NE David Author
NE David                                      Author

Talking Point

A NEW ECONOMY - IS GLOBALISATION DEAD?                                            19 OCTOBER 21

 

Last week I wrote about the prospects for a New Economy for Britain. This was in response to the challenges imposed by the unholy alliance of Brexit, Covid and Climate Change where recent events have shown that change is desperately needed. The answer put forward by Boris Johnson in his speech to the Conservative Party Conference  - High Skills, High Wages and Low Taxes - seemed overly simplistic and aimed at solving one apparently temporary problem - the current shortage of lorry drivers. I asked readers if they could offer any alternative solutions to the overall challenges we face. One has come to light and poses the question - is Globalisation dead?

 

As the recent incident in the Suez Canal with the container ship Ever Given showed, extended global supply chains and just-in-time ideology are vulnerable to shocks and sudden changes in world trade. Covid has provided just one such shock and we now see ships and the containers they carry stuck outside ports all over the globe waiting for clearance as we emerge from the pandemic. Brexit has doubtless caused a similar amount of dislocation although its full effects have yet to be felt and are somewhat masked by Covid. One hopes that phenomenon will eventually pass but Brexit will remain. As will Climate Change (for the foreseeable future at least) as both shortages and excesses of water, crop failures and fires further disrupt the world economy - a situation exacerbated by long supply chains and the carbon emissions their transportation incurs.

 

One potential answer to these difficulties would be for the UK to become far more self-sufficient, certainly in respect of some of the basic commodities. Fuel is an obvious example. I cannot imagine for one moment that we would want to be beholden to Russia (for gas) or China (for anything else essential for that matter). These are political decisions as much as anything else but they do reflect the problems of trade on a world-wide scale.

 

For the purpose of the argument, let me focus on one area in particular - food. 'The UK produces only 59% of the food it consumes. The vast majority of imports and exports are with other Western European countries' (see Wikipedia here). That may well have changed since Brexit and some of those exchanges will now have gone further afield. But that only goes to emphasise the point about extended supply chains and their vulnerability. I've already commented in a previous post about the fuss engendered around the fishing industry when we left the European Union. Why should our fishing industry 'collapse' because some overseas markets are no longer available to us when we produce less than 2/3rds of the food the country needs? Self-sufficiency in this and other areas would firstly alleviate some of thje problems caused by Brexit and secondly considerably shorten the supply chains associated with foreign imports, thereby minimising disruption and helping to lower global carbon emissions. We have one of the most mechanised and efficient agricultural sectors in the world. Why not support our farmers and put it to good use?

 

You'd be right to point out that the fly in that particular ointment at the moment would be the shortage of workers to pick the fruit and slaughter the pigs. Fair comment. The influx of foreign labour from the Continent has dried up for whatever reason and the problem in satisfying any two of the Brexit, Covid, Climate Change triumvirate often means aggravating the other. Nothing is perfect in this world but we have to try something. I suspect that Boris Johnson's response would be to designate such workers as Highly Skilled, have them paid Higher Wages and exact Lower Taxes. Let's hope the Chancellor has something more convincing to tell us in his statement next week.

 

A NEW ECONOMY - IS JOHNSON RIGHT?                                                     12 OCTOBER 21

 

My motivation in writing this piece stems from the speech Boris Johnson gave to the Conservative Party Conference last Wednesday. It attracted criticism from a number of quarters for being both 'vacuous' and 'bombastic'. I watched some of it - maybe the last half-hour or so - and yes, I found it light on policy and packed with allegedly witty 'bon mots' aimed principally at Sir Keir Starmer. But he did say one thing which struck me as particularly significant - we are going to need an entirely new approach to our economy. The question is, what is that going to be? And how will it be put into practice?

One could forgive the nature of Johnson's speech on the grounds that it was made to the Party Faithful and not to the Nation as a whole. He was speaking as Party Leader rather than PM. An opportunity missed, one might say, as the Nation stands in need of some reassurance right now. We seem to be facing a number of so-called crises - soaring gas prices, a shortage of petrol at (some) pumps, empty supermarket shelves (although I have yet to see any - perhaps I should get out more), pigs having to be needlessly slaughtered, the lack of lorry drivers etc. You might be tempted to think these are merely First World Problems but I believe they are symptomatic of something far greater. The world is experiencing a significant realignment in trade and we will need to adjust accordingly.

There are those who would assign all these difficulties to Brexit. Ardent Remainers will no doubt seek to do so. Similarly, hard-core Brexiteers will want to blame Covid and its aftermath. The truth, I believe, lies somewhere inbetween. Ros Atkins of the BBC has produced two excellent features on the subject, one dealing with the shortage of lorry drivers (click here); the other with the disruption to World Trade caused by Covid (click here). They indicate that there's a combination of factors which account for these present troubles and that those factors are likely to persist. Add to these the demands imposed upon us by Climate Change and it all constitutes a perfect storm. I'm tempted to add Chinese aggression (both economic and military) into the mix and one can see why things are going to have to change. Any one of the above would be enough to cause a rethink in normal times. But these are not normal times.

So, a new approach is needed. Not only has the basis of World Trade changed but it is continuing to change at a very rapid rate. Those countries who formulate appropriate strategies and adapt quickly will be successful - there is much to be gained. Those who do not will find themselves in further difficulties. Johnson's current mantra - High Skills, High Wages, Low Taxes - looks like an overly simplistic slogan. Does it amount to a viable proposition rather than something Boris has made up on the spot? Is it backed up by a long-term plan? What are the alternatives? I sincerely hope that someone in Government is working on this and that something sensible will emerge before too long. We're going to need it.

 

If you have any (sensible) suggestions as to a way forward, do let me know via the contact point on my website (click here). I'd be delighted to hear from you.

 

HEALTH, SOCIAL CARE AND NATIONAL INSURANCE

 

Much has been said in the last week about the Government's announcement on how the Social Care system in the UK is to be funded. Most of the commentary has been critical. This article aims to set out some alternative arguments, some of which have so far failed to to be made.

 

Firstly, despite the Conservative Party's manifesto commitments to the contrary, anyone who thinks that tax rises of one form or another were not inveitable as a result of the pandemic are fooling themselves. Covid will cost us and very soon we will have to start paying for it. Gird your loins. The projected rises in NI contributions and the tax on dividends will doubtless be followed by others as we seek to pay off the massive debts which have been accumulated. It may take us a generation to do so. This should not be seen as something particularly unusual. Many generations in the past have faced similar situations. The 20th century saw two World Wars and the massive financial crash of 1929. The 21st century has witnessed another financial disaster (2008) and now we face both the problems of Covid and climate change. On each occasion we've had to work our way out of these problems and the blunt truth is we will have to do so again now. Added to this is the perilous state of the Social Care system. No one I talk to denies that it needs fixing and that successive governments have avoided doing so. The question is, how is it going to be paid for? And is now the right time to do it?

 

As to timing, there is a suspicion that the Government is using the backlog which has built up in the NHS as a means of cloaking its Social Care funding reforms. Again, no one is denying that the backlog should be dealt with or that extra money will be required to tackle it. The calculation may be that a hike in taxation to cover it will be readily understood and that once we've got used to the rises, the monies can be more easily switched to Social Care. The simile is perhaps not entirely comparable but I see that Max Verstappen has been given a three place grid penalty for the accident with Lewis Hamilton at yesterday's Italian Grand Prix. He is also due a grid penalty for excessive engine use. It may be to his advantage to take both penalties at the same time and start from further down the field. And so with the Government. What one can say about them is at least they're grasping the nettle.

 

So is National Insurance the right way to pay for these spending increases? Leaving aside the politics of the situation, the answer would appear to be absolutely yes. Through the National Insurance Acts of 1911 and 1946, the tax established the basis on which the Welfare State was founded. It is "...a contributory form of insurance against illness and unemployment and eventually provided retirement pensions and other benefits" (see here). The historian Kenneth O. Morgan descibed the 1946 Act as "a measure which provided a universal basis for insurance provision that had hitherto been unknown" (see here). The NHS and Social Care are integral parts of the Welfare State. To suggest that fixing them should be funded by other means is purely politics.

 

So what are the objections to using National Insurance for its apparently legitimate purpose? Firstly, it's hailed as "a tax against jobs". Well yes, it is and it always has been. The blame for that (if there is any) lies with those who introduced it to begin with. The remedy would be to do away with NI altogether and replace it with something entirely new - a proposition of a completely different magnitude than the measures currently being proposed.

 

Secondly, the plans will leave "a private landlord renting out mutiple properties not paying a penny more in tax". This is patently untrue and betrays a fundamental lack of understanding as to how business works. Landlords are taxed either as self-employed individuals or as companies. Self-employed individuals will pay the higher levels of NI. Companies will pay the higher levels of NI on their employees (which may well include the owner/directors themselves) and any owner/directors claiming dividends will also see their taxes increase.

 

Thirdly, there is an implication that companies like Amazon "who squirrel away profits in tax havens" will also be getting away with it. Companies like Amazon employ a lot of people. These companies will be paying the increased company NI contributions on the salaries of such employees. Given the international community's inability to find ways of taxing Amazon et al effectively, a rise in company NI seems to be a good way of doing it. And it ensures that the proceeds remain in the UK for the benefit of British workers.

 

Next we have the idea that wealthy pensioners will somehow be exempt from paying extra toward their social care. In order to become 'wealthy pensioners', these people will have spent their working lives paying NI contributions. Given that entitlement to paid-for Social Care will be means-tested, these wealthy pensioners will have high incomes and will be expected to pay for their own care. And so, having paid into the system throughout their working lives, they will receive reduced or no benefit from it.

 

Then there's the suggestion that the young are being unfairly penalised in order to enable the older generation to leave their property to their children. There is some element of traction in this argument as I suspect that by splitting social care away from residential costs, the Government's proposals shift some of the burden away from those expected to sell their homes to pay for it. As things stand at present, if my parents (say) were to go into a care home and leave their house permanently unoccupied, I would expect to have to sell it to pay for their care. Having studied the new proposals carefully, I'm left with the impression that once the care cap of £86000 has been exceeded, I'd still have to sell the house but I'd be left with more of its value to prolong the period I could pay for accommodation or to ultimately inherit it. As Meryl Streep and Alex Baldwin discovered in the film of the same name, it's complicated, so do correct me if I'm wrong. But Social Care is not just about the elderly. 50% of the Social Care budget is spent on people of working age. The young may well need to draw on this support on a personal basis. All the more likely when they become elderly themselves. At which point they will be grateful that they provided for that contingency by National Insurance earlier in life.

 

This all speaks to the debate about how we value the older generation in our society. In many respects we treat them as a nuisance. We don't want them living with us; when they reach the point where they're no longer capable of looking after themselves we put them in a home and expect 'the state' to pay for it; but we do expect to inherit the house they were living in beforehand. It strikes me as not an especially caring attitude but one we seem to have adopted and one which we must ultimately pay for.

 

What we must hope is that the additional monies now being raised will be spent wisely on improvements to the Social Care system so that those in need of its services can be looked after with some degree of dignity. Reform of funding is only half the problem. A White Paper on changes to Social Care itself and integrating it with healthcare is promised for later this year. At that point we'll know what our money is being spent on. Let's see if it's worth it.

 

CANCEL CULTURE AND THE FREEDOM OF SPEECH

 

So, do we enjoy Freedom of Speech? The answer in some cases appears to be yes - but not in all.

I was sorry to hear last week that Mumford and Son's lead guitarist, Winston Marshall, had left the band citing online abuse regarding comments he'd made about a book he'd been reading (see here for details). The book and its contents are neither here not there for the purposes of this article but suffice it to say that it was anti left-wing in nature. Rather ironically, Marshall then endured further abuse from the other end of the political spectrum "this time for the sin of apologising". It would seem he can't win. So much for Connor Garel's statement in Vice magazine that cancel culture "rarely has any tangible or meaningful effect on the lives and comfortability of the cancelled". Although in terms of comfortability this may well be true for Marshall as I read over the weekend that his father, the hedge fund manager and philanthropist Paul Marshall, was worth a cool £300 million according to the 2011 Sunday Times Rich List. But just as The Beatles told us that money can't buy us love, it seems it can't buy you Freedom of Speech either.

 

This comes at the same time as it appeared that the trend of cancel culture was being forced into retreat. Earlier in the week we heard that the Royal Academy had apologised to artist Jess de Wahls after removing her work from its gift shop following complaints that she had expressed transphobic views (see here for details). The Academy went on to say "we had no right to judge her views on our social media. This betrayed our most important core value - the protection of freedom of speech". Hmm... Should have thought of that earlier. According to The Art Newspaper their belated apology was greeted by a storm of protests from Royal Academy students (see here for details). It seems the RA can't win either.

 

I suspect the motive for the Royal Academy's turnaround may not be entirely selfless. It more likely originates from a fear of litigation following the result of the recent court case featuring Maya Forstater (see here for details). I found the case of particular interest - not because of Ms Forstater's actual views (they've been expressed often enough elsewhere) - but rather because of the surprise I felt to learn that one's beliefs and one's right to voice them could be subject to law. Are we really saying that what we think can be legislated against? If so, do we truly enjoy Freedom of Speech?

 

The University of Cambridge's new statement on the matter gives the game away. Vice-Chancellor Professor Stephen J Toope said: "Freedom of speech is a right that sits at the heart of the University. This statement is a robust defence of that right. The University will always be a place where one can express new ideas and controversial or unpopular opinions, and where those views can be challenged. The statement also makes it clear that it is unacceptable to censor, or disinvite, speakers whose views are lawful but may be seen as controversial". (The underlining is my own.)

 

So it's clear. Our ability to think, and express those thoughts freely in public, are constrained - both by law, and in the case of Winston Marshall, by the extremes of public opinion. Is that what we mean when we talk about 'Freedom of Speech'? Maybe not.

FACT OR FICTION ? HOW DONALD'S TRUMPED-UP CHARGES CAN BE A FORCE FOR GOOD
 
This time last week we were eagerly scanning our TV and computer screens to see who had won

the US Presidential Election. Some of us still are. The Democrats and the media have called the race for Biden but his projected victory has yet to be formally confirmed. Trump's lawyers have launched a flurry of lawsuits alleging widespread voter fraud and corruption which call the result into question. But if this process plays out as I think it will, I believe it will only serve to bolster rather than diminish the American democratic system. Here's how.

 

Yesterday I was pleased to see that a team of international monitors from the Organization of American States (OAS) has praised the conduct of the US election. The delegation, which had 28 experts and observers from 13 countries said in its preliminary report: "While the environment of the elections was competitive and fraught, the ability of voters across the country to access the vote in less than ideal circumstances exemplifies the democracy for which the United States is renowned and which it has championed across the globe. The OAS mission urges all political parties, candidates and citizens to allow this democracy to prevail and to allow the remainder of the electoral process to unfold within the framework of the law."

 

But, despite this ringing endorsement, we live in the real world and no democratic system is completely flawless. There will inevitably have been irregularities and glitches. Human beings and computer systems both make mistakes, intentional or otherwise. Some disgruntled employee may well have dumped some unprocessed ballots into the trash on the way home after a bad day at the office. The fat-fingered press of a button (who of us have not done that at some time?) may have inadvertently allocated votes to the wrong candidate. Stuff happens.

 

Team Trump will seek to expose these incidents and use them to try and prove his case. As the Senate's top Republican, Mitch McConnell, has said, they are within their rights to do so. "The core principal here is not complicated. In the United States of America all legal ballots must be counted, and illegal ballots must not. The courts are here to work through concerns." Which all sounds to me like an important part of the democratic system.

 

Trump may win some small battles. He has already succeeded in persuading his erstwhile ally, Fox News, to withdraw their call that Biden had won Arizona when only 73% of the votes had been counted. Quite right, too. Subsequent counting has severely reduced Biden's lead in that state and has made the original call look premature. But this and others such will be minor victories and unless he can prove fraud and/or corruption on a significant scale (and I don't believe he will), he's not going to win the war.

 

However, there does remain one major fly in the Biden campaign's ointment. That is exemplified by by the situation in Pennsylvania where local election law provides for absentee ballots postmarked up to and including polling day but received several days later to be counted. This has helped Biden to 'take' the state. I have every confidence that the votes cast under this practice will have been properly dealt with so the question is not one of voter fraud or irregularity but whether the law itself is appropriate. If progressed, this will be a question for the US Supreme Court to decide and is precisely the reason why Trump filled the recent vacancy caused by the untimely death of Ruth Bader Ginsburg with his own appointee, Amy Coney Barrett, thereby increasing the Republican majority on the bench to 6-3.

 

Don't be surprised if the case goes in Trump's favour and Pennsylvania's electoral practice is ruled constitutionally unsound. Courts of Law are quite capable of making political decisions - as we discovered here in the UK when our Supreme Court under Baroness Hale ruled the government's prorogation of parliament unlawful in the fight over Brexit. I expect the case to go all the way and although it may not change the final outcome if successful, it could still prove damaging.

 

But if the legal process Trump has initiated runs its course and all but a few minor irregularities are shown to be false, then not only will Joe Biden be able to point to a major victory but it will also give the American democratic system a much-needed clean bill of health.