There are two main ways people can choose to earn a living. You can sell your time to an employer, or you can sell goods and services to customers.

Traditional employment – having a job – entails agreeing to be at your employer’s place of work, or in other places at his request, during stated hours. In return for losing your freedom over what you do for around 40 hours a week, the employer agrees to pay you for weeks when you are on holiday, and for weeks when you are sick. The employer also has to let you go home at a stated time whether the work is done or not. The employer stops you working for anyone else during the stated hours of your employment and may even stop you working at other times for another employer.

Self employment, or being a contractor, means you sell a company a given service, product or output. The company  normally has no right to require you to be in a given place at a given time, and cannot stop you working for others or doing other things as and when it suits you.  It means that the individual is not paid when they are sick or on holiday, because they are  not then supplying the good or service.

Parliament has always regulated these two different ways of working differently, and taxed them differently as well. The Labour party has concentrated in the past on improving working conditions for the large majority who opt for the job model rather than the contract model. Conservatives too support decent conditions of employment for those in jobs, and agree with a  framework which limits hours, requires minimum pay rates, and provides decent terms for sickness and holidays.

Labour  now wants to try to make many who work under the contract model work under the jobs model. They say some companies abuse the freedoms of the contracts model, effectively turning what should be jobs into self employed contracts to avoid holiday and sickness pay and the rest. They ignore the fact that many people working under the contact model have chosen to do so and do  not want to be forced into an employment contract instead.

The last three taxi drivers I have talked to about the contract model have all been in favour of remaining as contractors. One likes the contact model because he can earn more and work more hours as it suits him. One liked it for the very opposite reason. He values his time more and only works the hours that fit in with his other interests, working less than he would have to under the jobs model and going home when he wishes. The third was starting his own business which is not yet anything like self sustaining, but requires him to be able to have hours off during the working day to see new clients and customers  as need arises. The gig economy contract work pays the bills whilst he gets going with the new business.

The danger of the Labour approach is it will eliminate choice. I don’t want people to have to take precarious contracts when they want a job, but I do want people who have good reasons to work as contractors to be able to do so. There is room in life for the full time employed taxi driver and the self employed contractor driver. There is room for the staff journalist with holiday pay and the freelance journalist paid for each article. If we make everyone into an employee more of the entrepreneurial freedom loving types will go to another country.

The UK economy has slowed a bit this year. This is the direct result of Treasury and Bank policy, which has been tightening.

In 2016 the then Chancellor decided to slow the housing market by hitting Buy to let hard with new taxes, and by imposing higher Stamp Duties on the high priced end. This policy did indeed slash transactions volume with knock on effects to conveyancers,  removal companies, furnishing companies, decorators and the rest.

In 2017 the current Chancellor decided to hit the dearer end of the car market, at a time when cars were selling well with good growth in the market. His high levels of VED have knocked sales of higher priced cars ever since.

The Bank of England has reinforced these trends by issuing  warnings over consumer credit, certain mortgages and car loans. There has been a macro prudential tightening, as messages have been sent to banks and finance houses to rein in credit. The Bank seems to have reinforced the hit on the car market around the start of the second quarter.

The Chancellor is still out to tighten the fiscal stance, taking a tough line on more spending and revenue.

The Bank has recently been successful in talking up sterling , particularly against the dollar and yen. Whilst this has some desirable effects, it is also a clear monetary tightening.

There is no need for more tightening, and some need for a more balanced policy. The quickest way to get the deficit down faster is to grow faster. Both the Treasury and Bank need to be kinder to enterprise and growth in their approaches.

The UK has been running a substantial balance of payments deficit for many years. The main origin of this is the large balance of payments deficit on trade account with the EU, which has persisted throughout our time in the single market and is partly related to its asymmetric construction in ways favourable to continental agriculture and industry and against UK services.  In the twenty years before we joined the EEC our balance of payments on current account was roughly in balance. During our time in the EEC up to the completion of the single market in 1992 our current account was typically in modest deficit. After 1992 in the single market our current account deficit ballooned to £40bn  to £90 bn a year. Under Labour in their later years the UK also ran a budget deficit which became enormous with the banking crash.  Since 2010 the budget deficit has been brought down from 10% of GDP to under 3%. The balance of payments deficit has stayed at around  5%.

I am more worried about the balance of payments deficit than about the budget deficit. There are only two ways we can finance the overseas deficit. Either we have to borrow money in foreign currencies, or we have to sell more and more of our assets to foreign interests. So far this has proved relatively easy, as foreign investors have found UK assets attractive. They like our property, technology companies and the rest. Our markets are particularly open allowing them to buy up businesses and real estate.

Where we borrow to sustain our excess consumption of European imports we run currency risk of having to repay in a  foreign currency that has got dearer against sterling. Where we  sell more assets we forgo future profits and dividends, and may see the foreign buyer transfer some of the economic activity elsewhere if they wish to help their home production at the expense of a former UK competitor.

This is why stopping EU payments is doubly important. If we stop all the EU payments but spend all the money saved at home we still make a big reduction in the external deficit as this is money which no longer has to be sent across the exchanges to overseas . Every pound we save on net contributions is a pound saved from the balance of payments deficit. I would like the Treasury to be more concerned about the government’s role in boosting the external deficit, and keener to bring it down.

The Treasury does want to cut the budget deficit. That too is easier to do if we cut the amount we are sending abroad. If more of the overseas aid money was spent on the wages of UK public sector  who go to help abroad ,and more on UK supplies and equipment which we give to the aid recipient, the aid budget would be less of a strain on the balance of payments. If more of the actual costs incurred by our military and NHS in helping abroad was properly accounted as aid spending that would help the general budget. If more people who come to the UK for asylum were given housing and other financial support as part of the overseas aid budget that too would assist in cutting the overall deficit.

The Treasury needs to tighten up on the money spent abroad, as it imposes a double strain on our accounts.

 

 

Mrs Merkel lost a lot of ground in the German election, plunging from 41.5 % to 33% .  She lost around 65 seats. In her place the anti Euro AFD soared to 13% to give it  94 seats, where it had none before. This is a contrast to the UK Conservatives rising from 36% to 42 % for their share of the vote in the last election.

Mrs Merkel may be able to soldier on at the head of a difficult coalition, but she has lost substantial authority for her EU policies as a result of this voting collapse. If she and the potential alternative left of centre coalition both refuse to include the AFD one of them would have to govern as a minority. Only a further CDU/SDP coalition can get her to a majority. This Grand coalition between the two main rivals is not easy, especially now both parties see how damaging it is for them electorally.So far indeed the SPD have said no deal. Germany has voted itself into weak and unstable government. The BBC calls this a Merkel win!

The UK government has to see this is a further strengthening of its negotiating position. It looks as if the EU has rejected Mrs May’s generous offer and suggestions in her Florence speech, as appears to be the case from Mr Macrons words and from the reactions of the EU Commission. The UK government should in the event that the EU does confirm it refuses to widen talks and seek a positive future agreement soon make clear the offer is withdrawn given the lack of any positive response.The position anyway should be being reconsidered in the light of the   German election.

The Prime Minister made a very generous offer but made clear all had to be agreed before any offer is confirmed. Circumstances are now different so the UK needs to firm up its position and intensify its preparations for no deal to show it is serious. Then the EU may start to talk about the things that matter to both sides. If they continue in saying they will not even talk about trade and the future relationship there is no point in being generous. We should neither pay to get talks started nor pay for a trade deal.

On a recent visit to environmental and  river works in my constituency, I was asked if I knew about total water catchment management.  It was presented as some new breakthrough, based on understandings of the patterns of water movement. Apparently it includes the perceptions that you need to manage water on a water basin basis, and that you need to consider what happens to the water if you speed its passage upstream to avoid flooding when that water arrives more quickly downstream.

I expressed surprise at this.  Water has always been managed on a water catchment area basis since I have been involved in public policy. Our water companies were designed around water basins. There have been few attempts to transfer water from one catchment to another. The most famous was the decision to supply Birmingham from new reservoirs in Mid Wales, which caused controversy. Debates about creating a national water grid have not resulted in the creation of one.

I would also have thought it had been well understood by past generations of managers that if you solved the problem of flooding by improving capacity to move the water on upstream you could do more damage downstream unless you also made provision there for fast transit or storage of excess.

It is  true that much of the rain falls in the more lightly populated parts of the north and west of our country, whilst more people live in the drier south and east. There is some movement of water to those places by the Thames and other rivers,  but the south has had to build reservoirs for storage on a considerable scale and has put in desalination capacity as well to have sufficient water. It is important to recognise the need for more water capacity in the south and decide which is the best  value and best environmental means of providing that capacity. The UK overall is  not short of water and overall gets plenty of rain. There remain important issues about supplying enough drinking quality water during dry periods in the drier heavily populated parts. More water storage is one answer. More water transfer would be another.

 

Meanwhile water management is crucial to controlling flood risk. Given the extent of building on flood plain, it is becoming ever more necessary to engineer solutions to safe water transport and storage during times of heavy rainfall.

The result  of offering too many compromises with the EU is it will  make the Deal option less attractive than the No Deal Option. Paying large sums for a Free Trade deal makes no sense, when tariffs would  be a cheaper way where we can give the tariff money back to the UK consumers who paid it. Accepting EU control of our laws, trade policy, migration policy  and other matters after March 2019 means we don’t take back control.

The PM’s speech says considerably less than the versions of commentary that have been built on the back of it. She argues that we want as short a transition as possible, and says we need to  be able to run our own affairs from the moment we leave the EU. That is not the same as spending two more years in the EU and calling it transition.  She said “I dont  believe either the EU or the British people want the UK to stay longer in the existing structure than is necessary”, so lets get on with sorting everything out now. It need not be that difficult.

On money she says they might agree to stay in certain programmes where we would agree cash for benefits. I have  no problem with that, though there are no programmes which are a must as far as I am concerned, We can replicate the worthwhile ones for ourselves. She also reaffirmed we will “honour commitments we have made during the period of our membership” which some interpret to mean making  full contributions up to the end of the present 7 year budget cycle. There is no legal requirement to do that.

It is not possible to have a meaningful conversation about Transition or Interim arrangements without having a Deal agreed, or at least knowing the outlines of what the EU will offer and accept. I wish the PM well in her effort to get meaningful talks going. I am not persuaded that we owe them any money or that we want to stay in for moment longer than our legal requirement up to March 2019.

What the civil service have to grasp is there is no cliff edge. It is quite possible for the UK to have functioning borders and trade arrangements on March 2019 even with no deal. 160 other countries trade daily with the EU and most have no special Trade Agreement. The priority must be to get everything in order for 2019 exit. That will also strengthen our bargaining position for a better deal, showing we are ready and willing to just leave. The EU’s response to the speech shows that they will just go on  pushing for more and more money to make sure it is bad deal.

 

 

The Prime Minister made some good things clear. We will leave the EU in March 2019. We will not stay in the single market or customs union. We do not want to be in the EEA. We do need to be free to pass our own laws and to negotiate our own trade deals.

She also made a very generous offer to the rest of the EU. The UK will stay engaged and helpful to EU on security and defence matters come what may. The UK will happily allow continued tariff free access to the UK market on similar terms to today if the EU reciprocates. The UK may stay in various spending programmes and make a continued financial contribution to them if that makes sense to  both sides and if the UK will continue to benefit. Programmes like Erasmus and the work of the EIB may be what she has in mind.

More nuanced language was used for the passage on an implementation period. She rightly said this should be as short as possible and must have a final date. It remains difficult to know if we need such a thing, as that will depend on whether there is an Agreement to implement.  The issue of money remains sensitive on  both sides. The PM made no express offer of  cash, and stressed that budgets have to be talked about alongside trade and the future relationship.

I remain of the view that we owe them  nothing and we do not have to pay for a free trade deal. That is so much in their interests that there is still the chance they will come round to wanting it. We have always accepted we owe them contributions  up to the date of leaving, which will deliver them an additional  £30 billion ( rough estimate) between June 24 2016 and March 29 2019.

In the meantime the most important thing the PM said was Whitehall is charged with the task of getting everything ready to leave without a deal. There can  be no successful negotiation without the EU understanding  no deal is a feasible option. What matters now is the response of the EU. The UK needs to stop negotiating with itself and concentrate on selling a good deal to the other side, as the PM sought to do today.

The Spanish state refuses to allow the Catalans a vote on whether they wish to be independent of Spain. The elected Catalan government is preparing for a referendum at the beginning of October to decide whether to stay or go. The Madrid government argues this is against the Spanish constitution and refuse to sanction such a vote. Polls suggest the independence side is a little  behind.

The Spanish state is now arresting and bringing charges against Catalan politicans who are preparing this vote. They are seizing ballot papers, and  withdrawing powers and money from the Catalan government   to stop the vote taking place.

The EU in its earlier days encouraged regional governments and often appealed over the heads of national governments to them. It created a Committee of the Regions and prefers to run various programmes by sending cash direct  to regional administrations. Now it is more nervous of the centrifugal pull of regions, and keener to help member states that face disruptive regions.

The heavy handed approach of the Spanish state may be making more Catalans favour independence. It is strange to see a western democrcy going to such lengths to stop a vote which an elected regional gvernment wants. When Scotland wanted something similar the UK state granted it. Its not something to do too often, but when there is a strong head of steam behind such an issue and no vote has taken place for a long time it is a pity opinion can be thwarted. The EU once again backs the anti democratic forces.

I am tired of listening to endless negotiations amongst ourselves. There are too many interests and individuals who want to undermine the UK position by constantly urging us to make concessions. It is even more bizarre that they do so before the talks have even begun about our future relationship.

It is time to remind ourselves of why a majority voted to leave. We expect a better future as a result, with or without a deal with the EU.

Out of the EU we can spend the £1bn a month of net contribution on our priorities, as I proposed in my suggested post Brexit budget

Out of the EU we can set our own taxes. We can for example remove VAT from green products, domestic fuel and female sanitary items.

Out of the EU we can decide how to spend the money we do get back from the EU. We may have better ways of subsidising our farming, for example.

Out of the EU we can regain control of our fishing grounds and have a fishing policy that is kinder to both our fish and our fishermen.

Out of the EU we can sign free trade agreements with countries like the USA, Australia and New Zealand that the EU has  not bothered to settle.

Out of the EU we can shape our own laws, and Parliament can respond to UK public opinion where people want change.

Out of the EU we can have our own migration policy, inviting in those we wish, and controlling the numbers coming to take low paid unskilled jobs.

 

It will also be better for the rest of the EU, as they can press ahead with their currency, economic and political union without the UK trying to slow them down, block them, or opting out.

We can have a more positive relationship when we and they are free to do as we wish.

 

The EU is not offering anything we need pay €20 bn for!

The Governor of the Bank of England has a consistent track record over interest rates. Three times he stated  conditions for a possible  increase, only to fail to put them up each time we reached those conditions. He then followed this tour de force by actually lowering them instead.

He has now again suggested rates might need to go up soon. Why should we believe him this time? He has after all made a mess of forecasting the economy for the period after the Brexit vote, expecting a sharp slow down and technical recession when for the first half year after the vote the economy accelerated. He has also shown a marked inability to predict his own actions in the past.

His latest reasoning is based on the thesis that overseas rates are trending upwards. The markets instead think US rates are going to stay down as they edge instead towards cancelling some of the QE and bonds they have bought up. Rates in large countries  like India and Brazil are coming down, whilst rates in the Euroland and China do not look as if they are  about to rise.

He also alleges that Brexit could harm the UK’s productive capacity and thus worsen the trade off between inflation and growth. This reveals two substantial misunderstandings about our modern economy. The first is that if by any chance we do leave with no trade deal there will be considerable demand for imports to substitute for items like food where EU imports suddenly become dearer thanks to tariffs on top of the dearer Euro. As we have a large deficit it could actually boost productive capacity. The second is the Bank’s old fashioned idea that as you approach capacity working so inflation shoots up ignores the simple fact that we are running an open economy. If we run out of domestically produced tomatoes we import a lot from somewhere else rather than putting up the price of UK ones. if UK wages costs start to rise the EU sends us plenty  of extra workers to keep the wages down.

I note now that the pound is only 4% below its average in the months running up to the referendum against the dollar, and only 2% below against the yen. We don’t hear about the pound anymore from all the Remain facing media! The Euro meanwhile goes from strength to strength against all major currencies.