I now miss the school gate. They work, and often worry me
I live in hope
Without much expectation
[…] http://www.taxresearch.org.uk/Blog/2016/12/09/a-vision-for-a-post-brexit-economy/ […]
I am not sure if I have pressed the right button to reply to Ivan’s response to my post. If so I want to say that I am grateful for it but remain concerned that the focus of attention might shift from the immediate fight to a long term vision which might have very little chance of being realised in the lifetime of any of us.
While sharing much of the economics of Richard’s original posting I cannot see how politically there is much chance of realising it after a “hard” Brexit. There is a very clear political project in the minds of the leaders of the right to use Brexit to fundamentally alter British politics in a rightward direction. A key element of this is alienation from the European countries and alliance with the USA under Trump.
Britain is already a bit of managed democracy. We have a second chamber that is not allowed to challenge the Government. Next up are the judges. There is a hidden political party in the right wing papers which does not subject itself to election but acts as a sort of permanent coalition partner for the right wing of the Tory party. Parliamentary sovereignty is lauded only when Parliament follows a right wing agenda. Duncan Smith gave the game away when he said the House of Commons had handed over a “blank cheque” to the Government.
The only reason the right wing leaders want a hard Brexit is that it will strengthen their power. Modern right wing politics only thrives when people who gain nothing from the elitist policies of the right are frightened of or angry about some enemy. That is to be the role of the EU. The EU countries will also provide a very useful scapegoat for the failures of the right’s policies and a justification for rushing into the arms of Trump. The aim is for the this sort of thinking to dominate British politics for the foreseeable future. If , for example , Scotland does not buy it then let them go – they will provide another handy “enemy” and one more easily bullied.
You seem certain that public opinion has moved towards a hard Brexit. I must say there does not seem to me to be enough evidence to justify acting on that assumption. There was a poll at https://www.theguardian.com/politics/2016/nov/16/uk-voters-want-single-market-access-and-immigration-controls-poll-finds which found strong support for single market access as promised in the referendum.
I am not suggesting that progressives should confine themselves solely to the Brexit debate. There is clearly much in the Green New Deal and more work should be done on it to make it ready for implementation. Unless we stop the hard right , however , the Green New Deal , is more likely to end up as Pie in the Sky without Richard Griffith.
My argument is a simple one: we will never stop the Right without ideas
I accept all your points: but ideas are what change things
And ideas are what the left has not used, in the main
Until a group of strong-willed and determined non-neoliberal MPs can be found to lead us out of the cesspit, it’s impossible to disagree with Ivan’s comments. Tragically for us all, I see no sign whatsoever of the emergence of any such group.
It was bad enough being in total thrall to business generally but to be running out of hope for a better future, for everyone, is not a position in which I have ever expected to find myself.
While I can’t imagine myself ever being anything but a lefty, the only way the so-called left parties could redeem themselves in my eyes would be to admit that their own collective incompetence is significantly, if not exclusively, responsible for where we find ourselves, abandon their current obsession with household economics, adopt positions that put people first and find the balls to communicate their “new” position fearlessly.
Some will say that my suggestion would alienate a volatile electorate but, when the left has already become an irrelevance, and continues to alienate the electorate, what does it have to lose?
I need some hope that my childrens’ future will not look as dire as current events suggest that future will be.
An afterthought – if nothing else, it’s suddenly become crystal clear, ie more than an opinion, that so many of those that voted for Brexit had reached exactly the same conclusion as I have now for essentially the same reason, the absence of hope.
I just typed that same phrase…,
See the Independant is reporting that, if Britain leaves, Brits would be offered individual “associate citizenship”, letting them keep free movement to live and work across the EU, as well as a vote in European Parliament elections!
http://www.independent.co.uk/news/uk/politics/brexit-eu-citizenship-keep-freedom-of-movement-guy-verhofstadt-chief-negotiator-opt-in-passports-a7465271.html
Who says that Continentals don’t have a sense of humour?
Wonder if it is likely to be shared by our current government? Or might it just split them down the middle…
If people can be associate citizens what about companies? If corporation tax gets reduced say to 15% then maybe companies could elect to pay the difference to an EU fund, in return get access to the single market, export/import within the Customs Union, influence in European Parliament etc. It could be interesting to see if UK businesses liked the trade-off.
My ‘focus group’ has a slightly different demographic profile. I think they’re probably Daily Mail and Daily Telegraph readers, but they seem to have come to the same conclusion.
Anybody who questions what the government is doing is a ‘Remoaner’, we should just get on and jump ship and ‘we did it before on our own, so we can do it again’. The sooner the better we ‘take back control’ (that was a magic slogan) from those Machiavellian unelected bureaucrats in Brussels the better! Ahem!
I don’t think they care much (and possibly don’t even know much) about anybody outside their bubble. They have some faith in ‘them’ to sort things out, if everything goes pear-shaped. They possibly have a point, as they tend to be quite wealthy and older than average, with mortgages paid off. A Conservative government will throw them enough bread and circuses to keep them happy. I don’t think they have ‘no hope’. They’re optimistic that the metropolitan, elite PC brigade have been put in their place.
I despair!
PS. An early Happy New Year to all!
I agree, it is desperate
Sue
Apologies for posting again but there is some evidence in the NE at least that the mood is changing: http://www.sunderlandecho.com/news/politics/sunderland-echo-poll-shows-u-turn-on-brexit-1-8282851. I was always nice to get the results from Sunderland South first, particularly before Chris Mullen retired to his Northumbrian walled garden. The news is that there seems to be pretty much a reversal from 60/40 pro leave to 60/40 pro remain. The Sunderland demographic is very different probably more Sun readers. Interestingly it is Guardian readers which are most partisan with only 9% voting leave. Sun readers had only 70% voting leave.
I saw this and wondered whether reality is dawning
I can hope
Had a brief chat with Caroline Lucas today; first time I have met her. This was a very informal affair at the Boatside Inn, Warden, Northumberland with about 40 people; (where the north and south Tyne meet) and was impressed. Ther was a small informal speech about Climate Change bit only for a few minutes; but we had a chance to talk one to one (my wife – a senior NHS figure was with me). We talked about progressive alliances and briefly about Economics – the Green Deal. I said Richard Murphy had been plugging this for years. She said he was a great guy and did I know him? I said I interacted with him through his blog.
It was Caroline’s birthday today but overall a very nice experience.
I think to have a hope of getting anything like Richard’s agenda noticed there needs to be a change of government. Without a progressive alliance I think we are lost but Caroline was hopeful that Labour would come aboard. We all need hope to sustain us through these dark times.
Caroline is a politician I trust: there are few of them
Thanks for the account
For the avoidance of doubt I voted out in the referendum.
I did so for a variety of reasons. A major reason for doing so was a desperate feeling that without change the country was being run solely for the benefit of the wealthy, those who make a living hanging onto the coattails of the wealthy and of course megacorp. Voting out was a rare opportunity not choose between shades of grey.
I believe many who voted out did so for similar reasons. I also believe such concerns are not uncommon amongst those who voted remain.
The concerns expressed above that brexit will be used to reinforce the neo-liberal status quo are real. This is what makes your list, or some vatiant thereof, so important. There needs to be an intelligent programme that proposes and promotes practical and fairer ways of organizing how we live and none of the existing parties are doing that. For this to have a chance of working usage of terms such as ‘progressive’ and ‘progressive alliance’ to exclude anyone who voted out needs to be changed.
I would commend peo[le to take a look at Mark Blyth https://www.youtube.com/watch?v=Bkm2Vfj42FY
Mark Blyth is good
Thanks Roger for a good talk and a succinct analysis from Mark Blyth, a bit shorter than a micro century in length (my standard lecturing unit). His discussion of Kalechi’s bug was interesting – I had not heard it out in this way before
Maybe being pro or anti BREXIT is a cultural thing on my part. I being Irish have little faith in Westminster and almost none under a Tory government. I thought “taking back control” would hand control to the right wing of the Tory party and things would deteriorate over the next decade: financially, environmentally, culturally health-wise and educationally. (could I’m sure write a much longer list).
I also worried about Northern Ireland; the peace there is still fragile and exiting the EU will put massive strains on the province.
The way BREXIT has been handled so far by the buffoons (to use Mark Blyth’s term) reinforces my pessimistic feeling about the long term future of the UK; an ultra regressive neoliberal distopia, with a soporific public buying into the post-truth agenda. An increasingly zombified England of Daily Mail readers and watching a UK version of Fox News given that the Murdoch empire is likely to expand again.
If we get to something like Richard’s vision then I will be delighted to be proved wrong and am a strong supporter of a progressive alliance.
Bill Keegan in the Observer is good today.
He reckons (having spoken to others evaluating the vote) that by the time BREXIT is achieved, the older part of the vote that voted leave will have died off or be much reduced by the time it happens.
This means that the remain vote – proportionally higher amongst the younger of the population – will be more presentative of attitudes to the EU at a time when we will be leaving!!!
You couldn’t make it up could you? What a misgoverned little island we are.
Time to man the life boats methinks.
Nice article.
I will just comment on a few points :
QE easing will be gone yes.
As the UK has a structural deficit on trade in goods and financial services will be hit because the hard brexit (loss of banking passport) and because of lower £ expect a higher interest rate. This will cost you both higher interest expenses for taxpayers, for companies and for the Treasury.
In case of printing money by the BOE, expect higher inflation.
Fiscal support for industries might cost you export opportunities as complaints can and will be made with the WTO and you can expect sanctions from other countries because of unfair competition.
As for sustainability and workers rights : The UK has a definite reputation of being against sustainability. Idem for workers rights.
Academia : Brexit will cost you lots of research funding, which is already being the case, and will cost you the majority of European students as the Erasmus program, allowing them to study within the EU, is no longer appicable.
Just a few remarks. Mor can be, and are made , elsewhere,
Erasmus is especially significant
Indeed. I have mentioned elsewhere I am an Emeritus Professor at Northumbria University in Newcastle upon Tyne. I however maintain very strong links with my Alma Mater University College Dublin.
The contrast is very clear. There is tremendous optimism in the Irish University sector. Considerable extra government funding is going into recruiting EU students and not just Erasmus – postgrads, research funding – attracting the best academics in Europe. In contrast there is pessimism in the UK. Every single VC (University Head) was against Brexit and for good reason. The certainty that Brexit will be bad for UK universities is probably closer to one than in any other sector.
Agreed on all counts