Those in the Cabinet who told the PM this week that we cannot accept a backstop which leaves us in a Customs Union indefinitely were right. They are also right to want the full legal advice on the draft Treaty they are asked to accept.

There is however a much easier argument to use against the vague proposals emerging. The UK must not seek to sign the draft Withdrawal Agreement to pay the EU £39 bn in return for the promise of 21 months or more of talks about a possible free trade deal. That would be a very bad deal. It would be worse for the economy than leaving without signing such a one sided agreement. We need to spend that money at home boosting our own economy. We do not need another two years of uncertainty. Many Conservative MPs would vote against that. It would need new legislation to permit it.

We did not vote to leave one EU Treaty only to lock ourselves into a new one sided one. Nor is the Future Partnership Agreement likely to be one any independent self governing democracy could sign.

One of the reasons many people now do not listen to mainstream media news and commentary is the way that factual reporting coupled with expert and insightful balanced analysis has been replaced by a kind of campaign based activity. The BBC in particular has two regular campaigns running. One is to explain why the Remain campaign was really right and should not have lost. The other is to stress the need to cut back on carbon dioxide to avoid serious problems in the future.

I  have no problems with political parties, individuals, company shareholders, research institutes and others running campaigns about things they feel strongly about. I do not think this is in any way the task of an independent broadcaster paid for by taxation of all tv users in the country whether they watch the BBC or not, operating under a Charter to observe impartiality and to set high standards of journalism. It also makes for very tedious programmes.

In the case of Brexit I has lost count of how many times we have had the same old stories recycled as if they were news. They are not factual reporting. They are commentaries on various people’s forecasts and opinions. We get recycled opinions that we will be short of food, planes wont fly, short of medicines, that supply chains will be disrupted etc. All it needs is one quote from a Remain oriented think tank or business lobby group and we go round the same old scare story again. Rebuttals never attract the same attention. There is then the perpetual reuse of the Treasury 15 year forecast of a bit less growth on different scenarios, with no proper debunking of their base or of the whole idea of a 15 year forecast!

Where is the factual reporting of what airlines, pharmaceutical exporters from the continent, farmers in France and others are actually going to do on March 30th? Where are the balancing experts to offset the Remain “experts”. I have never been invited on and introduced as someone who correctly predicted the damage the ERM would do, or as someone who  has written extensively on the Euro project explaining its dangers and predicting the various Euro crises, nor as someone who has in the past led UK based international businesses with complex supply chains. If I had voted Remain and held the opposite view  I bet they would have mentioned that all the time.

We now see reported dozens of rumours about what deal might or might not be on offer, whilst it looks as if there is still no agreement on the Irish border issues or the wider issues of customs and goods inspections. The media that reports these things ignores the much bigger issue of why should we agree to pay them so much money anyway?  What linkage would there  be between the Future Partnership Agreement and the Withdrawal Agreement, given that such linkage was thought to  be fundamental to the UK negotiating position as defined by Mrs May in her Manifesto. If the EU in a couple of years time has in mind the UK should sign an Association Agreement along the lines of Turkey or Ukraine that would be the final denial of Brexit. Sensible MPs will not vote for the draft Withdrawal Agreement as it is a big  payment for more talks, which would simply prolong futile negotiations and leave the UK in a weak position.

No wonder many are turning off and being turned off by this approach. Let’s go back to news gathering, to reliable sources, to genuine experts or to clashes of experts where they disagree. We could also do with fewer reported briefings of sell out agreements when there is still no firm date for a November meeting to resolve the impasse, nor any leaked text of what might be agreed in such an event.

Today we remember the Gunpowder plot. This planned terrorist attack on the British establishment 413 years ago was fortunately thwarted, unlike the one in 1984 which I lived through. It is curious that we still commemorate the former.

What was it about 1605 that causes it still to resonate today? I suppose it is  because the outrage was planned on such a huge scale, aiming to blow up the King, his government, and all other people of whatever opinion in Lords and Commons. It left the establishment shaken, but also relieved that their intelligence networks picked up the mistakes of the terrorist group in time. The country had just got through the potentially difficult business of passing government from Queen Elizabeth to King   James, when there was no clear single heir with uncontestable title. Elizabeth died with  no son or daughter, brother or sister to take over. It was a reminder that there was a strong minority in the kingdom that could not accept a Protestant succession and would murder on a mass scale to overturn it.

The other reason is probably that the combination of a bonfire and fireworks makes a great evening out for many. It is seasonal, with colder dark evenings a suitable backdrop for a great warming fire and for a colourful display. Some now find the idea of burning a Guy in effigy distasteful, as we remember the best known criminal of the plot. Others worry about the noise of fireworks affecting animals, or fret about the safety risks of so much modern gunpowder. The trend to more large displays makes sense. You can pool the costs  to get better fireworks, and more care can be taken in setting up the show and letting it off. You can hold them away from homes, with strong emphasis on avoiding fire hazard.

I think it is a tradition that fulfils a need for a November event. We can all come together to be glad that different strands of Christianity now live in tolerance of each other, and to celebrate that on this occasion in 1605  terrorism was thwarted. It is a good reminder that settling political difference by arguments and votes is a much better approach.

Versions of a possible deal for the UK with the EU have today been denied by the government. That’s sensible of them. All the versions I have seen are not Brexit. Let’s just leave, spend our own money, and negotiate a free trade deal once the EU has realised we are out. There’s nothing on offer worth £39bn.

When I criticised so called economic and business experts on the BBC someone wrote in here to say if I were ill I would want an expert doctor to help. Yes, of course. I am all in favour of genuine expertise. I have spent a lot of my life reading and listening to people with expertise to widen my understanding. I admire learned people who improve our knowledge  and  make accurate predictions and diagnosis.

Were I ill I would of course turn to well educated qualified doctors who know far more than me about illness and treatment. I would however want an expert who was likely to get both diagnosis and treatment right. The first instruction for any expert must be, do no harm. The second must be to know the limits of your knowledge and craft, and learn each day from experience. I do not  usually write here with critical comments about modern medicine as I am not qualified to do so.

I am qualified in matters financial, and have studied economies and public policy for many years. That is why I feel confident enough to criticise and disagree with so called experts in these areas  who lack basic knowledge and with experts whose judgement is faulty. In the recent Today programme case both so called experts were commenting on the simple question of what the Bank of England was going to do on interest rates. Both wrongly stated the current interest rate, thinking it was one third lower than it is. Why should we then value their opinion?

An apologist for the BBC said it was just a simple mistake. I of course accept we can all make mistakes. I go to considerable lengths to check facts and figures for this blog, but agree I could make a mistake. If I did I would move rapidly to amend it. I have not heard Today amend this mistake. Whilst I could accept one of them could make a mistake I find it difficult to believe two genuinely independent experts could  both make such an elementary mistake on the same occasion. Surely the outside expert is used by theBBC to avoid just that sort of error or lack of knowledge by the in house expert? The outside expert did correct the BBC man when she thought he was wrong to say the Bank was forecasting a recession on a WTO exit from the EU. She quoted  the wrong interest rate as well as the BBC man.

I am returning to this because the Today Business correspondent regularly turns one of the few decent business slots on the mainstram media into an anti Brexit story. Following the interest rate howler he rushed on to try to explore how and why a no deal Brexit might cause a recession.His guest helped him, by agreeing that there were unnamed forecasters who hold this view though she did not think that included the Bank of England.

He asked her why these nameless forecasters thought that. It was surely a factual question which you could only answer as an expert if you had read these forecasts and could name them. If you answer speculatively and in general terms, as she seemed to do, you should as an expert  balance the answer with why others presumably in her view  including the Bank of England do not think there will be a recession just from a no deal exit.

The following morning a different BBC person introduced the business slot. This time we were told – with support from another “expert” interview” – that the pound had risen owing to rumours of a financial services deal between the UK and the EU. They made heavy weather of explaining this would be a one sided affair with the EU in the driving seat, without mentioning that the EU wants access to London and has more passports into London than London has into the continent. The government had denied there was any such agreement, and there is no official draft or agreed  text allowing an expert to tell us what they have in mind. More importantly during this section of the business slot there was no mention of the fact that the Governor of the Bank of England had added another possible two interest rate rises to his forecast, which most people think was the main reason the pound went up! They got around to mentioning this as an also ran possibility after this story about Brexit.

This is not serious journalism based on texts, statements and sources. Most days this section of the Today programme is just used as a way of attacking WTO Brexit.

 

 

The biggest items in the Italian election were economic. Did the economy need a stimulus? Does Italy need lower taxes? Should it reverse some of the big cuts in spending made at the EU’s request earlier this decade? Do people want a basic income from the state?

Voters answered clearly. In the north they wanted tax cuts and a boost. In the south they wanted better benefits and a boost. All across Italy they wanted to roll back the pensions cuts of 2011. They elected a Lega/Five Star government who set out to carry through their wishes.

To make the government more palatable to the EU they appointed a PM and a Finance Minister more to the EU’s liking, with the two winning party leaders accepting Deputy Premierships. They constructed quite a modest budget by their standards, limiting how far they could go on tax, benefits and pension reform. The EU decided nonetheless to reject it and to tell them to produce a tougher one.

The EU argues that Italy has borrowed far too much in the past. The underlying reality it has also  been borrowing too much recently, drawing down large sums at zero interest from the European Central Bank to keep its banking system liquid and to allow the state and companies to go on borrowing from banks. The custodians of the Euro are worried by the scale of this, now at Euro 500bn, and want to call a halt to it. They insist that if you are in the Euro the EU tells you how much you can borrow, as it is a matter of common interest. If a state does not comply the EU sends detailed proposals on taxes and spending to try to get a compliant budget. If the state still does not comply it will be fined. The ECB could also take action to make things very uncomfortable for Italian banks and the wider economy, as it did to Greece and Cyprus.

Greece went through this argument and lost. The radical Syriza government desperate to lift Euro austerity buckled when pressure was applied to the banking system. The absence of ECB support meant the banks had to close for some of the time and limit people’s access to their own money. This makes carrying on normal business very difficult. They discovered that if you want to stay in the Euro the EU  decides your budget. Italy says she wants to stay in the Euro, so she will be told the rules do apply for her.

What should the leaders of the Italian government do in this situation? They have a General Election mandate which the EU intends to veto. What is the point in General elections debating  big economic issues, if the national government is not in charge?  Who is and who should be accountable for Italy’s budget?  When will the EU complete the architecture of its political union, to make its power more accountable somehow?

 

Over our years in the EU some of the worst damage the EU has done is that to our fishing grounds and fishing industry. Environmentalists are rightly upset by the industrial trawler techniques ripping out so much fish, only to see a lot of it thrown back into the sea dead under the infamous discards policy. Our fishermen and women have seen more and more quota allocated to foreign vessels. There has been a big decline in our fishing fleets, and a big decline in the proportion of the catch landed in the UK.

As soon as we leave the EU the UK becomes an independent coastal state with full control over our own waters. We will decide how much fish it is safe to take out of our seas, and how much of that should be fished by UK vessels. The opportunities are great. People in the fishing industry think we could catch and land twice as much as we do today by taking back control of our own fish stocks, whilst removing fewer fish from the sea overall with no discards. They also think there is considerable spare capacity in the present UK fleet, given the controls on fishing.

Work is well advanced with systems to regulate the amount of fish taken without having to throw dead fish back into the sea with all the extra damage that creates. That means we can land more in UK vessels whilst still taking fewer fish overall.  If we landed in the UK twice the amount currently landed, that would add £900 m of raw fish value.  This becomes £3.5bn of total value for the UK once the fish have been processed and sold on to final customers. We would develop more fish processing industries, often in coastal communities that need more jobs and more value added processing.

These policies would boost employment, cut our balance of payments deficit on food, provide more wholesome local food, and reduce environmental damage. The seas would be plundered less, and there would be fewer food miles travelled from trawler to plate. It’s another compelling argument against delay in exiting the EU.

This morning in the business section of the Today programme after 6 am the BBC’s own expert and his chosen interviewee expert both told us that today the Bank of England will announce its decision on interest rates. They will, we were told, keep them unchanged at 0.5%.

Both seemed  unaware that the Bank of England raised rates to 0.75% on the 2nd August 2018, the second rise from the lows. The BBC man was in a rush to get on to his main theme, that the Bank of England was forecasting a recession should the UK just leave the EU on 29 March 2019 without a Withdrawal Agreement to hand over £39bn to the EU.  This was a bit much for his interviewee who said she did not think the Bank had forecast that, but probably others had!  She was then asked to explain why without naming any specific forecast which either could quote.

No wonder voters increasingly say to so called experts “We do not believe you”. The BBC Business correspondent for Today regularly leads his witnesses to his agenda for the day. He also seems to regard it as primarily a slot to pursue anti Brexit questions, when there are so many more accurate and interesting stories he could pursue. Normal business life carries on regardless of Brexit, and so far we are still completely locked into the EU. He usually  fails to question the EU critically or to comment on the perverse consequences of many of its decisions that still affect us.

I do wish the government would reverse the damage it has done to the UK car industry through its higher VED, its attack on diesels and the credit squeeze. Last month car sales were very weak in what should be a good month, with the biggest hit predictably taken by diesels. The latest credit and money growth figures from the Bank of England show that last month there was no money growth at all, with a big fall in car loans.  This  left the yearly rate of money growth  at a new low level below the current rate of inflation. Domestic policy continues to slow the UK economy, with the car sector and dearer properties bearing the brunt of the tax attack.

It is especially strange that the Business department, ever vigilant of alleged and often implausible problems for the car industry from Brexit, says nothing about the obvious damage to car output and car sales by the tax and credit policies currently being pursued. Indeed, with diesel car sales down more than 4o % now, it is difficult to understand how they have not observed this and not done something about it.

Returning VED to the levels prior to the 2017 budget would be a good start. Allowing more car loans, one per person in employment at sensible levels would also be a good idea.

Cutting Stamp Duty to 2016 levels where it is currently higher would help unblock the homes market. The Treasury had to admit in the budget that Stamp duty receipts will be £1bn lower this year than forecast owing to the decline in transactions and their model forecasting errors from the higher rates, with a loss of nearly £4bn over the five year forecast period.

I have been puzzling over why so many commentators think a so called No Deal departure would be a heavy negative for the UK economy.
There seem to be a series of specific fears that are unlikely to be realised e.g.

1 “Planes will not fly on 30 March. “

The overfly rights are under the Chicago Convention which will be unaffected by the UK ‘s departure from the EU. Landing rights are in the gift of member states and will presumably be mutually reaffirmed in time for exit. Airlines continue to sell tickets for post 29 March and do not expect to be grounded.

2. “Just in time supply items will be held up at UK ports, wrecking the factory plans.”

UK ports will be entirely under UK control. There are no plans being made that I have read about to hold goods up for longer. The addition of a customs payment to current VAT and Excise payments and currency changes can be done away from the border from existing compliance filings electronically, with or without a tweak to the computer data. Intrastat declarations are already very comprehensive and mandatory for EU trade. Products meeting specifications under contract will not need new inspection systems on 30 March.

3. “Food imports will be detained by the need for longer and more complex inspections at borders.”

Again there is no need for the UK to impose damaging delays and extra checks, and on imports it is a matter for the UK authorities. Current contracts contain inspection regimes, usually at the farm or processing plants, and product will also continue to be inspected carefully by the purchaser.

4.” Medicine imports will be delayed.”

As with food, things that have gained regulatory UK approval and are on the NHS approved list can be imported as before with similar inspection regimes and verification.

5” Calais will operate a go slow or blockade of UK exports to the continent”

The Calais port authorities have categorically denied this and say they wish to keep the business. Belgian and Dutch ports would like to take market share from Calais and see the need to offer a smooth service.

Making all these things work are in the mutual interest of the EU and the UK and are not controlled in the main by the EU authorities. There is every reason to suppose where they need agreements these can be reached, with a general wish to carry on as before.

There are then the economic arguments.

1” Imposition of customs dues will restrict and damage trade”

If nothing changes but the UK and EU impose EU level tariffs on each other then the EU will collect £5bn of extra customs, and the UK £13bn, given the large imbalance in trade in items that attract tariffs. The UK government could give the £13bn as tax cuts so people on average are not worse off from the higher prices. The high tariffs are almost entirely on food products, where the UK has a balance of trade deficit of £20bn with the rest of the EU. Imposing full EU tariffs is likely to lead to a lot of import substitution from cheaper non EU produce, and to a substantial market share gain by UK farmers. The UK gain in domestic market share should more than make up for losses of exports. There will be a crop cycle of adjustment to new demands. The UK can publish its own tariff schedule once it has left, and has the option of lowering tariffs compared to EU levels, which would mitigate the impact tariffs have on trade. It is difficult to see more than a marginal impact on the UK economy of high tariffs on food. Trade with the rest of the world which has been growing faster than EU trade for the UK would benefit from removing tariffs on products we cannot grow or produce for ourselves, removing small tariffs where the bureaucracy is not worth the trouble, and cutting very high food tariffs somewhat. The UK government has yet to publish a tariff schedule for March 30 for No Deal.

2.” There will be a confidence effect”

Presumably most businesses now understand that No Deal is an option, and see that its probability has risen as a result of the poor progress in talks so far and the EU rejection of the Chequers half in approach to the single market and customs union. There was a confidence impact on big business investment plans after the vote, but this did not prevent continued growth at a good rate for the first nine months after June 2016. Brexit voters expressed more consumer confidence after the vote. There were also some large inward investors who went ahead with big commitments, including the purchase of two £1bn plus London office blocks and major commitments to jobs and space in London by the leading US tec companies. If I am right in thinking we will avoid any big problem in the weeks after leaving, confidence should come back quite quickly to those large businesses that are preoccupied by this issue. There has not been the predicted exodus of businesses out of London despite more delay and difficulty in the negotiations than advertised.

3. “The UK authorities will raise taxes and tighten money to deal with the shock”

That would be entirely the wrong reaction and looks unlikely. On exit with no Withdrawal Agreement the UK state has £39bn more to play with over the next three years, and the balance of payments is immediately enhanced by the same amount. The Bank of England actually eased money after the vote, and could do so again were there to be any problems after exit. The Treasury has fire power to spend more and tax less were the economy to slow further.

The economy will get a bigger boost by leaving without a Withdrawal Agreement and spending the £39bn at home. Prolonging exit for 21 months or more prolongs uncertainty, commits us to large extra payments and does not even guarantee a better trade deal.

Staying in for another 21 months of protracted negotiation prolongs uncertainty and clearly will give a worse outcome than just leaving next March and spending the money saved.

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