The recovery won’t be V-shaped

Last week’s GDP figures showed the depth of the economic contraction during the lockdown and the extent of the bounceback afterwards. The decline was unprecedented but so was the subsequent growth. This is what happens when you switch the economy off then switch it back on again.

By most accounts, the recent figures were disappointing. Much of the bounceback was due to the partial recovery of the hospitality industry, aided by government subsidy and fine weather. The resurgence of the Covid virus and renewed restrictions in some parts of the country don’t bode well for the prospects of a continuing recovery.

Aside from Lockdown 2, though, there are other reasons to suspect that talk of a V-shaped recovery might be over-optimistic. The big scary slump on the ONS chart draws attention away from what was happening before the pandemic. Zoom in on the two years before the lockdown and it is clear from the most recent data that GDP growth hit the buffers well before March 2020. The economy had already shrunk on Boris Johnson’s watch and it was smaller on the eve of the lockdown than it had been a year earlier.

Source: ONS GDP Monthly Estimate

The Institute for Fiscal Studies and the Resolution Foundation published reports over the summer showing the state of pay and employment just before the pandemic. For living standards, the picture was dismal. Average pay, having just hit its pre-crisis level, was on the slide again and household incomes had fallen slightly in 2018-19. The only bright spot was continuing high employment without which, as the IFS remarked, the picture would have been even worse.

The only thing good about the UK’s economic performance after the recession was record high employment rates and even that now looks likely to fall victim to the pandemic. Today’s release by the ONS shows the impact of the crisis feeding through into the headline employment numbers. All the indications suggest that, even with continued government support, unemployment is set to rise sharply, with the lower paid suffering the biggest hit.

The government is making much of re-skilling. There’s a set of parallel narratives going on at national, organisational and individual level which depicts the pandemic as just what we need to shock the country, its companies and its people into new ways of working. The post-Covid economy will look very different but companies will pivot to take advantage of new opportunities. (Everybody’s pivoting now and if you’re not you really need to get with the programme.) This will shock the economy into renewed high productivity as zombie companies go under and the workforce reskills to take advantage of the new jobs available. That’s why the government is so keen on reskilling – hence its new advertising campaign showing shop-workers and ballet dancers retraining as cyber experts. Company failures and redundancies are re-framed as opportunities. This is just the kick up the backside you/the company/the country needed to move on to something bigger and better.

It’s a great story. No doubt older readers will remember something similar from previous recessions. Governments always pledge to help those people displaced by economic restructuring to re-skill and take on new jobs. I have long suspected, though, that the main beneficiaries from such initiatives are the companies awarded the contracts to run the schemes. 

The cold reality is that workers don’t tend to re-skill when they lose their jobs. As recent Resolution Foundation research showed, very few people change occupation and even changes in the same occupation between sectors are unusual. For the most part, when people lose their jobs, they move down the occupational hierarchy rather than up it, accepting lower paid and lower skilled jobs.  Even before the pandemic the IMF cast doubt on the ability of workforces around the world to re-skill quickly in the face of automation. Assuming that rapid re-skilling is possible, it is likely to require massive government investment. The recent record of employers on training provision is pretty poor. A few might put resources into retraining but, if previous behaviour is anything to go by, most won’t. Beware of government skills-washing. A great re-skilling is unlikely.

What we are likely to see, then, is significant displacement of people, similar to that which occurred in all previous recessions apart from the 2008 one. This will reduce demand, increase feelings of insecurity and slow down the recovery.

As Philip Inman said last week, the underlying problems with the UK economy are still with us. It is still beset by dismal productivity and a lot of its high performers of the past are in decline. Chris Giles noted two years ago that the UK’s leading edge companies and sectors are no longer as leading edge as they were. 

To make matters worse, hard on the heels of Lockdown 2 we will be switching parts of our economy off again as those firms dependent on exports and cross border supply chains will be hit with new trade barriers. Various estimates have been made as to the economic impact of Brexit but, whatever happens in the negotiations, trade will get more difficult and that is bound to impact on economic growth. The UK is the only country in modern times that has pursued a policy of making trade more difficult. A questionable policy at the best of times but bordering on the insane during an economy-wrecking pandemic. 

Add all this to the continuing fear of the virus which, as the IFS noted in its Green Budget today, is still significantly suppressing demand, and the V-shaped recovery is looking very unlikely.

I particularly liked this quote from Ruth Gregory at Capital Economics:

We expect the new Covid-19 restrictions to mean that the economy does little more than move sideways in the final three months of the year, leaving economic activity marooned 7.5% short of its pre-crisis level.

Moving sideways is a succinct description of what is going on. Some sectors are booming, while others are collapsing. A few workers may transfer from the collapsing ones to the booming ones but most won’t. Some firms will do very well but the overall aggregate is an economy which will remain smaller than it was for some time.

All of which suggests that the recovery, such as it is, will be more tick-shaped than V-shaped. Even the IFS’s most optimistic scenario doesn’t anticipate the economy recovering to its pre-pandemic level until the beginning of 2022. 

Chart from IFS Green Budget

An already weak economy has been flattened by a pandemic and then hit while on the ground by a self-launched missile from three years ago. There are serious doubts about the UK’s ability to recover from this and it is unlikely that we will see much improvement soon. It looks like we could be in for a long and grim haul.  

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The end of the furlough and the new social divide

“It’s begun,” said Resolution Foundation chief executive Torsten Bell, as the increase in unemployment fed through into the labour market statistics for the first time. He also reminded employers that there were 45 days to go until the end of the Job Retention Scheme, so consultations for any large scale post-furlough redundancy programmes would need to start now.

Until recently, the ONS labour market releases have had a slightly out-of-time look to them. Employment was still shown as being at record levels when we knew it wouldn’t be for much longer. The claimant count was rising but the employment numbers barely moved. The time-lag in labour force data and the furlough keeping many people employed, at least on paper, concealed the extent of the Covid-19 impact on jobs. (The Resolution Foundation did an excellent explainer a couple of months ago on why the employment figures seemed to be giving conflicting messages.)

Most commentators seem to agree that the employment situation is about to get quite a lot worse. Rising redundancies, falling vacancies and figures from HMRC that indicate a drop in the number of employees suggest that the labour market outlook will start to look a lot grimmer as we go into the autumn and the furlough comes to an end. No doubt newspapers already have their Halloween Horror headlines ready to roll when the Job Retention Scheme ends on 31 October.

There is already evidence that the lower paid sections of the workforce were most adversely affected by the lockdown. They are likely to be hardest hit by the coming employment contraction.

Source: Resolution Foundation, The Full Monty, 29 June 2020.

The speed at which organisations were able to make changes during the lockdown has whetted the appetites of some senior executives for further rapid and radical restructuring. Changes that would otherwise have taken years were implemented in weeks.  My data for this is anecdotal but I sense that a certain amount of ‘opportunistic restructuring’ is likely. Now that the initial shock the pandemic has subsided and managers are no longer as focused on simply keeping things going, some are looking at ways the crisis might give them an opportunity to re-design their businesses. This is perhaps borne out by the latest CIPD Labour Market Outlook, which shows an increase in the number of companies expecting to cut staff.

Meanwhile, many of those in managerial and professional roles are planning for a future in which they spend a lot more time working from home than they did before the pandemic. The reluctance to go back to the workplace is particularly strong in places with long commutes which are dependent on public transport, like London and New York. Some financial and professional services firms are preparing to make working from home the norm.

Recent data suggest that, even though the furlough is unwinding and people are returning to workplaces, many of those who have been working from home are not in any hurry to go back to their previous commuting patterns. Before the lockdown, only 7 percent of UK employees worked from home. Companies are now reporting that close to 40 percent of their employees are working remotely and that figure hasn’t fallen by much even as the lockdown has eased.

Chart by Resolution Foundation

In its April report on the economic impacts of the coronavirus, the Resolution Foundation divided the workforce into four sections:

  • Key workers in public-facing roles;
  • Workers in shutdown sectors;
  • People working outside the home – in other words, people who carried on working but couldn’t do their jobs from home;
  • People working from home.

That third category has been the least remarked upon throughout the crisis. We clapped the NHS staff and other frontline workers but there were many who were less visible, working to keep things going. The effort from manufacturing and distribution was particularly impressive. After the initial panic buying, we rarely ran short of much. Companies increased production to restore the supplies of food, soap, toilet paper and other products to the supermarket shelves.

It now looks as though this divide will solidify. It is unlikely that we will have any permanent solution to Covid-19 for some time. Frontline workers will continue to be at risk, many office workers will avoid returning to work and some of the shut down sectors will remain shut down. It may be that the Resolution Foundation has identified the new social divide of the 2020s.

Last autumn I participated in a number of discussions about the future of work, which tended to look at it in terms of changes over the next five to ten years. Now it is difficult to envisage what workplaces and employment might look like a year from now. The Covid pandemic has changed our assumptions and, as Edgar Schein told us, when assumptions change, culture and behaviour changes. As a result, some parts of our economy will not go back to normal. Some of the jobs that people used to do that we thought of as part of everyday life will no longer exist. It’s difficult to see how this will play out but the divide identified by the Resolution Foundation may be an indicator. By next year, we might have settled into a pattern  – the frontline workers, the workplace workers, the home (and occasional commute) workers  and the displaced. The implications of all this for the management of people, social cohesion, living standards and, for some, basic survival, are subjects I will return to as this story unfolds. As ever, though, it is likely that, whatever the re-ordering of work looks like, it will bring most pain to those at the lower end of the income distribution.

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Britain’s reputation trashed for the sake of a three word slogan

Theresa May was horrified by the idea of a trade border between Great Britain and Northern Ireland.  “No United Kingdom prime minister could ever agree to it,” she said. No sovereign state, least of all one that still claimed world power status, could allow a part of its territory to be severed from it and governed, even if only on matters of trade, by someone else.

Two years later, though, a UK prime minister did exactly that. He agreed to a customs and regulatory border in the Irish Sea. He then sold it to the electorate as ”a great new deal that is ready to go” and enthusiastically recommended it to parliament, which duly voted it into law. A matter of months later, the flaws in the plan and its inherent threat to the unity of the UK have become clear. What Theresa May saw immediately, Boris Johnson has only belatedly acknowledged.

The UK leaving the EU meant that there would have to be a customs border somewhere between the UK and Ireland, either on land, between Northern Ireland and the Republic, or in the sea, between Great Britain and Northern Ireland. Once the UK was outside the single market and customs union, there would have to be import/export paperwork, border formalities and checks somewhere between the two.

Trade experts explained this soon after the Brexit vote. There was no way for the UK to leave the Single Market and Customs Union and avoid a trade border. David Cameron’s aide, Matthew O’Toole, saw this coming before the referendum but his warnings fell on deaf ears. The government was always going to be faced with the Brexit trilemma. It could pick two but it couldn’t have all three. Something had to give and in the end it was circle number 3, so we ended up with Option A.

The Brexit Trilemma


The EU made it clear early on that it would not sanction any agreement with the UK that recreated a land border of any sort in Ireland. Once it had committed to that line, there were only three ways there could be a Brexit arrangement that applied to the whole UK. Either the UK stayed in the single market and a customs union with the EU, the BRINO or EU Minus option, it stayed in a customs union and had a single market arrangement for goods only, the Jersey Option suggested by Sam Lowe and John Springford in 2018, or it left altogether with no deal with the EU on anything, a relationship similar to that of Venezuela.

It is, with a little imagination, possible to envisage a way in which the government might just have pulled off an all-UK clean-break Brexit. It would have needed some clear guiding principles and a well thought out strategy to match. It would have required a long lead time to build up the infrastructure and staffing necessary to cope with a No Deal trading relationship and to prepare UK organisations for the level of change. A declaration of intent in 2016 to leave the EU at the end of the budget period on 31 December 2020, or possibly even later, would have given a breathing space in which to prepare. Above all, the government would have had to level with the public about what was to come.

There would have been an outcry. The Northern Ireland peace process was very much an international effort and there would have been widespread disapproval of anything that threatened it. Even so, the UK government could have constructed a reasonable argument to say that the Good Friday Agreement is over 20 years old and was concluded in very different circumstances. It would be unconscionable for such a treaty to prevent a sovereign nation from leaving a trading bloc when its people had expressed their wish to do so through a democratic vote. There would have been complaints about the UK breaching a treaty but the government could have put forward a moral case for doing so. It would not have convinced everyone but it would have been good enough for many.

This, though, would have required a government with strategic capability, moral principles and candour. It would have required planning, preparation and honesty about trade offs, with the UK public and with international partners. Unfortunately, this government lacks all these qualities and capabilities.

Instead, it signed a deal handing over part of its territory to the partial jurisdiction of an external power, while trying to pretend it hadn’t and telling its voters that everything would be pretty much the same. When the reality of what it had agreed became clear, it then pretended that the bill it had signed into law a matter of months earlier was a terrible idea and introduced legislation to renege on the deal. Therefore, instead of making a reasoned case for repudiating a treaty the country signed more than twenty years ago it is now making a hasty case for repudiating one it signed little more than twenty weeks ago. Instead of possibly being found guilty of breaking international law, it is now such a dead cert that the government has already admitted it in parliament. While some in the international community might have seen the UK’s point of view if it had made a reasoned argument for an all-UK Brexit and taken the time to make its case diplomatically with allies and trading partners, doing it this way makes us look ridiculous and offends even this country’s closest friends.

Peter Foster reported in the Financial Times on an unpublished civil service document, which warned the government some of the ways in which the Withdrawal Agreement would affect Northern Ireland.

Under the Northern Ireland protocol, which was agreed to enable Brexit without creating a hard border on the island of Ireland, the UK agreed the region would follow EU state aid law for any matter that affected goods trade.

However, civil servants warned ministers in the January briefing document that Article 10 of the Northern Irish protocol that covered state aid could give the EU power over state aid to UK companies operating outside Northern Ireland.

A decision to subsidise British companies servicing Northern Ireland clients might fall within the scope of the agreement, or granting aid to any company in Great Britain exporting to Northern Ireland or with a subsidiary in the region.

Kit Malthouse was on BBC Breakfast earlier today warning that exports from Great Britain to Northern Ireland could become illegal when the Northern Ireland Protocol is implemented. He’s right, at least in theory. If UK food standards were to diverge significantly from the EU’s, some exports might be banned. Were that to happen, though, UK exporters would also be locked out of the entire EU so they would have a lot more to worry about than not being able to sell to Northern Ireland. It’s an unlikely scenario. Perhaps Mr Malthouse was only using it to illustrate a point of principle. The trouble is, his prime minister conceded that principle at the end of last year.

The implications of the Northern Ireland Protocol were always clear. The EU even published a set of slides to explain it. In Part VI, the fact that Northern Ireland will still be governed by EU legislation on product requirements, agricultural production and state aid is spelt out.

It also sates that:

Northern Ireland can be included in the territorial scope of the UK’s independent trade policy, provided that this does not prejudice the application of the Protocol.

It’s glaringly obvious what takes precedence here.

The Withdrawal Agreement makes Northern Ireland, in many ways, a separate country. It is a partial surrender of sovereignty over part of the UK’s territory. Even the DUP, surely the stupidest political party in any European legislature, spotted this in the end. Late in the day, it finally dawned on them that the project they have been getting excited about for years isn’t going to include them. The rest of the UK is quitting the EU but their bit is being left behind. As Tom McTague said, the price of Brexit is Northern Ireland.

There is now no way out of this which doesn’t involve all the problems we would have had from a properly planned No Deal exit, together with the complete shredding of our international reputation and the probability that no-one will take this country seriously again. Even as he insists that songs celebrating the old empire are sung at the Albert Hall, Boris Johnson has set England on a course to where it was before the empire began: a peripheral European country walking a delicate line between stronger world powers. He accuses the EU trying to break up the UK. The truth is that Boris Johnson has already done that. His agreement and the treaty that he promoted have cleaved the UK into separate jurisdictions. His attempt to backtrack on the deal may further threaten the UK’s unity. If the country is becoming a rogue state, it adds weight to the arguments of those who want to leave it. Polls are already showing rising support for Scottish independence. ‘Let’s leave the ship before it sinks’ could be the sentiment that finally seals it.

Twelve years ago, the UK provided global leadership in the financial crisis. It may be a stretch to say, as some did, that Gordon Brown saved the world but the world came to London, at his invitation, to work out what to do next. Since then, first David Cameron, then Theresa May, have thrown away much of this country’s diplomatic capital. Boris Johnson is now hell-bent on destroying what is left. If he pushes ahead with his plan to renege on his own agreement even our closest friends will distance themselves from us. No one is going to listen when British politicians bang on about the Mother of Parliaments or the Rule of Law. Like the songs at the Last Night of the Proms, it will look like a façade from the past. Peel back the curtain and there is nothing there. We used to joke about the Perfidious Albion tag. It’s not funny any more.

Boris Johnson left Northern Ireland under EU jurisdiction so he could get the Withdrawal Agreement signed and claim he had got Brexit done. The details of the agreement were always clear and it was obvious that it would mean a trade border in the Irish Sea. His attempt to row back on the deal in a matter of weeks fools no one. He is destroying this country’s international reputation for the sake of a three-word slogan. That tells you all you need to know about his government.

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Why Conservatives love the culture war

I bet Dominic Cummings did a little happy dance when someone scrawled graffiti on the Cenotaph during a Black Lives Matter protest. He probably opened a bottle when the Archbishop of Canterbury announced a review of statues in churches. These are the sort of things that annoy people, capture headlines, cause a storm on social media and thereby get him off the hook. One minute there was outrage from lockdown-fatigued voters over his flouting of the rules and the preposterous stories he made up to justify it. The next, everyone was talking about statues and there was fighting in the streets over which ones should be dumped and which ones defended.

Right-wing politicians love a good culture war. It’s no coincidence that the terms ‘political correctness’ and ‘woke’, both originating on the American left, have been eagerly seized by the right. They know it is an ideal way of stirring up indignation and deflecting attention from things they’d rather not discuss.

Some research published by UK in a Changing Europe earlier this week throws some light on why these tactics work. Using data from the British Election Survey and plotting voters’ views on two scales –  the economic left v right and the social/cultural conservative v liberal – they show on one simple chart why the right loves the culture war.

Labour and Conservative MPs, councillors and activists fall more or less where you would expect them to on both the social and economic scales. Labour fall into the socially liberal and economically left-wing quadrant while the Tories in the opposite one. The voters don’t split that way though. As we have seen from a number of studies, British voters tend towards the economically left-wing and the socially conservative. In general, they are more aligned with Labour on economics and more with the Conservatives on social issues. It’s no wonder, then, that the Conservatives like to fight on the cultural front.

The other interesting piece to emerge from this research is the gap between MPs and voters on the same side. Labour MPs are more socially liberal than Labour voters but on the same scale, Conservative MPs are way adrift of their voters. In fact, they are more socially liberal than the average voter.

So, if they are that liberal, what are they doing in the Conservative Party? The clue comes when you look at the positions on the economic scale. Here the Conservative MPs are some way to the right of their councillors and activists and well to the right of their voters.

The right-wing, free-market, shrink-the-state libertarianism that gained the upper hand in the Conservative Party during the 1980s has always been an eccentric viewpoint. It looks mainstream because it has a number of well-funded think-tanks pushing its agenda and its adherents are over-represented in politics and the media. We are used to hearing about radical deregulation, state shrinkage and privatisation because these ideas are espoused by some very wealthy, powerful and influential people. The voters are really not interested though. They never have been. Despite relentless propaganda, all the small staters have managed to do is increase the proportion of the population that thinks taxation and spending should stay the same and reduce the proportion that thinks it should increase. Even that is shifting the other way again now. Support for cutting the size of the state has never gone above 10 percent.

Attitudes towards taxation and public spending, 1983-2017

Chart by NatCen Social Research

The voters, then, are not that keen on right-wing economics. So why do they keep voting for politicians who are? That’s where the culture war comes in. Get people worked up about political correctness, persuade them that woke liberals will take the country to hell in a handcart and at least some of them will vote for you even if they don’t like your rich men’s economic policy.

For Conservative politicians, the culture war is also an incredibly cheap way of getting votes. People still think you are socially conservative even if there is quite a lot of evidence to the contrary, which means you don’t actually have to deliver anything.

That most right-wing of prime ministers, Margaret Thatcher, did very little for the socially conservative voter. As James Ball noted after her death:

The legacy of Thatcher’s social conservatism is modest: Britain is, by and large, a nation marrying less, more accepting of homosexuality, and more accepting of people of other races.

In the 1980s the Conservatives even shied away from illiberal legislation that would have been overwhelmingly popular, such as the re-introduction of capital punishment. The liberal policies initiated during the 1960s, and the social changes that went with them, continued apace. Conservative politicians may have railed against ‘political correctness’ but they didn’t do much about it. Racist and sexist language that would have passed unremarked in 1979 was considered unacceptable by the time John Major left office. Margaret Thatcher might have talked tough talk on immigration but she did little to change the existing laws. Corporal punishment in schools was abolished by her government in 1987.

I’ve had some interesting arguments about that last one. People still find it difficult to accept. It must surely have been the Labour Party and its PC policies that did for corporal punishment. Which brings me to the other reason the right likes the culture war. It works even when you are in power. You can persuade people that a rising tide of wokeness has driven the country to ruin even when you have been running the show for a decade.

Being able to gain votes from social conservatism without having to implement any socially conservative policies suits Conservative MPs just fine because most of them don’t believe in it anyway. When it comes to crime and punishment, for example, they are, on average, to the left of Labour voters. As the charts above show, the money side of things is far more important to them. It has been for decades. In the 1980s, it was almost as though a tacit deal was done; you can have diversity, minority rights and discrimination laws if we can have privatisation, deregulation and tax cuts. Breaking the unions and selling off the state was always what mattered. Who cared if your company had to have an equalities policy and you couldn’t watch Love They Neighbour any more?

Could the Conservatives pull off the same stunt in 2020? The Daily Mail seems to think so, as it gleefully reports a Tory plan to declare a ‘War on Woke‘. Would such thing work now? After all, as Kenan Malik said just after the last election, the idea that there is a mass of reactionary working class voters has probably been overdone. Voters have become less socially conservative in recent years. The most recent British Social Attitudes Survey bears this out.

As former Downing Street pollster James Johnson said, most voters in what used to be the Red Wall couldn’t care less about statues:

Some have suggested that No 10 is actively looking for a fight on cultural and identity issues, seeking to drive a distinction between Tories and Labour for red wall voters – whether on statues, trans issues, or the right to tell offensive jokes.

On the surface, this approach feels like it might work. Paula Surridge of Bristol University has shown that 2019 Conservative voters are united in their social conservatism, while Labour is more vulnerable as its voters are split.

But polling on these issues sets up a divide that might not be at the front of people’s minds. Britain is not the US, where polarisation among politicians has translated into polarisation among the public. In focus groups I have conducted over the last few years, statues, transgender toilets and no-platforming barely register. Most people do not know what “woke” even means.

He’s right about voters not caring much about these issues but they tend to blame the left when such things make the news. A few left-wing activists can usually be relied upon to give the right-wing press the ammunition it needs by doing or saying something silly. Even a poorly considered comment or rebuttal can lead to stories that run for years, like Baa Baa Green Sheep and Winterval. On the basis of one person writing ‘racist’ on Winston Churchill’s statue, Boris Johnson has been able to cast himself as the defender of a monument that is not under any serious threat. He was at it again yesterday, attempting to spice up his lacklustre speech with a promises to defend the “statue of our greatest wartime leader” from, well, no-one really.

The problem for the left is that some of this stuff lands. It makes otherwise quite reasonable people cross. And it doesn’t need to make many of them cross. There were only 330,000 votes between Theresa May’s humiliation and Boris Johnson’s triumph. All it needs is enough people in the right places.

Anand Menon, one of the authors of the report, says that Labour would be well advised to avoid getting embroiled in the War on Woke and should, instead, maintain a laser focus on economic issues. As he says, whoever gets to set the ground on which the next election is fought will be at a distinct advantage. This isn’t just about winning the arguments, it’s about deciding which arguments you are going to have in the first place. A government already on the ropes over coronavirus and with very little idea about what to do afterwards should be an easy target. From what I have seen of Keir Starmer so far, my guess is that he won’t fall into the trap of fighting the War on Woke but that won’t stop the government and its allies from pushing it whenever they are given the opportunity.

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This recession could be long and deep

If, like me, you have spent some of your lockdown time catching up with stuff you recorded earlier in the year, you will have experienced that strange sense of watching something from a bygone age. The adverts, in particular, feel like they belong in a different world. Was it really only February when we were still going to pubs and restaurants and getting excited about major football, rugby and racing events?

The official employment statistics issued earlier this week had a similar feel. Because of the time lag in collating survey data, the most recent figures are from the January to March period, only the last 2-3 weeks of which were affected by the coronavirus lockdown. They showed a joint record level of employment, at 76.6 percent, in line with the previous trend of rising employment rates. What would have been worthy of comment only three months ago was barely mentioned. It was a snapshot of the olden days. We know things aren’t like that any more.

Fortunately the ONS also started reporting on HMRC data a few months ago and this gives us some more up-to-date information. The rising employment of the last half decade has come to an abrupt halt and the beginning of a collapse in employment is already visible.

Chart by ONS

The claimant count data gave a similar picture, showing a sharp spike at the beginning of April, taking the numbers above those we saw during the last recession.

Chart by Resolution Foundation

Next months data, showing the position in April and early May will be even worse as the full impact of the lockdown becomes visible.

It was a similar story for the GDP data published last week. The ONS release has a series of charts showing the economy contracting sharply in March.  This, too, is likely to look even worse in next month’s figures. 
Chart by ONS

The revised data for the previous quarter show that the economy had already stopped growing in the final months of 2019. The coronavirus lockdown poured cold water on a fire that was already going out. This doesn’t bode well for a bounceback once the lockdown ends. Last month’s optimism about a V-shaped recession, with a sharp downturn and a rapid rebound, was short-lived. Even the chancellor is now saying that it is “not obvious there will be an immediate bounceback”.

It is likely that pent-up demand will lead to a short-term economic bounce once the lockdown ends. Maintenance tasks that have been on hold will finally get done. People will get their hair cut, fix the car and call in the plumber. Companies will carry out a backlog of routine but necessary activities. Beyond that, though, the extent of the recovery depends on how confident people are about the future. Will people commit to major purchases like houses and cars? Will companies risk major investments? The fact that things were staring to slow down in the months before the coronavirus outbreak suggests that they might not. If they decide to wait and see the recovery is likely to be slow.

The big problem forecasters face is the unpredictable impact the coronavirus and the lockdown will have on human behaviour. Recessions and recoveries are, for the most part, caused by shifts in human behaviour. Confidence plays a big part. The last recession started when people lost confidence in certain financial instruments. This one has started because we have lost confidence in our ability to move around without catching a life-threatening infection.

It was Edgar Schein who explained to us, 35 years ago, that culture is a pattern of shared basic assumptions and beliefs. Because these are unspoken, those who share them don’t realise they are doing so. They just carry on assuming. They only stop assuming when the beliefs they have taken for granted are challenged. Even then, they will cling to these beliefs even in the face of powerful evidence. These assumptions and beliefs underpin the behaviour that produces the unwritten rules, the rituals and the visible artefacts that define the society. This is why changing culture is so difficult. Long-term behavioural change only happens when the assumptions and beliefs behind that behaviour change.

What we are seeing now could become a major cultural shift. Apart from those in particularly exposed occupations, most of us in the developed world, with clean water, clean living space and good sanitation, went about or daily business on the assumption that we were not likely to be infected with anything. Like all deep rooted assumptions, it was so deep rooted that infection barely crossed our minds. If we worked in city centre offices, we would get off filthy trains, go to work at our keyboards, pop out and buy a sandwich, sometimes (but not always) wash our hands and then eat the sandwich while bashing away at the keys we had been touching all day. We would then go to meetings where we would shake hands with, or even kiss, colleagues who had been doing the same thing. We knew, intellectually, that we would probably get a cold at some point during the winter yet it still came as something of an irritation when it happened. If we were unlucky enough to get flu or a stomach bug, we would respond with indignation. ‘How the hell did I get this? I bet it was that restaurant we went to at the weekend.’

That assumption has now been turned on its head. We leave the house now under the assumption that there is a good chance we will catch something and that, if we do, it is likely to be extremely unpleasant or fatal. This risk may be lower than a lot of people think, especially for younger age groups but, for the moment, that is beside the point. People fear this disease and that fear has changed our assumptions. When we leave the house, we react to people in a different way. We get a taste of what it is like to live in a dangerous neighbourhood. We look upon strangers with suspicion and are wary even of people we know. Suddenly, we see other people are a risk in a way they weren’t a few weeks ago. We applaud the bravery of essential workers because, in the course of their jobs, they are going out and mixing with people in a way that would scare the hell out of a lot of us. As we clap, many of us are thinking, ‘Thank God I don’t have to do that.’

Though this shift in assumptions has been rapid, the reversion to previous assumptions, where we once again do not see other most other people as a risk, is likely to be very gradual. Even if we find a vaccine for the coronavirus, which may not happen, or if it becomes less potent over time, there will always be the question, ‘What if there is another one out there?’ After all, this one seemed to come from nowhere. How long will it be before people are prepared to get on crowded trains or aeroplanes? Will people shake hands again? Will they happily sit together in offices and meetings? I’d be willing to bet that the (relatively recent in the UK) practice of kissing one greeting will cease. Even if people do relax their guard and decide that the risk has passed, they will do so gradually and one-by-one. Some people may never do so.

The return to normal, then, is likely to be a slow process even if scientists tell us that the serious risk has passed. One of the details that seems to have got lost in the discussion of the lockdown that people began to change their behaviour before the government told them to. A study by the Centre for Cities showed that the proportion of people travelling into city centres for work and leisure fell significantly during the week before the lockdown.

Studies from the US have produced similar findings. To an extent, then, people started locking themselves down before they were told to. Many will be reluctant to return to normal until they are sure the coast is clear. That is not likely to happen for some time.

The trouble with a modern economy, though, is that it only works if a lot of things work together at the same time. Supply chains and public transport are obvious examples but schools are a crucial part of the dependency map too. People are showing some reluctance to go back to work or to send their children back to school. The planned opening of schools on 1 June now looks doubtful. And if the schools aren’t open a lot of people simply won’t go back to work.

The longer this goes on, the more difficult it will become for many organisations to restart operations. Skills will atrophy and the team cohesion needed in the workplace will start to dissipate. The threads that hold an organisation together are difficult to maintain remotely and the task becomes harder over time. Video conferencing and remote contact can only go so far. We are facing a gradual loss of organisational capital.

The return of the economy to anything like its pre-crisis level looks like it will take a long time. It was already showing signs of weakness before the coronavirus pandemic and the shift in our cultural assumptions, even if it is temporary, will make the revival a slow and piecemeal process. We didn’t get a bounceback after the last recession and it is unlikely that we will see one this time. If I had to predict the shape of the downturn I would go for a bath-shaped recession, a similar shape to the last one, with a sharp fall, a bump along the bottom and then a very gradual recovery. Only this time the bath will be a lot deeper.

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Don’t make the self-employed the punchbag of the next recession

Two months ago, few people had heard of Rishi Sunak. He is now about to go down in history as the most interventionist peacetime chancellor. His plan to pay 80 percent of the wages of employees kept on by their employers will help to mitigate the impact of the inevitable recession that will follow the shutdown of most business activity. But it has left a lot of people asking ‘what about the self-employed?’ They have been ‘hung out to dry’ says Paul Mason.

Self-employment passed the 5 million mark at the end of 2019 and now accounts for more that 15 percent of those in work. While the rise in self-employment has been celebrated by politicians and commentators as a success story and a sign of entrepreneurialism, there is a story less often told. A lot of the self-employed are skint. Or, if not totally skint, they are not earning very much.

The rise in self-employment hasn’t been matched by a rise in self-employment earnings. Most of the increase in the number of businesses in the UK since the start of this century has come from firms under the VAT threshold. The number of employing and registered businesses has increased roughly in line with the size of the workforce. The big rise in self-employment has seen a steady increase in the number of low turnover businesses.

 Source: Department for Business, Energy & Industrial Strategy, Business population estimates 2019

People often assume that the self-employed are minted because a few self-employed people earn a lot of money. However, most don’t. A report by the Institute for Fiscal Studies (IFS) last summer found that the mean annual self-employed income (£30,000) was just below the mean employed income (£31,000). However the median self-employed income was only £14,000 – much lower than the employee median of £22,700. The mean figure for the self-employed is skewed by a small number of very high earners at the top, usually working in partnerships.

Strip out the partnerships and the numbers look even worse. The figures for sole traders, who are around 85 percent of the self-employed, are even lower, with a mean income of £21,000 and a median of £13,000.

Sole trader incomes were particularly badly hit after the recession. Since 2008, the aggregate sole trader profit has fallen in real terms. That’s an astonishing fact. There are 800,000 more of them than there were in 2008 but they are making less in total than their counterparts did in 2008. I’m reminded of those nature programmes where, as the oasis dries up in a drought, more and more animals arrive to drink from the rapidly shrinking pool.

Consequently, the average real-terms profit for sole traders has fallen.

Chart source: Who are business owners and what are they doing?” – Institute for Fiscal Studies

As the IFS remarked:

These falls in profit are consequential: they represent falling living standards for individuals and households, and falling value added from the sole trader sector of the economy.

While the image of the rich, tax dodging self-employed businessman may persist, the majority of the self-employed are likely to be on lower incomes than those in employment. Many are people who were already struggling to get by.

The restrictions brought in to combat the coronavirus outbreak will hit them hard. Entitlement to the equivalent of statutory sick pay and the removal of the minimum income floor for Universal Credit will help. As the Resolution Foundation explained:

With this change, UC can essentially play the role of a means-tested unemployment benefit or an earnings-replacement benefit for the self-employed. This change will make a significant difference to some families’ incomes should work dry up for the self-employed.

While that might help the very lowest earners it will still leave many self-employed people dangerously exposed. According to the Telegraph the chancellor is “racing to plug “gaps” in his latest support package for businesses and workers, as he faces claims that he has “left behind” the self-employed.” This will be more difficult when dealing with people whose incomes are not assessed through PAYE and what emerges probably won’t be as generous as the support for the employed. Nevertheless, among the 5 million self-employed are a lot of people who are going to need help and it would be unfair to leave them out.

The incomes of the self-employed took a big hit after the financial crisis and have still not fully recovered. As I said a few years ago, they became the punchbag of the last recession. Let’s not make them the punchbag of the next one too.

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The Hoaxer

(With apologies to Simon and Garfunkel)

I am just a rich boy,
And my story’s often told,
I quit management consulting,
To write mendacious columns for a pot of gold.
All lies and jests,
Still folks hear what they want to hear and disregard the rest,
And so it’s best,

To lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie lie lie.

I betrayed my own dear leader,
And I tricked the DUP,
My shabby Brexit deal,
Means there has to be a border in the Irish Sea.
Still every day,
I cheat, the commentators shrug ‘That seems to be his way’,
And so I say,

Just lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie lie lie.

My promises are lavish,
But I’ll never see them through,
The fifty thousand nurses,
Will be forgotten by next season’s winter flu.
Yet still I win,
Opinion polls are saying I’m a cert to get back in,
So it’s no sin,

To lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie lie lie.

By stirring up the credulous,
I deflect all the blame,
My opponents scream with outrage,
But they still haven’t realised it’s just a game.
All fear and hate,
By the time they twig I will have won and it will be too late,

And lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie lie lie.

In the morning stands the Hoaxer,
It’s just coming up to four,
The seats they are declaring,
Just another handful and he’s through the door.
The verdict nears,
The carpetbaggers laugh but for the rest it’s pain and tears,
And five more years,

Of lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie lie lie.

Lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie,
Lie lie lie lie lie lie lie,
Lie lie lie lie lie.

(Repeat ad nauseam for the next 5 years.)

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Whatever happened to The Debt?

Remember The Debt? The Debt was a really Bad Thing ten years ago. The sheer hugeness of it was going to drag the country down, cripple the economy, turn us into a pariah on the international markets and bankrupt the country.

The Conservatives managed to weaponise The Debt so successfully that it was able to beat Labour in two elections. Despite the evidence being pretty flimsy, the Labour Party never managed to kill the story that it was to blame for The Debt. It also helped to cajole the Liberal Democrats into coalition. After all, it was a national emergency. Time to pull together. Stop all the party infighting or The Debt will get you.

Nobody talks about The Debt any more. Even the chancellor barely mentions it and the threat of a downgrade by Moody’s, which would have seen panic headlines ten years ago, hardly made the news. It hasn’t gone away though. In real terms it’s bigger than it has ever been and as a percentage of GDP it has only recently started to fall. It’s certainly a lot bigger than it was in 2010. Ten years ago a debt-to-GDP ratio of 60 percent was going to cripple us. Nowadays, it seems, 80 percent is nothing to worry about. Politicians in both the main parties are now so relaxed about it that they are happy to see it grow again.


Chart by Economics Help

The Resolution Foundation and the Institute for Fiscal Studies have both attempted to calculate what the main parties’ manifesto commitments would mean for the public finances. Both the Conservatives and Labour are promising to increase spending. The Resolution Foundation noted that the word ‘Invest’ appeared more often in both manifestos than ‘Brexit’, ‘NHS’ or ‘Environment’. The trouble is, neither party is keen on increasing taxes to pay for it.

As Chris Giles pointed out, while the Conservatives plans are a lot more modest in terms of spending than Labour’s, there is a big expensive promise in their manifesto:

3. The Tories have no costing for social care

The Conservative manifesto contains one expensive pledge on future financing of social care, by saying that “nobody needing care should be forced to sell their home to pay for it”. The party does not cost this pledge. Labour’s proposal of free personal care — help with daily living but not accommodation costs — was costed at £10.8bn a year, indicating that this is a large omission by the Tories. The Conservatives therefore have a large hole in their manifesto costings, which implies additional tax increases, more borrowing, or public spending cuts elsewhere.

Then there is Brexit. On Page 5 of the Tory manifesto, in bold, it says:

“We will not extend the implementation period beyond December 2020.”

Almost nobody with any experience or knowledge of trade deals believes that it would be possible to agree one with the EU in such a short time. Former trade negotiators have warned that the UK is likely to be in another Brexit crisis this time next year as the deadline looms and a trade deal still hasn’t been negotiated.

The Conservative commitment, then, is almost a guarantee that there will be a severely disruptive hit to the economy at the end of next year. Once you factor the lower economic growth into the manifesto costings, says the IFS, the public debt level under the Conservatives is likely to be even higher than under Labour.

Screen Shot 2019-12-02 at 16.57.30

A party that spent the best part of ten years banging on about The Debt is, apparently, now happy to see it rise. Everything, it seems, must be sacrificed on the alter of Brexit. The Debt is yesterday’s news.

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Johnson’s Suez

Brexit meant there was always going to be a trade border somewhere between the UK and Ireland. Unless the future relationship was to be so close as to make Brexit pointless, a UK outside the Single Market and Customs Union meant that there would have to be customs and regulatory checks on trade passing between the two. Valuable time was wasted trying to find magical technological or legal solutions to the Brexit trilemma, most of which should never have been taken so seriously by so many people for so long.

The problem is that any kind of border is unacceptable to a lot of people. It doesn’t matter how visible it is, or how unobtrusive the cameras are, how discreet the border patrols are  or how far from the border the searches take place. Simply knowing that the border is there is bad enough. As Matthew O’Toole tried to explain to tone deaf English people, before and after the referendum, this is about identity.

We might wish for a world in which more of Northern Ireland’s people shared a collective identity, but that is not is the world we live in. Nations are imagined communities, to use an old truism. The people of Northern Ireland have, over time, constructed separate psychological spaces for their identities. And part of the reason for enduring political instability is that neither monolithic identity can win. Both are inherently insecure.

People who feel Irish live in the island of Ireland, but not the state called Ireland. People who feel British live in the British state, but not on the island of Great Britain.

The Good Friday Agreement was an inspired and elegant fudge which enabled people with both identities to feel part of the country they believed they belonged to. The Common Travel Area along with the EU’s Single Market and Customs Union enabled people to travel freely for work, trade or leisure. Once the peace process ended the need for security checks it was possible to abolish the border completely. As Matthew O’Toole said, this enabled people to forget the border even existed.

The agreement is fastidious in keeping Northern Ireland within the UK until a majority votes otherwise. But it is expansive when describing the right of people there to be part of the “Irish nation”. To make people who feel Irish relaxed about Ireland being partitioned as a matter of legal fact, the agreement sought to soften the border in people’s minds: to help them imagine it wasn’t there.

Brexit means that is no longer possible. There would either have to be a land border Northern Ireland and the Republic or a border in the Irish Sea between Northern Ireland and Great Britain. Somebody was always going to end up being disconnected from their own country. If there were a land border, an Irish businessman from Derry would now have to complete paperwork to trade with a company in Dublin, another city in his country. If there were a sea border, a British businessman in Belfast would now have to complete paperwork to trade with a company in Birmingham, another city in his country.

To say that this is all fairly trivial misses the point. Symbolism is important in most cultures but particularly so in Northern Ireland. As Jonathan Powell said, any form of border is a threat to somebody’s identity:

The DUP has a perfectly legitimate complaint against the border between Northern Ireland and Britain because it undermines its identity. The Irish are rightly never going to agree to a border with the EU. And a hard border between Northern Ireland and the Republic would reopen the issue of identity underpinning the Good Friday agreement.

Brexit was always going to destroy the delicate balance achieved by the peace process and the Good Friday agreement. Even if the suggested technological solutions had delivered all they promised it still wouldn’t have been enough. Identity and symbolism can’t be wished away. Even a completely invisible border policed by magic robots would be too much. Just knowing there is a border between you and the rest of your country is enough to rekindle the old hostilities.

Someone, then, was always going to lose out. In the event, it was the unionists. According to the deal negotiated by Boris Johnson there will be a trade border in the Irish Sea between Great Britain and Northern Ireland. There is an attempt to fudge this by saying that Northern Ireland will be part of the UK for customs purposes but this is a face-saving formula. The customs and regulatory checks will take place in Irish Sea ports not on the Irish border. Our British businessman in Belfast will be the one completing the paperwork to trade with his country. We’ve ended up at Point A on the Brexit Trilemma.

It’s not only Northern Ireland where symbolism matters though. The image of Britain as a world power is bound up with our national identity. Even people who consider themselves progressive or anti-imperialist make assumptions about the UK’s place in the world. For the most part, deft diplomacy enabled the UK to transition from global power to global influence and to maintain its seat at the top table of nations. As the only country to be a member of the Western military alliance, the English speaking world and the European Union, the UK sat at the intersection between powerful groups or countries. This gave it considerable influence. While its military power might not be what it was, the UK was still a global player, ‘punching above its weight’.

As well as deft diplomacy, though, the UK expended a considerable amount of blood and treasure to stay at that top table. At least some of the rationale for maintaining the nuclear deterrent was to keep this country on the UN Security Council. Who knows whether the nuclear deterrent would work in a modern war or even if it did whether it would be any use but we don’t ask such questions because we have to have nukes. It’s simply what world powers do. Likewise, while there was a lot of talk about protecting the rights of the islanders and even some suggestions of oil wealth in the South Atlantic, the real reason we went to war over the Falkland Islands was because we could not be seen to be pushed around by a middle-ranking Latin American countries. World powers don’t have bits of their territory nicked by tinpot dictators.

Yet here we are about to concede a part of our country to be governed by trade rules set in another country. OK, it might not look like a big deal but it is symbolic. When it comes to trade, Northern Ireland will be yanked out of UK jurisdiction. Some aspects of its law will be made elsewhere. Make no mistake, this is a capitulation. The hardliners in the British government would have loved to be able to tell the EU and the rest of the world to shove the Good Friday Agreement and leave the EU with No Deal but they knew they simply didn’t have the power to do so. For all the talk of Blitz Spirit, they knew that, in the end, the people wouldn’t wear it. Sure, many of them don’t really like the EU but they don’t actually care about it that much and certainly not enough to see their living standards hit. There is little tolerance for economic disruption and hardship. Politicians know that and know they will get blamed. Voters have short memories. Many will forget how much they wanted to leave the EU when the factories start closing and the jobs start disappearing. Johnson’s government knew they had to make a deal and the only way they could leave the EU’s trade framework was by leaving Northern Ireland behind. As Tom Mc Tague said, the price of Brexit is Northern Ireland.

This will not be lost on the rest of the world. The decline in Britain’s diplomatic stock and global influence that began under David Cameron has now reached its ignominious conclusion. A country that pretends to be a world power has had to concede partial control of part of its territory because it had no choice. No other major country has a customs border running through it. World powers don’t have parts of their country governed by other countries.

The fact that this has been imposed on the UK severely diminishes the country’s global prestige. Like the man who ostentatiously walks out of his job only to find he can’t even get another one at his previous salary, the UK found that its international clout didn’t carry as much weight as it thought. As Fintan O’Toole said, Brexit is a long overdue reckoning for Britain. The limits of its power have suddenly and clearly become exposed. The UK’s global pretensions have been marked to market.

This has been brought about by a leader who presents himself as a patriot and quotes Churchill. The man who taunted others with the word ‘surrender’ has agreed to split the country. The man who wrapped himself in the Union Jack has pulled the string that may unravel the united Kingdom. The world will see this deal for what it is, another point marking the UK’s long decline. With the same unseemly haste that Britain pulled out of India, fled from Palestine and backed down on Suez, Boris Johnson has cut and run on Brexit, leaving part of the UK behind as he went. The man who said there would never be a border in the Irish Sea has just signed up to one. He didn’t really have much choice. The border in the Irish Sea will be a constant reminder of Britain’s diminished status, forced upon it as the price of its unhappy divorce from its neighbours.

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Brexit is the road to nowhere, whoever is driving the car

Brexit has ground to a halt. Theresa May will put her deal to Parliament again and it will fail again. At this rate we will come to the end of the extension period having achieved nothing. Which isn’t surprising, given that very little has really changed in the past two years.

Why has there been so little movement? Simple. Brexit is a really bad idea. Some of our politicians have known this for a while and the reality is beginning to dawn on many others. The trouble is, they haven’t got a clue what to do next.

People have come up with various analogies to illustrate the near impossible situation in which we now find ourselves. Perhaps the most famous is Hugo Rifkind’s ‘submarine made out of cheese’:

Perhaps a better way of understanding it, though, is to imagine that people had voted to get rid of motorways. After all, few of us like motorways. It’s much more pleasant to drive on A and B roads. If someone promised that it would be possible to get where you needed to go just as quickly on A roads and that you need never drive on a motorway again, there would be plenty of takers. After all, many of us have fond, half-remembered recollections of the days before motorways. Quiet roads and gentler speeds. Pootling through the Cotswolds, along tree-lined lanes, stopping at a little cafe or some woods by the road for a picnic, Dad having a chat with the petrol pump attendant on a crisp spring morning, the sun just poking through as the mist rises over the Fosse.

It’s even possible to construct a cod-economic argument against motorways. After all, the UK’s per capita GDP grew at a faster rate in the decades after the Second World War than it did from the mid-1970s. The more motorways we had, the less our economy grew. And just look at all those booming economies with much lower motorway density than the UK, such as India, China and Singapore. Motorways, who needs ’em?

The trouble is, after having voted narrowly to get rid of motorways the problems start to become clear. Motorways are baked into the business models of many UK firms. They assume that it will be possible to get from one point to another in a certain time. Many companies warn that getting rid of motorways will put them out of business. Others point to the devastating impact on just-in-time supply chains. Modelling by civil servants predicts a significant hit to the economy and, in the case of a sudden ‘cliff-edge’ closure, localised shortages of food and medicines.

Some politicians put forward compromise plans, such as a phased transition period or a ‘name only’ option under which all the motorways will be re-branded as ‘A+ Roads’. The ultras are having none of it though. They dismiss the warnings as ‘project fear’ and insist that the motorways be closed immediately as its ‘what the people voted for’. A TV presenter remarks that we managed fine in the 1960s before we had motorways. “It’s not the end of the world. We won’t starve,” say rich businessmen who can afford to go by helicopter or private plane. A bombastic and hitherto unknown MP pops up, decrying motorways as a foreign idea and saying that his dad didn’t fight at D-Day only to have a Nazi road system imposed on Britain.

The hardliners come up with ever more preposterous explanations as to why a sudden closure of the motorways would have barely any impact, often citing crank science or convoluted interpretations of obscure laws. A consultant appears offering to implement an as yet untested technological solution that would somehow enable A-road journeys to be done at motorway speeds but with none of the tedious unpleasantness. It could be done ‘if only governments had the will’ he insists. Despite most other experts dismissing this as a ‘unicorn solution’, his comments are seized on by hardliners as ‘proof’ that the motorways could shut tomorrow and life would go on as before.

MPs are split. At one extreme is a small but growing group who realise that the whole idea is crazy and should never have been suggested in the first place. At the other extreme is a group of ultras. They are a mixed bag, ranging from those harking back to a semi-mythical Golden Age of British Motoring, through to the financier-politicians paying lip-service to the nostalgic dream while salivating at the prospect of making a killing by building new toll roads. One MP, while publicly sticking to the patriotic rhetoric, advises his investors to get out of the industries that will clearly be damaged and to invest instead in those companies preparing for the new world of privatised highways.

In the middle is the bulk of MPs who know that closing the motorways will screw the country but who don’t want to be seen as going against the ‘will of the people’. They struggle frantically to find a compromise that will minimise both the economic damage and the risk to their political careers. Arcane ‘solutions’ are debated, voted on, rejected, amended and them debated again. The MPs hope that if they string it out, eventually something will turn up. Against all logic, some of them put their faith in a new leader somehow being able to sort something out. None of this will make any difference. It is a circle that can’t be squared. No matter how many people voted for it, it is impossible to close the motorways without severely damaging the country.

A ridiculous story? Well, yes, but not that much more ridiculous than the impasse we find ourselves in over Brexit. Membership of the European Union and the frictionless trade that goes with it is baked into companies’ business models just as surely as the assumption that they can use motorways to move their goods. The economic arguments for Brexit and the fairy-tale technologies and made-up legal arguments that will make it work are every bit as preposterous as the suggestion that we could close motorways and carry on as before. There really is no way of doing Brexit without damaging our economy and/or unravelling our country, unless we stay so close to the European Union that there seems little point in leaving. The options are, to varying degrees, bad so it’s no wonder we can’t get a majority for any of them.

None of this is going to change, regardless of who wins the Euro elections or whether a Tory leadership contest or a general election gives us a new prime minister. Whoever replaces Theresa May will be up against the same problems. However tough their talk, the reality remains the same. People have been promised the impossible – leaving the EU without any negative economic or geopolitical consequences. As a result, there is now no way out of this dilemma without significant political damage to parties and individual politicians. By far the least damaging option for the country would be to revoke Article 50 and stay in the EU. The political fallout will be horrible whatever happens but dealing with it after a chaotic Brexit would be so much worse. How long it will take for this penny to drop is anybody’s guess. Perhaps we need another leader to fail before the reality becomes so stark that even the most blinkered of MPs can see it. The road to Brexit leads only to stagnation and chaos. It’s time to turn off and take another route.

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