Gerontocracy

As usual, there was some very interesting stuff in the Institute for Fiscal Studies review of the Autumn Statement. This chart by Andrew Hood caught my eye.

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The over-60s escaped the post-recession income stagnation. On average, they have done rather well since 2007. It’s a similar story with wealth, as Andy Haldane pointed out in June.

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For many of those over the state pension age, the recession was something they witnessed second hand, either through the media or by talking to younger relatives.

What does the IFS think will happen over the next few years? Well with pay stagnation, benefit cuts and inflation, things are looking worse than they were in March. The IFS reckons that, in real terms, average earnings won’t get back to pre-recession level before the end of the decade. State pensions, though, will continue to rise.

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The upshot of all this is, as the Resolution Foundation says, a serious downgrade to the forecast for household incomes. The difference between the March and November forecasts (the blue and red lines on this chart) shows the impact of the economic slowdown.  A third of households will find themselves worse off than they are now.

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As Conor D’Arcy says, the last time we saw a pay squeeze like this was in the 1810s.

The likely impact of Brexit, then, will be more of the same. Stagnant or falling incomes for those in work with relative protection for those on pensions. Five years from now, the charts showing income and wealth by age will probably look very similar.

This graph by Oxford demographer Maja Založnik displays, for each age group, the percentage of the vote and the turnout in the EU referendum. Remain voters are in yellow, Leave voters in blue, registered voters who didn’t vote in light grey and unregistered voters in dark grey.

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It shows clearly how big a role the over-65s played in swinging the vote to leave. She points out that, had the vote been weighted by remaining life expectancy, the result would have gone the other way, as the votes of those with longer to live would have counted for more.

Many of those who voted Leave won’t have to live with the long-term consequences of Britain’s exit from the EU. Thanks to the relative insulation of pensions and pensioner benefits from the economic fallout, they won’t feel many of the short-term consequences either.

As John Harris remarked recently, in British politics, older politicians and voters are now calling the shots:

In both main parties, the former dominance of a clique of self-styled “modernisers” has been avenged, and politics is about a new emphasis on age, experience and supposedly traditional values.

In contrast to the excitable 40-somethings of the recent past, Theresa May and Jeremy Corbyn are 60 and 67 respectively. Besides leaving the EU, her flagship policy is the return of grammar schools; his, as far as I can tell, is the renationalisation of the railways. There may be occasional signs of interest in things more relevant to the 21st century (even if they have yet to cohere into a convincing vision, witness some of the recent pronouncements by the shadow chancellor John McDonnell). But the mainstream too often seems to be carved up between two conservative parties, led by people who are neither intellectually curious nor shaped by the great technological convulsions that have defined the past 25 years.

The electorate is growing older, and politics is clearly being reoriented accordingly.

On the day of the Autumn Statement there was a pro-Brexit demonstration. The chap in the middle here asks, “Who really runs this country?” If the income and wealth stats are anything to go by, the answer to that is pretty clear.

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No end to austerity

Four months ago, there was much cheering and dancing on George Osborne’s political grave (or at least his political cold-storage) as he announced the government’s abandonment of his deficit target and his own resignation.

Some people, including the leader of the opposition and the shadow chancellor, claimed that this was a U-turn.

 

Even the Daily Mail said that the government would “abandon George Osborne’s austerity agenda.”

The line was repeated by excited people in my Twitter timeline. George has abandoned the deficit target so it’s the end of austerity. Game over!

If anyone still believed that, the Autumn Statement should have put them right. The OBR’s fiscal outlook report shows that, when it comes to public service spending, very little has changed. The forecast looks pretty much as it did in March of this year, only with the fall in per capita day-to-day public service spending now continuing into the next decade.

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With NHS, schools and defence budgets protected, to an extent, this means an ever tighter squeeze on everything else. The cost of the Brexit process, including thousands of extra civil servants, will also have to be found from this shrinking pot.

No, the reason for the abandonment of the government’s target is not an end to austerity it’s simply that, even with continuing public service and welfare cuts, the public finances are now in such a dire state that eliminating the deficit by the end of the decade is now all but impossible. Lower economic growth means lower tax receipts. Even without the modest increases in capital spending, weaker growth meant that the government was already on course to miss its target.

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Chart by Ben Chu based on OBR figures.

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This forecast assumes that the government is able to achieve all its proposed cuts to public spending and social security. This is unlikely to be any easier than it looked this time last year so even the new deficit target might prove to be a tall order.

In any case, the Brexit vote has made economic forecasting even more difficult than usual. It has turbocharged Robert Chote’s donkey. The OBR has based its projections on the UK leaving the EU in April 2019, in line with  the prime minister’s statement but even then, there are so many possible variations on the terms of exit, it is very hard to predict what the economic impact might be.

What we can be reasonably sure of, though, is that Brexit will not improve the economy in the short run, which means that cuts to public service spending will continue for the rest of the decade. Much about the next few years is uncertain but, whatever else happens, austerity will be with us for some time yet.

 

 

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MPs should not vote for Article 50 until they are sure what it means

If you give notice to your landlord or your employer, you trigger a process which, if you don’t do anything else, will leave you homeless or jobless after a given period. Furthermore, even if you do take some action, the decision is still partly in the hands of others. You need to find a house you like and a landlord that will let to you or a job you like and an employer that will have you. For this reason, most people don’t give notice to their landlords without having another home to go to or notice to their employers without having another job lined up. The only people who do are those who have enough money behind them to give them other options. Or those who are extremely reckless.

Something similar applies to the triggering of Article 50. As we understand it at the moment, once triggered, Article 50 is irrevocable. It sets in train a process at the end of which, if we don’t do anything else, the UK drops out of the EU with no trade deals. That really would not be a good place to be. As the CBI concluded:

Relying on WTO rules alone would not work for the UK. Any limited advantages are easily outweighed by the significant costs to the economy as a whole.

This isn’t Remainer scaremongering. If anything, the warnings from some in the Leave camp are even more blood-curdling. The disruption to trade in goods and services from tariffs and non-tariff barriers would be horrendous. Martin Stanley, a former civil servant, explains the impact of non-tariff barriers here.

[T]he growth of ‘just in time’ manufacturing means that many firms are still very concerned that their businesses on both sides of the UK/EU border might experience significant post-Brexit impediments and delays in ports and at customs posts. I understand that one major bank has estimated that – if the UK were to lose unfettered access to the Single Market – the consequential non-tariff barriers could impose a cost on exporters equivalent to a tariff of 10-15%.

Of course, it is in everyone’s interests to reach some sort of trade agreement before this happens. The other EU countries don’t want to see their trade disrupted any more than we do. However, while a failure to reach an agreement after 2 years would be damaging for the rest of the EU, it would be catastrophic for the UK. If, on 1 April 2019, there is no deal, the rest of the EU would still have its trade agreements with the other countries in place and most of its cross-border supply chains would be intact. The UK would leave with nothing. Not even independent WTO membership.

The ‘they need us more than we need them’ argument, often trotted out by Brexiters, doesn’t stack up either. When it comes to trade, size matters. As this chart from the Economist shows, the EU’s exports to the UK are a relatively small percentage of its total exports, whereas the UK’s exports to the EU account for around half its total. Tariffs would  therefore affect a relatively small proportion of France and Germany’s trade while they would hit a much larger proportion of ours.

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The consequences of a failure to reach a deal after two years would be much more damaging for the UK. The time pressure therefore puts us at a disadvantage. The closer it gets to the deadline, the more attractive even a bad deal will look when compared to the alternative. Being under time pressure in negotiations is never a good place to be. If counterparties know you need to do a deal by a certain time, they are more likely to hold out and wait for you to blink. Effectively, it will be the UK against 27 other countries and the clock.

The LSE’s Thomas Sampson spelt this out a couple of weeks ago:

Bargaining power affects the outcome of trade negotiations. Countries that have little bargaining power are less likely to achieve their objectives. Unfortunately, the UK is starting from a weaker position than the EU. Because UK-EU trade accounts for a much larger share of the UK’s economy than the EU’s economy, the UK needs a deal more than the EU does.

The weakness of the UK’s position is exacerbated by the two-year time limit on exit negotiations under Article 50. As the two-year limit approaches, the UK will become increasingly desperate to obtain an agreement. There are two steps that the UK should take to improve its bargaining position. First, delay triggering Article 50 until the government has decided its post-Brexit objectives and EU leaders are ready to start negotiations. Theresa May’s commitment to invoke Article 50 in early 2017 before the French and German elections weakens the UK’s position because the EU will not be able to participate in meaningful negotiations until after these elections.

Second, the UK’s immediate objective after invoking Article 50 should be to neutralise the two-year time limit by agreeing a transition arrangement to govern UK-EU trade relations during the period between when the UK leaves the EU and when a longer-term agreement is concluded. Returning to the principle that you only get what you give, the UK needs to decide what it is willing to offer the EU in return for a transition agreement.

Agreeing an interim solution before we start negotiations would remove the time pressure. If no agreement was reached after two years, the UK would leave the EU but stay in the single market until such time as a deal can be agreed. That would at least avoid the severe disruption to trade and give everyone a bit more time to think. This option has been advocated by, among others, the former permanent undersecretary at the FCO, the Adam Smith Institute, the Centre for European Reform and professors Damian Chalmers and Anand Menon. Most people who have been involved in trade negotiations don’t believe that the negotiations can be completed in 2 years anyway. Even the chancellor doesn’t. Surely an interim deal that lets us continue negotiations at a sensible pace would be better for everyone.

Negotiation theory 101 says you should be clear about your fallback position, or Best Alternative To A Negotiated Agreement (BATNA), before going into any negotiation. At the moment, the UK’s BATNA is WTO only, which would be a disaster. An interim agreement would give us a better fallback position. It would be very unwise to start the negotiations without one. The UK’s strongest card is that, at the moment, it has control over the timing of the exit process. Starting that process is not something we should be bounced into either by ideologically motivated Brexiters or by those in other EU countries who are keen to be rid of us.

Against this background, the Brexit policies of the opposition parties make no sense. Jo Maugham has written an excellent piece taking Labour’s incoherent stance apart. As he says, waving Article 50 through removes any chance parliament might have to influence the deal. Once Article 50 is triggered, John McDonnell can bang on all he likes about red lines and moral pressure but it won’t make a scrap of difference. The country’s fate will be in the hands of government negotiators and their EU counterparts. Parliament will be irrelevant.

Almost as illogical is the Liberal Democrats’ policy which seems to be to vote for Article 50 with the condition that the government agrees to a second referendum on the final deal. By then it will be too late. With the clock running down, the British people will be offered the choice between whatever is on the table and no deal at all. To go back to my housing analogy, that’s like giving notice to your landlord then saying to your family, ‘We’ve got 3 days left in this house. We can either take this hovel we have been offered or be out on the street. What do you reckon, folks?’

No, the time to put up a fight on the terms of Brexit is now. If MPs want to determine the shape of Britain’s exit from the EU, they need to do so before Article 50 is triggered.

Of course, it might be that Article 50 isn’t irrevocable after all. The Lisbon Treaty is deliberately vague. But this raises another question. If we understand so little about what Article 50 does, should MPs be voting for it at all? Shouldn’t they get legal clarification on what Article 50 actually means before they vote for it?

MPs have a duty to act in the national interest as well as considering what they believe their constituents’ wishes to be. That’s what representative democracy is about. Before triggering Article 50, they need to know three things:

  1. Whether or not Article 50 is revocable;
  2. That there is a fallback deal in place should the negotiations extend beyond 2 years;
  3. What the government’s starting position will be.

For MPs to vote for Article 50 without establishing these facts would be utterly reckless and a dereliction of duty. It would set the country on a highly uncertain and potentially dangerous course. History will judge them harshly if they do.

Update 

There’s a further problem. It’s not even clear whether trade negotiations can be run in parallel with negotiations about the UK’s exit from the EU. The EU trade commissioner has insisted that it is against EU law for any trade agreement to be negotiated until after the UK leaves the EU. All that can be negotiated in the two years following Article 50, she argues, is the terms of the divorce, the withdrawal agreement covering short-term issues such as the relocation of EU agencies based in the UK, the rights of EU and UK citizens and cross border security arrangements. (There’s a detailed discussion of the difference between the withdrawal agreement and the longer-term relationship agreement, which covers trade, in this Institute for Government paper.)

Under this scenario, the UK would have to leave the EU and default to WTO only terms before it could even started negotiating its trade relationships.

Not everyone agrees with this interpretation and certainly most of the public discussion about the negotiating period assumes that we will be conducting both the withdrawal agreement and the trade negotiations in parallel. David Davis insisted that we can run both negotiations in parallel, while also admitting that defaulting to the WTO only option would be a disaster.

Luis González García of Matrix Chambers says:

This is a rather strict interpretation of Article 50 of the TFEU. In my opinion, such an interpretation would be contrary to the purpose of Article 50. The broad reference to ‘framework’ should be interpreted broadly in a way which ensures future stable and predictable trade rules to the benefit of businesses, investors, citizens and consumers of the UK and the EU after the UK exit from the EU. This means that the UK and the EU should enter into parallel negotiations of a free trade agreement.

This legal analysis from Sussex University comes to a similar conclusion.

Article 50(2) TEU addresses the content of the withdrawal agreement. It is open-ended, stating that ‘the Union shall negotiate and conclude an agreement with [the UK], setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.’ This does not preclude trade talks forming part of the Article 50 TEU withdrawal agreement or taking place in parallel. In practice, as Article 50 TEU has never been implemented before, legal debates about whether the UK faces restrictions in pursuing trade talks are highly politicised.

But the important point about all this is that it is yet another aspect of the withdrawal process that is not yet clear; another potential pitfall hidden in the fog of Article 50.

As Chatham House director Robin Niblett warned:

After invoking Article 50, UK negotiating leverage with the EU is greatly reduced.

The approach that would offer greatest certainty for all sides, therefore, would involve interlocking the Article 50 process of negotiating Britain’s withdrawal with the process of determining the framework for its new relationship with the EU. In fact, the government should not trigger Article 50 until EU governments have stated collectively that they will negotiate, in parallel, this framework and instructed the Commission accordingly. After all, Article 50 states that, “the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking into account of the framework for its future relationship with the Union.

So, to the 3 questions I suggested above, we can now add a 4th. Before triggering Article 50, MPs need to know:

  1. Whether or not Article 50 is revocable;
  2. That there is a fallback deal in place should the negotiations extend beyond 2 years;
  3. What the government’s starting position will be;
  4. That the other EU governments have agreed to negotiate the withdrawal and future relationship agreements in parallel.

Without this clarity, voting to trigger Article 50 would be an act of sheer recklessness.

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The High Court’s ruling means a better Brexit

The High Court has ruled that the government cannot trigger Article 50 to start the process of leaving the EU without an act of parliament. Unless and until the Supreme Court overturns that decision, that is now the law.

The row that erupted afterwards drowned out sensible discussion as hysterical Leave voters screamed about unelected judges overturning democracy. I had the luxury of a long train journey during which to watch the gathering storm. As a general rule, the more noise people made, the less likely they were to have actually read the judgement, or even the useful two-page summary provided with it.

The judgment and summary are both here. I will try to pare it down even further, as much for my own understanding as anyone else’s. Essentially, the logic went like this:

  1. Parliament is sovereign. The government has no power to alter the law of the land. It cannot override legislation enacted by parliament.
  2. With the European Communities Act in 1972, parliament conferred certain rights on British citizens.
  3. These rights can only be repealed by parliament
  4. Article 50, which would begin the process of taking UK out of the EU, is irreversible. Once triggered it cannot be stopped.
  5. Therefore by triggering Article 50, the government would be depriving British people of rights granted by parliament – in effect, undoing the 1972 act.
  6. Article 50 cannot, therefore, be triggered without parliament’s consent.

That’s it. Whatever the hysterical newspapers and their echo chambers on social media might say, the court hasn’t overturned the result of the referendum and it hasn’t stopped the UK from leaving the EU. All it has said is that the government doesn’t have the authority to take this country out of the EU. That is something only parliament can do.

It is true that parliament approved the referendum but there is nothing in the 2015 Referendum Act that allows the government the right to trigger Article 50. The High Court said the referendum can only be advisory unless very clear language to the contrary is used. No such language was used in the 2015 act. Furthermore, a clear briefing paper for MPs clearly stated that the referendum would only be advisory. Those who claim that parliament has already voted on Brexit are therefore simply wrong.

Even sillier is the argument that the government promised in its referendum leaflet that it would implement whatever the voters decided. According to the Daily Mail, John Redwood said:

I cannot believe the judges failed to read the leaflet. Parliament was passing the decision to the people.

Of course, DPhil and Fellow of All Souls, Mr Redwood, knows full well that the judges will have read the referendum leaflet and that it is entirely irrelevant. The court’s ruling, in effect, says that the government had no right to make such a promise. This wouldn’t be the first time that government ministers have over-reached themselves. Fortunately we have a parliament and judiciary to rein them in when they go to far. Which is exactly what happened on Thursday.

Far from being a blow to democracy or a constitutional crisis, Thursday’s ruling shows the UK’s political system working at its best. Politicians here cannot claim that a majority vote gives them the right to do what they like. Parliament is sovereign. The courts can tell the government when it has exceeded its authority and needs to go back to parliament if it wants to go any further. They do so quite often. This tends to provoke angry headlines in some newspapers. It was inevitable that there would be an aggressive response to Thursday’s ruling from certain sections of the British press. As David Allen Green said, the outrage of media moguls is also a sign that the constitution is working.

The case will now go to the Supreme Court, probably sometime next month. It may yet overturn the High Court’s decision. If the decision stands, though, we will get a much better Brexit. A parliamentary vote means a longer and more considered process. A lot of people won’t like that, including some of our EU partners, but this is not a decision we should be rushing into. It will be a tremendous upheaval. Over more than two decades, we have built an economy on the assumption of free movement of goods, capital, services and people. We can’t dismantle that without serious disruption to trade and economic activity. How we do Brexit and how we design what comes afterwards will set the tone for this country for decades to come. The scrutiny of parliament will help us to avoid making too many decisions that future generations might regret. This is a job for wise heads not hotheads.

The requirement for a parliamentary bill may well delay the triggering of Article 50 being 31 March. This too will be a good thing. The French and German governments will not be in any position to negotiate until after their elections so nothing will happen until the autumn of next year. Starting a two-year clock running on 31 March would therefore lose a quarter of the negotiating time. Much better to leave it until the end of next year. What’s an extra six months when the consequences of these negotiations will be felt for generations.

The High Court’s ruling  will also ensure that the people are represented in the decisions about what post Brexit Britain will look like. So far, the only mandate the government has is that on 23 June, a majority of those who turned up to vote wanted to leave the EU. That’s not very much on which to base a strategy for the country’s future. We don’t even know what people think about remaining in the single market. For example, there is an assumption that the referendum was a vote against immigration but some polls suggest that curbing free movement is not as popular as the government might think. Given that the Will of the People is so vague, and that having referendums on the many aspects of Brexit is impractical, surely involving the people’s elected representatives in the design of post-Brexit Britain is the only democratic way forward.

It is unlikely that this ruling will stop Brexit. MPs will be very reluctant to overturn a democratic vote. It will, though, ensure that we get a better and more democratic Brexit.  Parliament took us into the EU and it’s up to parliament to take us out. That way, we are far more likely to end up with a favourable settlement than if we simply left it up to the government.

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Uber: control without obligation

The Employment Tribunal judgment on the Uber case is one of the most amusing I have read. The tribunal ruled that Uber’s drivers are not running their own businesses, as the company claimed, but are workers and therefore entitled to the minimum wage, sick pay and holiday pay. Contrary to some reports it did not rule that they are employees.

Darren Newman explains the case here. Both he and Michael O’Connor also eloquently dispose of the rather silly suggestion that working for Uber is no different from renting a room on Airbnb or selling stuff on ebay.

The tribunal was scathing about Uber’s attempts to portray itself merely as a facilitator of thousands of small businesses.

Any organisation … resorting in its documentation to fictions, twisted language and even brand new terminology, merits, we think, a degree of scepticism. Reflecting on the Respondents’ case, and on the grimly loyal evidence of Ms Bertram in particular, we cannot help being reminded of Queen Gertrude’s most celebrated line: ‘The lady doth protest too much, methinks’.

The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous.

The crux of the case was about how much control the drivers really have over their own work. The tribunal found that the company has a high degree of control and that, far from being operators of their own businesses, the drivers are essentially dancing to Uber’s tune.

The relevant paragraph from the judgment is here:

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Uber drivers are recruited like employees, told what sort of car to drive, don’t know the names of their customers, don’t set their own fares and don’t see the customers’ money. They are paid by Uber and they even have a performance management system.

As Darren says, the tribunal’s response to Uber’s assertion that the drivers are running their own businesses amounted to “Oh come off it!”

A couple of weeks ago, Sarah O’Connor wrote about the echoes of the past in the gig economy:

We forget history. Go back to the 18th century and you would find a place like London was one big gig economy. Few people had jobs as we know them now; most were hired intermittently and were paid by the “piece” or task. There was an eclectic mix of payment arrangements depending on the nature of the work. The carpenters who maintained the timber starlings on London Bridge were paid per tide, according to Judy Stephenson, an economic historian.

She might also have mentioned the practice of putting out work where manufacturers would subcontract parts of a process to people in domestic workshops for piece rates.

Manufacturers replaced putting out with the factory system to control and standardise processes thereby ensuring quality control and driving down costs. The only problem was that when workers were together they tended to do awkward things like take collective action and demand employment rights, a process which eventually saw most piecework being replaced with regular wages . The factory system can therefore be said to have created employment in the way that we now understand the term, complete with its legal obligations.

New technology, though, enables companies to control their processes without their workers being in the same place. You can therefore combine factory discipline with the piece rates and reduced obligations of the putting out system. An army of people doing pretty much as you tell them but taking on much more of the risk themselves.

Of course, not only does this put more risk onto the worker, there is also a risk for the taxpayer. The low pay, lack of employer’s NI, missing pension contributions and poor benefits that characterise self-employment will eventually rebound on the general public. As in the eighteenth century, the burden of social protection and welfare provision falls on the parish.

Technology means an employer can combine a 21st century control of its processes with a 18th century lack of obligation. Last week, a tribunal dismissed this attempt by a company to have its cake and eat it as “absurd”, “faintly ridiculous” and “pure fiction”. Whether or not it stays that way has far-reaching implications for the nature of work and employment. As Torsten Bell said, technology has moved on and, as so often before, the law needs to catch up.

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Enough of this ‘Will of the People’ nonsense

‘The Will of the People’ is a phrase with a slightly sinister ring to it. We expect to hear it from the likes of Vladimir Putin and Tayyipp Erdoğan but not from a British prime minister. It seems to be the soundbite of the moment. Government ministers are, with gay abandon, trotting out an expression we usually associate with demagogues and dictators.

Not only is this the language of autocrats, it is, in the context of the EU referendum, utter nonsense. Let’s look at what we know about the vote. On 23 June 2016, 52 percent of those who voted, 37.4 percent of the electorate, said that they wanted to leave the EU. That’s it. We know nothing more. We don’t know what they wanted instead or when they wanted it to happen. We also don’t know what those people who didn’t vote wanted, although as Adrian Low says, most were probably in favour of remaining in the EU.

But that was then. We have even less of a clue now because things have moved on. Some people will have changed their minds and a lot more may do so over the coming months and years. People have a tendency to do that. In 2003, a majority supported the invasion of Iraq. If the government had called a referendum on it we would probably have voted for war. Nowadays, most people think the invasion was a bad idea and you can’t move for people who say they marched against it. As YouGov found, most people now claim to have been against the war.

Though it has been controversial for over a decade, the invasion was actually popular at the time. In 2003, YouGov conducted 21 polls from March to December asking British people whether they thought the decision by the US and the UK to go to war was right or wrong, and on average 54% said it was right.

But more than 10 years of opposition is a long time, and many people now remember things differently. Now only 37% of the public say they believed military action against Saddam Hussein was right at the time, instead of the 54% recorded at the time.

The Will of the People has a habit of changing and of re-writing its own history.

But it’s not just the minds that change, the make up of the electorate changes too. Already, since 23 June, some of the people who voted have died and others have turned eighteen. By 31 March next year, the deadline the government has set to trigger Article 50, the electorate will contain around half a million new voters and a slightly smaller number of adults will have died. By 2019, those numbers will be roughly 2 million apiece. Given what we know about the age profile of the referendum vote, most of those dying will be Leave voters and most of the new voters will favour Remain. As the majority for Leave was only 1.2 million, it is highly probable, therefore, that by the time we leave the EU most people will be against doing so.  The People are a different people now and they will be a very different people by the end of the decade. And their Will is likely to be different too. This perhaps explains the shrill and hysterical demands for the immediate triggering of Article 50. People tend to get very aggressive when they know that the demographic tide is running against them.

Of course, we elect governments based on snapshot of public opinion but general elections differ from referendums in two important respects. Firstly, those who have lost are still represented in Parliament. British governments, despite occasional appearances to the contrary, are mindful of the fact that a majority doesn’t confer the right to do absolutely as they please. The Opposition, the House of Lords, by-elections and the occasional backbench rebellion usually curb a government’s excess. Secondly, most of what a government does can usually be undone in the next parliament so, if the Will of the People changes, then so can the measures enacted in their name. There a few decisions, like going to war, which can’t be undone, which is why such things are usually put to a parliamentary vote.

Leaving the EU is an irreversible decision. It is almost impossible to envisage a scenario where the UK might re-join once it has left. Yet we are about to make this decision based on an interpretation of a snapshot of public opinion. A word that has been sadly missing from the debate about Brexit is stewardship. Politicians and public servants have a duty to balance the needs of current voters with those of future generations. Many of those who voted Leave will not live to see the long-term impact of their vote but it will affect younger people for decades to come. Like going to war, the consequences of leaving the EU will be far-reaching.

As Thomas Sampson warns, triggering Article 50 without clarity on the UK’s position and what happens if we fail to reach a deal would be extremely foolhardy. If ever something is worthy of proper scrutiny and the insurance against recklessness that Parliament provides, this is surely it. Shouting down the appeal for a parliamentary vote on Article 50 by invoking a fictitious Will of the People is the sort of thing you would expect from governments that hold ostentatious parades and lock up journalists. Suggesting that opponents have no right to be in Parliament is particularly shabby.

The government has no idea what the Will of the People is, let alone how it might change during the next few years. Short of having a referendum at each stage of the negotiating process, the only way to ensure that the interests of all the people are fairly represented in the Brexit process is through our tried-and-tested parliamentary system. It might not be perfect but it’s the best we have. So please, let’s leave Will of the People to the puffed up autocrats elsewhere and get back to sane and responsible representative government. We need it now more than ever.

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Why low paid self-employment is everyone’s problem

More evidence of the collapse in self-employment incomes was published last week. The Resolution Foundation’s Earnings Outlook showed that the median weekly income of the self-employed is, in real terms, less than it was 20 years ago.

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The gap between employee and self-employment earnings widened after the recession as the proportion of the workforce in self-employment rose to a record high.

On the same day, the Social Market Foundation also produced a report on low paid self-employment. They calculated that just under half the self-employed are being paid below the National Living Wage and that this rises to well above 50 percent in some sectors.

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Furthermore, even before the introduction of the minimum wage, the self-employed were already more likely to be low paid than their employee counterparts in the same industry.

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The discrepancy is only likely to get wider. The SMF report showed how difficult the self-employed find it to increase their earnings. Of the various routes out of low pay, the one most likely to succeed is a return to employment.

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A widening gap between those on the minimum wage and the self-employed may lead employers to make greater use of self-employed labour. The numbers in self-employment fell as the economy recovered but began to rise again shortly after the National Living Wage was announced. This could be coincidence, of course, but the idea of using contractors as a minimum wage dodge must have occurred to some employers.

This isn’t just a problem for those struggling to get by on decreasing earnings. It’s a problem for the public finances too. As Sarah O’Connor said yesterday, the fact that more people are drinking from an ever-shrinking pool is finally dawning on our politicians.

Britain’s self-employed workers have caught the attention of policymakers, not least because their ranks are swelling while their incomes are shrinking. They account for 15 per cent of the workforce but earn less on average than 20 years ago. A debate rages over whether (and how) the government should intervene to support these workers, many of whom are happy, some of whom are not. Yet no one wants to deal with a more intractable problem — tax.

And while the self-employed are often accused of fiddling their taxes, even though the scope for doing so is pitifully small these days, it is the employers who have the most to gain.

Employees pay a higher rate of national insurance contributions (NICs) than self-employed workers. Employers, meanwhile, have to pay NICs on employees’ wages, but not on the money they pay to self-employed contractors. So the employer who chooses a self-employed contractor over an employee pays less, while the contractor takes home more. The exchequer is the loser, to the tune of about £2.85bn this year.

Not to mention the lack of sick pay and pension contributions which may well store up trouble for the future.

Perhaps the lower tax might be stimulating a new wave of entrepreneurship. Then again, maybe not.

You could argue this tax break is justified because it promotes entrepreneurship. But the proportion of self-employed people who employ staff of their own has dropped from 23 to 11 per cent since the turn of the millennium. The proportion who work more than 40 hours a week has dropped from 51 per cent to 35 per cent. If this is entrepreneurship, it is not the go-getting, job-creating entrepreneurship to which politicians usually allude.

The ONS Business population estimates published earlier this month show that the vast majority of the increase in the number of businesses is accounted for by those under the VAT turnover threshold.

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That said, there are some promising signs in the latest set of figures. Until 2013, the number of businesses over the VAT threshold had barely kept pace with the increase in the workforce. In other words, it had remained largely flat while the number of low turnover businesses shot up. Since 2013, though, there has been a marked increase in the number of director only businesses turning over enough to be VAT and PAYE registered (the red section on the chart). In other words, enough to give their owners a reasonably stable income. There are over 180,000 more such businesses, an increase of 19 percent in three years. This is unlikely to give the chancellor the long hoped for self-employed tax bonanza but it does, perhaps, show that at least some of the newly self-employed have got into their stride and are starting to build sustainable businesses.

The overall picture, though, is still dire. It will take some time for the earnings of the self-employed to get back to where they were before the recession and the presence of an army of low paid self-employed might act as a drag on wages and encourage employers to substitute employees for cheaper freelancers. And if those freelancers are VAT-less, PAYE-less and NIC-less, that will be a problem for all of us in the end.

 

 

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