A few months back I reviewed the danger posed to the Tories by UKIP, aka the UK Tea Party. I pointed out how the worse thing the Tories could do would be to try and out flank UKIP by lurching to the right.
This is exactly what the republicans did in America and it likely cost them the election. As faced with the choice between Obama and some loony climate/evolution/science denying “rich white guy” even many conservatives felt inclined to vote for Obama. This also applies in the UK, a lurch to the right with the promise of an in or out referendum on Europe might appeal to the Tory base, but the vast majority of the UK population are more interested in politicians who’ll keep the country running, sort out the economy and get them jobs, not pander to the ideological extremes of Daily Mail readers.
However, it seems that this is exactly what the Tories are doing with attempts to put through a bill which pretty much requires Cameron (in the unlikely event of his re-election with an overall majority) to commit to an unworkable in/out referendum or presumably go and commit Hara-kiri. An apt metaphor as what the Tories are committing to is essentially a form of political suicide. As well as economic suicide for the whole country.
The general view is (as I discuss here) that pulling out of Europe will have a largely negative effect on the UK economy. Indeed I find it deeply hypocritical how the Tories go and try to scare the Scot’s out of voting for independence (highlighting the negative effects on the Scottish economy caused by this) then turn around and argue that withdrawal from the EU will have no negative economic effects on the UK :??:
Effects on the Shop floor
Casing point I was in a car factory the other week and I noticed two things. Firstly about 75% of the cars coming off the line were being built in Left Hand Drive mode (i.e. for export to the EU, US and Asia). And secondly, while many of the parts are made in the UK, they were relying on parts shipped in from all over the world, notably from the EU, to build the cars.
UKIP seem to be unaware that in the last fifty years this thing called globalisation occurred (its had good effects and bad, something we can debate another day, but suffice to say its happened). They dont seem to understand that if they start chucking up trade barriers its going to look awfully tempting to said car manufacturer to shorten its supply chain by moving production overseas (thus avoiding the need to ship parts into the UK and then finished cars back out to Europe again).
And remember many so-called British brands are often foreign owned these days. British Steel has now been merged into the Tata group. Even that most iconic of British products, the London Taxi is Chinese owned. Needless to say, they will drop the UK like a sack of spuds if the global economic winds blow unfavourably.
It is this “chilling effect” on the UK economy that now has me worried. As I suspect many companies will now begin to factor in the possibility of a UK withdrawal from Europe into their business plan. Which given how crucial trade with Europe is to many firms, essentially means a halt to long term investment into the UK in certain industries.
Would the last one out please turn off the lights!
For example, I’ve highlighted before how the combination of lassie-faire polices on energy and the Tory obsessions with Nuclear has largely scared off many companies looking to add new power generating capacity (either with coal, gas or renwables) from setting up in the UK. Despite having a huge energy demand and one of the best wind and offshore renewable resources in Europe very little power generation hardware is built in the country. And don’t blame China, because countries like Sweden, Denmark, Poland and Germany have tens of thousands employed in these industries.
It is, like I said the unpredictable nature (not the unpredictable nature of wind…we have these things called “weather forecasts” you know!) of the business environment that UK government’s have created that is preventing new infrastructure from being built. And naturally putting the threat of an EU withdrawal into the equation does not help matters. If the light do indeed go out in the near future it will be due to a failure of the UK’s energy policy….or more to the point a lack there-of a policy!
Immigration and the EU
And of course, UKIP core proposal isn’t just that of withdrawal from the EU but also shutting the door on all those nasty evil immigrants. i.e. they want a full moratorium on inward migration. The Tories again seem to be pandering to this paranoia, as laid out in the queen’s speech.
But again, the problem with UKIP’s policy here is that it is divorced from the realities of us being in the 21st century, as like I said, UKIP don’t seem to understand the effects that globalisation has had on international trade. Such a bar on immigration will represent a substantial trade barrier imposed at a time the country can ill afford it.
In the past the term transnational company used to apply to a handful of mega corps. But now it applies to hundreds of thousands of companies of many varying sizes (e.g. I know a company with a few hundred employees who specialist in lenses for lasers with a few dozen employees in Germany doing research, couple more in the UK, several offices in the US, bigger manufacturing hub in Singapore, more offices in Asia, etc.).
Many of the employees who work for these firms (particularly given the reluctance of companies to offer permanent employment anymore) are fairly mobile. Which is just as well as the pace of technological change often means companies will need to hire in expertise from wherever the latest developments are being made (and thats generally Asia these days!) in order to keep up to speed (as I mentioned in a prior post my uni’s had to hire quite a few people in from overseas).
By way of example, UKIP are very keen on nuclear power (why? don’t ask me, likely because many on the left are against it I suspect!) as they want to get 50% of the country’s energy from nuclear. Their budget manifesto proposes to spend £3.5 Billion on Nuclear power….Of course, given the price tag of £7 billion for one reactor, this would buy them
half a reactor
.and youd need at least forty or more to achieve that target (so theyre off by a factor of 80!)
and thats just the UKs electricity (which is only 20% of overall UK energy consumption, i.e. youd need about 5 times this amount to get 50% of the countrys energy from nuclear). All in all I dont think they sort of did the maths on that one!
But putting such issues aside, building a nuclear plant is very much an international effort these days. The lead contractor will probably be either AREVA (French), Hitachi (Japanese) or Westinghouse (American). While some parts will be built in the UK, others parts will come in from all over the world. The most crucial part of the reactor, the pressure vessel (the bit with all the nuke stuff in it!) will almost certainly come from the Japanese Steel Works factory on Hokkaido Island in Japan.
In order to provide quality assurance (i.e. make sure that it doesnt leak!) all of these international companies will need to send employees to the UK to assist with the build and make sure everything runs smoothly. Given that a nuclear build program can take many years or decades (particularly if youre planning on building lots of reactors) theyd likely need to relocate to the UK along with their families and thus we are talking about tens of thousands of people here looking to move to the UK.
How then can UKIP proceed with its immigration policy and expect to commit to new nuclear reactors? Indeed, even the alternatives to nuclear be they shale gas (American drilling companies dominate
as do increasingly the Chinese!), wind farms (those Eurotrash UKIP just mooned
.and yet more Chinese! While we hand wring about a few turbines theyve plants to build the worlds largest power station with some 20 GWs of wind power!) or solar power (Germany, US and China again…are the Chinese on to something you think that the rest of us are missing?).
Furthermore, as I pointed out in a prior article both UKIP’s & the Tory policy on nuclear will mean overturning a number of Thatcher era policies, completely contradicting their own political ideology in the process. Also wind power is now regarded as a much cheaper means of generating green energy
.of course with Lord Monckton as their science advisor, its hardly surprising that UKIP’s energy policy is as divorced from reality as all their other polices.
Its ironic indeed I heard one UKIPer advocating voting for UKIP
to keep the lights on
when in fact they would make it all but impossible for any company to build power stations in the UK and guarantee the lights will go out!
Flat Tax falls Flat
A couple of weeks back I caught sight of UKIPs budget manifesto (here it is again). Needless to say it highlights just how bonkers these guys are.
For example UKIP also indulge in that other libertarian fantasy of a flat tax (its another favourite of the Tea Party). This is largely driven by ideological principles as they simply cant understand what all that money the state takes from us pays for. In the libertarian world roads build and maintain themselves, the sick cure and health miraculously, anyone on benefits is a lazy scrounger, even those with serious disabilities or long term illness, natural disasters never happen, pollution, rubbish and industrial waste vanishes into thin air, nor is climate change a threat, etc.
Libertarians often try to argue that a flat tax will be fairer, however that seems doubtful. The whole point of having multiple tax bands is for reasons of fairness as it equates the rate at which you pay tax to ones ability to pay. Any gains to those at the bottom by dropping out of the tax window will be offset by the withdrawal of public services. Similar tax cuts by G. W. Bush (which were not nearly as radical as UKIPs proposal) led to increased inequality in the US and are largely blamed for Americas crippling budget deficit.
Another fatal flaw in UKIPs tax proposals is that of merging NI with income tax. Again this merely betrays a fundamental misunderstanding of how the tax system works. One could characterize income tax as the tax we pay for the things that government does, running the NHS and other public services, the police, the army, keeping the Queen in her palaces, etc.
National Insurance, by contrast, is arguably our money that the government holds in trust and uses to pay your dole money (if you become unemployed) and ultimately helps pay for your state pension on retirement.
Both labour and the Tories have long seen good reasons about keeping clear blue water between these components of tax because of the danger presented if they were merged, i.e. it would be all too tempting for the government to not adequately fund pensions into the future (then go bankrupt trying to pay them!). Worse the state would also get its hands on the countrys pension reserve fund, or to put it more starkly UKIP are proposing to let the government pick the pocket of every pensioner in the country!
Privatise the NHS
While Cameron and Osborne are electing to privatise the NHS by stealth, UKIP come flat out and propose it.
There policies seem to assume that we can roll back the health care service to how it was run in the 1900s, relying heavily on mythical charities to run hospitals rather than the taxpayer (again this is a common but entirely unworkable proposal of many libertarians)…of course they seem to be clueless to the fact that technology and population means that health care costs are a tad higher now. Plus the main health care charities prior to the NHS happened to be religious orders (obviously theyve not visited a church recently!). So all in all, sort of a non-starter.
The UKIP kool-aid
Oddest of all the UKIP manifesto promises are a lot of major and substantial spending commitments (at the same time as they are cutting tax, obviously they don’t teach basic arithmetic at British public schools any more!) notably a 40% increase in military spending. why? dont ask me! but I do know that other right wing slightly xenophobic parties like them in the past liked to have a big army
for parades and stuff
Of course I would actually blame these ideological obsessions with Europe and immigration for all of the other fantasies above. UKIP have long deluded themselves that EU membership costs the UK some ridiculous amount of money (they often quote figures in the hundreds of billions, while its probably more like a few hundred million and this ignores the economic gain from trade with Europe) and that all the benefits budget is spent on immigrants (not so! Actually immigrants are likely to represent a net gain to the economy as I discuss here). Naturally having drunk their own brand of kool-aid, they then assume that ditching Europe and shutting the border will save vast amounts of money to fund all their other right wing fantasy ideas listed above.
And ironically, if UKIP’s policies came to pass, it wouldnt be manufacturing, but the city of London (that they claim their policies will defend) who would take the biggest hit from the policies they advocate. As “the city” is often even more reliant than other sectors of the economy on bringing in overseas investors to keep going.
Many of the UKs top investment firms would be forced to relocate out of the UK
or up the M6 to Scotland. As Ive long pointed out the scales are tipped against Scottish independence but a UK withdrawal from the EU could easily tip the scales the other way, particularly once the Scots realise they can steal the UKs seat at the EU table (in essence Scotland and possibly Wales would stay part of the UK and in the EU with England getting independence and leaving the EU) and soften the economic blow of independence by stealing a host of British based firms to boot!
UKIP are not a new face on British politics. Their policies assume that the last hundred years of history and economics never happened. They want to take Britain backwards to some sort of mythical cartoon version of Britain that never actually existed. They are in short like some crazy right wing version of pol-pots Cambodia. The worse thing the Tories can do is to try and emulate this policy, when they should instead be confronting UKIP and pointing out the glaringly obvious flaws in their franlky barmy proposals.