Monthly Archives: January 2017

New Nations and New Taxations?

We stand at a unique point in modern times when two new western European nations may appear within the next five years.
New nations, Catalonia and Scotland, demand new solutions and they could well look at the balance between taxes, labour policy and welfare spending through new eyes and adopt novel approaches.

The Taxing Question…..

Traditional Neo Conservative theory states that the lower the taxes, the greater the growth in the economy and the greater the wealth of all in society. In reality all capitalist economies are actually characterised by trickle up. Capitalism is the accumulation of wealth in capital hands, be that an expanding number of citizens or not in society.

On the other hand traditional democratic socialist theory states that this accumulation of wealth in few hands is a process which inevitably empoverishes the proletariat. High taxes on the highest incomes are the best means of addressing this imbalance because the accumulative, pyramid of wealth. On the plus side for the economy in olden days, the super rich were rather nationalistic and country bound and had to work harder to make their cash it could be said, and you can see that effect today in oil lake economies like Norway and Saudi Arabia where the super rich need to invest a lot to avoid taxes and to make money.

However of course in reality these two extremes within parliamentary societies have too much of a down side. Enter then the social democratic parties: modern labour parties in Scandinavia, the Democrats in the USA and the other social democrats and watered down socialists around the world. They have adopted in fact a Neo Liberal model for a growing, enterprise economy with moderate taxation. So they want the best from Capitalism in growing the overall economy, while skimming off enough tax from that to pay for  what are socialist welfare policies.

Things Fall Apart……

The trouble is that Capitalism evolves in odd, irrational ways in its pursuit of the multiplication and accumulation of wealth. Both in the 1929 and the financial credit crash of 2008, it fell upon its own sword of freedom, when that became anarchy and a bubble of deciet and lies which imploded. I am sure Trivsky and Kehnann were born at exactly the wrong period between these two events to have actually helped hinder them or inform us on why they happened from their Ivory towers.

Also the trouble with even tame social democratic public spending and welfare state programmes is that they are victim to vagiaries of the current day economy and worst of all the demographics of ageing populations in the west. Only the oil economies can salt away enough money to span any slow downs in the economy, or address actually having a national pension fund.

Forward to the latter paragraph, it seems Sweden and the UK are doom sayers in respect of their envied welfare states due to these factors- lack lustre economic growth over the two decades where the current pensioners worked out their years, and new workers didn’t increase GDP enough. This however is how you want to frame it. You can say that these economies are so large today, that the modest Neo Liberal period growth is actually larger in real terms that those of the 1950s and even 60s. If you take some forms of inflation, RPI/CPI , then also you can say that we have a situation where two to three percent growth is worth a multiple equivalent to the best years. However taxation is far lower. So we need to cut tax to stimulate the economy to bring in more tax to pay for a given level, which is cut anyway.

The net result is these economies hitting the buffers of dissatisifaction. A good proportion of society who own businesses or fluid capital assets have done wonderfully well from both social democracy and centre right coalitions across Europe. However very many were not doing all that well, with mediocre wage rises in the face of real inflation in real living costs far outstripping CPI. Today we only spend about a fith of our income maximum on goods and produce covered in the CPI (former RPI)  contra the days when we used about a third on it. So we could have far higher retail price inflation without it making as much a difference as the main costs which are housing, transport, and grouped together university debt and vanity. More of us went to university and now we demand nicer, posher toys than before. 900 pounds for a phone with some games on it? Are you mad they would have said in 1980.

Dissatisfaction is high with the status quo, across many countries, but those with the most right wing controlled media funnily enough manage to spring radical policies which lead to as much uncertainty as they do create clarity. Simple solutions which offer change, when the status quo is a higher risk option. That is why Hilary failed, and why Remain failed.

Optimising Tax to Maximise Revenue 

There is of course an area of equillibrium when it comes to income tax and any taxes related to those who sit on investments and property, or just live in a huge pile in the countryside while only paying nominal local rates.

Tax too hard and people avoid paying it, tax too little and you loose income which in fact you do not make up in VAT and economic growth when it concerns the top 30% of salaried workers or the super rich. They just do not spend a multiple of what an ordinary person spends in the economy, and more often they affect the property market via investment in buy to rent or business property, which is an inflationary pressure to the rest of us hoi palloi.

However higher rate tax payers make up a very large proportion of total income tax revenues for the UK exchequor. How much and how that then relates to total taxation is not somethign I remember off hand. But you have to take into account that these salaried folk on  60  grand or more are by number biased to the public sector. GPs earn now around 100,000 pounds, the same for various ranks in the armed forces and senior civil servants. We then also have armies of consultants working for enterprise bodies and other parts of government, hospitals included. So a very large amnount of that money, ourside the city of london and the North Sea, is circulative!

Under the Thatcher years the Neo Liberal doctrine seemed to be working very well, because in fact total tax returns grew markedly. However if we subtract North Sea oil and the effects of BIg Bang on the CIty, and the revenues from privatisation, we get a different picture. It still shows that revenue went up, in line with earnigns. Yet if you take income tax alone what happened? It is more unclear. If we look at VAT which is the Tories’ favourite sneek tax, was the UK actually taxing credit card purchases ?

Luckily England has The City and its regional ring effects via institutions and banks like the Norwich Union and so on, down the the IFAs who sell the lions share of financial products to consumers and businesses. Luckily too Scotland has a slice of this investment ‘over spill’ and the North Sea where average wages are twice the national average wage.

There is then a line where discretionary income rises to when consumers would have to have very lavish lifestyles to spend that money, and being Scots, many of the highest paid are canny and perhaps looking at early retirement, or investing in property and trust funds for their offspring rather than in consumption and investment in productive enterprises. Here we come into the leverage effects raised by Nick Hanauer and Warren Buffet. Also that it has become so attractive to invest in the ‘rentier’ side of the service and property economy rather than in production or value adding processes.

Investing in Productive Enterprises, Personal Well Being and Value Adding Services

There is a line between where the ‘rentier’ economy based on property and services which we all need, and that which multiplies value or adds a distinct value to society which assists our productivity, output or just well being and health.

In the rush to deregulate financial markets, investments and businesses the UK has missed a big trick in not realising that rentier economic investment is inflationary and reduced productivity in society as a whole as a net result of being in  a lean efficiency, and maximising prices that can be extorted in a captive market. We see too much price parity and ‘cost plus profit plus admin’ financial models for the private utilities and even within retail.

A future Scotland or Catalonia could do well to examine how taxation is differentiated between productive activities and the rentier economy. There is no fine line between ‘services’ and ‘manufacturing’ in reality. Service engineering – refurbishment and upgrades, are now worth more than new build in the North Sea sector for example. Where does an ordinary car mechanic’s business fall? Is a health provider adding value to society?

Business rates are a contentious area too in respect of this. WHy should a retailer with low wage, low skill, part time workers get to pay the same per square meter as a factory with high productivity, and skilled, full time and well paid workers? Why should a small service engineering enterprise feel hindered by the cost loading of new, larger premises?  Why should a slum landlord pay the same as a research laboratory for the same area they own?

 

New Models In New Countries

So we have two wealthy, productive regions of two kingdoms based on unions of member states, forced, humiliated or negotiated into the ‘greater good’ hundreds of years ago. I dare say Catalonia has had its share of ups and downs, but like Scotland it is an area where very much primary production takes place, and there is then sizeable secondary and large tertiary (service) economies.

They could well consider the dissatisfaction of the ordinary worker with the status quo which is driving the thirst for independence in both these regional states. Just as importantly, they should consider what is good about business conditions and new enterprise creation. They have a unique possibility to shape a novel tax environment.

Punitive Taxes Don’t Work

The trounble with the simplistic solution ‘ tax the rich and spend on the poor’ is several fold. Firstly punitive taxes disuade inward investment ?  Well that is percieved wisdom at least. The SNP had as a cunning plan an 18% corporation tax to undercut the UK (and the USA incidentally) level and retain current businesses, help some locate HQs or administration N. of the Border, and attract new enterprises. Who cares how much Bill gates makes if he invests in Barcelona? Here in lies the second issue, that punitive personal taxes politicise the wealthy who organise themselves. Well nothing new with that. This is what predates democratic parliament in the UK and most other European states, and plutocracy was the predecessor of democracy in Ancient Greece. It is a question today of how vehemently they get politicised and who they are prepared to employ to ‘persuade in the new soundbite, viral internet spread sound bite and 15 nano seconds of fame.

Very high income taxes or taxes on personal wealth then are counter productive over time. Yes you can squeeze more internal investment out of encumbants who work harder to make money, or have made so much that they are more interested in building something than how much it makes them, You could say Trump is like this, with some interesting but failed side lines like Trump Air. Also the big Scandinavian dynasties have had a paternal interest in their home lands, until their grand children lost interest at least.

These days there is far more money in real estate and money itself that industrial moguls who employ hundreds of thousands in their home lands are consigned to Korea, India and China. This is really what was behind 1929 and 2008, capitalism got too used to the fruits of the casino rather than production. However today the world’s richest 8 or 10 if you like, are mostly software giants. Warren Buffet is a corporate raider of course, but built as many as he raped I am told. He gives away much of his income anyway. You have Bill Gates of course, and Larry from Oracle and then vrious upstarts. Not the cigar puffing, guffawing evil capitalist like you could paint Henry Ford perhaps.

Investment though has to be considered more in terms of productivity. Inward investment in the UK and Scandinavia is all too often that which is Rentier- it wants to buy up internal service sectors in the economy rather than build on primary production and value multiplication in the secondary economy.

That is one key to the new countries’ taxation of business,  but it is argued that this bias is complex. I don’t see that as true, but rather a polticially biased view point that is self serving for the easy life of Rentier investors.

New Taxes Hinder the Economy –Thinking Administration and Regulation Rather Than Just Tax Level

Business is always lauded as complaining about regulations. Very many businesses though have their own internal torturous beaurocracies to ends such as quality documentation or transparecny of accounting which exceed government demands and rather pander to customers and investors. It is not the understanding of regulations, and their effects of level-playing-field intentions, or accident prevention, it is the administration time in complying which businesses and especially SME businesses moan about. In fact many of them enable smaller companies to accept a defined framework of quality and safety, which in turn permits them to trade with large international corporations or governments.

Yet businesses of course want to be productive and not administrative by nature and goal. In my latter day profession as a supply chain manager, I am reminded by my mentors and institute that administration is the theif of time and opportunity to do proper purchasing, logistics and stocking. A single invoice, correctly presented, can cost a Norwegain company almost 50 quid to approve and pay when presented in paper form and the vast majority I get at work are still snail mail ! Reducing tax and employee administration frees up companies to do more enterprise, more endeavour, to use their grey matter on something more than a business process auto pilot.

New taxes for consumers, such as the local levvy in Scotland, also come with a tax collection cost and at some point a burden on businesses in many cases. It is easier to simplify tax affairs for both individuals, small businesses and productive enterprises and raise those simple taxes by percent points than try to sneek in new taxes. Environmental levvies and taxes are also a costly means to affect change, we are better investing for example in cleaner energy production as we do, and also a network of fast chargers for electric cars and delivery vehicles which would transform any nation’s emissions. The internatl combustion engine is the worst offender by far. Electric vehicles are now a fully practical proposition for the vast majority of consumer use.

So here comes my own suggestion for the Caledon and the Catalan: 

Shift administration of employee taxation out to the banks and government. Here then an employer still pays those unpopular hidden taxes and national insurance, but just as a flat rate lump sum on top of wages. This is in part the system in Scandinavia and of course in part true of the USA.

We have then the opportinity in the digital age for the bank to take a small fee to manage the tax affairs and of course, abide the laws, regarding income tax and national health and welfare insurance contributions, but also we simplify greatly the tax return set up for individuals. This is how in fact it is done today in Norway, and despite some torturous property taxes and imaginative areas for deductions for people with fours sheep and a pine tree, it works a treat between the banks, other lenders, employers, employees and the tax-man.

Housing and Transport / The Two Big Inflationary Pressures on Most Workers

Second to this above, we have an opportunity to reshape taxation for those exposed most to the infaltionary pressures of real life. Firstly as we still have in Norway, we should allow home owners with modest, average mortgages on their residential home, *and that is crucial* ,  interest rate relief on their mortgages. MIRAS. Further to this, in order to tempt people away from very high leverages on interest only periods, we should reward modest capital repayments.

We then in the interests of the evironment should allow deduction via tax allowance extension on things like commuting on public transport with season tickets, investing in green homes and green improvements, and in electric cars. Also things that help you get into work, like if you have to commute away all week for a new job.

All the above are present in Scandinavian tax systems. In the UK to address inflation in the housing market, they introduced an inflationary first time buyers underwritten deposit loans scheme. It helped a lot of even highly paid people get their first house in the South East of England at least, but stoked the market at a time when wages were falling in real terms or people had less hours pay. More on housing later.

Can We Strike a New Balance Between Tax for Public and Deduct for Your Own Choice?

On the personal side we should be looking at  balance between private and public provision. So for example a privat health care plan often helps with minor ailments or new chronic disease, but in Europe they dont often want to insure or plan for chronic disease, and they dont offer an emergency ambulance and A&E department. So we can reward some of private health plan and insurance via tax deductions, while not making that ridiculous means of spiting the government.

The same is true of infant child care and after school – can these be best done privately or do we benefit from economies of scale via taxation and public provision? We legistlate with some common sense, so in the cities and larger towns with bigger schools and tighter pre school habitation we make it a harder opt out for tax., while in small towns and rural areas we allow for more provision by small enterprises, which is in fact the reverse of much of the current scandinavian model, where kindtergarten is big business in the cities and parents have a very high self payment on top of high tax.

That is where the debate can lie for many social welfare, we give an option to the individual or a means for market provision and offer a level of tax relief which compensates for good, modest services. 
We have this type of set up where parents with kids under 18 get larger tax allowances (initial large deduction from salary prior to taxation)  for having kids, such that consumption need is addressed. However is it such that older folk should pay for this? Or that folk in the middle age should pay more tax for both young families and pensioners to enjoy welfare goodies? That is I am afraid a fact of life, as why should a pacifist pay for the military or why should a famer pay for a new harbour?

We have some areas where we can offer a better public service for a higher direct tax, and enjoy economies of scale, and a little at odds to that,  even quality of provision geographically, and that is fair. It is equitable. But also it is equitable to compensate those who seek private provision which will save the state money of course, inthat they take up services outside the public sector.

This is how in part the EU pensions directive works, but it is not all that popular with some types of employers, and it penalises temporary workers, and some argeu due to the admin burden, it makes temporary employment more attractive. However you could have a better situation likie in Norway where PAYE pension can be propped up in lower income times, and small EU directive pensions like I have, can be consolidated to PAYE pots, which I am about to do! Tax relief on the employee rather than compulsion at the employer on private, a basic PAYE pension contribution and the option to enter that set up during times of temporary work or lower net pay. In Norway you see your pension funds state and private, digital magic, and can make informed decisions about this very set up, and look at outcomes from different risk levels in private pensions. Norway of course does have a state pension fund, but more on that dream of Salmond later.

Employment Patterns  Must Change

As mentioned with pensions, employers like to avoid paying for employees and administrating social type things for them and the government. In nearly all EU / EEA countries we see that the major problem for a large part of the work force is not unemployment but UNDEREMPLOYMENT. Too many part time, temporary jobs and too many graduates not working in their field. The latter is about right-sizing the education system, and removing the ‘consumer’ marketism from the school leaver and tyring to inject far more from the employer and job market end instead.

The former requires some blunt action really, because we cannot have three people doing a job which would make a very nice living for one person in that week or those two years of a project. Why? Because they go begging to the state, or rather the state incentivices them to carry on in this, while employers avoid on top costs. As above I say send it to the banks for admin and the tax office can have big clever computers to talk with the banks ones. Catalonia and Scotland are right sized and right banked to do this.

There is always going to be an element of supply and demand for part time work in economies which have become more tertiary in nature, but it is used both as a way out of admin and as a tool against workers themselves, pitting them against each other for a marginal lifesyle supported by the state. The source of the very low productivtiy rate in the UK, and the very high number of people in work but in reciept of benefits is here.

We need to introduce new employment laws alongside a pro-rate social cost rate per hour. Workers should have the right to ‘permanency’ as in a contract of work which rewards their loyalty and specific skill investment with better terms for in particular, tenure of employment. It is fine for employers to still have part time staff with some way of avoding zero hours abuses,  and temporary staff on defined contracts, but then there is a draw from those better employers who want to reward loyalty. Already there is talk of a revolution mediated by mobile apps, where even accountants are hired in on zero hours contracts.

That last phenomenon will be devastating for the economy when more employers become in-contractors , heaving more people on to top up benefits and out into abject poverty. In the long run it will prove inflationary as workers with scarcer skills are able to extort high hourly rates as they become used to negotiating each hour and trying to make a living playing hard ball with in-contracters. We only have to see the effects of underemployment today and what it costs, or the social unrest that a shift such as this will cause as it has down through history, when security of tenure of labour lead to the whole union movement in the first place.

Flexibility must always be there, you cannot say to a small cafe that they need to employ people 37 hours a week and pay a pension, but you can make the cost per hour pro rata the same as the cost of a full time, permnanent employee and remove that discrepancy which drives employers to utilise more part time statff than they otherwise would need to. I would go so far as to make employers do morre of the administration for part time workers to unload the banks and make it even more atttractive to consider full time, on contract workers. Then work really does pay because, ahem, it is paying all the time. The state makes a big gain by having fewer transient and marginal workers to pay benefits to, and some of the saving is passed onto the employer in lower ‘social cost’ per hour-  for a 37.5 hour week that is, 37.5 times as much as a one hour saturday or breakfast helper would cost, or even a lower multiple.

Minimum national earning levels are a bit of a red herring in Scotland, and maybe suit the oddities of the Finns better. Moving people into more solid work as a culture for it, is far more preferable for those employees, the tax man and quite likely those employers will also find productivity gains from staff who have that good old 9 to 5 franchise with work, and dont shuffle in for two hours back shift, worried about paying their bus fare home or if they have worked too much for benefits that week.

Once again we see in these top up benefits, the Neo Liberal influence on the left, who dare not interfere  with what looks like market mechanisms and demand for part time workers in a ‘dynamic’ economy, when in fact it perverts the market and affects producivity in GDP as a net result. Combined with go-to-china, the Democrats and other social dems around the old west have generated the large scale social dissatisfaction which lead to change via trump and brexit. Work does not pay anymore for a large proportion of the work force.

Property – A Farier Market Via Which Mechanisms?

Here I shall wrap up where I almost started. We have in the western property markets by in large a sickness of capital investing in extracting gains and profits from housing we all need rather than in making our lot better via investing in productive systems and companies. This is also a generation shift thing, with the baby boomers able to lever second, third, multiple properties in the buy to rent sector, or just having a dormant summer house lying there 8 months of the year.

 

Housing cost inflation is the single thing which makes the actual agreed economic measure of retail based inflation calculation so laughable. We could endure CPIs of nine percent a year for three years without it actually hurting us much, we spend so much more on housing from our incomes. We spend also more money for a lot less property, will make on average less capital gains than the baby boomers and many of us will die with mortgage arears it is feared. Average age of first ownership goes ever upwards it seems, reaching towards 37 in London and the SE.

We all know this is a problem, yet a large proportion of the older electorate benefit from the capital gains the over heated, under supplied market delivers to them and polticians dare not go there with significantly higher taxation.

Very simply we need to look at removing any incentives for second properties for individuals and tieing more housing into the affordable bracket, while also removing green belt in central Scotland.  We also need to look at taxes on secondary properties and a degree of rent controls, especially for ‘social tennants’ the state has to foot the bill for. Why subsidise a ‘market rent’, that is an oxymoron.

Once again punitive taxes on mansions this time, may be a side show. If yes you want to stop Russians laundering money or the super rich avoiding tax somehow by owning a country pile with farm estates, then tax higher. The shift though is quite small, and it is actually higher paid public employees who will end up paying the brunt of rates rises in Scotland I believe.

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There we have a little pot boiler for you which looks at some of the pragmatic and some of the radical based on my own experiences and opinions.

 

Emerging Irrationality, Politics & Science.

“One thing we have lost, that we had in the past, is a sense of progress, that things are getting better. There is a sense of volatility”

 “It is the consistency of the information that matters for a good story, not its completeness. Indeed, you will often find that knowing little makes it easier to fit everything you know into a coherent pattern.”- Daniel Kahnemanut not of progress.
– Daniel Kahneman
Our world is changing in ways we probably never imagined. Modernism was replaced by the Nouveau Vague ‘post modernism’ which allowed for Neo Liberalism to displace progressive societal policy. When the team at the Oxford English Dictionary chooses “post-truth” for its word of the year, it ripples through the solidity of our world.
Our pluralism and diversity used to be a cause of celebration. Now it feels slightly dangerous, divisive to many. Author Michael Lewis recently said, “the world is a far less certain place than our mind is prepared to be in.” 
Quoting Amos Tversky, Lewis adds “Reality is not a point; it’s a cloud of possibilities.”. Our clouds have suddenly shifted into unexpected patterns, where certainty established amongst the less capable intellects is used to ridicule the etablished ideas which were once radical and liberating. All that was Liberal in politics and Neo Liberal economics is rejected because it created too much uncertainty and crisis of idenitity for the proletariat caught up or left behind by these self same earlier, once novel winds of change. There is truth in the lie-factories of Trump and Brexit, and anti Scottish Independence. The truth that the last epoch of these liberalisms created nothing but a void to be filled with demagogues.

New eras are born when the old certainties die, and the collective imagination goes into overdrive. People seize on new myths that help us deal with uncertainty. Yesterday’s win in the ‘best truth” levers today’s excuse to grasp politicial power without transparency. Last week’s mistaken ‘best truth’ is thrown away in favour of the latest spin.

Theresa May on Brexit: Then and now – http://www.bbc.co.uk/news/uk-politics-38653681

Immigration, net or not ? Who is a worker and who is a tourist

http://www.bbc.com/news/uk-politics-19646459

Let us see more on Tversky and Kahneman:

( Their) concept of systematic irrationality is the description of errors people make according to some predictable rules, governed it seems by survival psycology we evolved. This applies to individuals, but rather than being levelled out or duilutes by market mechanisms, the whole market can behave irrationally as a sum of these irrational behaviours. 12 years after his untimely demise, the finance crash of 2008 is testimony to his ideas.

“Whenever there is a simple error that most laymen fall for, there is always a slightly more sophisticated version of the same problem that experts fall for.”

– Amos Tversky
“We are not deciding based on facts and things,but on the description of facts and things. We are more interested in the vividness of the stories we tell ourselves, than the actual facts.”

– Amos Tversky

Essentially their studies were on phenomena around the “gambler fallacy”  Tversky argued, is nothing more than the standard laws of chance, observed through the imperfect lens of human cognition. 

Specifically, he noted, people have a tendency to expect the overall odds of a chance process to apply to each and every segment of the process. (say, the 50 percent distribution of heads on a flipped coin, or the 46 percent accuracy of Toney’s field-goal shooting) 

For instance, when flipping a coin 20 times, it’s not uncommon to see a string of four heads in a row. Yet when people are paying attention to a shorter sequence of the 20 coin flips, they are inclined to regard a string of four heads as nonrandom – as a hot streak – even though a strict back-and-forth of heads and tails throughout the 20 flips would be far less likely. ( In roulette ) the confusion arises from an impulse to see the overall odds of the wheel reflected in any given sequence of spins.

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The world is inherently probabilistic. Reality is Not a point it is a cloud of possibilities’  Amos Tversky
Pessimism is a stupid strategy and waste of energy, because you live it twice- once in anticipation and then again if it actually happens to go that way.

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On Science and ‘Truth’ and Progress 

Richard Fineman on science – a satisfactory philosophy of ignorance. …being humble in science, we know little. 

You can’t direct people to do good, original and ground breaking science. It is a creative and playful process. You cannot push people down a route and expect results in fundamental science.

Andre Giem in manchester graphene nobel prize acceptance speech. 

” I have met many promising researchers who later failed to live up to their promise because they wasted their time on searching literature, instead of spending It on searching for new phenomena.

What’s more, after months of literature search, they inevitably came to the same conclusion: Everything they planned had been done before. Therefore, they saw no reason to try their own ideas And, consequently, began a new literature search. 

One should realise that Ideas are never new. However brilliant, every idea is always based on previous knowledge and, with so many smart people around, the odds are that some- one somewhere had already thought of something similar before…….

………This should not be used as an excuse for not trying because local circumstances vary and, moreover, facilities change with time. New technologies offer a Reasonable chance that old failed ideas may work unpredictably well the next time round. ”

( Re… ‘Friday sessions’ refer to something that you’re not paid for and not supposed to do during your professional life……)

(On experimenting, like a child almost ) “.…you are not supposed…. to do… curiosity-driven research. Something random, simple, maybe a bit weird – even ridiculous. Without it, there are no discoveries. ”
Ernest Rutherford’s 1908 Nobel Prize in Chemistry wasn’t given for the nuclear power station – he wouldn’t have survived that long 

– it was given for showing how interesting atomic physics could be.”

– Andre Geim
“The last decades were relatively peaceful and quiet for the planet. But with no obvious danger from outside, we are facing another danger, from inside. Instant information about everything and everyone often allows an individual opinion to compete with consensus, and paranoia with evidence….. Science is not immune from such pressures. ”

–  A  Giem.

The world emerging in front of our eyes is one many of us could not have imagined.  Progress is grinding to a hault collectively. Free thinking becomes something suspicisious when it is intellectual but hailed when it is banal. 

When the team at the Oxford English Dictionary chooses “post-truth” for its word of the year, it ripples through the solidity of our world. Our pluralism used to be a cause of celebration. Now it feels slightly dangerous, divisive to many. Author Michael Lewis recently said, “the world is a far less certain place than our mind is prepared to be in.” Quoting Amos Tversky, he adds “Reality is not a point; it’s a cloud of possibilities.” Our clouds have suddenly shifted into unexpected patterns.
New eras are born when the old certainties die, and the collective imagination goes into overdrive. We seize on new myths that help us deal with uncertainty.

Brexit and the BMW Fallacy

The main strategy in the ‘new, better, free-er deal with the EU’ is of course give us as free access as possible or we’ll burn you BMWs. Figuratively speaking. The UK accounts for 17% of BMW sales we are told. This is just one of the main thousand of market opportunities the EU won’t want to lose, we’re laughing at them ! Ha Ha!

Well he who laughs last, laughs loudest. Or maybe just tuts and lets little britain default to WTO rules. Firstly any targeted, high value product approach faces instant retaliation. Salmon, luxury cheeses and not in the least of course UK luxury cars themselves who probably have more than 17% of their sales from the EU. This isn’t going to be such a titt-for-tatt negotiation, although that would be the threat, the fall back ‘no deal is a better deal’, which is in reality Russian roulette for the economy.

Second up on that point on ending up hurting your own economy, take those high value BMWs. They steal all other manufacturers top models with their base models holding more kudos and being in the opinion of many, over priced and under spec’ed. They sell a lot of base models of the 116 series, the new 200 and the redoubtable 3 and 5. The flasher 6 and 8 cyclinder “mow-tas” drag up the brand perception, and earn nice margin. So you would think the Munchen Smugbach would be terrified of the potential loss. Well who is making the biggest lost? Over 50% of the cost of a new BMW goes between the dealer in the UK, and of course in taxes to the exchequor. Being higher value, the chancellor makes more out of them than the Ford range say.

Now we get onto supply chain and life cycle. BMWs are very, very expensive to service although you do get treated like a king at the dealer of course. The lifcycle of ten to fifteen services not only costs  most all the purchase value of the car, it also takes more man hours to fix than to make. And those man hours, pretty highly paid auto-technicians as grease monkeys are called these days, so they do well and the exchequor does well out of full time employees in the service sector, a rare thing perhaps.

So what the WTO would just impose a 10% tariff or the like. Well the EU could vote to have a higher tariff on UK cars, or block their export due to May’s offer to pay the tariff, which is against both WTO and EU rules, and the US won’t like that one bit even if their consumers are interested in Sub Compact SUVs made in Sunderland. BMWs will cost more due to tariffs, the pound may get weaker in a default to WTO and then they cost even more. The EU on the other hand may seek to compensate the manufacturers for loss of market due to unforseen disruption, which may be inside the WTO rules and would be voted for by an EU seeking to not quite punish the UK, but soften the blow they get internally from the pain the UK thinks it is going to impose.

 

Now we move onto supply chains. In particular car manufacturing, electronics, defence and then that very staple of living, food. Disruptions to costs are here already due to the weakened pound. Next we have suppliers actively seeking new markets from this day onwards for their produce, or seeking to vertically integrate to increase value to make up for the loss of volume. The CAP is believe it or not, moving towards a free market for produce, as we see the hurt for the UK dairy cattle farmers. Much maligned for its lakes and mountains of wine and cheese, milk and corn, it was based on the 1950s model of standing up to a soviet attack and feeding our people. It has moved away to what are still complex rules “single farm payments” being the outcome.

Maybe UK farmers will find it a lot easier to operate and sell their produce in the UK, but as with milk today, maybe they will find that supply starts to outstrip demand and that there is not such a big domestic market for the value added produce they export from small and medium sized farms and food processor companies today. Some of those UK processors are reliant on cheap imports of commodities and specialities, or a low price on the common market for local supply. Some of their products will become more expensive for the UK consumer, and exports will perhaps dry up in a trade war.

Comp0nents are the same as food in that respect. Higher prices and of course any delays in deliveries caused by longer customs queues at the ports. Rare components and materials may in fact be withheld by the EU to favour their suppliers first, and the source may see that as sensible, cutting out the UK. Anything that upsets a modern factoryu with just-in-time delivery and lean supply means that money is lost. Also the same is true in delivery to EU customers or export routes.

Then we get onto the real reason for Brexit, immigration or rather freedom of movement of labour. A “simple work permit system” which allows the uk to “get the talent it needs” is not a great thing for securing labour on the spot, for the season, or when actually competing for rare skills. The weak pound works against the UK as an attractive place to work, while of course the sky high costs of housing and transport also erode that little send-home profit margin Poles and other migrant or relocated workers make. The reason there came so many of these people was not because they were looking for a tawdry life on benefits, they were wanting to work and get cash. Live five to a caravan, not go out at the weekends, get two maybe three jobs. Money plain and simple. It will take the UK a very long time to make up skills if there is any real incentive to train and for young people to go into debt chasing training for quite low paid jobs with what they see ans antisocial conditions, such as fish processing or picking crops.

By intention of course , post brexit policy on immigration will create a shift  of poorer, lower skilled workers back to the EU over time, so those UK workers without any real skills who have been ‘precarious’ in and out of benefits and top ups, will stand a little more on their own two feet. However threats on quotas and tax tariffs per head, disclosures and protests outside ‘named and shamed’ companies is likely to put a stop on inward location and a lot of investment. Once you give the mob a good simplisitic, economic argument based on xenophobia and excluding those xeno-workers,  it tends to run off in the worst possible directions.

In the new global corporate wage and conditions climate which will now rush into the UK, in “deregulating the labour market”, better skilled UK workers in those “cube farm offices”  will find that that promise of better pay from a tighter labour market is replaced by the price parity with back room agreements against wage rises, and 12 hour day, no over time, of the USA system. ( You read it here folks). White van man will not be happy about autonomous vehicles either, hastened by the acceptance of USA regulations over EU caution on the technology.

The final point is what does the UK consumer say, and who voted in Brexit. UK consumers are not going to enjoy this year’s round of exchange rate driven inflation, coupled to more austerity in the public sector pay and employment suppressing private sector wages too. Putting up the price of a beloved BMW; the birth right of middle management, by 20% will be less popular again in light of flat wages. Immigration is in the very back of people’s minds by 202o, and the common market solution is what they want to be reaching for.

Political strategies are often to talk really hard, tough and far and then back down to a compromise which is actually futher than the opposition would have allowed you to go, or is a necessary, pragmatic fall back position which saves the UK, while behind the scenes major shifts in worker’s rights, the privatisation of the health service and more austerity have been implemented during the confusion while of course, the media attention is on the trade deal. I predict the common market re-entry by 2020.

 

 

 

 

Brexit on the Flipside

For me personally Brexit is not very attractive a proposition, neither by politics or by my own ability to have moved my labour freely abroad within the EU/EEA agreement. At worst it could cost me about six hundred pounds to change citizenship and I could lose some pension in the UK. At best I get a dual nationality and business as usual, plus a weak pound for the next decade for my trips ‘home’.

But as a business consultant and erstwhile economist, where do I stand on this?

Why Did They Do it?

Firstly in reply to any ‘darn sarff’ener, flat-capped No’thener or Welsh Brexiter, I am Scottish and we just didn’t feel the need for brexit, despite having significant numbers of EU workers north of the Border. Perhaps we are more welcoming as a nation, perhaps we are more used to foreign tourists and war time refugees with their ‘free polish’ clubs and synagogues. We are also perhaps more secure in our national identity as a small, plucky nation who has taken a few knocks. And of course, EU membership was a big political football in our 2014 referendum on independence, when exit stage left was painted as negative all round!

Or perhaps we have a wry angle, knowing that migrant workers keep our soft fruits affordable, and our offices, trains and ferries clean. Also at a guess I would say that perhaps more Scottish young people have experienced travel and work in the EU than their southerly compatriots. One thing I know to be sure is that Scotland has quite a few foreign companies with their headquarters for the EU, or at least international call/service centres, based in the central belt. Between that, the universities and the tartan draped tourist industry, many Scots have experienced working with ‘furriners’ and enjoyed the experience, and I am firmly in that bracket.

Economically Scots beleive that being in the EU, warts and all, is better than coming out. Those high tech’ and oil companies with EU headquarters are part of this picture. Along many an upgraded (ie  two way traffic) roadside or harbour front in the highlands and NE, you can see signs with that wee circle of stars on ‘beaurocratic blue’  – so hated by the ‘Kippers – that this development was supported by EU funds. The same extends to Science where proportionally more Scots go into research than their compatriots south of the border who live  outside the south east of England. That means more travel to work abroad, many have exposure to EU researchers’ freedom to come to Scotland too, while also at home enjoy sharing a larger part of the pie in EU research grants than many other countries per capita.

However certainly many of the northern counties of England felt very much different as did the fishing coastline of Enlgand and the regional cities. Do they really feel inundated with foreign workers ? In some areas and proffessions I guess that eastern europeans in particular make up perhaps a fith of the workforce. Was the fear of hoardes of Africans and Muslims more of a driving force? Certainly it wasn’t bent bananas, CE marking or market access and ease of movement outwards,  which people felt their national pride dented by.

“Basta!” Says White Van Man

When you look at the rhetoric from the public and the “populist” UKIP, rather than the rest of the New Neo Right’s scribbling, then we see Brexit was about immigration, immigration and immigration. With the back drop of mass african migration and the middle east refugee crisis, the UKIP camp had the fear factor to get people out voting who maybe wouldn’t have voted in a less troubled time, or indeed had voted yes under Ted Heath.

Also the Brexit vote was very much like Trump-In, it is a cry for ‘basta’ from ordinary working people on lower wages. For the end to exposing them to cheap labour from abroad. We have had exactly four decades of mainstream Neo Liberal propaganda and policy creation which tells the ordinary worker that organised labour is always bad for them and will take jobs away from them, while in fact trade deals have exposed those same workers to a declining ability to earn by pitting them against the lowest common denominator on a global basis, which can be as low as slavery in some primary and processing industries.

After four decades of union bashing, the working person is afraid of the language of collective bargaining and class action, rather though they can grasp some simple market mechanisms that less immigration means perhaps hope of higher wages.

Brexit Means, Well, Brexit of Course! 

Brexit does not mean EEC or EEA membership , it means a trade deal or more likely many trade deals, not a wider set of agreements involving society. It means years of uncertainty around areas of being able to get funding for research and infrastructure. Most importantly to economists, it also means restrictions on being able to either get highly skilled labour, or being able to sell products freely. Another thing, in the new ‘fortress Britain’ there will be a ‘hard border’ both at Dover and Calais,  and there will be therefore  supply chain delays (which I detest at work).

Brexit entails the Conservative party making postures towards the EU and the public on deals which will seem to favour business.  In fact a very favourble international business environment has been sculpted it seems as far as the Brexit voter is concerned,  totally behind the scenes for six decades via the EEC, EEA and finally the more federal EU. These established agreements make it easier to do business and remove tariffs and border customs delays. The Conservatives are not saying the UK will go it alone, they are saying they are going to invent a better wheel , a new agreement …..And by the way, they are not going to tell you what it looks like becasue that would be showing their hand before going into negotiations.

As a leading spokesman for a bank said ” The pound is now the de facto opposition to government policy” (on brexit) and that is likely to be the situation forwad for at least five years.

Simple Chuck Em Out Arithmetic Old Bean (?)

 

It should they say,  be a no-brainer. Immigrants out, unemployment down, wages up. The UK has currently around 7% of its adult workforce from EU countries and this could  have risen to well over 10%. With their families in the picture, this influx could render  that proportion of the total population to 15% by 2030 if “things were allowed to go on”.

With unemployment and underemployment running high amongst the unskilled, youth and “wrong-skilled” UK graduates, an arrest in the growth of EU immigration,  and a partial or complete shift out of this 7% over time by natural self repatriation, work permits and quotas, should mean there are enough well paying jobs for everyone who is a UK national.

QED. Simple arithmetic. 5% unemployment solved in a short space of time, wages can grow thereafter on the island paradise bathed in best-bitter and sated on pork pies.

The trouble is of course this: Will the economy grow in the next five years, and what will happen after we slow down and reverse this flow labour? Here we have two elements , firstly do other EU nationals do the jobs brits won’t or can’t? Will then companies struggle to recruit at both ends of the skills market  and no longer be competitive or attracted to remain in the UK? Secondly how does this influx of people feed the great monster of the housing market, which turns so much of the economic wheel of Britain round?

Less availability of skills and less demand for housing may sound ‘oh goody goody’ to the UK worker, but in fact it may be a ‘double whammy’ to the economy,  and that great pyramid-sell we nearly all buy into, ROI from bricks-and-mortar.

The Flipside Viewpoint

How many UK nationals will return with their age related health problems if Spain pulls the plug on free health care? How many ‘wrong skilled’ graduates who emigrated for work,  and right-skilled itinerant UK workers will return over the straits of Dover as a result of the new climate?

There are an estimated 3-4 million Brits living in the EU, Council of Europe and EEA countries.  A hard brexit  may mean a hard response or a more insidious rise of discrimination and marginalisation of Brits working abroad who want to keep their UK passport at least. How many will come back and what will they be doing upon repatriation? Will they not push up costs while forcing wages down ? Or how many will relinquish UK passports in order to secure their current status and jobs abroad,  and thus lock themselves out of the UK market for labour later?

How many companies are going to say, we can no longer get staff here, it is too much hassle, we are moving to the ‘mainland’? Or companies lured at first by a favourable tax and regulatory environment only to find the same is true when they explore the labour market? Or will there be one rule for the rich, ie those with high skills or high demand skills at least, and one for the poor?

Back to the flipside, given a slight assymetric deal or absolute numbers deal, head in for head out, then after new laws are passed enforcing poorer working conditions in the UK, how many graduates and skilled labourers will up and leave the UK for better prospects in especially Germany which lacks labour on a long term basis?

Training And Education Is The Cure We Are Told

The new minister for work and pensions has already pretty much laid out the political demand and public expectation that from day one of their new cabinet and the move to the day article 50’s severance is reached, UK employers had better look at training up UK staff with the skills they need, and not expect EU migrants to make up their numbers. The trouble is that it can take four years to train up a hand worker to be proficient and productive with their skills, and British ” youff ” seem notoriously fickle when it comes to sticking-out training and ‘hands dirty’ careers.

The whole education system is hell- bent on ever better Pisa results, in maths in particular, but really do you need differentiation to be a bricky or a joiner? Do you need more than pretty basic arithmetic to sell insurance? There is a suggested return to the ‘secondary modern’ which may be admirable enough with a view to less academic more practical pupils, but what proportion of those do we need contra data-literate, bi-lingual and comminicative school leavers? What will happen to the Pisa tables if that old fashioned parallel stream of brown coated pupil is introduced? In any case, none of this is influenced by  EU policy.

The UK education sector is basically pretty bad at right-skilling pupils or even equiping them with a mix of practical skills and academic results to open their opportunities as school leavers. There has had three decades of expanding the university degree system, and focusing pupils in secondary school, to taking that route as the best means of securing a prosperous and productive life. This is a strategy which can be argued has devalued that level of qualificaiton on the one hand, while on the other it has taken away very many practical elements and natural work experience progression from the older HNC and HND routes, and even reached into apprenticeships perhaps. The same is apparently true in the USA.

Many graduates in even the more practical applied-technology or vocational degrees, find themselves in a job market where it is necessary to do a ‘slave labour’ internship for extended periods just to get onto the career ladder, while many from those more academic or esoteric subjects find that teaching-training is over subscribed, and research careers are a narrow pyramid of selecting the very few best and brightest only.

Correcting Supply and Demand is Inherent in Brexit ?

Ah but I am ignoring basic economics of supply and demand, aren’t I. It means that those brickies and white van men will have higher wages and cheaper houses in one fell swoop. Well no, the answer is no. We come back to another couple of economic basics: What is fueling growth in the UK economy? ….. and the connundrum between costs, turn over and margins.

Brexit voters were predominantly in two groups of sociodemograhics:  older over 55 y.o.,  or thirty something less skilled “white van men”.  The educated middle class voted Remain, and the youth of the country were on Snapchat that day. The older generation are increasinly investing in buy-to-rent properties as a means of investing and reaping return on their high wages and personal equity, while the generation of brickies, mortgage brokers, plasterers and Ikea workers are dependent on the demand for new housing growing.

However the British mum is not playing ball in this picture. She is having her kids much later, and as a consequence, fewer of them. By 1995 it was down from the clicheed 2.4 to 1.7 and it has fallen further. That means that the population is decreasing over time, and rapidly ageing. We are not breeding as many people as we are today. It takes 2 to tango, but 1.4 say as it may be right now, means we loose 0.6 children per parentship.

So if you also remove demand from immigrant and migrant workers out ofthe housing market, it starts to lose not only first time buyers, but also the growth which is feeding those nice littlenest eggs (actually, nasty) which the over 50s baby-boomers love to have- yes, buy-to-rents.

Is the UK Economy Driven Forward By the National Mortgage ?

No one has really a grip on how much of the UK economy is actually fuelled by the housing market, but given that the finance crisis was precipitated by mortgage defaults and we all have to have more capital to fund out homes post that, it is very significant. Also looking at the FTSE 100 companies we see a large number of banks and financial institutions tied up with this pyramid of mortgages, consumer equity release and the  “funny-money” sloshing around higher up between institutions. As a final point, one of the very first major firms to be negatively affected by the Brexit vote, was in house construction and real estate.

Growth in GDP has been nothing spectacular the last three decades in fact, but it is of course on a ‘leverage’ for capital gains because rises in wages are multiplied upwards in mortgage lending and capital value of property. One pound more in wages leads to three pounds more in mortgage. This trickles money upward, while also sideways into construction, retail bank jobs, insurance,  hand worker services, and consumer white and brown goods.

Perhaps some of the country is driven by a  cycle of crypto Keynsian credit fuelled growth, but you all enjoy capital gains don’t you? Well not really, because people are buying houses later and the growth in those values are not so high. There is more net gain in building rabbit hutches or modernising old flats for first time buyers than that gain which those first time buyers can expect to make themselves over the first five years-  relative to the rest of the housing market. Also that regulationary stipulation for deposits or capital bound to the first time sale, is putting pressure on first time buyers making them older as a trend which may gather pace. Locked into rented accomodation while they save, those rentals become more sought after in areas with high employment, and more income gets soaked up into the buy-to-rent market. A driver then of later first time purchasers which excaserbates itself.

This should though all adjust and offer UK citizens a better, British deal? Well not really because already the costs of new land and building,  or the costs of refurbishment,  are high. Any decrease in the out price will render many of these sites uneconomic in the eyes of investors, who may look at more established property or other markets. Also of course with fewer poles on building sites, construction costs will go up.

Barriers to “Being Arsed”

This same ‘retun too low to be bothered’ extends into other areas of business both large and small. From everything like fruit picking to fish processing. Where margins are traditionally acceptable but only if wages are kept in check, then business will just give up or employ fewer people to do the same work, taking full advantage of weak labour laws to avoid overtime payments and maximum working hour limits.

In other words because the EU migrant worker is so cheap, geographically mobile and “flexible” some companies find that it is easy to do the sums on the day and get on with the job, rahter than thinking of training and relocating UK workers. If they loose access to this easy route to percieved high margins, then they will just give up. New entrants will find this door to juicy margin closed too and fail to attract investors. Given also potential falls in exports to the EU, tariffs and customs delays, many businesses and entrepreneurs will simply ‘not be arsed’ to carry on. The risks will be higher on a lower gross margin, with possibly less top line too.  The ROI and return on effort is just not going to be percieved as being there because they have had a decade of free-and-easy labour.

Working More for Less and Just Loving Brexit!!

When you read the rhetoric of the more political oriented arguments against  EU membership, then farily firmly up the list, ( just behind those demands for that minimum capital in our homes, which are IMF driven anyway) is the Social Chapter on workers right’s. Right up there, with immigrtion, only this is definetly holding the UK economy back. What is this evil, faceless beaurocratic legislation?  It’s the 48 hour week, family friendly hours and maternity/paternity leave.

So the Neo Liberals really behind brexit will have you working longer hours for less money per hour, with less time off for your families, while of course also inevitably exposing you to the true costs of health care, via creeping privatisation and the marginalisttion of health provision contra attractiveness of private policies, as has happened with pensions of course.

The Sun Always Sets Now

The old generation who voted OUT, hark back to the UK of the 1950s when there was a ‘simple’ trade deal with the early EEC, and everyone had a really good time. However back then the UK could rely on protected markets around the commonwealth and  technological leadership. The empire disappeared, and the lead in applied science, would soon be eroded by the emergent economies of Germany, japan, scandinavia and the US.

Manufacturing has regressed to being only 14% of GDP from nearer 30% in the 1950s, and a good deal of manufacturing is linked to defence and healthcare which in turn is paid for by the state, and otherwise traded on rather ‘interesting’ international agreements which used to be done on the Royal Yacht apparently. How much more of UK manufacturing is reliant on EU money and cooperation, such as Airbus ? Will car manufacturing survive the muscle of the EU ?

So far there are just more and more questions about how the UK will get on outside the EU, and what real benefit trade deals with the USA;  Australia, and little old New Zealand will actually render, of if they will be somewhat assymetric in reality establishing further balance of trade issues. The old empire no longer needs to accept British is Best, and the sun sets on Lands End.

Blighty is Over Run by Johnny Foreigner! 

But dear boy, I hear them say, ‘we will be over run by dirty furriners if we don’t take control now!’ There has been very high rate of immigration from the EU in the last five years, which is a direct result of the slow down and restructuring of some economies. Other national economies have remained relatively low wage in the former eastern block, and their nationals have come back home from the UK with flash cars and pay packets for holidays or smug self repatriation. Thus there is a word-of-mouth snow ball effect going on.

Given 2010-2015 immigration rates, by 2030 the country would have at least 10% of its workforce composed of foreign nationals, while the proportion of the whole population may be as high as 15% .

 

Would this immigration have just continued though,  or would it tend to tail off?  Market mechanisms would maybe explain a movement either way. Either there is a saturation point in the UK market for those migrants who don’t speak very good english , buthave particular skills where language is not so important, and thus there would be sloping off in numbers ? Or would the numbers motivated to uproot their national countries with cheaper goods and housing, to emmigrate to the UK’s expensive cost of living,  naturally come to an end as cheaper end accomodation in the UK gets pressurised up in price by their own sheer numbers alone?

I tend to believe that if the general EU economy picks up, then there will be more demand for skilled labour in the old eastern block, and there will be a knock on demand for unskilled nationals to return home. And  further to this, those who are thinking of leaving can demand  a little more wages domestically which renders migration to dear old dear UK,  less lucrative. However if the EU economy still falters, then we would have a self perpetuating situation perhaps in the UK, driven by demand for housing. The UK has growth and new jobs so it attracts more immigrants which means there is more growth in the housing sector, which leads to growth and more jobs……and so on.

The EU Unravelling By the Migrant and Refugee Crisis ?

On the side of the African migrant and muslim refugee crisis, a Le Pen win in France will force the hand of the EU to act to shore up the borders and intern especially young, itinerant males while they are processed as the extremities of the EU. There will be a new strategy and possibly a rewriting of the international convention on refugees. The route for bone fide refugees from in particular Syria, will have to be through UN camps in Aisa Minor and Egypt in order to stem the dangerous illicit trafficing over the Meditteranean. Europe must say “Non!” if it is not to risk a right wing swing in nation states continuing, with the EU as the scapegoat, all being based on the fear of young migrant males doing bad things in the EU.

The Great Experiment Begins

Now however,  growth in immigration is pie-in-the-sky because Brexit as we are reminded, means Brexit not halfXit. Control on immigration must be achieved to deliver on the hype. The UK is entering an experiment where it will find out for itself how much migrant labour,  the housing market and freedom of movement of goods, capital and its’ own citizens within the world’s richest economic zone,  means to its national economy.

Offshore tax haven status aside, banks are very conservative as are most international investors, and would quite likely prefer the more regulated, but more stable and defined EU environment to an uncertain island tax holiday of undetermined duration. If the EU gains a new centre of financial gravity competing with London, then there could be a shake out of London based institutions and investments. A cold shoulder from the EU  to particular off shore advantages like profit exporting, which the EU is already reviewing, would turn a trickle into a tide.

The City aside, what shape will these trade deals take then, and what lever does the UK actually have over luxury goods and BMW’s? Would tariff setting on BMWs and Gucci not disgust the UK consumer into demanding EU Brentry? WIll the weak pound punish the UK economy and have each chancellor resident in No. 11 squirming in austerity for another decade? I think there are going to be many deals, and some of them will be temporary sticking plasters. Some will be agonisingly long to ratify, while others will be overturned with political shifts in the European Commision and Parliament.

Despite being able to see the White Cliffs of Calais over La Manche, the little strip of water can suddenly seem a very long sea to cross,  and the UK could be heading to become the sick man of the region as it was painted to be in the 1970s, only this time as an outsider drifting away from consensus and freedom.

 

 

 

 

 

 

The Stagnant Millenial Generation?

People are starting to wake up to what economists have described for at least the last 160 years if not more. That wealth is inevitably accumulated up over, and in times of relative recession (low growth or negative growth) wages stagnate and are eroded by inflation.

It is not the big nasty, top hat wearing, cigar toting capitalists who are really to blame for this in the UK and many other countries. It is those darned post war baby boomers.

This recent BBC article is one of many you can find on the internet from both sides of the atlantic and as far away as Australia and NZ, and if you cared to look at this in other EU languages I dare say you would find the same phenomenon. The older generation currently in ‘peri-retiral’ have run off with all the goodies and aren’t giving them up any time soon.

 

Very many of them have worked their way up in to management now, or have successful businesses which can lever out new whipper snappers with credibility or a plain old price war they can survive. Many are in fact enjoying work so much that they are postponing any ideas of early retirement, so common in the previous generation reaching retirement in the 80s and 90s, and are even staying in jobs beyond 67! As demands are place upon companies to increase productivity, down size and out source to cheaper labour, they are aiding and abetting this which affects young and unskilled workers the hardest. The baby boomers are keen to keep their positions of power and will go with the flow of downsizing, something they have good experience with too from the slash abd burn during privatisation of utilities etc in the late 20th C.

So they have accumulated an ounce of power or two in the work place and are able to survive effectivisation by being the managers who pull it off. However they are not just ‘epistatic’ , standing upon the younger generations in terms of the work place and stiflign promotion prospects while encouraging out-sourcing to the hard and bitter end of the labour market. They own all the property.

 

Not only does this generation of post war luckies own their own houses, and have a capital proportion often outright, they are remortgaging for the lucrative buy-to-rent, which puts more pressure on the market for first time buyers in smaller properties, and even semi detached houses where multi occupier rental is accepted by the banks for a second mortgage based on equity release.

Also they are not down sizing any time soon. They are used to a high material standard of living and are likely to keep those grand houses with extra bedrooms such that their children can visit or move home when they are made redundant of course. On one side in fact housing is not such a big pay off relative to pensions when you spread out the equity which is released, while on the other those desirable area, smaller properties are in that lucrative buy-to-rent market which erodes their potential equity release more.

We have an imbalance between inflation in not just the cost of real estate, brown or green. Yes we could and are freeing up greenbelt and legislating affordable homes, key worker appartments and even some place owner-occupier covenants, but the cost of building has escalated. The average new build in the UK in materials and labour is well in excess of £120,000 and that is before the ground is paid for or estate agents marketing fees are put on, and the profit the developer expects is around 20%.  Flats are just as bad, where the cost of build is relatively high per sqaure meter due to the larger scale required in site equipment costs and foundations, supporting walls, stair wells and roofing. Often flats are built in urban areas or along suburban transport routes, so they are subject to high land prices, especially when local councils are (ahem) a bit careful with planning applications , that is to ask, are there meetings at the masonic hall to discuss how much land and what type of building is desirable to hold prices up?

Wages have in no way kept up with house price inflation, and what has happened is that a far greater proportion of disposable income goes to the basics of living than it did in the 1970s when the baby boomers had free reign to buy those two-ups’ on even below average wages. The fundamental disconnect has happened because the baby boomers have built their own quasi pyramid selling scheme, based on capital in their houses and leverage from loans when they release equity and upsize or gentrify new urban areas.

You can forsee that there is a ticking time bomb for the economy which kind of solves itself by market mechanisms. The baby boomers are not as healthy a generation than their war time parents and are likely to both live shorter lives (mortality) while also not enjoying as good health (morbidity) according to several studies. They are the group of working age now, most likely to be life long smokers and to have given up regular exercise. So from about the magical 2028 onward, when a large proportion of baby boomers come over 75 years old, we are going to see more sudden deaths possibly and more nursing home hospitalisation, plus the need to move out of two up-two downs into single level accomodation and sheltered housing.

This natural senility could mean a flood of established property onto the market. However since buy-to-rent is so popular and unrestricted, it could be that a new predatory investor comes in, as has happened in Austalia. The chinese global property investor has so much cash that if they see that capital value can be upheld and loans paid off from rents, then they may invest en masse in UK two up two downs and bigger villas and bungalows. Perhaps there needs to be owner-occupier legislation to hinder that global investors reap this harvest rather than the natural, national succession to the collective ancesterol pile.

Back to jobs though, and in the shorter term we do then see a crash very likely as the wave of new retirees hits the beach in 2020 when a large proportion will retire of those born 1950-1955, the baby boomers. Also we can see changes in the methodology and mechanics of work pushing older employees out to pasture as more modern IT savvy management swings into the board room and seeks to sweep away old empires built on pushing paper. So we have a very big shift in front of us in many western countries as those people who have ‘hogged’ jobs for up to 20 years in many cases, especially in the public sector.

This isn’t just a trickle down in the job market, it is a sea-change. It is quite an abrupt exit stage left of hundreds of thousands of managers, gaffers, techocrats and semi skilled folk too. For millenials this bodes perhaps well, with their numbers being lower than school leavers and graduates of yor. However the baby boom actually is strung out if you look at the figures, and can be said to have lasted into the late 1970s when suddenly thereafter, we see a decline in the older fashioned family life, with a disrputive economy and more women seeking careers.  Millenials are babies to parents who were born themselves of that last homely period with 2.4 kids in the 1970s. The average now is decling from 1.7 at last national census btw. Now they are my generation, and we have often struggled in the face of the baby boomers going along with all the down sizing and privatisations reducing wages for us, and even worse for millenials today relative to the real costs of living.

Our generation are next in line for senior management, and unfortunately for millenials, all the mechanisms of countering corporate inflation will accelerate because my generation is IT literate.  We are under threat from an even more IT literate Generation X, who have that lovely coding experience on those web sites, ERP systems and laterly apps, which millenials lack solid and CV credibility from despite being on average, more IT savvy. Millenials often have patchy and weak CVs where the highest quality experience comes from work placements rather than jobs they actually secured, which are themselves part time in low level service like retail and catering. We the 60s and 70s babies on the tail of the boom, will take up all those cushy college and university lecturer positions, professorships, senior civil servants, senior partner, planner, gaffer and general boss positions.

Generation X had it in my opinion, a lot better despite there being a pretty mediocre promotion market in the 1990s as companies by in large down sized middle management out of the picture. Gen X had a different, experiential and self confident approach to life than my generation’s rather formulaic following in our parents footstepts or taking their advice on getting a degree for gods sake. Many Xers shunned traditional routes to employment, and found their wander lust, super self confident, happy go lucky attitueds made them fit in in new service companies, or seek out practical job experiences thoruhg their social network. They became the now time Hipster with the small craft beer and sandwich business, they became the lucky under qualified managers in the internet and app companies, they took up skills in building and other areas where a good buck is to be made as self employed punters.

Millenials were under the cosh from their late baby boomer, older, and more cynical parents at the time when they were born to parents of the 1960s and 70s generation. Society placed even more pressure for academic performance, while delivering even fewer jobs for graduates now. They have three generations of adults above them who are looking to oursource and hire in the cheapest labour possible so as to take a bigger cut in their part of the supply chain, and they have a super ready supply of willing and easily disposable youngsters. They are vicitms of margin maximisation imposed by older, cycnical generations.

Trump and Brexit are symptoms of the end of the Neo Liberal, “let them eat cake ” epoch which has delivered such inequality across class and now generations. The generation sitting in power now are on the one hand desperate to hold on to power, while on the other they want to avoid the dreaded signs of inflation which wage demands could impose on the economy in their eyes. They are blind to the true level of inflation for younger generations in the real cost of living. Also blind to the threat in the housing market in particular that this poses with an ageing generation.

Trump and Brexit voters are not who some people think they are. In fact they are working class, whom are disatisfied with globalisation because it is has eroded their standard of living and job security. Unlike subsequent generations, they remember the super inflationary 1970s so see keynsian solutions as leading to that grizzly end, and have by in large bought into many of the concepts of the ‘free market being good, labour laws and unions are bad’. Millenials and gen Xers have no such relationship to the more left wing past, and stand only to learn from the last three decades of erosion of wages for the majority of younger workers. Expect some politicisation old timers!

 

Post Truth Media in a Post Democratic Age?

It is argued by the cynics in a position to own some media space and time, that we entered a post democratic age some time ago, and that we now live in a post-truth media era. 

There is of course a huge ambiguity in this which is of Heisenberg uncertainty proportions. It is beautiful to think than in declaring the post truth era we actually expose the need for more truth by the means of the good old ‘rigorous scepticism’. Also too that populist hard right politics are swinging into democracy, shows in fact that we are exiting a bland period of conformity in politics, with Neo Liberal economics on the one side, and perpetually watered down social democratic policy on the other. 

Why though has post truth media become the new oppressor? Clearly it is the internet which is driving this, but far from the Luddite cry that there will be both anarchy and new state fascism mediated via its web sites and trivia-apps, the media is its own saviour and the people are not some puppet like crowd habving their strings pulled subconsciously.

However it is not just the internet which is driving this move to a new or rediscovered rhetoric which is aimed at achievement in its own terms. Winning as being wholly the technique rather than the value of the goal or the validity of the exponent. On Friday for example, we asked a consultant in to help with some issues I have which my current leader does not have time to cope with. She was from the challenge management school, and seemed to have a sense of entitlement and empowerment to be, basically, a bully with a never ending stream of challenging questions and an set of goals which were to reduce the value, go for the low hanging fruit, get the win out of the way and not worry that it will cost us later in being quick and cheap today. For once I took a counter attacking stance and that was really petrol on the flames, yet we reached some areas we could work on, really back to square one I had intended to go out on, but now I expect more questioning of my strategy and work rate, versus doing something tactical which could be a quick win for her as a consultant. I was left flabbergasted at how far people are prepared to go in terms of persistance and verbal bullying to advance so little and impose questionable tactics upon others in a pit bull way.

 Then I was of course reminded that this is how a lot of society works.’ Truthes’ can be shaped for short term gain in business or politics and their falseness is soon forgotten as the next crisis or opportunity presents itself. What some individuals get remembered for is having done something, and that something acheived something and that something achieved was actually achieved in a short space of time. Which then gets rewards and headlines. A quick win. The truth in stocks and shares as much as the truth in economic policy outcomes, is never actually out there, it is just the system claims some ‘truthes’ so as to own the attention of people who expect actions and certainties. Truth doesnt matter if someone can win on their own spin in the short term, but truth cannot be escaped in the longer term.

As a person I have always, always been interested in the truth, and how it can be like onion layers or just a fleeting belief. What is the aetiology, the causative factor, the underlying reason, the basic instinct? Truth reveals itself most through both the sens of justice and its societal structures in law. Bitter senses of injustice drove my childhood and adolescent life and have come back to plague my career in a new stubbornness and inflexibility which renders me often difficult for, well, difficult stubborn people to work with. The trouble for me is that they are often entrenched and I am the new boy even if I am middle aged. I need to swallow my pride, but in fact there is a wonderful Norwegian duality in “jantas lov” their own brand of presbyterian style self denial. It finds itself in a false modesty, a subtle language of understatement, a way of bowing and laying flat for your opponent in agreement while then totally disagreeing and moving things amother direction. 

The internet and social media for me, have come full circle and I find myself using my view of the truth to promote arguments against people who are clearly in the post truth camp to me, yet who is telling the truth? Time is a moderating factor on truth because phenomenoms happen in chains of often chaotic events with truth often being a post mortem which is unusable by the time the expert coroner delivers his report to the court. Wwe cimne back to that Heisenberg thing, where we cant perhaps know where the truth is AND where it is going at the same time. In uncovering a truth which destroys an illusion, we are stupified by what the psycologists call cognitive dissonance. The truth of new events can then not be grasped, it overwhelms us instead and appears to be fake for a while. Old certainties too fall away in my life, and old things I held near or dear, become strangely alien and almost scary in a deja vu way. New realities take over around the priorities of middle aged, parental life elsewhere from where I grew up. 
What we do see mediated by the internet and in society is a new verbal aggression. The voices we hear or internalise from trite memes to cyber-bullying on FB, are far more concentrated on winning by all means possible. Project fear, the popular anti refugee right, anti EU Brexit campaign.  In part this began with several conservative organs regrouping in the face of either annihalation or their economic policies finally reducing much of working life to a near feudal situation for an increasing proportion of workers, while China proceeded its miracle driven by Keynsian investment and interference, so unfashionable in the west. The other right wing establishments which have regrouped into verbal and literal terrorism, are the religious conservative sects in all the three Abrahamic religions on all their continents. From the 1970s  rise of the Taliban to the current Islamic State cult terrorism on the rampage, Islam has seen radical conservativism fighting against westernisation. The softer side of this is what happened in Iran and has been even happening in Saudi and even Iraq, a kind of conservative but quite benevolent islam governance. In the USA there has been one over riding crusade against modernity and that has been the ‘intelligent design” approach to offering a biblical alternative to the observations and theories of Darwin and all thos whipper snappers in the evolution camp.

Both islamic terror recruiting and “intelligent design” are examples of this hyper aggressive post truth posturing, which for the former have had grave consequences for the middle east and Europe. The former is of course the employment of that age old religious technique to convince the mild sceptic and humiliate the weaker infront of their piers, or on maintime TV these days. That of the being unable to deny it because it is an explanation which is alternative. As in its day Darwinism was radical so will this small yet noisy crowd of christian conservatives try to question ‘orthodox’ with new theory. The new establisment is science, with religion offering an alternative, which can be argued for ad absurdium. Everything can be questioned, from radio isotopic dating to genetics and the individual on the spot is aggressively persued like a witch hunt as to whether they really can claim this. In a few years time we will no doubt see new sects who are vehemently anti evolution and anti gay, and they will be populated by feeble minded people being lead by opportunist egotists.

Which brings us to Trump and Hitler for that matter, not that you can really compare them but both came in from the fringes and were able to use their personality to persue a radical stance via the ballot box in outset. They are opportunist egotists who live in the pre-post-peri truth era which has been part of mankind since our leaders first commanded us to go to war against other tribes, or offer them more of their fruits of labour, food and possessions via the structures of tribe and then the ultimate meta tribe mechanisms,  church and political parties. 

So post truth and post democracy are just the least truthful or modern concepts we can embrace. They have always been the nature of society, that people are easily lead or rather anti democratic leaders are easily empowered. The fact is though that the internet is a mega media which for the first time allows for the rapid dissemination of real information and the ability for the masses to scrutinise and debate this as to its value, meaning and indeed truthfulness. There are many cynical political actions or policies which could be ‘gotten away with’ in the pre mobile device, pre public internet world. Now though take the US elections hacking scandal, where the internet was the mediator, the criminal and yet it is also the police, the prosecutor and the jury! The internet has delivered us to this radical age and will facilitate more freedom if it is allowed to be free, and any restrictions on its freedom will lead to outcry and revolution over its ownership or structures. 

A Fishy Plan For Brexit ?  UK Fisheries out of the EU

Probably the most vehement anti EU communities were those which are of course involved in fishing. Those hardy folk who brave the often forbidding seas around our coast became a cause celebre in the run up to the Brexit vote, and examples of how ridiculous and wasteful the EU was were often drawn from the Small Medium Sized Enterprise (SME) end of the industry.

The Nation’s Favourite Friday Night Dish – A Corner Stone of the Economy at Stake? 

Cod and chips, in paper, with salt and vinegar and a pickle on a friday Night to save mum cooking at the end of the week. It is really a part of the British soul if you like beccause of the love of fish and chips, the summer holidays and retirals to the picturesque fishing villages dotted around the coast and the respect support which our fishermen have for their often dangerous and always regulated seafaring profession. We have a love of our national dish and a deep affection for those historic rural  harbours. Fishing makes for a good news story and nice trip for the camera crew, unlike say, deriviatives in the city of London which are actually a net ‘export’ ware on a global market.

However the national salt water catch is a tiny proportion of the economy, less than one percent. There are only 11,000-14,000 employees directly involved in coastal fishing in the UK, over half of which live in Remain Scotland. Indeed the top three landing ports by tonnage are all in Scotland.  Here a proportion of fishermen themselves, mainly along the  Aberdeen-Banff coast, actually praise the EU for the decommissioning scheme in reducing excess capacity which was there,  and their combined approach to managing stocks in the north sea.

Will in fact our fisheries show the true benefits of brexit, with soveriegn power over our ‘own’ resources, or will the economic realities of a more isolationist Britain with a partisan EU fishing lobby and pro EU centre of gravity looking to political levers and ways of making life outside the EU seem less attractive for members with fishing fleets? Will pounds sterling and euros determine more of what actually happens to the health of the UK industry ? How is it to be a neighbour to the EU today ?

Access to Waters versus Access to Markets 

The biggest economic connundrum is simple- we have an equation in the balance between

1)  exclusive fishing rights and a protected domestic market

2) Market Access to the EU (both ways)

Brexit to some extent places the UK in the position it found itself in 1939, in terms of suddenly having much of its supply under disruption and exclusion, as well as their exports. The fact is that the UK is not self sufficient for fish, with 70/80% imported and the majority of that is caught outside UK waters. How much is caught currently by other EU boats in UK waters and processed and sent back to the UK? How much is from outside the EU in the first place, but lost by second country seller obfusion?

The UK exports only one and a half billion pounds in fish to the EU, or 500,000 tonnes while the direct subsidies for compliance and efficiencies from the EU for those ‘touchstone’ small fisherman Farage sailed up the Thames with, are 10% of that figure. Plus many of those coastal communities have recieved infrastructure grants for harbours and roads etc from the EU even during years of ‘austerity’ in the last decade.

It is very likely that ‘no access to our waters’ will mean ‘no access to our market’ because of this huge imbalance.

The Wrong Type of Fish

Small fishermen are only a small part of the industry, but highly  visible in those lovely little coves and hewn stone harbours. Much of their catch in the last 25 years has moved over to shell fish, taken by value,  and special catches like monk fish which command a far higher price at market than the palageants like cod, whiting, haddock and herring. High value fish, like those monk fish, tuna, salmon, turbot, sole and halibut, are also a co-catch on some shallower water palgeant trawls and a welcome source of extra income for medium sized trawlers.

The trouble with losing the EU as a market for all fish, despite it being quite small in terms of the imbalance of trade, is that for those ‘farage touchstone’ fishermen the demand in France, Spain, Italy and Portugal for premium fresh fish and shellfish will disappear. In the UK it is currently only wealthier households and restuarants who can afford much of this catch, and also the UK average coook is not interested in somethign which isnt out the freezer, ready battered and takes 20-40 unattended minutes in the oven to make. Worse the old fish monger is by in large a thing of the past, and the supply chains of most super markets place pressure on the actual freshness of the fish / its appearance, quality and final use by date.  These small fishermen quite likely face then falling prices and unpredictable demand for their premium catches.

Ah but the EU need these and they love them so they will make allowances for things premium? Well if you take all the little trade spats with the USA in the 1990s it was premium items like cashmere and salmon which were targetted as highly visible pawns on the chess board of negotiations. EU fishermen will delight in having higher prices for those too, if they become scarcer due to brexit.

White fish for the mass market, is by in large caught and processed by large companies in ship sized factory trawlers. The majority of quotas by tonnage in the UK are owned by just three major players, not the plethora of flag waving sub 60 foot SME fishers. . It can be the case that this will be more of these big trawlers based in the UK, and that the UK places a new demand by protectionist policy tit-for-tatt with the EU. However this is all big catch, lower value per tonne which is only profitable in scale. With UK wages and availability of labour to such ‘getting your hands dirty’ professions on the decline with young UK nationals of the YouTube generation, it may be that it becomes less economic rather than more in a partially isolated market.  We have then an issue with the wrong type of fish at the wrong cost-price pay off for the UK. Or the great fish and chips will become a much more british affair, with imports falling.

Who Guts and Fillets the Great British Cod?

By 2010, it was estimated that more than one in five workers in the fish processing industry were  non UK nationals, with the majority coming from the EU, and of those poland and the baltic states being most represented. Another fifth of the workforce are due for retiral or naturally seek other work as they age and cannot tackle the physical work into their late fifties and sixties.

Thus the industry complains of a skills gap, which probably is forcing wages upwards to levels where managers do not feel the margin is sustainable. Fish processeing is a labour intensive, physical work mostly done standing in cooled plant and with of course a lot of fish odour and little kudos attached to the job. The main areas domestic processors are to be found in terms of plants with significant volume and employment are Aberdeenshire, Hull and Grimsby and Shetland and the Hebrides. One employer on Lewis reported requiring 40% of its workforce from EU countries due to local difficulties in recruiting,  and even provided portacabin accomodation to secure their labour.

One commentator from the industry has voiced concern that the industry in Grimsby will simply pack up and move to those EU origin countries where the workers come from. Catches from the UK once  Brexited, could end up being processed in Poland and the Baltic countries which are only a two day sail from the mid north sea. This could result in a similar situation as is currently seen in high-wage Norway, where most white fish which is caught for the ordinary dinner table frozen fish market, gets processed in lower cost countries or offshore factory ships under foreign flags,  and shipped back in to the domestic market. This is already the case for a proportion of even fresh Scottish and Norsk salmon which is shipped to China for filleting ( which seems incredible and  probably is uneconmomic and only possible due to subsidies and currency manipulation from the Keynsian-orientated government there).

Figures showing the actual distribution of labour geographically and by employer were not found at the time of writing, and indeed there may be no accurate total figures collected. It could be that Hull, Grimsby and Fraserburgh are more reliant on foreign labour than uncovered, and that forward into 2017-19 there is an even higher number of non UK born workers to be uncovered, when employers are forced to declare them and seek work permits for them.

The trouble for UK fish processors is the cost of living in the UK, and some small coastal towns and villages in England are particularly expensive for accomodation. What was 15 years ago a relatively high wage of around £12.50 an hour (app. £25,000 p.a.) , can now be demanded by semi skilled manual workers and data literate office workers as more or less a minimum. EU migrants are often prepared to live in cramped conditions in poor qaulity (and even illegal) rented property and have a frugal lifestyle when resident in the UK. Internal migration and shifting of labour from the unemployment black spots is the great hope of Brexi, yet may render many jobs obsolete in the onshore side of the fishing industry. So the UK may end up not only with the wrong type of fish on their hands, but the wrong type of worker.

Fish Have No Boundaries, Fisherman Will Have New Hard Borders

Iceland and to some extent Norway, have a luxury of having large fish stocks which are ‘born and caught’ in their own waters, in particular north atlantic strains of Cod, and the sought after migratory ‘Skrei’ strain for example. The UK really does not have such a palegeant nursery relationship, and as we know from the 1970s cod wars,  is actaully reliant on migratory or roaming (palageant) stocks from Icelandic and other waters.

Some fish do ‘know’ boundaries, even within the same species.  The north sea has seen more than just a decimation in its alleged ‘home grown’ cod and haddock where it is argued that the nursery ecology has been largely destroyed by variuos factors, mostly over fishing in years before and after EEC access. The same is true of coastal varieties and specialities which fisherman either complain the EU boats suck the seas dry for, or like monk fish and lemon sole, they have to throw back into the sea because their EU quota is met. Local stocks are of course both managed on the one side, and on the other they are subject to other environmental cycles and pressures.

Also to some extent quotas help maintain reasonable gross margins for fishermen such that their catches are valued in the supply chain and they vocer more than their costs of fishing. Those costs are not just fixed in their boats and nets, but quite a high proportion are in fuel, labour and especially repairs. Fuel goes up with tonnage and if they need to catch more to cover costs it can become a viscious cycle for small and medium sized boats, where also they expose themselves to riskier weather conditions. There is a balance between market price, availability of fish, conserving breeding stocks and an economically sustainable industry which is often not actually struck no matter the market or waters if we consider the history of fishing and historical failures in catches such as herring.

However our national catch can be managed nationally! Local fish for local people. This will put the fishermen against the scientists, although in Scotland there is a well accepted peace between them now as many fishermen have taken education or training in fish ecology and relate it to their own experience and often family historical legacy from bad cathces in years before the EEC access. We will have fishermen vs science again arond the south coast of England and NE, where these coastal, shallow water varieties will have ebbs and flows of populations and market prices over the years just as the tidal waters they live in switches twice daily over their heads. There may well be less subsidy forthcoming and a more free market approach to allowing the industry to ‘right size’ its mechanisms.

Another fact for the deeper water trawlers from family businesses to corporate catchers is that suddenly over night, they will no longer be able to chase shoals over the borders. They will have to up nets and turn  around or face the undoubted wrath of the Irish, French, Dutch, Danish and possible Spanish fisheries protectiion ships. Things as with the Cod War, could get ugly. It could mean many domestic trawlers will have to diverisify their target catches, say mackrell in addition to large white fish, and thus need new nets and associated gear to be able to switch catch as it is available in soveriegn waters.

Where will these borders lie? We have an established border effectively mostly UK administered to Norway and Iceland, which is 200 miles for the UK. However we are not going to be extending very much right to a 200 mile border, and where we do it will be in the poorer fishing of the central and southern north sea. Further south we come up against a midway point or international waters demands laid out by the EU. So our plucky essex, kent and cornish fisher could find they have a lot less water to fish in.

As we see in Norway’s border with Russian waters, their massive factory fleets concentrate on sailing along the migratory path of cod and haddock up and down the border line, catching them also on their return and expanding a virtual thousand kilometer net towards the arctic ice front which was previoulsy not subject to quotas. International cooperation has addressed the issue and cross border cheekiness has been reduced, but the russian fleet in the barings sea still dwarves the Northern Norwegian fleet.

Norway Shows That Borders Outside the EU are Irrelevant

Brexiters often liked to compare the UK’s predicament to the luxury of soveriegnty that Norway enjoys, and the prominence of the deep water fishery when oil is removed from the economic big picture. It is very much not like with like though, because Norway has a straight line coast line which is the same as from John o Groats to Genoa or Bilbao. This massive soveriegn sea has both important nurseries, some palageant stocks being largely resident within it, and also large migratory stocks of white fish, mackerell and even now some Tuna. There is a suggestion that fish have actually evolved behaviour to avoid the EU waters to thrive better in the traditionally tougher Easter North Sea, Norwegian Sea, Arctic Sea and Bearings Sea north of that. So Norway is just so much bigger and can enjoy economies of scale while quotas keep an easy check on even the hint of catch availability reducing.

No matter the size thouugh, their waters are soveriegn and their fisherman free to compete. Well yes, their fisherman have to pay for the pleasure of having a q1uota. And very often these days, larger quotas are just bought up by locally listed Ltd or PLC  “AS” firms which are actually in the hands of large portugeuse fishing conglomerates. On the other hand, shore based jobs are being willfully eroded by a goverment who want to see ‘effectivisation’ in the industry, and the larger owners who want to make more profit on their catches by using foriegn landing and processing to reduce costs. This is to the expense of other, smaller and independent owners who end up with a landing site and processor in far flung Troms, Sogne or Finnmark which is no longer economic to run because the big catches are going to Russian factory ship transfers from Norwegian trawlers, or even to mainland China for processing.

One very positive policy that Norway by in large has, is that in striking contrast to the EU, it is illegal to throw catches away in order to come under quota upon landing. There are various quota bargaining tools which help this, but the main one is simply buying forward your next period of quota. The boats still remain idle when their qouta is finally made. Then the government steps in with special allowances for employees, ‘permittering’ which would be politically anathematic to the UK right right centre of gravity. This keeps skilled hands on up to 40% of their basic income they had when out trawling for the period of quota stoppage, or in prelonged bad weather or stock collapses. With the NHS to ‘save’ and tax cuts ‘needed to stimulate the economy’, this would be an unacceptable appraoch to putting folk on the social back in the UK. The pragmatic Norwegians use ‘permittering’ to lay off skilled workers who then have the legal right to their job asap things turn up, very much the case in the oil business since the collapse in prices there too.

Reversing the throw back of catches may mean that fisherman face over supply at the market once again, thus having a lower margin while they are fishing, and more down time, making employment more seasonal, unprediuctable and less attractive for crews over time.   Alternatively fish species they protested were plentiful and won bigger ‘as caught’ quota extensions on ( or where the science was wrong in outset ) collapse under over fishing on a local or whole coast basis. Norway realistically only faces real pressure on Stocks along its border from greedy Russia, while the UK will face all those competing nations, who may well create a virtual vaccuum clean of the spring palegeants as they funnel up the approaches to the english and North Channels.Fishing of those shared catches could become more intensive as foreign fisheries concentrate on along the natural funnels at the border lines, perhaps catching a higher proportion of stocks (with perhaps the UKs quota now being dished out to all without regard to stocks)

Economics in Uk Fisheries, will be Ahem, Interesting

The real economics of this will be interesting, but we have seen a Tory party willing to support industry by non market mechanisms so far. There is no doubt that politicians in the EU know fine well that fishing for the UK spirit is a cause celebre, and a major ball in the game of negotiations, where they can be seen aas being strong by denying the UK access to markets and waters, while improving the price of fish and income for those supply chains in the EU.

On balance from this essay it could be concluded that there are long term economic threats to the industry given a hard border, which could out  weigh the percieved benefits of Brexit for fish.  A tough stance will be a tough two way street. There will be many uncertainties, but the first blow will be when the EU failry inevitably block the import of UK luxury fish in that trifling 1.5 billion. When the UK faces shortages of some stocks, and seeks to cooperate on quotas and overall extraction, the EU may do nothing to stop their catching them in their EU waters en route to the UK and north sea,  thus depleting Uk catches further.

In the short terms the UK consumer stands to loose out if there is a hard brexit trade war or simple end of business as usual, with prices on all that 70% imported, mostly frozen white fish, going perhaps up. In the loinger term the reverse is quite possibly true if UK waters sustain large catches and the supply chain becomes more efficiently. Certainly the well healed will probably see their luxuries like Turbot coming down in price as the EU blocks their import from the UK and prices collapse. In the longer term, food pressure could even lead to the EU doing the reverse and securing more stocks and global fish for their own consumers, by using collective buying power, and squeezxing the UK out or legislating them out of their own supply. Food security could be disrupted with this imbalance in trade. The type of fish the UK household buys and the price is seemingly wrong from the domestic catch.

Trump-Win and Brexit are two fingers up to Globalisation as much as anything else, but unfortunately no country is truly an island and things therefore, are going to be both different and erm, interesting for UK salt water fisheries.