I want a Labour Prime Minister

I recently joined the Labour Party. I’m the sort of person who drifted away from the party due to the Iraq war but given the binary choice we face in the UK I’ve always wanted a Labour Prime Minister. And that’s the reason I’ve joined, I want a Labour Prime Minister.

I recently went to a meeting of my local CLP where a motion on Corbyn was debated. Speaker after speaker (all over 45) stood up to complain about Iraq, PFI and other sins of the Blair government. I agree on many of the points, PFI was an accounting fiddle, Iraq was a disaster. However I don’t support Corbyn as leader for that simple reason, I want a Labour Prime Minister.

Purity is not a positive character trait in politics, responsibility requires difficult choices, getting anything done requires compromise and pragmatism. In the current climate anyone who disagrees with Corbyn’s absolutist stance is a neo-liberal, a Blairite, warmongering scum.

Let me tell you a story. It’s about a Labour politician who opposed strike action being used as a tool of political action. He served as a minister in a Labour government that followed misguided economic theory in imposing horrific austerity cuts on the country. He then took over after a coup to oust a pacifist Labour leader. So who is this neo-Liberal, Blairite class-traitor scum? Clem Attlee, the man who gave us the NHS and the welfare state.

Pragmatism and the ability to get things done are key skills for a Labour leader, but they are not the most important trait. That is the ability to win the 37% of the vote required to command a majority in the Commons. At the last election the largest number of people who left Labour to vote for other parties went to the Tories. For all the angst about losing voters to the Greens it was in the centre where Labour shed the most votes. If Labour wants to win a majority in the Commons it needs to win over around 3 million people who voted Tory at the last election. Do you think Jeremy Corbyn can do this? Do you think that a floating voter in Stevenage will look at Corbyn and say “he is a better Prime Minister than Theresa May”?

That last point is important. So many people at the CLP meeting said “We don’t want a presidential system”, well tough, strong & popular leaders win votes. Do you really think Corbyn will win in the potential Prime Minister stakes? Do you think that after a campaign with Corbyn portrayed as being in Gerry Adams’ pocket or being steamrollered by Putin will end with swing voters choosing him as PM?

You’ll notice that nowhere here didn’t really discuss policy. That’s because I agree with some of Corbyn’s policies, especially the idea of fiscal stimulus to boost the economy. However he does not have the political skill to win 3m voters, he is not seen as a strong leader (his approval ratings are worse than every party leader in history except Thatcher in 1990). He has built his career addressing rallies of people who agree with him and has built a personality cult based on those people. This does not demonstrate the ability to win over 3m swing voters in places like Nuneaton and Stevenage, in-fact it likely shows he may not have the detachment required to look outside his own bubble and see how to win over C1 and C2 swing voters.

I’m middle class, I can afford to wait, let Corbyn lose in 2020 and then rebuild the party afterwards. But there are millions of Labour voters who cannot afford this.

I want a Labour Prime Minister, do you?

 

I want a Labour Prime Minister

No, you aren’t ending austerity

OK, due to living down south I haven’t often commented on the Scottish election but here goes. Basically the main thing that has got on my nerves is the discussion of austerity. Put simply, austerity is cutting spending or increasing taxes to reduce the government deficit (the difference between money spent and taxes brought in). So let’s look at what the parties have to say.

Labour will

“dispense with austerity”

While the SNP say they will be

“In government in Scotland, and leading the opposition in Westminster, the SNP have stood stronger for Scotland and against the austerity agenda of the Tory Government.”

Here’s the thing, neither of them have the powers to do that. If you want to reduce austerity you either have to use very unconventional monetary policy (which the Scottish government can’t as it doesn’t have its own currency) or increase borrowing. Under the new fiscal powers being given to Scotland the Scottish Government will be able to borrow per year,

  • up to £500 million for in-year cash management
  • up to £300 million for forecast error
  • up to £600 million to manage economic shocks

This is capped at a total of £1.75bn and the last term only applies when the economy is growing by less than 1% in a year. There’s also the ability to borrow about £3bn in total for capital expenditure (building stuff). For context the Scottish Government has a total budget of £28bn per year. So, unless the economy is in trouble the Scottish government can’t borrow any money to reduce the impact of austerity on day-to-day expenditure. Of course an independent Scotland would be able to borrow as much as the market would sell it but it would also have a significantly higher deficit than the UK as a whole.

I should briefly note that the UK Labour policy is to balance the current budget and to borrow only for investment. This is slightly different from the Tory policy of balancing the whole budget as it allows higher infrastucture spending. The SNP’s policy is perhaps more accurate as it states that they will be a vocal opposition in Westminster but other than that they won’t be able to actually do anything against austerity.

Shifting the burden

So what is Scottish Labour’s tax policy (1p increase on the basic and higher rate and 5p on the additional rate of income tax) going to do? Well it will shift the burden of austerity more towards the better off. The SNP have claimed that Labour are

“determined to hit the poorest in our society with the cost of Tory austerity”

This is demonstrably false. Under Labour’s plans a person on the 20th income centile (so someone earning less than 80% of the UK population, 2013-2014 figures) will pay £21 more in tax per year or 0.15% of their salary. Look at the 80th centile (so earning more than 80% of the population) and they will pay £261 more per year or 0.69% of their income. The tax and benefit changes over the last few years have disproportately hit poor working families (pensioners not so much) with the poorest families with children losing the equivalent of 7% of their income due to tax and benefit changes during the last UK parliament. Labour’s plan is to spend the money they raise on benefits for carers and money for eductation projects targetted at the poorest children, shifting money back to the poorest. The SNP plan to shuffle some money around, help soften the blow of the bedroom tax, stuff like that. But their policy is and always has been small-scale action on poverty to appeal to their base whilst not doing anything too scary to rock the boat for Middle Scotland. Their goal after all is independence and they have consistently avoided radical action which might scare off people in the political centre-ground.

So in summary, neither of the two larger centre-left parties in Scotland is actually going to do anything to stop austerity because they can’t. Labour will likely shift the burden more towards the richest and the SNP will take some action to lessen the blow with benefit changes.

However none of this matters as the main issue of the campaign is independence even if the parties claim it isn’t. The SNP will get about 85% of Yes voters plus a small number (about 1/6) of No voters and with the Unionist parties splitting the rest of the No vote (1/3 to Labour, 1/3 to Tories, 1/6 to Lib Dem/others) the SNP will win by a landslide.

No, you aren’t ending austerity

Are migrants draining the NHS?

The Leave campaign seem to have decided that this week they will focus on the NHS. The underlying claim of most leave campaigners with regards to the NHS is that EU migrants put the NHS under strain. The simple arguement seems to be more people = more demand for NHS resources. This is frankly overly simplistic as it misses one major point, EU migrants, like everyone else pay into the NHS via the tax system. They are only a burden on the NHS if they represent a demographic group which uses far more NHS services than they pay for.

 

In the rest of this post I’m going to ignore the significant contribution that EU immigrants who work in the NHS add to the country.

 

Who uses NHS services?

To put it bluntly, the NHS spends most of its money on a small number of people. Some, like me, are young (ish) and have chronic conditions which are expensive to treat. However most are older people as the chart below demonstrates,

Screenshot 2016-04-04 01.46.15
Cost to NHS of each age group with 100 set to be the cost for the 85+ cohort. Source

Clearly older people use NHS services much, much more than younger people. So if we had a huge influx of EU immigrants who were all aged 90 then it clearly would put a massive burden on the NHS.

 

Who are EU immigrants?

So, are EU immigrants the flood of 90 year-olds that are the stuff of nightmares for NHS planners? Well, no.

EU migrants are younger and better educated than the UK-born population and are less likely to be unemployed, claim benefits or use social housing. In fact the average age of an EU migrant is 26.5, which is unsurprising as the average age of a immigrant to the UK is 26. So the typical immigrant to the UK is young, has had their education paid for by another country and is at the age where they are unlikely to be a burden on the NHS. Let’s look at that plot again,

NHS_age_cost

I think it’s pretty clear that immigrants from the EU are not the sort of people who would add extra stress to the NHS.

Are migrants draining the NHS?

How much does the UK benefit from the EU?

Last time I went over the erroneous claim that the UK pays £350m per week to the EU. The true gross figure is £250m and the net figure £137m per week. Per year that comes to roughly a cost of 0.3% of the UK’s GDP. But this only counts money we directly send to the EU and money we directly get back. What other costs and benefits are there?

There are two sides to this, how much does the EU cost the UK’s economy by regulation and how much does it benefit us by increased trade?

Firstly let’s look at EU regulations. Whilst the media rants about myths like bans on prawn cocktail crisps or forcing farmers to give pigs toys, most major regulations are much more mundane. The thinktank Open Europe created a list of the 100 costliest EU regulations. These come to a total cost of £33bn per year. So there you have it, the EU bureaucrats cost us £33bn a year, we’d save that if we left the EU. Not so fast, regulations can cost some people money but benefit others. A regulation requiring increased training for commercial vehicle drivers might cost a haulage company money but it would benefit a driver training company and an insurance company if it led to fewer accidents. Open Europe found that the total estimated benefits of these 100 regulations was £56bn. However a large amount (£20.8bn) of that comes from the EU Climate package and the benefit of that relied on a global climate deal that hadn’t materialised at the time (March 2015) the study was written. That knocks off about £19bn off the benefits*. Some of the other large benefit items may also have been overstated so it’s hard to say that the financial benefits of EU regulation outweigh the costs.

But hang on, that’s just monetary cost. The ban on sending children down coal mines probably cost the 19th century economy a fair whack but had substantial non-monetary benefits for the children involved. The Open Europe study claims there is no monetary benefit from the Working Time Directive (which prevents workers from working more than 48 hours in an average week), the Data Protection Act, a ban on gender discrimination and many others. Many other regulations also have obvious benefits, for example regulations forcing banks to hold bigger capital buffers, which protects the economy from bank failures like in the last crash. Even if you ignore the monetary benefits of regulation, saving the full cost of removing EU regulation would require doing nothing about climate change, removing many laws preventing employees from being exploited, allowing gender discrimination in employment, removing rules protecting consumers’ data from being carelessly left open to fraudsters, leaving banks dangerously exposed to financial shocks and repealing many more popular measures.

Whilst it’s possible to find someone to argue against even the most popular regulations,

suggesting the UK would be some deregulated “paradise” after Brexit is daft.

It’s important to remember the alternative scenario when considering how much the EU benefits the UK’s economy. When doing a study of the UK leaving the EU you need to have an alternative scenario to compare to. How credible your cost-benefit analysis is depends on whether you’ve taken all the costs and benefits into account and how realistic your alternative scenario is. If I were to propose that after Brexit everyone would get a free unicorn and an unlimited supply of gold my study wouldn’t produce terribly credible results. Unfortunately some studies are better than others.

Medicine faces similar problems. Studies of a particular drug may not be done terribly well, all the participants may be Olympic athletes so might not represent the population at large, or there could be some underlying variable (the ones getting the drug were richer and had better diets than those on a placebo) that explained the observed effect. Hence the best thing to do is take all the studies, look at the strengths and weaknesses of each one, then look at what the best studies say. This is exactly what the CBI have done.

These studies take into account the UK’s monetary contribution along with the benefits from zero import duties and low administrative barriers to trade. A complete withdrawal from the EU would lead to UK companies having to complete substantial amounts of paperwork, certification and safety checks before their products would get access to the EU. These Non-Tariff Barriers would reduce the UK’s trade with the EU and thus harm the economy. The best studies in the CBI study take these into account and find that the UK’s economy is 2% about larger by being part of the EU. Leaving the EU, even with a best-case free trade deal would likely take about 1% off the UK’s economic might. The typical cost of leaving the EU is about the same as the painful recession the UK suffered in the early 90s at best and costing as much as if not more than the Great Recession of 2007-2009 at worst.

Note these studies don’t include the cost of regulation but that’s because a) the monetary benefits of regulations aren’t terribly well-known and b) the alternative scenario of total deregulation is highly unrealistic. Note some of the poorer quality studies make barmy assumptions or leave important things out. The idea that the UK would abolish all trade tariffs with the whole world is unlikely. Suggesting that the UK would’ve done better without the EU because European economies have growth more slowly than the rest of the world is clearly daft because the rest of the world includes loads of developing countries catching up with developed countries. Also studies which completely ignore any benefit from EU regulations are unrealistic. The worst studies almost all show net-negative effects from EU membership, the worst is a UKIP study which ignores the UK rebate and uses misquotes from press articles to inflate the cost of regulation.

In summary, even though the UK contributes a net 0.3% of GDP to the EU, membership likely benefits us by 1-3%. We get triple to ten times our net contribution back in economic benefits. Vote Leave do a similar calculation but they ignore any benefit regulation may have, assume complete removal of all EU single market regulation post-Brexit, pretend the UK rebate doesn’t exist and ignore any money the UK gets back from the EU. Their claim of a small net cost on this basis not only relies on an unrealistic alternative scenario but includes blatantly dishonest accounting.

*Note that since the Open Europe study was published there has been a global climate deal of sorts.

How much does the UK benefit from the EU?

How much does the EU cost the taxpayer?

One of the repeated talking points of the pro-Brexit is that the EU costs the UK £350m per week.

Here’s Michael Gove,

We’d have £350m a week extra to spend on our priorities, we’d be able to set our own laws, vary our own taxes [and] cut our own trade deals

So if the UK were to leave the EU we’d have £350m extra per week to spend according to Gove.

Here’s Kate Hoey,

If we vote to leave, then the £350m we send to Brussels every week can be spent on our priorities like the NHS.

Boris,

save ourselves £350m a week

Iain Duncan-Smith says the UK would save the equivalent of a new hospital every week.

Nigel Farage says,

Britain pays £55m per day to EU

So what’s the reality? Well here’s a post from FullFact on the topic and here’s the official Treasury figures. The £350m number comes from dividing the how much the UK should hypothetically pay to the EU per year and dividing it by 52. But note the crucial part of that sentence, it’s not the amount the UK actually pays. In the 1980s the UK wasn’t getting the same benefits as some other countries from some EU programmes such as the Common Agricultural policy. Hence Margaret Thatcher managed to negotiate a rebate from the EU every year. The roughly £100m per week from this discount doesn’t leave the Treasury’s account. Saying we send £350m per week to the EU is like going into the bar to buy a drink for your mate that costs £3.50, getting a pound off and when asked “How much do I owe you?” saying £3.50.

So we send £250m to the EU per week, almost a third less than the Brexit campaign would have you believe. But would we have £350m extra to spend as Michael Gove claims? Well in theory yes, in practice definitely not.

The money we put into the EU doesn’t, the popular press may have you believe, disappear into Caligulan orgies for Brussels fatcats on the EU gravy train; we get a fair whack back.

Firstly the UK receives about £2.9bn (a little under £60m per week) in payments from EU programmes to subsidies farmers and rural development. This goes to support farmers to ensure food security. The UK also receives about £1.3bn (about £25m per week) for regional development. This latter number is fairly low for the EU but it is simply a result of the UK being richer than much of the EU thus only Cornwall qualifies for the highest level of regional support although many UK regions still receive substantial amounts of development aid. In total the UK pays about £8.5bn per year (or £160m per week) in net contributions. That’s not unusual, almost all the rich countries in North and Western Europe pay more in than they get back whilst the poorer countries in the South and East get more than they pay in.

But that £160m per week number only counts money the EU gives back to the UK’s public bodies, it excludes one of the UK’s success stories in the EU, science and technology. The UK receives about 15% of grants from the EU’s research and development fund, that’s £1.4bn per year. However this goes to universities, labs and companies, not directly to the government, so isn’t counted in the treasury figures. That means the UK’s net contribution is £7.1bn per year or £137m per week.

So in conclusion for Michael Gove to get his £350m per week extra to spend or for Iain Duncan-Smith to get his one new hospital per week they would need to,

  • Get £100m per week which never leaves the UK
  • Eliminate all farm subsidies, causing huge hardship to already struggling rural economies
  • Eliminate a huge programme of research grant the UK is the prime beneficiary of
  • Eliminate regional development funding for poor and peripheral areas of the UK

It’s also important to state numbers in terms of how much these figures are a percentage of the economy. The UK’s economy is big, so even small parts of it is seem huge. The UK’s gross contribution to the EU is 0.6% of the UK’s economy and the net contribution is 0.3%. These relative numbers are important as the numbers for the EU’s positive effect on the UK economy in general are quoted in such terms. I’ll come to that in my next post.

 Update: There’s a new analysis out from the IFS which states that in 2014 the UK’s net contributionwas £5.7bn. This is a bit lower than other years due to fluctuations in the timing of payments made. The UK’s contribution until 2020 is likely to be about £8bn per year, still about 0.3% of the UK economy. The Leave campaign’s use of the £350m per week figure is still obviously dishonest.

 

How much does the EU cost the taxpayer?

Donald Trump doesn’t understand the First Amendment

I’m guessing you’ve seen the pictures from the cancelled Trump rally in Chicago last night. I don’t want to focus on what went on, more on a few things Trump has said since the incident.

Firstly when talking about the incident to Dom Lemon Trump said,

We made a decision, even though our freedom of speech has been violated totally, we made a decision not to go forward.

Note the highlighted section, Trump claimed his freedom of speech was being violated.

Today at a rally he went further saying,

The organised group of people, many of them thugs, who shut down our First Amendment rights in Chicago, have totally energized America!

Now firstly there’s the racial element to him using the word “thug”. But look at the meat of the comment, his “First Amendment rights” were shut down. Well what does the First Amendment to the US Constitution say?

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

The protesters in Chicago were not a legislative body and they were not making a law that prevented freedom of speech, or the press, or assembly. The basic problem here seems to be that Donald Trump, running for president, does not understand the First Amendment.

The First Amendment prevents the government restricting your rights to free speech and assembly. It does not prevent other people from shouting you down, it does not prevent people from criticising you, it does not prevent people from calling you out on a racist, sexist or homophobic statement, it does not in general protect freedom of speech on private property.

Trump is clearly wrong in claiming his First Amendment rights were violated. It’s an all too common fallacy to mistake a freedom from oppressive laws against expression to a freedom from people disagreeing with you or a freedom from being shouted down by others.

Donald Trump doesn’t understand the First Amendment

Where do the leave campaign want to take us?

Let’s play a game, what would the UK’s relationship with the EU be like after an ‘out’ vote? It’s probably the most important question of the Brexit debate, not scemantics about adjustments to benefit rules or made-up stories about banning pawn cocktail crisps. The reason is that around half of the UK’s trade with other countries is with the EU. Hence having access to the EU’s markets is extremely important for the UK businesses. Let’s say the UK were to leave and were to go for an agreement similar to the ones the EU has with places like Norway or Switzerland. The problem is that the none of the current agreements the EU has with neighbour nations would protect UK trade and provide the key aim of the Brexit campaigners, stronger controls on immigration.

So let’s look at the sort of trade deals countries outside, but bordering the EU have.

Norway: This is the most mentioned trade deal when talk about Brexit is brought up. Norway is a member not of the EU but of the European Economic Area. This means Norway gets access to European markets, however it needs to abide by EU rules for huge swathes of its economy. At present the UK has a say in EU regulation, Norway does not and needs to accept what it gets told to by the EU. A current dispute about offshore drilling environmental standards shows that Norway has to accept EU regulations against the objections of major industries. Norway is a rule taker not a rule maker. Norway’s agricultural products are excempt from the trade deal so face tarriffs in the the EU and Norway.

One of the key aims of the Brexit campaign is to restrict immigration by ending freedom of movement for EU citizens. Norway has to accept this freedom of movement so thie Norway option would have no effect on immigration. There’s also the fact that Norway still has to pay money into the EU. As the 10th largest contributer it has to pay more than Denmark, Portugal or Ireland. I’ll end this section with a quote from Norwegian Conservative MP and European spokesman Nikolai Astrup,

If you want to run the EU, stay in the EU. If you want to be run by the EU, feel free to join us in the EEA.

Switzerland: We now move to yet another part of the confusing set of similarly named organisations on the EU periphery, the European Free Trade Association. Switzerland deals with the EU through a series of agreements. The Swiss can in theory refuse to accept EU regulations on manufactured goods. However if they chose to do so this would leave Swiss industry locked out the EU market. Hence in practice Switerland has to do what it’s told. Again, a rule taker, not a rule maker. Switzerland does not contribute to the EU budget in general but has to pay in to particular EU programmes it wants to participate in. Also Switzerland has to accept free movement of EU nationals. There is however currently a mechanism for Switzerland to cap migration in a particular year if it increases by more than 10% from the last year. There are two other large issues with the UK adopting the Swiss model, one is that it excludes service exports meaning that one third of the UK’s exports to the EU would be excluded from any similar agreement. Second, as pointed out by the CBI, the EU does not like the complex series of agreements it has with Switzerland and is looking for a simpler alternative. Hence it’s unlikely the UK would get a similar agreement.

Turkey: This is the final model I’ll mention and only briefly. Turkey has a simple trade deal, its manufactured goods have access to the EU but they must conform to EU standards. A rule taker not a rule maker.

The summary of what these three cases suggest about post Brexit UK-EU relations: going from rule maker to rule taker, putting the UK’s huge service exports at risk and likely not being able to withdraw from freedom of movement for EU nationals.

There’s also the power issue in any negotiation. Half of the UK’s exports go to the EU whilst only 11% of EU exports go to the EU. Imagine in 2017, Prime Minister Ian Duncan-Smith is sitting down opposite Juncker negotiating the new EU-UK tade deal. Which one of the two will be more desperate to make a deal?

So why does all this matter? Because voters are being asked to choose between two futures, one the EU relationship we know, one which we don’t know. The issue for the “leave” campaign is that they can’t set out that alternative because it is not in their power. In the Scottish referendum the “Yes” side said they were going to keep the pound but the UK government said they couldn’t. However Scotland could’ve just used the pound in a similar way to Panama using the dollar. The “leave” campaign can’t make any similar unilateral declarations about a bilateral agreement. They are simply asking voters to take a step into the dark and to trust them they aren’t standing at a cliff edge.

 

Where do the leave campaign want to take us?