Issue 124: 2017 10 12: Mrs May’s Speech (John Watson)

12 October 2017

Mrs May’s Speech

A look at the substance.

By John Watson

“I am no orator, as Brutus is.”  So spake Shakespeare’s Mark Anthony, before proving, of course, that he was a very good orator indeed.  Mrs May could use the same words with more justification.  She is no natural on the podium and her speeches owe more to hard work than to flair.  Witness the irritating repetition of the statement “That is what I am in this for”, a trick straight out of “do it yourself speech-writing” and not the sort of gambit on which Boris Johnson or Winston Churchill would have relied.

Nevertheless, on the whole it was a good speech, carrying a great deal of personal commitment and identifying accurately a number of domestic issues which need to be dealt with.  It is true that the delivery had snags but those who put that forward as an argument for changing leader only do so because they are intellectually incapable of criticising the Government’s political position.  Well, we all know that some Tory backbenchers are a bit thick.

Perhaps the most striking thing about the speech is the extent to which Mrs May’s concerns overlap with those of the Labour Party.  Both she and Mr Corbyn are concerned about the shortage of housing for young families.  Both of them too are concerned about University fees and both believe that the energy market is leaving some vulnerable consumers paying too much.  Where they differ is in the remedies, with Mr Corbyn taking the bold approach which is the prerogative of those in opposition; Mrs May, as you might expect from the head of a party which calls itself “conservative”, takes a far more cautious and step by step approach.

On these central issues of domestic policy the question has to be whether the measures announced by Mrs May will do the trick.  In relation to housing, she has promised an extra £2 billion for public sector provision which should enable councils to increase their building programmes.  Much, however, will depend on the extent to which new private housing can be provided alongside this.  Private newbuild is, after all, a way of increasing supply in the market, and thus making it more affordable, without the injection of government funds.  Will Mrs May’s determination to take charge of this program herself ram through the acceleration needed or will it turn out to be something but not quite enough?

In relation to University fees, everyone knows that something has gone badly wrong.  This can be demonstrated by looking at nursing.  We all know that there is a shortage of nurses and yet consideration is being given to charging them tuition fees.  That is a barkingly silly proposal and hopefully will go nowhere, but if you ask why it is silly you are quickly swept into a much more general point.

Let’s look for a moment at the thinking behind charging fees.  Yes, I know, the main reason was to get money to finance universities without recourse to the public purse, but I mean the thinking used to justify the move socially.  The first step in the argument is that a degree is a privilege which will enrich the life of the recipient either by enabling them to earn more or in ways less tangible than that.  Why, then, the argument goes on, should this privilege be paid for by those who do not receive degrees at all?  That is what happens when universities are paid for by the state.

The trouble with this is that it misses the important point.  In the case of the nurses, fees have not been charged historically because of the importance of a supply of well-qualified nurses to public wellbeing.  We need the nurses, so we must pay to train them.  That, however, is surely the case with degrees generally.  If Britain is to flourish as a trading nation, our citizens need to be better educated than (or at least as well educated as) those of our competitors.  That doesn’t mean that they all have to read finance.  More traditional subjects train and strengthen the mind and we need people with well developed minds if we are to prosper.  For a bright student to go to university is in the public interest as well as his or her own.

Once upon a time that was recognised by the fact that the student paid no fees and, to the extent necessary, received a grant.  That has now gone and, given the current state of public finances, it would be difficult to get back there.  Also the fact that the students pay something has its advantages.  It has made them far more critical of what they get in return, and university teaching has probably increased in quality as a result.  The real question is to what extent should the training be funded by the students and to what extent by the state?  A contribution which leaves students with unpayable debt is clearly unsatisfactory.  It has to come down and, as Frank O’Nomics mentioned last week, the interest rate on the debt has to come down too.  That may mean an increase in taxes but they are taxes we need to pay.

Mrs May acknowledged in her speech that this area needs to be looked at again and presumably contemplates going further than the current proposal of capping fees at £9,250 and increasing the salary level at which debt begins to be repaid.  She needs to.  That people should be in debt for 30 years sticks in the craw even if the debt is then waived.  To be indebted to the government is not what most of us regard as being free.

Another big issue addressed by Mrs May is the capping of energy prices and here too the issues run deep.  The problem is that although there is a market and people can fix their energy price, many of them do not do so but stay on the expensive standard variable tariff.  Inevitably these are the least savvy, often the most vulnerable, and the effect of their inactivity is that they pay more for energy than do others.  This goes to the usefulness of relying on consumer choice generally.  If the mechanisms are at all complicated, giving the public a choice simply doesn’t work.  Those at the bottom will always end up paying more and you see this just as much with railway fares as you see it with fuel.  Clever multiple pricing is generally a mess and beyond the wit or energies of large sections of the public to operate.

There can, I think, be little doubt that Mrs May understands all these issues and that the leaders of the other parties do so too.  Her risk is that she will be too timid in her solutions, either giving too much weight to the Treasury on student loans or failing to push through meaningful reforms on housing and fuel prices.  If they believe that she will fail here, her backbenchers are right to call for a new leader.  If, on the other hand, she has the determination to tackle these areas they should not ditch her over the relatively minor mishaps which affected the delivery of her speech.

 

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Issue 124:2017 10 12:Show Yourself (Neil Tidmarsh)

12 October 2017

Show Yourself

Face on for a face off.

By Neil Tidmarsh

The Austrian government’s Anti-Face Veiling Act came into force last Sunday, and only days later this ‘burka ban’ law claimed its first victim.  But the victim wasn’t a woman wearing a burka.  It was a man dressed up as a shark.

He was advertising a chain of computer stores called McShark.  But the costume’s head covered his face, and the law forbids the wearing of full-face coverings in public.  He refused to take the shark’s head off (“ain’t doing no harm, officer, just doing me job, ain’t you got no real criminals to arrest?”) so he was fined €150 by the police.

An Algerian businessman, Rachid Nekkaz, has offered to pay the fines of anyone caught out by the new law (apparently he has already spent €300,000 paying fines for women falling foul of similar laws in France and Belgium) – it would be interesting know whether or not he’s signed a cheque for the Shark Man.

Meanwhile, in Iran, a nineteen year old girl has been kicked out of the national chess team and banned from the game for not covering up when playing for her country.  Dorsa Derakhshani has stood out from an early age: more than ten years ago, she was the only competitor not wearing a headscarf at a national chess tournament for under-eights – she was wearing a princess dress and tiara instead (which she admits was a canny psychological ploy – it made her feel powerful).  But her refusal to wear a hijab came to a head last February when a controversy blew up over the dress regulations imposed by the Iranian chess federation for the Women’s World Chess Championship held in Tehran; all competitors were required to wear the hijab, but a number of players from the USA and elsewhere refused to do so and boycotted the event.

It’s all very confusing.  The Austrian foreign minister Sebastian Kurz said that his country would not tolerate symbols of a parallel society; but what about symbols of diversity, pluralism and tolerance?  Rachid Nekkaz described the new anti-burka law as an attack on freedom; but those protesting women chess players described the Iranian pro-hijab rule as an attack on freedom, choice and the rights of women.  It just goes to show what a mess the authorities get into when they proscribe – across the board and without precision or good practical reason – what people can wear or do.  Surely everyone should be allowed to wear whatever they like as long as it doesn’t present any specific danger or threat to the rest of the public?

There were other examples this week.  In Tajikistan, President Rahmon (“Founder of Peace and National Unity – Leader of the Nation” as state media have been ordered to describe him whenever his name is mentioned) banned mourners at funerals from wearing black.  Potentially very confusing for those of us for whom wearing black at funerals is de rigueur.  Mourners have also been banned from wailing loudly, tearing at their hair and scratching their faces.  Birthday celebrations were banned in 2007 to prevent excessive expenditure, of course, and in recent years the police have shaved the beards off tens of thousands of men in this mainly Muslim country as a gesture against Islamic fundamentalism.

How much of your face you should or should not show was also in the news from India this week, where moustaches – rather than beards – and whether they should be permitted or banned have provoked mystifying levels of violence.  In Gujarat state, the lowest caste, the Dalits, have launched a movement intending to end their ‘untouchable’ stigma within thirty years.  Many Dalit men have begun to grow moustaches as a result, in defiance and protest against an ancient tradition which forbids them from growing facial hair.  In recent days, however, some of them have been attacked – beaten up and stabbed – by higher caste men eager to enforce the tradition by imposing a ban.

Of course, there are places and occasions – such as issuing passports, and at passport control at airports – where the authorities need to regulate how we appear and dictate what we can or cannot wear, for the good of society as a whole.  As three Chinese women found out a few days ago – they had flown to South Korea for plastic surgery, and when they tried to return to China they weren’t let back into the country because they no longer looked like the photos in their passports.  Moreover, their heads were swathed in bandages and their faces were so swollen after the operations that any sort of identification was difficult.  Tens if not hundreds of thousands of Chinese people visit South Korea for cosmetic surgery each year, and some surgeons issue their patients with certificates to inform immigration officers about the operations as part of the service.

Perhaps McShark should have issued their man with a similar certificate.  But I doubt that it would have saved him (or Rachid Nekkaz) that fine of €150.

 

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Issue 124:2017 10 12:Does Macron need to mind his argot?(Richard Pooley)

12 October 2017

Does Macron need to mind his argot?

Why does his vocabulary matter?

By Richard Pooley

photo Robin Boag

I am sending this article to Shaw Sheet’s esteemed editor a day early. I have no idea what his policy is on the use of swearwords in his august organ.  But if you find he has resorted to asterisks instead of letters and are hence confused, blame him.  I am writing in France, where I live, and here they don’t mince their words when speaking (although, come to think of it, mince is a common substitute for merde among older French people, just as sugar was for shit in the UK).

President Emmanuel Macron was in my part of the world last Wednesday, 4 October. He was in Égletons, just up the valley of the Corrèze river from Tulle in the old constituency and now retirement home of his predecessor and mentor François Hollande.  He had come to open a training centre.  He was greeted outside the building by employees of GM & S, a car parts manufacturer in La Souterraine, a town some 140 km by road from Égletons.  They have been demonstrating for months, angry at the closure of their factory and the failure of its main customers, Renault and Peugeot, and the French Government to come to their aid.  During his tour of the new centre, Macron was filmed by France 3 and BMTV giving his reaction to something said by one of his hosts, Alain Rousset, Socialist president of the Nouvelle-Aquitaine region to which the Corrèze department now belongs.  Rousset told Macron about the problems the aluminium foundry at Ussel, 30 minutes away from Égletons, was having recruiting skilled workers.  Boom microphone over his head, television camera pointing straight at him, Macron had this to say: “Certains, au lieu de foutre le bordel, feraient mieux d’aller regarder s’ils ne peuvent pas avoir des postes là-bas, parce qu’il y en a qui ont les qualifications pour le faire et ce n’est pas loin de chez eux.”  44 words. But the French media and France’s political class have in the past week, to a large degree, ignored all but three of them.  Instead of focusing on the content of what Macron said, something which would have caused universal outrage in the France of his predecessors, they have expressed disgust at his use of a phrase, which though vulgar would not raise an eyebrow if heard in any bar from Marseilles to Lille.

The British press had a stab at translating what Macron had said.  The Independent doesn’t seem to have enough money to employ its own translators; it quoted the Daily Telegraph’s clunky attempt: “There are some who, rather than wreaking f***ing havoc, would be better off seeking if they could get a job there, because some of them have the right qualifications.”  Those were the Independent/Telegraph’s stars by the way.  The online English language newspaper, The Local.fr, chose “stirring up shit” for “foutre le bordel.”  The Guardian went all coy and offered “kicking up bloody chaos.”  “Bordel” means brothel but is often used to mean a mess or chaos.  “Foutre” is one of those French verbs you (or, at least, I) were not taught at school, yet which is essential  if you want to know what the fuck is going on.  It could be the verb used in the translation into French of the last part of that sentence.  With its mate ficher, it is used in countless phrases, of which Je m’en fous and je m’en fiche are perhaps the most well-known, delivered with a full Gallic shrug: “I don’t give a fuck”.

Perhaps you have had enough of this vulgarity.  One of France’s main television news presenters certainly had last Wednesday night.  She was interviewing Christophe Castaner, the Government’s spokesperson, who told her that he could not see why the French president should not be allowed to use words that every French person used.  “Not me,” she said. “I have difficulty saying it.”  Castaner had described the president’s words as “banal”.  This struck me as odd.  The one thing Macron’s comment was not was trite.  But then my wife, so fluent in French that a waitress refused last Sunday to accept she was British, put me right.  Banal in French is not pejorative; it means commonplace or normal.  Yet another faux ami (false friend) for me to remember.

By Friday, Macron’s own spokesperson, Bruno Roger-Petit, was giving a slightly different spin to his boss’ apparent faux pas (a phrase not used by the French; they would say impair).  Apparently, Macron had thought it was a private conversation (ah yes, the kind with a microphone hanging over you and a television camera up your nose).  Perhaps the President should have chosen his words more carefully.  He would, of course, not use bordel in an official setting, as when giving a speech (So foutre is okay?).  But he would continue to use such language in “une discussion officieuse.”  (No, not a chat with an officious jobsworth; just an informal discussion).  But it was the last point that Roger-Petit made which struck me as the most important: “Le chef de l’État ne retire rien sur le fond de ses declarations …” In other words Macron may have put it a bit crudely but he does not take back the underlying sentiment: If you’ve lost your job, get off your backside, stop messing around and find another one.  It was Macron’s equivalent of Norman Tebbit’s 1981 “Get on your bike” remark.

But unlike the abuse which Tebbit got in the UK, the response in France to the content of Macron’s comment has been muted.  A right-wing MP attacked Macron for his arrogance.  One far left MP, Ugo Bernalicis, used Macron’s language against him: “That which is fout le bordel in this country…is getting rid of subsidised jobs…is raising the CSG…is lowering the APL.”  No, I don’t know what the CSG and the APL are either.  And I doubt if most French do.   Monsieur Bernalicis suffers from that French disease, Acronymitis.  And, of course, Jean-Luc Mélenchon, the Marxist head of La France insoumise, was quick to excoriate Macron for once more denigrating French workers (since being elected in May Macron has, inter alia, accused some of being “fainéants” – slackers, illettrés – uneducated, and “rien” – nothing).

Yet in an interview on Thursday, Stéphane Le Foll, the Agriculture Minister throughout the last Socialist government’s five-year term, was not willing to criticize his old colleague.  Nor the next day was another of Macron’s old Socialist partners, the former Prime Minister, Manuel Valls.  He thought Macron’s words were unbecoming of the nation’s head of state but he “understood his sentiments” and, by not openly disagreeing with them, appeared to endorse them.  He went on to say that he would be supporting Macron’s radical budget reforms in the National Assembly even though he is not a member of République En Marche, the ruling party.  The online part of Le Point, a centre-right weekly magazine with 400,000 subscribers, asked its readers the following question on Monday: “Was Emmanuel Macron right to castigate ‘those who, instead of fucking around, should go and see if there were jobs available nearby’?”  By the time I answered, 82.4% of respondents had said “Yes”.

I have some sympathy with those employees of GM & S whom Macron attacked.  Though France 3 showed a straight line between La Souterraine and Ussel, suggesting they are a mere 110 km or 70 miles apart as the crow flies, those workers would have to move house if they took a job in Ussel.  The two towns are, at best, more than 2 hours’ drive away from each other in this mountainous region.   And while it is far easier to find affordable housing in France than in the UK, I doubt anyway if many of GM & S’s employees have the qualifications necessary to work in Ussel’s foundry.  But do most French people share my opinion? It does not seem so.

Yes, there have been large demonstrations in the streets of Paris and other major cities since everyone got back from their summer holidays.  And there have been the usual operations escargots – go-slows – in factories and, most annoyingly for commuters, by truckers on motorways.  On Tuesday this week civil servants and state employees – teachers, hospital staff, railways workers and air-traffic controllers – were on strike.  But the demonstrations have not turned into riots; the strikes are half-hearted and ineffective (Tuesday’s got third billing on the national news programme which I and millions of French people listen to); and REM’s majority in the National Assembly is ensuring that Macron is able to introduce the reforms that they and he were elected to enact.

The Professor of Political Communication at Science Po in Paris, Philippe Moreau-Chevrolet, told L’Express last week that Macron’s continuing use of coarse language is deliberate: “He wants to break the image of him as an elitist banker.”  The professor believes that Macron wants to show those on the political right that he agrees with what they are thinking.  What better way of doing this than using the argot of the street?  I would only add that he must be confident too that such language will not put off his supporters on the centre-left.  Presumably his old Socialist Party colleagues voiced similar views in private, probably in the same pithy way.  The public reactions of such Socialists as Le Foll and Valls seem to show that Macron is right.  We can expect to hear many more foutre le bordel-type language from the French president over the next few months.

 

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Issue 124:2017 10 12:A timely nudge for economics (Frank O’Nomics)

12 October 2017

A timely nudge for economics

Richard Thaler’s Nobel Prize signals a new direction.

by Frank O’Nomics

The economics profession has a very poor track record.  Despite the decades of research that have been spent in analysing the economic cycle, seeking solutions that will ease hardship and promote growth, there has been little progress.  Earlier this year Paul Romer, Chief Economist at the World Bank wrote a paper called “The Trouble with Macroeconomics”, in which he asserted that that branch of social science had been ”going backwards for three decades”.  Macro and microeconomics have each spent a long time becoming almost purely mathematical disciplines, which appears to have left the subjects increasingly detached from the real world.  It is then refreshing to hear that the latest Nobel Prize for Economics has been awarded to a Behavioural Economist, Richard Thaler.

Behavioural Economics, a bridge between economics and psychology, recognises that economic agents are human and that economic theory needs to acknowledge this.  It challenges the standard assumption, that still persists in macroeconomics despite the very human factors behind the 2008 financial crisis, that the economy is made up of “rational actors”.   Central Banks and government treasury departments have continued to apply strict mathematical models to guide policy.  Economists like Richard Thaler propose alternatives where human behaviour is analysed in an attempt to work out solutions to problems such as: how to adjust tax systems when investment is needed, how to stimulate consumer spending when the economy is struggling, and how to discourage borrowing when debt levels once again threaten financial stability.

Thaler has spent many years looking at why people make choices, and demonstrates why a lack of self-confidence, an aversion to risk, an inconsistency in how people value things over time (with a tendency to focus only on the near-term), leads them to behave in a less than rational manner.  If I offer to sell a £20 note for £10 then most people would almost certainly take me up on the offer (only sympathy for my stupidity would stop you), but people repeatedly reject such a proposition when their employer offers to match additional pension contributions.  People focus on their near-term ability to spend rather deferring consumption for their old age.  Similarly, most of us appreciate the risks of unhealthy eating but the temptation of fried food tends to override fears of an early death.  In books such as, Nudge: improving decisions about health, wealth, and happiness Thaler (in this case with Cass Sunstein) looks at how governments might better organise the context in which people make decisions.  The idea is to develop a “Libertarian Paternalism” where people are shown how to make better decisions, without losing freedom of choice.

Behavioural Economics is by no means a new discipline, with other notable proponents, Daniel Kahneman and Vernon L Smith jointly joint Nobel laureates in 2002, and Robert Shiller in 2013.  The policy implications have not been missed by the US and UK governments, with the UK setting up a Behavioural Insights team in 2010 to harness the implications of the research for government policy.  Further, there are plenty of examples of the findings of research being applied to good effect, with Thaler devising a prescriptive life savings programme that generated an increase in the savings rate for the employees of a large company in the US from 3.5% to 13.6%.  Such measures can have a profound impact on people’s retirement prospects and could help significantly reduce the burden on the state.

None of this suggests that Behavioural Economics is some kind of panacea to cure all societal ills.  Indeed, playing on the irrationality of humans can be utilised in a negative way.  If doctors and dentists embraced the concepts of “Nudge” they could push us into a great deal of non-essential and expensive treatment, and payday lenders are amongst the prime exponents of playing upon borrowers short-term proclivities.  Similarly, we cannot say that Keynesian or Monetary economics have nothing to offer.  We can, however, argue that these theories may be much more effective if they incorporate a behavioural element, rather than assuming complete rationality.  For financial regulators, trying to avoid a financial crisis of the order of 2008, the analysis can be effectively used in setting regulations for the financial services industry, helping bankers (and others) to behave for the long-term rather than a short-term bonus.

Studying people rather than adopting abstract models can help generate better government policies. Small incentives can help push people in the right direction – whether that is to save more, pay more tax or donate their organs. Richard Thaler has declared that he will attribute any future personal spending excesses to his $1.1mn Nobel award (he is also no great fan of Donald Trump, having said “I simply cannot lower the bar far enough for him to get over it”).  His response is refreshingly irrational and hopefully the renewed impetus the award has given Behavioural Economics will be a “nudge” in the right direction for governments, and an opportunity for the economics profession to shed some very tired assumptions.

 

 

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Issue 124: 2017 10 12: Spanish Customs (J.R.Thomas)

12 October 2017

Spanish Customs

The trouble in Catalonia

by J.R. Thomas

Spain, ancient and modern – and deep water?

A week, the late Harold Wilson observed, is a long time in politics.  In Spanish politics last week seemed a lifetime. Spain, as our readers must have observed, has had some little local difficulties.  To most people, and to the Spanish government in Madrid, the crisis caused by the Catalan independence referendum seems to have come almost from nowhere, to such an extent that little preparation had been done.  And when it was necessary to do something, the government moved instantly from “It’s not going to happen” to full scale panic, with an almost inevitable overreaction by the Spanish police.

A number of people were hurt on referendum day – impossible to say how many because both sides are rather coy on the point, the government saying only that it was few and the Catalan administration saying that it was many, and the media showing endless picture of students being pushed and old ladies with blood on their faces.  They do tend to be the same students and old ladies who figure, so we might conclude not many were hurt, and not too seriously.  The whole thing thus begins to take on the air of a minor farce, with state police trying to grab polling boxes and the regional police trying to stop them.  But to have such a brawl is not a farce; it is a serious indictment of a modern political system that this fighting, pushing, and grabbing could occur where talking would have been so much better.

A week ago the popular media view was “brave Catalonia, standing up for democracy and independence, trying for freedom, but being denied even the people’s right to vote”.  But in a week, things have moved on apace; the line now seems to be “naughty Catalonia, breaching the laws of the land and springing a left inspired and driven vote onto an unsuspecting Spain.”  By next week, indeed even by the time this is published, things may have moved on more, but we will attempt to stop the roundabout for a moment and try to draw out a few facts.

Firstly, of course the vote was not a surprise to the politicians of Madrid, to the rightist government of premier Mariano Rajoy, or to the Spanish media.  There have been threats from the Catalonian regional government for some time that if central government did not make concessions to localism in the region, then there would be a serious push to procure independence.  Catalonia does not have a history of independence – this is not Scotland or Wales, independent nations absorbed into their neighbour – Catalonia was a part of the ancient Kingdom of Aragon, which in the late fifteenth century drove out the Moors and united Spain.  But Catalonia had a different language, a different culture and style, created largely by its isolation from the core of Spain in the north and centre.  In the nineteenth century much of the rise of Republicanism and the Left began in Catalonia; its leaders tended to be Catalonian.  Catalonians are great writers and poets so many of the ideas of the left wing revolutionaries were heavily filtered through Catalonian minds and voices.  It was one of the last regions to hold out against the troops of General Franco in 1939; Franco hated it and Catalonia cordially hated him back.

But the idea of Catalonia as a nation is something new.  Support for independence has varied wildly – in 2007 only about a sixth of the local population said they would vote for independence; by 2012, 51% said they would. Recent polls have suggested small majorities against striking loose from Spain.  Catalonia has for at least one hundred and fifty years been politically leftist, but the left is deeply split when it comes to the concept of a sovereign Catalonian Republic.  On the one hand independence represents that urge to get away from that Spain of devout  Catholicism, traditionalism, conservative right wing politics; on the other independence is rejected by those who see Catalonia as a left leaning conscience, that radical driver of new democratic free Spain.

Within the Catalonian left, which controls the provincial government, there has recently been a sort of internal coup; the longstanding regional president Artur Mas, who played the game of threatening to secede to secure negotiating advantage but never went so far as to do anything about it, was elegantly pushed aside in 2016 by Carles Puigdemont, former journalist, leftist, and enthusiast for unilateral independence.   Unlike Mas, he aimed at independence, with a socialist government to follow.

There is another factor to be taken into account; Catalonia was historically one of the poorest parts of Spain; it vied with Andalusia in the rural poverty stakes.  Both have changed, but Catalonia more so; it has become wealthy through industrialisation, and recently through tourism.  Barcelona, its capital, has become one the wealthiest cities of Spain.  It suffered especially badly in the 2008 recession, and has been slow to recover – not least because the independence noises of Mas were believed by some major Catalonian companies who moved their head offices (and thus tax revenues) elsewhere.  Recently economic recovery has accelerated and Catalonia finds itself a net contributor to the central Spanish treasury in Madrid – unlike, for instance, the Basque Country which has an arrangement that it pays no more to Madrid than it gets back.  Whilst nobody says the independence movement is just about economics, the inequality of treatment is loudly resented.

Snr Puigdemont is a clever politician, and Snr Rajoy, who famously prefers to do nothing if he possibly can, has fallen into a trap, albeit one of his own making.  By the time he realised things were getting serious, it was too late to do anything subtle.  So he had to be unsubtle, and send in the federal police.

King Felipe VI, in the first test of his reign, was equally unsubtle and told the Catalonians to behave themselves.  This has been heard with astonishment in Europe which is used to monarchs saying as little as possible and certainly keeping out of politics.  “Look” the liberal intelligentsia say, “his father was bold in the cause of democracy in the attempted coup of 1981, but what is Felipe doing?” (we look at a fascinating book on 1981 in our review section this week).  Felipe is of course being equally bold for democracy, as most Spanish people have now realised and the actions of monarch and government are now widely supported.  It is also true to say, no doubt, that Felipe knew that a left wing independence heading government in Catalonia was unlikely to listen to any words, however honeyed, from a Bourbon monarch, so he might as well go for broke.

Snr Rajoy’s strategy seems to be going reasonably well.  Behind the scenes there have been suggestions that the tax payment issue could be addressed.  In front of the scenes the government is threatening to suspend the regional government, as it can do under article 155 of the constitution, has sent several naval vessels to the port of Barcelona, and has threatened to have Snr Puigdemont arrested (for sedition, presumably).  Carles has backed off declaring independence (or technically has said he has declared it, but suspended it).  His left wing support group has split, between those who wish to negotiate and those who want to close the border now.  And there have been a series of marches in Barcelona and elsewhere by anti-independence protestors, who make the not altogether surprising point that they are indeed Catalan; but also and very proudly Spanish.

Which brings into focus the result of that ballot just over a week ago. Ninety percent voted for independence, yes, but only 45% of those eligible voted.  It is not at all clear if there would be a majority for independence if another ballot were held.  The result could be, for instance, 48% to remain and 52% to go.  And we know how much trouble tight results like that can cause.

 

 

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Issue 123:2017 10 05:The Tale of Mrs M (J.R.Thomas)

05 October 2017 

The Tale of Mrs M

by J.R. Thomas

There is something wholly delightful about the way in which practically all commentators are wholly consistent in their prediction of election results.  And wrong.  And indeed about the politicians who happily endorse the predictions and so persuade themselves against all the odds  to believe their own publicity.

Mrs Clinton and even more so the press thought at every possible opportunity that she had in the bag whichever particular cat she was trying to catch – Barrack Obama in 2008 (he won), Bernie Sanders in 2016 (she won, but it was a close run thing), Mr Trump (he won).  Gordon Brown and the press agreed that he had walked it in 2010 against David Cameron – Mr Cameron won (albeit in coalition).  In a reversal of direction but not trend, Mr Cameron thought and the press concurred that he had lost in 2015; but not so (he probably wished he had done so fourteen months later).  And Mrs May was on course, the press and she agreed, for a massive majority in 2017 – er, no.

So when the cynical Shaw Sheet – not cynical, seasoned, the Editors insist – noticed that Mrs Merkel was said to be on course for her fourth successive term as Chancellor we should have advised our readers to get quickly down to the bookmakers to put down a few contrary Euros.  As it happens she was not defeated, quite, in the same way that Mrs May was not quite defeated in June.  But she fought the same non/low key campaign and with a similar result.  She did not lose but she not win either.  Indeed, her party, the CDU, (the Christian Democratic Union) slumped to its lowest share of the vote since 1949 – in comparison with Mrs May’s Conservatives who actually scored a thirty year record high.

Angela is in the same tricky position as Theresa; that of not having a majority sufficient to govern with.  Both ladies need partners; and the ladies are not so keen on those available.  But needs must, and Mrs May has made some new friends in Ulster and is hoping her old Tory friends will not abandon her.  Where Mrs Merkel will find her new friends is not so clear.

Unlike Mrs M, Frau M has been outmanoeuvred not to the left but to the right, by a new political party, AfD, Alternative for Deutschland.  Afd is UKIP-in-Germany, not yet campaigning for Gerixt (Deutschixt?), but not great fans of the European Union, against immigration and immigrants, and generally for old fashioned German values.  Like UKIP, it is a strange coalition of extreme right wingers, old fashioned conservatives, and nationalists of varying degrees of intolerance for foreign persons.  That simplistic nationalist cause has engendered unexpectedly strong support in this election, from almost six million voters, giving it 12.6% of the popular vote.  It performed especially well in the former East German states, and became the largest single block in Saxony.

The post war West German rebasing of democracy was carefully designed to keep out parties of the fringes and the extremes, to avoid subversion of democracy from within.  It did not allow, nor, in reality could it allow, for groups of extremists gathering into coalitions; AfD has done just that and breached the barriers with one great leap, giving it 94 seats in the Bundestag, making it the third largest party.

Angela may be the cosy Muti (Mother) of the German nation, but she is also a wily old fox and the one thing she will not do is go into coalition with AfD.  That would destroy her reputation and the carefully crafted moderate conservative image of her Christian Democrat Party.  So where can she find the friends she needs? Not with the Social Democrats (SPD) who have been part of her Grand Coalition for the whole of her past term.  Martin Schulz took over leadership of the centre-left party with great expectations only six months ago, fresh from his previous role of Presidency of the European Parliament, but his party’s boosted opinion poll ratings did not last long.  Mrs M’s careful stewardship of the economy and image as a strong and safe pair of hands undermined Schulz’s criticisms of her leadership and Mr Schulz came over as a dull and unimaginative leader; his late switch to campaigning on immigration issues merely made him look opportunistic.  The result was the SPD reduced to only 21% of the vote, like the CDU, its lowest share of the vote since the 1940’s.

The big winners were the minority parties – not just AfD, but also the Green Party, not hugely significant but, with 8% of the vote and 67 seats, far from inconsequential; The Left (no prizes for guessing their orientation), with 9% and 69 seats: and the FPD, a liberal party of libertarian cast with 11% of the votes and 90 seats.  (This incidentally is a powerful comeback for the FPD; though a long established party it fell below the 5% of votes threshold in 2013 and lost all its seats.)

To add to the confusion of acronyms, the CDU is itself a coalition, of the CDU itself and the CSU, the Christian Social Union.  The CSU has been the ruling party of Bavaria for many a year, Bavaria being almost semi-detached from the rest of Germany when it comes to politics (and social attitudes, some Germans would add).  We should also give an honourable mention, in a country which is said to have no sense of humour, to The Party Party, which wants to rebuild the Berlin Wall and is best described as a satirical movement – it managed to gather a quarter million votes, which alas gives it no seats and no possible role in a coalition.

The FPD appears to be the obvious friend and coalition partner now for the CDU/CSU, though it has nervous memories of the last time it went dancing with Mrs Merkel – which may well have led to its loss of support in 2013.  Philosophically the two parties are relatively close so in the end a deal might be done. But that will not be enough to give Mrs M a majority, which brings her to the plain pine door of the Green Party.  Germany is a country where Green issues rank very high and where conservation is strongly supported across party lines.  The Greens themselves, although generally described as Centre/Left, are quite pragmatic about working with other parties to achieve progress on green issues.

Lord Dunsany, that great novelist of Edwardian times, wrote one tale (“My Talks With Dean Spanley”) partly from the perspective of a dog.  In it he described how dogs, smelling death on other dogs, would go to great lengths to avoid them.  As with dogs, so with politicians.  Mrs May must be getting familiar with careful distancing by those colleagues who a few months ago wanted to be in her pack.  And Mrs Merkel, her fellow party leaders will detect, has a slight tang of political death around her.  So who wants to be in her gang; and on what terms?  The upside of being junior player in a coalition is hard to see (unless, it must be said, you are an Ulster politician with a carefully crafted shopping list). The FPD has been there and much good it did them.  The Greens could be a very muddy green after four years with Mrs M.  Both those parties also have doubts about the EU, especially about the role of the euro as a currency, which would do serious damage to Mrs Merkel’s role as de facto leader of European nations – not that M. Macron would mind that. The SPD have seen what coalition can do, with The Left now doing an outflanking move per J Corbyn. And even talking to AfD would be Angela’s ending.

Mrs Merkel is a very serious politician and does not want to retire yet.  Most Germans think she will survive this, and probably in a way that will be to her considerable advantage.  The next few weeks will show how.

 

 

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Issue 123: 2017 10 05: Referendum in Catalonia (John Watson)

05 October 2017

Referendum in Catalonia

How does the upsurge in separatism affect the EU?

By John Watson

It is a pattern we have all seen before.  The authorities are challenged by those who want independence.  They overreact.  Their brutality feeds the very movement they seek to repress.  Remember Dyer at Amritsar in 1919; remember the soldiers firing into the crowd at Croke Park, Dublin, in 1920; and what did their actions achieve in political terms?  They turned those who had not previously been involved into militant supporters for the independence of India and Ireland respectively.

Fortunately, the brutality in Catalonia is not on the same scale.  Rubber bullets and not live rounds have been used and people have been injured rather than killed.  Nonetheless the pictures of unarmed and often elderly voters being forcibly dragged away from the ballot boxes is not a pretty one and can only inflame an already resentful relationship between Catalonia and the Spanish government.

Okay, it wasn’t well-handled, but what should Spain have done?  Catalonia is its richest province.  Should it have just let it go or should it have tried hard to find ways of augmenting its already very considerable autonomy?  No doubt the government considered both courses.  Perhaps neither was viable.

Seen through Spanish eyes the vote for Catalonian independence is a practical problem.  Looked at more broadly, however, it fits into a pattern, a spreading pressure for fragmentation.  Scotland frets over its relationship with the other members of the UK.  The Kurdish ambitions for their new state threaten both Turkey and Iraq.  The Basque country is quiet now but no doubt watching what happens in Catalonia carefully.  Parts of the Ukraine celebrate the cultural identity of their citizens by breaking away and allying with Russia.  Britain walks away from the EU.

There is nothing new in all this.  Provinces have always broken away.  Look at the wars of religion in Europe when protestant areas sought to establish independence from their catholic masters.  Look at William the Silent who led Dutch in their ultimately successful war to throw off the yoke of Habsburg Spain.  Look at Southern Ireland, come to that.  There is nothing new in the conflict between the imperial master and the resentful province but now, as with politics generally, the nature of the conflict is moulded by the new forms of communication which technological advance has made available.

Instant communications have undermined political deference.  In the days when the news was filtered by the media, the public were content to listen to its analysis and views.  Now news apps simply pass on the photographs of those present with direct comments from those on the spot.  This data is raw and often misleading, but those who receive it over their phones are understandably tempted to form their own views on the basis of what they have seen rather than searching around for reliable commentators.  This makes space for a new form of populist politics. The rabble-rouser who can use the new technology sways public opinion whether his views are rational or not.

Politicians are still adapting to this phenomenon and changing the way in which they communicate accordingly.  Nowhere, however, does the new technology create more political opportunities than for those hoping to float their careers on the tide of political fragmentation.

There is no lack of these and it is easy to see why.  Suppose that you fancy a political career but, despite your efforts, you do not feel that you’re on the way to the top.  The rules of populist politics dictate that you need an issue on which you can be said to represent your “constituency” so that you can roar around protesting and attract that all important media attention.  If you are in Catalonia or Scotland, say, the obvious place to focus is on the relationship with the larger unit.  After all, there are bound to be some parts of that relationship which could work better; if you can find a grievance, there is an obvious target which you can complain about, and if there isn’t a grievance now something is bound to come up in the future and if you keep whingeing away at the union you will be in a good place to exploit it.  Yes, separatist politics is fertile ground for the ambitious and unscrupulous.

Now I do not wish to be thought to be giving a view on whether Catalonia has fair grievances against Spain.  Perhaps it does and perhaps it doesn’t.  What I would say, however, is that at the moment the dynamics of politics favour secessionist movements both because they present easy pickings to the demagogue and also because the messages are easy for the public to grasp.  Anyway, separatism is on the up.

It is interesting to consider the future of the EU through this prism.  There, after all, the direction of travel at the official level is in the other direction.  Listen to Mr Macron.  His talk is all of deepening relationships and, prior to the German elections, he probably carried Germany with him.  There is nothing wrong with that in principle and, indeed, commentators are more or less agreed that, having created the Euro, the EU now needs to create new institutions to support it.  The trouble is, rather, that he swims against the tide.  If Catalonia is restive in its relationship with Spain, and Scotland uncertain in its relationship with the rest of the UK, how is he to persuade Europeans from different cultures that they must live together in a single ever-deepening block?

In a sense the EU has made its own problems here.  In an age of division there will be increasing resentment of power exercised from abroad.  The EU bureaucracy is already seen as overpaid and self-serving and it would not take much for it to be regarded as an engine of oppression.  In Britain some already see it like that.  Had they only kept the relationship looser, exercising a practical restraint by only legislating when measures were really necessary to protect the market or some new and exciting venture was in the offing, then the popular talk would be about the need to work together more and the need for more community-wide ventures.

Sadly it has not turned out like that and so the demagogues will work away grubbing for the grievances which will promote their successionist careers. We’ve seen it in the UK and we will see it elsewhere.  Iit will make Mr Macron’s dream of a European State very hard indeed to achieve.

 

 

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Issue 123: 2017 10 05: All Right? (Neil Tidmarsh)

05 October 2017

All Right?

Not quite.

By Neil Tidmarsh

A couple of weeks ago, as the German elections approached, I wrote that the far-right anti-immigrant AfD (Alternative For Germany) “is in disarray”.

And what happened on election day?

The AfD emerged as the third biggest party in parliament.  It won 13% of the votes, entering the Bundestag for the first time, with 94 seats.  5.9 million voters backed the party, taking a million votes from Chancellor Merkel’s CDU and half a million from the SDP.

Oh dear.  An alarming enough result for anyone other than an AfD supporter, but for a political commentator who had dismissed it as a party in disarray… I wiped das Ei off my face and put my crystal ball out with the empty bottles and jam jars to be recycled into something more useful and reliable.

But then what happened?

In AfD’s very first post-election press conference, only days after the vote, the party’s co-leader Frauke Petry dismissed it as too ‘anarchic’ for government and walked out.  She stepped down as co-leader, resigned from the party and said she would sit in the Bundestag as an independent.  Her husband Marcus Pretzell, AfD group leader in North Rhine-Westphalia, also announced that he was leaving the party.  Four AfD members of the state parliament in Mecklenburg-Vorpommern followed their example a few days later.  Die Welt reported that Ms Petry’s state deputy in the Saxony state parliament and another senior member are also quitting the party.  And this week, further confusion ensued when AfD’s now sole leader, Jörg Meuthen, rejected Alice Weidel, its candidate for chancellor, as a replacement for Frauke Petry.

A party in disarray, after all.  I rushed out to the recycling bins to retrieve my crystal ball; luckily it was still there – the week’s collection hadn’t yet been made.

Frauke Petry had recently clashed with other leaders over her pragmatic approach (intended to give the party political credibility) and her attempts to lead the AfD away from xenophobia.  At the party conference in April, she withdrew from the running for the party’s candidate as chancellor; and in the run-up to the election, she was sidelined by the joint candidates for the chancellorship, Alexander Gauland and Alice Weidel, who are taking it even further to the right.  It was Mr Gauland who said recently that Germany should be proud of its soldiers in the two world wars; and a court in Hamburg ruled earlier this year that a comedian had every right to call Ms Weidel a “Nazi slut” on TV.  One of the new AfD MPs is Wilhelm von Gottberg, a district mayor, who has said of the Holocaust “the genocide against European Jews continues to be used as an effective instrument to criminalise Germans”.  As a 77 year old, he would have had the honour of delivering the opening speech of the new parliament – which traditionally goes to the oldest member – had not the government (clearly equipped with a better crystal ball than my own) passed a measure a few months ago giving that honour to the longest-serving member instead (who happens to be Wolfgang Schauble, the former finance minister, who is being proposed as the new speaker).

The AfD isn’t the only far right party which seems to be in disarray at the moment.  This week, Marine Le Pen sacked the National Front deputy leader Florian Philippot as chief strategist and head of communications.  M Philippot promptly quit the party.  He had been recruited by Ms Le Pen in 2010 to help her detoxify the party and broaden its appeal; he advocated greater social tolerance and a move away from its traditional anti-immigrant, anti-Islam stance, which can’t have endeared him to many in the party.  And he supports absolute national sovereignty, which means he insisted that the party must be anti-EU and anti-euro, ideas which many members believe cost it votes in the presidential elections and led to its defeat by M Macron.  M Philippot’s departure, like that of Frauke Petry, seems to have been precipitated by a movement even further to the right; interviewed on television, he said that he thought the party might now make “a terrible return to the past, the FN caught up again by its old demons”.

And here in the UK, Ukip has just elected its fourth leader in less than eighteen months.  Just about the only heartening thing in British politics at the moment is the fact that the Brexit vote didn’t result in Ukip riding to any sort of success on the kind of wave of populist right-wing xenophobia which has sustained AfD in Germany (taking it into parliament as the third biggest party) and the National Front in France (bringing it neck and neck with the two main parties and taking Marine Le Pen right through to the final round of the presidential contest).  Ukip took less than 2% of the vote in June’s election, has no MPs and lost control of Thanet district council (the only local authority in which it had a majority) last July.  The temptation to use the leadership election to move even further to the right, as AfD and the National Front appear to be doing, must have been great; but to Ukip’s credit, it was resisted.  Anne Marie Waters, the director of Sharia Watch UK and anti-Islam activist described as “the Joan of Arc of neo-fascists” was the bookies’ favourite for leader – but she came second with only 21.3% of the vote.  A former Liberal Democrat, army officer and policeman, Henry Bolton, came first.  He has announced a plan to throw out the “integration agenda” which focuses on Islam and Muslims, and declared that his election has stopped Ukip from becoming “the UK Nazi party.”

Frauke Petry, Florian Philippot and Henry Bolton have all tried to make their parties less extreme and less intolerant.  Frauke Petry and Florian Philippot have largely failed; Henry Bolton appears to be succeeding.  There’s little to be thankful for in British politics at the moment, but that at least is something, I suppose.

 

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Issue 123:2017 10 05: Student Loan Groan (Frank O’Nomics)

05 October 2017

Student Loan Groan – There must be a better way.

Forthcoming changes highlight a flawed system.

by Frank O’Nomics

As a way of trying to win back the vote of the younger generation, the proposed capping of the university fees at £9.250 and the raising of the salary trigger for repaying student loans, from £21,000 to £25,000, would appear to have some merit. For those earning less than £25,000 they could have an additional £500 per annum to spend after graduation in 2020, and (according to the Institute of Fiscal Studies) the changes could save middle earning graduates as much as £15,700 over their lifetime.  This is not a small cohort, and it is estimated that 83% of graduates will not have fully repaid their student loans by the time their debts are cleared 30 years after graduation. So what’s not to like? First, these measures do nothing to alleviate the usurious level of interest rates that students are being charged, currently 6.1%.  In addition, the 9% tax on earnings over the trigger puts graduates at the highest marginal tax rate in the world (once you factor in income tax and National Insurance).  For society as a whole, as one starts to engage in a little cost-benefit analysis, it is clear that there are a great many issues with the current, and proposed system of student loan repayments, and a fundamental overhaul is needed.

I will get to some potential ways of improving the system – but first let’s look at the extent of the mess. The problem is that, from an economic point of view, the current regime would appear to offer very little help to any section of society. For the universities the proposed fee cap will quickly start to eat into the real value of their income, causing many to cut back on course provision.  For the taxpayer the costs are potentially enormous. The increase in costs in the provision of higher education could rise by 41%, or more than £2.3bn, per year. For graduates, beyond the obvious benefit to restricting the total of their loan and the near-term increase in disposable income, there remains the prospect of living with a high level of debt for 30 years – which will restrict their ability to buy their own property or to save for their retirement.  A graduate who progresses to earning £60,000 currently pays £3,510 towards their student loan – a sum that would fund an additional mortgage of around £80,000.

The main problems stem from the repeatedly poor assumptions that were made at the outset.  First. The Department of Business and Skills extrapolated from 30 years of graduate income growth and assumed that this would continue, thereby providing an acceptable level of repayments.  This was clearly dubious given the changing nature of the student population, which includes many who earn modest amounts with restricted pay growth, such as nurses and social workers.  Second, they thought that pay growth would be spread evenly across the graduate population – and this was just plain wrong.  Because of its poor logic, the government miscalculated the amount by which it would subsidise the student loan system, the so called RAB (Resource, Accounting and Budgeting) charge. This rate has risen steadily from 31% to an estimated 45% as a result of the proposed changes.  Interestingly, if this subsidy were to rise above 48.6% – not an unrealistic possibility if the prospects for graduate employment deteriorate, then the government would be incurring more costs than it would have done under the old £3,000 university fees scheme!

There are two ways in which the situation may resolve itself.  First, the outlook for graduate pay may improve, thereby reducing the RAB charge, although the trend for wage growth overall does not suggest a more rapid loan repayment rate. The second is an improvement in the discount rate that the Treasury uses to calculate the value of future repayments. If the government could secure long-term funds to back student loans at a very low rate, they could then be more optimistic about the value of future repayments.

Prudent government funding could also have a much more important consequence for the rate at which students are charged interest on their loans. Students have to pay interest of RPI +3% on their loans which, given that the rate is set each September, means that they are currently paying 6.1%.  Other than payday loan deals this looks very expensive. If the government can secure funding at RPI +0.5% then there ought to be scope to improve the rate that students are charged.  How can they do this? Well there could be some money raised via National Savings – where the last Index-linked certificates were withdrawn as they were seen as too generous in paying RPI +0.1%.  The more wholesale solution would be to issue hypothecated government bonds.  Currently index-linked gilts with a 33 year maturity have a negative real yield approaching 1.5% – i.e. investors are receiving 1.5% less than inflation over the life of the bond.  Such negative yields are the product of a desperate need for inflation-linked securities to help fund the future liabilities of pension funds.  There would be huge demand for debt at this rate if it had government backing. Clearly students not paying back their debts is an issue in borrowing sums secured on such debts, but if the government will underwrite them they can surely find a better level to charge students – say somewhere between RPI -1.5% and RPI +3%.

Cutting tuition fees might help students and as a result, the prospect of the government being repaid, but this will not help universities get the funding that they need.  If the government insists on a system where students pay in full for their education, they need to make sure that the interest rate that they pay is not overly burdensome.  There will be many arguments why the rate has had to be high, but most will simply reflect the fact that so many students are likely to effectively default on their debt.  If the government wishes to appeal to younger voters it needs to desist from charging an extortionate interest rate and a high marginal rate of tax.  Merely hoping for a fall in the level of inflation will not work.

 

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Issue 122:2017 09 28;Kicking the can down the street (John Watson)

28 September 2017

Kicking The Can Down The Street

What are the two years for?

By John Watson

Two years more? Just what will it achieve? That is the question which Mrs May will be asked about her proposal in Florence that there should be a two-year transitional period after Brexit in which nothing much changes.  On the face of it, it sounds a good idea.  Everyone has been saying that they cannot get the job done in time, so a little more time will not come amiss.  The question is, of course, whether it will be spent driving forward a practical solution or whether it will simply result in a corresponding delay before the parties begin to negotiate in earnest.  It is a commonplace that real negotiations do not start until the pressure to agree is inescapable; so, if the additional two-year transitional period relaxes that pressure, it might do little more than extend the period for uncertainty and bickering.  Two years more of chaos and self harm.

That would be the argument if this was a normal commercial negotiation.  Nature abhors a vacuum so if you create extra time you can expect it to be filled with extra sitting about and posturing.  But this isn’t a normal negotiation.  Moving the effective deal date by two years means that the parties themselves will have changed their nature.  Neither the UK nor the EU will be the same entities in 2021 as they will be in 2019.  We are aware of the potential changes at the UK end of course – a press anxious to fill the column inches has seen to that.  Before 2021 there may be a general election.  That could produce any number of different outcomes.  Quite apart from the result itself, who knows what the various parties will look like by then.  Labour has not yet settled on its approach to Brexit so there are a number of possibilities there.  They could be a Remainer party headed by Sadiq Khan or Keir Starmer, focussed on participation in the market.  They could follow Corbyn’s inclinations, averse to any participation in the market, concerned lest the state aid rules block their nationalisation program.  The Lib Dems will probably still be all for rerunning the referendum but the trouble with that is that unless the public mood has changed they will get the same answer again.  Perhaps a change of mood to remain will both win the election for Vince Cable and allow him to push forward with a remain agenda.  There is no evidence of it at the moment but the chance of it happening before 2021 must be higher than the chance of it happening before 2019.  The future attitude of the Tories is also hard to predict.  Who will be leading them?  Still Mrs May?  Boris supported by Liam Fox?  Putting back the date for leaving the market gives all these possible changes the opportunity to play out.

Still, this just focuses on the UK.  Three and  half years may be a long time in domestic politics but it is even longer in terms of what is happening in Europe.  There 26 nations are being squeezed into a one size fits all straitjacket and, as it gets tighter, the strains are beginning to show.  Mr Macron’s vision of much closer integration is already being undermined by German domestic politics as the Free Democrats, sceptical of his proposals for a Eurozone budget, become likely coalition partners of the Christian Democrats.  Then there is the worrying increase in nationalism, with 13% of Germans voting for a far right party and the possibility of Spain losing Catalonia, its most prosperous province.  Further east the divisions darken with Hungry rejecting the EU approach to migration.  These are all huge pressures and although the EU may survive them it is unlikely to do so unchanged.  Mr Macron, in setting out his vision, suggested that one day the UK might wish to rejoin.  If that was where we had got to by 2021 it could change the negotiations fundamentally.  On the other hand a strengthening of right-wing movements in Europe and a corresponding disgust in the UK could change the negotiating positions in quite a different way.

That puts the transitional period into its context.  Do we want to wait an extra two years before a decision is actually made?  Of course that has the advantage that by then we will have seen how some of these uncertainties will turn out; but, then again, other uncertainties will inevitably have taken their place.  In the end the position will always be volatile and at some stage we will need to hold our fingers to the wind and commit ourselves.  Perhaps then we should just get on with it, leaving the deadline where it is, accepting that there will be some rough edges and chaos as the civil servants struggle to get the systems in place, and using the increasing time pressure to drive the parties to reach an agreement.

 

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