Trade, the Environment, Austerity, the 16th Earl of Warwick and Deutschland Uber Alles

‘Come quietly to the camp

You’d look nice as a drawstring lamp..’

 

Prior to this week’s main event, the happenings in Thuringia (Germany) last weekend, let’s update on Brexit and the UK.

 

Firstly, trade; and three statistics ^(2):

• In 2018 the EU accounted for 45% of UK exports
• In 2018, the UK recorded an overall trade deficit with the EU of -£66 billion.
• A surplus of £28 billion on trade in services was outweighed by a deficit of -£94 billion on trade in goods

 

In short, even with our ‘dominance’ in services, mainly thanks to the City, we still can’t balance the books. To try and preserve this it is suggested that the government would seek a ‘permanent equivalence’ regime for financial services that would last for ‘decades to come’

However, this I far from certain, the EU’s chief negotiator, Michel Barnier said, ‘I’d like to take this opportunity to make it clear to certain people in the United Kingdom authority that they should not kid themselves about this. There will not be general open-ended ongoing equivalence in financial services, nor other management or financial agreements with the United Kingdom’. ‘We will keep control of these tools, and we will retain the free-hand to take our own decisions.’

‘There will not be general open-ended ongoing equivalence in financial services, nor other management or financial agreements with the United Kingdom’

And, from the fishy business of finance we move to fishing itself, and its environmental impact.

Whilst the ecologically sound part of our fishing industry is relatively small, it depends on frictionless, overnight trade with the EU. About two-thirds of the shellfish, lobsters, crabs and langoustines caught by British fishers are sold to the continent in this way.

In their opening salvos in the post-Brexit trade negotiations, the British government and the EU27 have drawn competing lines in the sea. Johnson says Britain will ‘take back control’ of fishing in its ‘exclusive economic zone’ of up to 200 miles from the end of this year.

He is prepared to talk about access for EU boats but insists quotas must be ‘first and foremost’ for Britain.

Environmentally speaking, escaping the EU’s common fisheries policy offers ministers a chance to stop overfishing.

Disappointingly, whilst the bill currently before parliament retains the broad aim of restoring stocks to ‘maximum sustainable yield’ (the level, worked out by scientists, at which fishing does not harm the ability of the fish population to reproduce), the fishing quotas each year will still be set by ministers, with the power to depart from that scientific advice.

Then we have the environment bill itself which sets out four priority areas: air quality, waste and resource efficiency, water and nature.

Air pollution contributes to 40,000 deaths a year, and the new bill sets out a framework for standards on key pollutants.

Disappointingly, whilst this could be law within months, the new standards on air, and the other three priority areas, will not be set until October 2022.

‘Expect us to concede much, and one of the prime areas of division is climate policy’

Furthermore, the bill introduces a new system of environmental land management contracts, phased in over seven years, which will be voluntary, the measures farmers will be required to take will be decided at the level of individual farms, leaving gaps for interpretation and abuse.

Currently, there are specific protections for species and habitats that apply across the UK, however, under environmental land management contracts, these will become voluntary.

Farmers could pick and choose what protections they sign up to, and those not accessing public money could opt out altogether.

The last point on the subject of trade and the environment, is the vital trade deal we need to agree with the US, the world’s largest economy, we will sit at the bargaining table on our own, with the clock ticking, and little in the way of leverage other than hope!

Expect us to concede much, and one of the prime areas of division is climate policy.

For example, the UK has ambitious plans to decarbonise by 2050, while the US has little in the way of policy or targets.

Indeed, leaked documents from a 2018 meeting set out US intentions: they will not discuss the climate crisis or include the term in any deal, meaning it won’t consider existing climate policies legitimate grounds for opposition to any of its demands.

In addition, the government’s recent fracking ban could also come under pressure from US companies looking to operate here. In practically all the sectors identified by the committee on climate change as requiring decarbonisation policies, the US will look to lock-in market mechanisms, set in stone ‘competition’, and head off attempts at regulation.

 

‘There was a factory

Now there are mountains and river..’

 

And, without successful trade deals leading to revenue for the government, how will we achieve the stated policy of ‘Level Up’? Perhaps austerity has already cut too deep to be reversed?

A recent Guardian article looked at Newcastle; £37m was cut from its budgets in 2013-14, followed by £38m, then £40m and £30m – and so on, until the council had lost an estimated £300m by the end of 2019.

‘Perhaps austerity has already cut too deep to be reversed?’

Nick Forbes, the council leader, said last week: ‘We’ve cut every other service that the council provides to the absolute minimum, to try to protect social care. This is the first year we haven’t been able to do anything other than take money out of social care budgets … in some cases, we’re going to have to take away support that people have previously had.’ ⁽³⁾

Supporting the contention that austerity has already cut too deeply, the National Institute of Economic and Social Research reports this week that the amounts promised by Johnson to date will do little to reverse this trend. Indeed, it could be 2030 before we start to ‘Level Up’.

The economies in the north and Midlands rely more on public services meaning that any cuts are disproportionately detrimental to them. In addition, there is the £12bn of cuts to benefits, especially to tax credits, again this has had a greater impact on low-wage areas.

This was summed up in a recent report by Andy Haldane, head of the government’s Industrial Strategy Council, in which he warned that regional inequality of income is at 1901 levels.

 

‘Well excel the standards of the working man

And tear down the barrier

That separates the caste..’

 

In terms of equalising regions, Germany is the stand-out success; 30-years on from the fall of the Berlin Wall it has leveled up the east of the country.

Having started far behind, the former East Germany is now richer than England’s north. ‘They spent 10 times more than the [British] government is proposing, on research and development, gold-plated universities and business support,’ says Tom Forth, head of data at ODI Leeds, a specialist in regional policy.

Germany did it by using cities as hubs: he points to those cities needing fast train, tram and bus services to local towns. And we shall return to Germany a little later in this article.

What is certain after today’s cabinet reshuffle, is that we will have a new Chancellor cooking the books.

The resignation of Sajid Javid as Chancellor came as a surprise to most people, and it is yet another sign of the power wielded by Dominic Cummings, allowing him to effectively take absolute control of the Treasury and install his man as chancellor.

‘we will have a new Chancellor cooking the books’

The interaction between Johnson and Cummings is key, unlike Trump, Johnson isn’t a natural populist, he has just jumped on the bus driven by Cummings.

They are perfect bedfellows, the latter has no desire to lead, understanding that being the ‘Kingmaker’ gives him de facto control, and Johnsons desire to be the frontman together with his lack of ideals provides harmony. For the rest of us it’s disharmony!

And now we return to Germany, and a familiar hobbyhorse of mine, the inexorable rise of the right as we return to the politics of the 1930s and, in this instance, the Weimar Republic.

Just over a week ago, for the first time since 1945, a state premier was elected in Germany with support from a far-right party – Alternative für Deutschland (AfD) – tearing apart a cordon sanitaire which for years forbade major parties from working with far-right politicians.

In the East German state of Thuringia, a little-known politician from the liberal Free Democratic party (FDP), Thomas Kemmerich, was elected state premier, beating the leftist incumbent Bodo Ramelow by one vote.

The result was made possible by an unspoken state-level alliance of politicians in the FDP, the centre-right Christian Democratic Union, and the far-right AfD.

Without wishing to cast aspersions on the participants, drawing parallels with the fall of the Weimar Republic and Hitler’s ascent to power are inevitable.

Hitler was aided by conservatives who thought they could use him to retain their own fading influence, and, in Thuringia last week, conservatives, most notably members of Merkel’s CDU, cooperated with the AfD in a bid to exert their own diminished power.

As in other countries, the traditional parties fared badly, support for the CDU and SPD plummeted. Die Linke, or the Left, the successor to the East German Communist party, came first with 31% of the vote, whilst the AfD saw the biggest increase in support, finishing second with 23.4%.

‘Let us hope that the 2020’s end better than the 1930s, assuming, of course, that Coronavirus doesn’t take on the mantle of the Black Death’

Bjorn Höcke, the leader of the AfD in Thuringia, previously came close to being ejected from the party for his views; today, he’s an increasingly powerful force within the party, and a symbol of its radicalisation.

He has spoken-out against Holocaust remembrance and uses Nazi vocabulary, warning of ‘Volkstod,’ a death of the Volk, through a ‘population replacement’. His wing of the party, known as Der Flügel, is currently on a watchlist for extremism.

Whilst these problems in Thuringia may seem localised and a long way from home, they are related to a bigger issue, one affecting almost all liberal democratic parties in Europe and beyond: an absence of strategic thinking about how to deal with the far right.

Cas Mudde, a professor of public and international affairs at the University of Georgia, refers to this as ‘the fourth wave’, when ‘far-right politics seep into the mainstream, even when far-right parties haven’t taken power.

In France, for example, Marine Le Pen’s National Rally is excluded from forming coalitions, but the mainstream right-wing Republicans party has adopted, and normalised, many elements of its political programme.’

An example of this closer to home came prior to the Brexit referendum; David Cameron refused to cooperate with UKIP, calling them a bunch of ‘fruitcakes, loonies and closet racists’, the Conservative MEP Daniel Hannan was instrumental in creating space for more radical parties in Brussels, as secretary general of the European Conservatives and Reformists party.

If liberal democratic parties don’t address the growing influence of the far right, the scandal in Thuringia could be just be the tip of a very unpleasant iceberg.

Last week I drew parallels between the market crashes of 1929 and 2008, both of which were followed by prolonged recession for the many, leading to the rise of the far right and extreme nationalism. Let us hope that the 2020’s end better than the 1930s, assuming, of course, that Coronavirus doesn’t take on the mantle of the Black Death.

 

‘Das Leben ist nicht bunt

Geballt gehen wir zugrunde

Sag nein

Nein nein nein..’⁽⁴⁾

 

Notes:

1. Richard Neville, 16th earl of Warwick, also called 6th earl of Salisbury, byname the Kingmaker in reference to his role as arbiter of royal power during the first half of the Wars of the Roses (1455–85) between the houses of Lancaster and York. He obtained the crown for the Yorkist king Edward IV in 1461 and later restored to power (1470–71) the deposed Lancastrian monarch Henry VI.
2. House of Commons Library, Briefing Paper, Number 7851, 16 December 2019, Statistics on UK-EU trade
3. https://www.theguardian.com/commentisfree/2020/feb/10/austerity-level-up-newcastle-budget-cuts?CMP=share_btn_link
4. Life is not colourful, We perish together, Say no, no no no

 

We’re delighted that Philip is back so soon, and in truth he was never going to be able to resist responding to Mr Cummings cabinet reshuffle when it confirms so much of what he has been saying so long.

Understandably the Saj didn’t fancy reading from a PJ Masks script with an arm up his backside; the cabinet may have taken a retrograde step in terms of equality, but it has taken a huge leap forward in terms of malleability.

Let’s hope that Philip’s foreboding is ill-founded, but there is a distinctly Teutonic backdrop, and continuing concerns about the deeply damaging and divisive effects of austerity.

In terms of the tracks he has chosen, each fits the bill perfectly, but boy you’ll have to work hard to trouble the scorer; the hotline will be open from noon on Friday for anyone claiming a full house.

First up, ‘simply a punk classic, a man who had much to say, and went on to work with a number of interesting bands’ – 3 points if you got to Dead Kennedys and ‘California Über Alles’

Next ‘not what you would normally expect from this cult band, and an interesting departure’ – 3 points and bragging rights if you got to Talking Heads and (Nothing But) Flowers

Thirdly – ‘short (48 seconds!) sharp, and angry, the voice of the disillusioned in the early-80s’ – hats off and three points if you got to Minutemen and ‘The Struggle’

Lastly, one that had me scratching my head; trying to picture Philip in a leather recliner with a glass of something rich and red and his cans on is not easy – just ponder what goes on in Gilbert Towers as you ‘experience’ Einstürzende Neubauten for 2 pts and 3 more for ‘Negativ Nein’.

‘One of the most experimental bands of post-punk, perhaps of any era, they found new ways to make music’ – you got that right – enjoy!

 

 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

 

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