EU collapse fantasies

theresa_may_the_brexit_negotiations__tjeerd_royaards-564x391

Press brexiters on the fact that they’ll get a worse deal outside the EU than inside it, they’ll go into denial, why would the EU cut itself off from its main trading partners…..well largely because you dickheads voted for brexit! Case in point, UK airlines have now been warned they’ll need to move their base and refinance such that they are majority EU owned and based, if they want access to EU airspace. David Davis himself more or less conceded this week, that yes, the UK will be worse off. At this point, forced to accept that yes, it is all but inevitable that the UK is going to get a pretty raw deal, they’ll mumble something about how the EU will probably collapse anyway. This fantasy of the EU crumbling, just because the UK leaves, tells us a lot about brexiters.

Firstly I would have to agree that the EU as an institution has never been more vulnerable. I’d rate the chances of it falling apart at about 25%. Now if you’re a eurocrat, that’s a pretty scary thought, a 1 in 4 chance of the EU breaking up. That’s a big red warning light that should be going off in Brussels. Certainly the need for reform of the EU post-brexit is urgent. Unfortunately for the brexiters, this reform will likely involve making it more democratically accountable (e.g. an elected EU president), more centralisation of certain powers (including possibly NATO) and to balance that all out, more regional autonomy with perhaps a multi-speed Europe. In short, everything brexiters don’t want to happen.

But that still leaves a 75% chance that the EU will survive this crisis. Part of the problem the brexiters don’t understand is that getting another country to leave the EU, aside from Greece and Italy (who many in the EU want to leave!), isn’t going to be easy. Much was made by the Daily Mail of the “success” of the Dutch and French fascist parties recently, with them leading opinion polls. Unfortunately, leading an opinion poll in most cases means getting just 25-30% of the vote.

While in Britain the Tories won a majority with the support of only 37% of the vote, things are a little fairer in Holland and most EU states with proportional representation. You want a majority, then you need 50% of the votes (which the Tories haven’t gotten in decades), about half of what the Dutch fascists are currently getting. The chances of Le Pen winning a run off, even if the other candidate was a potted plant, is somewhere between slim and zero.

And even if they could win an election and put an exit from the EU on the ballot, its not quite as straight forward as it was in the UK. The UK is also leaving the EU on the basis of support from only 37% of the electorate (the 70% turn out times the 52% support in the referendum), closer to 27% if we factor in the many millions of EU citizens and UK citizens living abroad who were denied the right to vote in the referendum. In most of the rest of the EU, the idea that 37-27% of the electorate (most of them old geriatrics who’ll be dead before brexit goes through) is not democracy, its perversion of democracy. Generally election rules in these countries would require something as radical as leaving the EU to gain +50% support (i.e. a majority of the electorate, not a plurality of those who showed up on the day). Its doubtful you could get that in the UK, so even less so in the rest of the EU.

Screenshot_25_06_2016_11_07.png

Hence the brexiters are likely to be disappointed to learn that the EU will likely survive. And in fact, that’s just as well because its better for the UK that there is an EU. If there’s a worse case scenario than a hard brexit from the EU, its a hard brexit and then the EU breaking up shortly thereafter. That means the UK has to go and negotiate deals with each of the 27 member countries, and they’ll all have a host of competing agendas. We might get a trade deal with Germany for auto parts, by conceding on allowing free movement of German citizens into the UK, only for the French to slap a 25% tariff on all car parts travelling through their ports unless we rebrand Cheddar Cheese la merde anglais.

Indeed, this is precisely the problem with brexit, it involves the UK delegating important decisions to Brussels (or Washington and Bejing), fooling itself that its taking control, but leaving it up to the EU to be the responsible grown up and pass all the regulations and laws that will ultimately govern UK trade. So by conjuring up such EU breakup fantasies, what the brexiters betray is that they have no plan, no big idea.

And also by pandering to such EU breakup fantasies they show that they simply do not care. They don’t care that people are losing their jobs (e.g. Heriot Watt just announced 100 jobs to go and put the blame squarely on brexit), they don’t care that young people are now migrating in droves (the talk among my students seems to be where to immigrate to after graduation, given the lack of graduate places), or British citizens with an EU spouse are being forced to leave the country. They don’t care that people have lost money due to the collapse in the pound, with prices now gradually creeping up with inflation rates going up.

Granted they probably will start to care when they realise they can’t afford retirement anymore and that many of the retirement perks the government showers on the grey vote are starting to be withdrawn. Case in point, many councils can no no longer afford to pay for elderly care homes anymore and there are chronic staffing shortages, so services are starting to be withdrawn. And with the son or grandson the old brexiters were relying on to look after them in old age having now immigrated, they’ll find there’s nobody left in the country to look after them. And I can’t say I’ll have much sympathy.

And given that polls do show that people will not accept a hard brexit or any deal that leaves the country worse off, its very likely that either parliament might come under pressure to reject the deal Theresa May gets (and remain in the EU). Or in a decade or two (once all the old racists have died off), its possible that another referendum will be held and the UK will rejoin the EU.

In short, this brexiters EU collapse fantasy is essentially an admission that they know they’ve screwed themselves and the country over for ideological reasons, just so they message their fragile egos. Is the equivalent of some fool who burnt his house down for the insurance money, but the company refused to pay, so now they want everyone else to burn their houses down too just so they can feel a little less foolish.

The flawed logic of preppers

daryanenergyblog

apocalypse-8.jpg When we said brexit could end badly……

I started writing this one a few month ago (prior to travelling long distance) and then forgot about it, but thought maybe I should finish it.

For quite some time in American there has been a survivalist movement, which grew out of fears of the aftermath of a nuclear attack during the cold war. “Preppers” believe than in the event of some major calamity of some kind they must be ready to “bug out” if things go south. Preppers come from a wide variety of different political backgrounds. Certainly thought some of the more oddball right wing elements tend to be the most vocal. Oddly enough many of these are keen Trump supporters (so there’s a certain element of a self fulfilling prophecy as a result!).However there are some fundamental flaws in many preppers (particularly the right wing…

View original post 2,774 more words

The Trouble with AirBnB

tl-vertical_stack

There’s been a massive increase in the number of spare rooms,or even entire flats, offered for rent on AirBnB, across the UK and worldwide. We’ve recently identified several within the building where I live. However this is cause for concern, because there are quite a number of issues with AirBnB. Put rather bluntly, if you are offering rooms on AirBnB you might be breaking the law and you are also possibly jeopardising your neighbours financial well being.

So what’s the problem? This clip from Adams ruins everything sums up the main arguments against AirBnB. Cracked also reviews the major arguments against it.

But for starters, if you are offering rooms on AirBnB what kind of mortgage do you have? Because if you’ve got a owner occupier mortgage that only allows you, your family and non paying guests to stay in the property. Even with a buy to let mortgage only registered tenants on a long term least (generally more than 90 days) are allowed to stay. If you are renting rooms, or worse the entire flat on AirBnB, then you are almost certainly breaking the terms of your mortgage. In theory if the bank finds out, they could tear up your contract and demand immediate repayment (i.e. you get 30 days to come up with say £100,000 or lose the house!).

And this issue of who is allowed to stay in the property is not some minor bureaucratic point. People tend to prioritise mortgage or rent payments above all else, as they don’t want to end up homeless. So the risk to the bank of you defaulting on a mortgage loan is relatively low, hence why they can get away with offering such a low rate of interest on such a large loan. By contrast hotels and B&B’s are a much more risky business (recall Trump’s four bankruptcies involved exactly these sort of properties). They are much more likely to go bankrupt, hence why they have to put up a higher proportion of starting capital and get charged a higher interest rate. While some banks are starting to offer AirBnB compatible mortgages, they generally involve a higher rate of interest and a larger deposit. So unless you are on one of these mortgages, you are likely to be committing mortgage fraud.

airbnb-cartoon.jpg

Then there’s the issue of home insurance. Again, home insurance assumes you are either renting (long term) or living in a house you own. AirBnB type arrangements aren’t covered. Some insurers are starting to offer AirBnB compatible policies, but as with the mortgages these cost more than a conventional insurance policy. If you are renting out rooms under AirBnB and you lack an appropriate policy, then you (and any of your guests) are likely to be uninsured and there is very little chance of your insurer paying out in the event of a claim.

Also the above only applies to home insurance. There’s also the issue of getting liability insurance (in case you being sued by a guest if he falls in the bath tub or tumbles down the stairs). Then there’s your block insurance if you are in a larger apartment complex. Hotels and B&B’s have to comply with a long list of safety requirements to be given permission by the local council to operate and too convince any insurer to provide them with cover. e.g. does your building have a sprinkler system? I know mine doesn’t, but I know that in some countries hotels (above a certain floor height) are legally required to have one (and this applies even if the building is a mixed development). Hotels tend to have better security arrangements, CCTV, key cards and codes that expire every 24hrs, security guards, etc.

Hotels aren’t doing all this for fun, they are doing it generally because their insurance policy will be voided if they don’t. e.g. in the UK there are no sprinkler requirements, but your insurer (or fire officer) may insist on expensive modifications (e.g. putting in fire walls and new fire escapes) if you don’t have a sprinkler system.

Now I’m not usually the sort of person to get worked up about health and safety, but this is one situation where the H&S killjoys experts have a point – hotels, B&B and hostels do catch fire, there have been several large and often fatal incidents over the years (e.g. the MGM Grand fire or the Downunder Hostel fire in Australia, hence why the regulations are so strict. And no, small B&B’s aren’t exempt, you still have to comply with at least some minimum level of safety.

This raises the question as to whether, in the event of a claim, would the insurance company pay out. My guess is they’ll probably take it on a case by case basis. If a fire started say in an AirBnB rented property, they’d likely pay out to any of the neighbours effected, but refuse to pay out to the AirBnB owner (so he gets saddled with maybe £50,000 of fire damage and he’s still in debt to mortgage company). If it was an issue nothing to do with any AirBnB property (e.g. the roof caves in), they’d likely just pay out and not ask any questions. However in a scenario where say a large number of flats in a block are AirBnB and say the building burns down, the insurer might well argue that the block was essentially functioning as an illegal hotel, thus invaliding the policy and they are within their rights to refuse to pay out to anyone.

Suffice to say, its hard to say which way things could go, it will likely take a few test cases to sort out. However the implication is that if you’ve got AirBnB owners in your building, there is a risk that you might not be fully insured anymore. So anyone renting rooms via AirBnB is having a potentially detrimental effect on their neighbours. Quite apart from all the other issues with large numbers of people coming and going at odd hours.

And as I mentioned earlier, you generally have to apply for planning permission if you are planning to set up a hotel or B&B. And yes, this applies even if you don’t plan to make any alterations to your building (as you are changing the use of your property). In some parts of the world you will also need to apply for a license of some sort in order to operate a hotel or B&B. And this is not some bureaucratic rubber stamp process. Any application from an AirBnB owner for permission to operate has a very strong probability of being rejected. Why?

Well because, as noted, homes and apartment blocks often don’t comply with the same building codes imposed on hotels. There’s also issues like disabled access, which hotellers have to cater for (newly built apartments also have to have disabled access, but older residential blocks don’t) and possibly parking issues. Then there’s the provision of water, electricity, broadband and public services (e.g. bin collections, access for fire engines and emergency vehicles), which will be based on the assumption that all the apartments in a certain area are domestic properties, not defacto hotel rooms. This is why hotels pay business rates to cover these costs. An Airbnb might also need a different form of TV license to those used by a domestic property.

And speaking of which, you are paying tax on any earnings you make from AirBnB, aren’t you? You’d need to declare this as income on your self assessment tax form (as well as paying those business rates, water charges, TV license, etc.). So its very likely than anyone offering rooms on AirBnB is not paying their taxes in full….like David Cameron’s dad, or Jimmy Carr.

Also the freehold (or leasehold) on many buildings may well prohibit any form of AirBnB like activity (mine forbids the operation of any form of business within the block for example). Getting around this is going to be harder than dealing with the council, as you’d need to get your neighbours or the leaseholder to agree (and they’d either say no or insist on a cut of any of your profits).

Another issue for councils is the fundamental matter that they don’t want all the apartments in a city turned into hotels. This makes it harder for people to buy or rent. If its possible for a landlord to kick out his tenants paying £1,000 a month on a 3 bedroom apartment and then move in AirBnB guests paying £50 a night each (i.e. up to £4,500 per month!) everyone would do it and city centres would be full of AirBnB‘s with nowhere for the people who live there to rent. So AirBnB is contributing to the housing crisis in the UK. Hence it is not unreasonable for the authorities to be resistant. And while some aren’t doing much about it at the moment, a crack down is going to come at some point. Already some cities are starting to take action and my guess is that this is only the start.

Screen-Shot-2016-08-11-at-4.59.35-PM-930x658.png

Protests against AirBnB by renters facing eviction is a growing problem

Then there are other issues, e.g. lets suppose you are an AirBnB owner and one of your guests refuses to leave at the end of his stay (as has happened on a few occasions already), nor will he pay you anymore. What are you going to do? Drag him out by the scruff of the neck? Okay and then when the cops show up they’ll be putting the cuffs on you (for assault) and letting him back in. In the UK a landlord has no legal right to undertake an eviction. Only the courts can sanction an eviction and it can only be carried out by an agent of the court (e.g. a bailiff). Until your tenant has had his day in court, he remains your tenant, you can’t throw him out or harass him in an effort to try and make him leave, indeed doing so would likely make it harder to secure an eviction.

While yes it is true that certain providers of shorter term accommodation can get around the need for a court order, but they still can’t drag someone out of the building (there is a due process they have to go through as well). And they are operating within a tightly defined legal frame work. As I think we’ve established, any AirBnB owners is likely to be operating in legal limbo and is almost certainly in breach of the law. So it would be up to the courts to decide. While they would almost certainly authorise an eviction, that could take weeks. And one wonders what the court will make of someone admitting under oath to operating an illegal hotel, in violation of planning laws, building codes, while simultaneously committing tax fraud, insurance fraud and mortgage fraud.

And note that we are talking about the UK here. UK law blatantly favours the landlord, unsurprising in a country where the landlords and the landed gentry have been making the laws for several centuries. In certain US states or in Europe the legal situation is very different. It can take months, sometimes years to evict someone.

As for AirBnB guests they have to consider the risks they are taking. For example, what do you really know about the person you are renting off? There’s already been a number of clients who’ve been scammed by rogue landlords and con artists. You might find the room you’ve been offered is well below the standards, or even dangerous. There’s even been guests who’ve died during their stay at an airbnb (due to poor safety standards or carbon monoxide poisoning). You might find your host suddenly cancelling on you days before you travel. Note that a recent crack down by authorities in London caused many to lose their bookings. This link includes a few tales of woe from Airbnb guests and providers.

Cartoon.Airbnb-1024x615.jpg

And this brings us to the racial profiling. About the one thing you will know about your AirBnB guests or hosts is what race he is, as he will provide either a photo or a short video. Trouble is you can’t really tell a lot from that. You’re host could be fine, or he could be Begbie from Trainspotting, or an axe murderer on the run from Eastern Europe whose previous premises was the inspiration for the movie Hostel. As a result this has let to accusations of racial profiling or profiling by social class by both hosts and guests.

Certainly, the fact is that the law, factors, insurers and mortgage companies haven’t quite caught up with events. Once they do, they’ll likely re-draft laws and policies to accommodate things like AirBnB. However, this will almost certainly come at a price. AirBnB owners will suddenly find it costs a lot of money and hence there’s a reason why hotels charge £100 a night for a room (because that’s about what it costs to pay off all those bills!) and suddenly AirBnB isn’t the brilliant money making scheme they’d thought (much like Uber). Also changes to the law, while bringing AirBnB the right side of the law, they will probably allow more leeway for AirBnB operators to be blocked from operating, if for example other residences in a block object to it.

And inevitably further crack downs will come at some point, both by the authorities and perhaps private investigators operating on behalf of insurers and mortgage companies. And woe to any AirBnB owner who gets caught in this dragnet.

Taxing the Sun

daryanenergyblog

4911d461-db30-4e6e-9a52-0b5106193a2e-2060x1236

I’ve joked before that it would be just a matter of time before the Tories started taxing solar panels rather than subsidising them. Well, now its happening. To help pay for the ever increasing cost of brexit they are putting up business rates. And within this tax hike they’ve sneaked in a clause that withdraws certain exemptions to business rates meaning they will now apply to those selling electricity to the grid via solar feed in tariffs. And we’re not talking a minor increase here, a 6 to 8 fold increase in taxation is expected for some operators, effectively making some solar installations uneconomic.

This is not the first time they’ve tried to pull this trick, they tried it before prior to the referendum, but were forced to back down, when the media caught them at it. Oddly enough they blamed the EU on that occasion for forcing them…

View original post 818 more words

The impact of brexit on Northern Ireland

assembly-election-2017

Well the results from the NI election are in and the result isn’t going to make great reading for either the Unionists nor the brexiters. The one thing that was never supposed to happen in Northern Ireland has happened – the Unionists have lost their majority.

While the DUP are still the largest party, in theory they and the UUP can now be outvoted on any issue…such as whether or not to hold a border poll. Now granted, Sinn Fein don’t hold a majority either. They’d need support from the smaller non-unionst parties. And all “non-unionst” means is that they don’t go on orange parades, nor is their pin code 1690. While they aren’t against the idea of a border poll, they aren’t in favour of one either, it doesn’t make them flag waving Irish nationalists.

However in the event of a hard brexit, one that starts impacting on the Northern Irish economy, they could be persuaded to back a border poll, to settle the issue. In short there is now a path to a border poll, that did not previously exist. And its very difficult to tell, particularly against the back drop of a hard brexit which way such a poll would go.

The unionists can block a border poll even without a majority. Rules written into the Northern Irish constitution allow a minority of delegates to veto legislation. Ironically, these rules were inserted to protect the nationalists, something the DUP originally objected too! But the DUP cannot do this alone anymore, they’d need UUP support too. Also blocking a vote and standing against the rest of the assembly raises the risk of the pro-poll parties pulling the plug again, declaring a new election and an electoral alliance in which they don’t stand in each other’s constituencies, effectively turning the election into a defacto border poll.

Now like I said, the other smaller parties aren’t automatically going to go along with Sinn Fein on this. And there’s no guarantee even if a border poll was held that it would be a Yes vote. But the point is that its now a plausible option. The unthinkable (from a unionist point of view) is actually possible now. And the unionist have to look to the moderates in the centre ground and on the left, to save them from a mess of their own creation.

While many unionists are generally euroskeptic (and often to the right of UKIP on many issues) the UUP backed Remain in the referendum, precisely because they feared what is now playing out in NI might happen in the event of a leave vote. But the DUP very stupidly backed leave. Arlene Foster may go down in history as having done more for Irish reunification (through a combination of arrogance, stupidity and incompetence) than Gerry Adams or Martin McGuiness!

But either way, the cost of brexit for unionists is not that they are going to “take control”, its that they’ve lost control and their fate is now in the hands of others….something the rest of the UK will soon discover when brexit negotiations start and they realise its the EU, US and other powers who will decide the UK’s future.

The trouble with Tony

8

Tony Blair made a speech last week regarding the EU referendum, in which he made a number of very good points. He pointed out that the EU referendum process was flawed, it was set up by Cameron to settle an internal matter within the Tory party, he never considered the consequences of losing. People did not know what they were voting for and to push forward with a hard brexit on such a narrow margin (and less than 37% of those who voted) is not democracy, its a perversion of democracy.

screenshot_25_06_2016_11_07

Brexit was only supported by 37% of the UK electorate and under 27% of the UK population

However there’s a problem with this message – Tony Blair. One can scarcely think of a worse person to lead any sort of resistance to brexit that Tony. He’s still dogged by the legacy of the Iraq war. Now to be fair many of the same Tories who are attacking him over this EU speech are the very same people who also voted for the Iraq war. Only two conservative MP’s voted against it, against 84 members of his own party. Given how the Tories are throwing themselves at Trump one has little doubt that a Tory PM would have also backed an Iraq war. The only difference would have been they’d have likely committed to unilateral action without the UN, as the White House had been calling for.

But even so the Iraq war casts a long shadow over Tony Blair and his legacy. Case in point, the Daily Mail accused Tony Blair of giving £1 million to a Gitmo detainee who recently blew himself up in Iraq. Naturally he pointed out the hypocrisy of the fact that the Daily Mail had publicly backed a campaign to get this man freed. And that it had been during the coalition government (i.e. with the Tories in charge) that he’d been paid compensation.

In another example Jeremy Corbyn tried to blame the loss of a byelection on Tony Blair. Normally winning by elections for a opposition candidate is like shooting fish in a barrel. But Corbyn simply can’t defend seats, nevermind take them off the Tories. So its a bit rich him blaming “disunity” within the party when he, not Tony, is the main source of this discord. However, it again shows the problems with relying on Tony Blair to be the standard barer for anything.

So if there’s to be opposition to brexit, while Tony Blair’s welcome to express his views, we need someone else to lead it.

The Trump who came to tea

6a00d8341d417153ef01bb0973ea13970d-800wi

It is becoming increasingly obvious that Theresa May’s decision to invite Trump over to the UK was premature and ill advised, to put it as diplomatically as one can (a cluster-fuck screw-up from a stand-in PM would be a less diplomatic way of describing it).

Trump’s disastrous performance at press conferences, his erratic behaviour, conflicts of interest and of course the resignation of his national security adviser in record time, have all contributed to a view that his will be a chaotic and probably shortlived presidency. Already his job approval numbers have plunged in just a few days, to a point it took Nixon 8 years and a Watergate scandal to reach. In my view it is only a matter of time before there is some move to unseat him.

Keep in mind that only a minority of Republicans need to join forces with the democrats to unseat him. The prevailing wisdom was that this was unlikely to happen any time soon, as the GOP need him more than he needs them. That if there was a move against him, it would likely happen either just before, or after the mid term elections (depending on whether the GOP feel they would be better served by removing him from office prior to or after the mid terms). Aside from the impeachment option, Trump’s erratic behaviour does raise the possibility of removal via the 25th amendment. While this would require the support of the cabinet, recall that most of his cabinet it are the sort of odious cronies who can be easily bought. Trump I suspect may have forgotten that someone might make them a better offer.

So the danger for the brexiters is, they invite Trump over, put the country through the political mess of mass protests, embarrassing the queen and parliament, etc., only for him to then be removed from office shortly afterwords. Aside from the political damage this would do, it could have serious consequences if for example there’s a Scottish independence referendum campaign ongoing. Voting for independence just to piss off Trump, might just swing the referendum the way of the SNP.

And needless to say it could put the UK in an awkward position in terms of negotiating with Trump’s successor, doubly so if the democrats win in 2020. Recall that it would be illegal for the UK to even start negotiations with the US until they are out of the EU in 2019, so baring a ridiculously fast turn around on a trade deal its likely to fall to the winner of the 2020 election to complete these negotiations. And the chances of that being Trump aren’t particularly high.

So Theresa May may well have just made it harder for her to get a favourable trade deal, than better. So why did she do it? this could be a potential resigning issue. Well the answer tells us a lot about the post-brexit UK. Notably that the country is desperately short of friends and as a result we’re going to have to let Trump and his grubby (small) rapist hands near the Queen. Obviously given the weakness of the UK’s position, its unlikely we’ll be getting a favourable trade deal with anybody, not the EU, not China, nor the US.

Getting a trade deal is certainly possible, in much the same way that if you go down to a used car lot, and you are suitably desperate you’ll come away with a car (you’ll pay a lot more than you’d like to and it might break down on the way home, but you’ll get a car). The problem is that the devil is in the detail and its likely the UK will have to concede a lot.

So in essence the situation with this Trump visit more or less confirms that the UK will be a lot worse off after brexit than it was before.

Why post-brexit immigration policy is doomed to failure

20160402_brp503

We’ve had two reports come out over the last week regarding the post-brexit impact on immigration. One warns that already skill shortages are creeping in and that these will inevitably impact on the economy. Another report predicts that the brexit bigots are in for a nasty surprise, as its likely that brexit won’t produce any meaningful cuts in UK immigration. It will make little difference overall and simply mean trading EU migrants who come in for shorter periods (which we want, as it means they pay taxes and leave before they become a burden on the state in later life). While in return we’ll be getting more older UK citizens moving back home, or longer term migrants from beyond the EU (both of whom are generally looking to settle permanently).

800x-1

Surely both of these reports can’t be correct? Well yes they can be. Its just that both of them are feeling different parts of the brexit elephant at different times in the future. Inevitably the drop in the pound (which makes British wages less attractive), brexit uncertainty and the sharp rise in xenophobia all means that the number of Europeans coming in will take a knock. And, as noted, we are already seeing some of these effects. This will lead to labour shortages in many key areas. And a drop in people in work will eventually mean a drop in tax revenue.

Why can’t unemployed brits take up these posts? Well because in many cases they lack the skills and training required, or they live in the parts of the country where there aren’t labour shortages. At the same time, the low value of the pound makes wages in the rest of Europe suddenly seem rather attractive. So some of those with the skills we need, both British and EU citizens, might be tempted to move to Europe to take advantage of their now higher salaries.

On the other hand, as I’ve pointed out in a prior post, the representation of EU citizens in migration figures is often misunderstood by the brexiters. While yes, group together all of the EU countries their numbers look high, but we’re ignoring the fact that on a country by country basis far more come in from India or China than any EU country. And UK citizens and their families make up a very large chunk of net migration figures.

800x-1-1

Also net migration figures represent just what they say – net migration, i.e. the turn over, those coming in minus those leaving. This is an important distinction because it means the numbers of people we are dealing with is a lot higher than many realise. You’ve got many UK citizens who travel back and forth for work related reasons, as well as seasonal workers who come into the UK to meet key skills shortages. The idea that all of these people are going to have to go through some sort of intensive screening and form filling is going to create a logistical nightmare.

FREE-MOVEMENT

We’ve had a taster of sorts of the chaos this will cause already. Some EU citizens have been thinking ahead and applying for UK residency. Note we’re talking about people married to British citizens, who’ve been here for 24 years. They get asked to fill out some Byzantine 85 page form, pay a few hundred quid in costs, surrender their passport for several months and then have their application rejected for no obvious reasons and get a letter back advising them to prepare to leave the UK.

160330_refugees_graphic

The UK is lagging well behind taking in its far share of refugee’s.

Unfortunately, this is exactly the sort of crap that migrants from beyond the EU have had to deal with for years. It highlights something we’ve long had to cope with in the HEI sector – that the UKBA is one of the most incompetent and badly run government departments on the planet. They are a law onto themselves who are able to hide their ineptitude and stupidity behind a cloak of scary Daily Mail headlines. Regularly they’d impose all sorts of Monty python-esque like rules or dictates on us (or employers), rules they’ll often then re-interpret in a completely different way to what the law actually says….then ignore any information we send them. e.g. the one time we did have to report one of my students to the UKBA (she dropped out of the course), I was more than a little surprised to bump into her on the bus a few months later (and she got off at the same stop as the halls of residence, so I’m guessing she was still living in her term time address). Yes they had her name and address and several months later, they still hadn’t done anything!

If any other government department behaved like the UKBA they’d be spending half their budget just defending themselves from lawsuits and paying out compensation to those whose civil rights they’d violated, or the time of employers and universities they’ve wasted.

Now imagine what’s going to happen when a few million EU citizens in the UK all have to apply at once for residency. Throw in another 6 million for those of us of Irish descent (if for some reason our reciprocal rights are lost) and we’ve got a massive backlog (I believe they currently handle only about 100,000 a year!). The end result is something akin to the Clark County gaming commission. There will be a ten year backlog and as a result anyone who you would genuinely want to kick out (e.g. a Muslim jihadi, Romanian Gypsy criminal horse meat butcher….I’m trying to imagine the worse case scenario for a Daily Mail reader), it will take several years for his application to get to the front of the pile and thus for anyone to realise he shouldn’t be in the country. And when his number is about to come up, all he has to do is change his circumstances (e.g. change his name by deed poll, marry, divorce, have a kid, etc.) and his application gets moved to the bottom of the pile.

At this point UK immigration law becomes pointless, as one could live and die without it ever applying to you. This is why Australia, UKIP’s poster child, doesn’t apply the same rules for New Zealand citizens as it applies to those from Europe. Similarly Canada and America apply a much more relaxed immigration policy to each other than they do to those from further afield. Its simply not logistically possible to have everyone coming in from your nearest neighbours fill out an 85 page form and then pay some civil servant to read it. In short, the proposed immigration controls are just unworkable.

Clearly what these stories show is that there’s an urgent need to reign in and reform the UKBA. Keep in mind that this incompetence and mistreatment of EU citizens has already been noted by the EU and they will inevitably reciprocate post-brexit. So failing to reign the UKBA in will mean it takes 6 hours for UK citizens to clear customs post-brexit. Frankly whichever moron came up with this ridiculous 85 page form (so complicated that even the UKBA can’t seem to figure it out!), should be sacked on the spot. Ultimately for the sake of speed and efficiency, the UK’s immigration rules will require simplification. And even in the best case scenario, more border guards will still have to be hired to prevent any backlogs developing in the system. And that’s going to cost a few billion. Yet another of those many “hidden extra” costs (along with a few billion for the farmers, eight billion for university research, another eight for the car industry, etc.) that the brexiters forgot to mention on the side of those buses.

_90495472_hi034187888

The UK border post brexit?

So the Tory policy on immigration is clearly unworkable, it would be difficult to come up with anything worse. But what is Corbyn’s response? Well he’s come up with some half baked plan to divert immigrants away from certain parts of the country that already have large numbers of migrants. To call this a massive misreading of the situation is an understatement. Migrants generally congregate in the parts of the country where there are labour shortages and thus jobs available. These areas tend to see very little support for either UKIP or brexit. By contrast areas with high unemployment and low rates of migration tend to be where the support for brexit was at its strongest.

image-20160707-30710-1hglytw

There is an inverse correlation between leave voters and the number of migrants in their local area

It is in these areas with relatively low immigration rates where you’ll find UKIP bigots sitting on their arse whinging about migrants taking their jobs, when in truth there are jobs available, if they’d just get up off their arse and move somewhere where there is work (or perhaps retrain and gain the skills to get a job). And unlike the UKIP’ers, migrants have no interest on sitting around living on benefitsAnd how is Corbyn going to make them move where he wants them too? Is he going to have is own version of the stasi follow immigrants around?

800x-1-2

EU citizens are a tiny portion of benefits claimants…..

Corbyn’s is basically proposing to pour fuel on the UKIP fire. It represents such a colossal misreading of the problem, that it clearly shows that he is even more out of touch on this issue than the Tories. And that takes some doing.

800x-1-3

…..and far more Pakistani’s claim benefits anyway….so how is leaving the EU supposed to help?

Either way, all of this means that any hope of the brexiters for a points system and serious cuts to immigration is unlikely. But unfortunately, that’s not going to stop them trying. Hence why we’ll probably see them try to impose some Daily Mail friendly border controls. Of course once the UKBA ends up buried under a sea of paper work, many millions of the types they want to keep out, sneak in through the cracks, while a lack of skilled labour leads to factories closing, chronic NHS staffing shortages, crops rotting in the fields, etc. Finally at this point, there will be panic and they’ll have to roll back these restrictions.

In short, the UK will have voted for the worst of both worlds, loss of all of the benefits of being in the EU with none of the border controls that were supposedly the justification for brexit in the first place.

Trouble is brewing…

rexfeatures_5760153g.jpg

I worry that we’re going to see a lot more strikes over the next year or so as the full impact of brexit works its way through the economy. Already, there’s been a number of strikes, southern rail for example, multiple ones at Heathrow, the London underground, etc. But I worry that is just the start.

I’m not usually the one to get too involved in Union politics, but I happened to go along to a recent meeting and I think it highlights many of the problems. No doubt the Tories will try to spin any strikes as some sort of leftist plot to get Corbyn elected. Well his name, nor did the labour party come up once in the meeting. The only time I’ve heard any union member mention his name it was as the butt of a joke afterwards.

What the union did discuss was the hypocrisy of lay-offs of some research staff while on the teaching side we’re massively overloaded, largely because brexit has made it so much harder to recruit. At the same time the unions worry that the drop in the value of sterling and rising inflation means we’ll effectively be swallowing a 20% pay cut over the next few years. And deducting inflation from any pay rises since the start of the financial crisis means we’ve already had to take a 9% pay cut since then, which is better than the defacto 10.4% average pay cut across the UK. And this cut in wages in real terms at the same time as inflation rises is also a factor in why a third of UK families are living in a defacto state of poverty.

So naturally, the unions are less than pleased and the likelihood of industrial action is increasingly strong. And across the public sector, the NHS for example, this picture of workers stretched and overworked while being forced to swallow a defacto pay cut is replicated. And in the private sector too, it is inevitable once people start to notice how their pay packet seems to get that bit lighter every month that they too will start to demand a higher salary.

One feature of strikes that I think people don’t get is that they often don’t start for the reasons they are really about. Take the Southern rail strike, officially its over who gets to close the doors on a train, the driver or the conductor. This sounds silly yes, but then again many marriages collapse usually for some very silly reason, such as the colour of a IKEA futon (IKEA is Swedish for “arguments” I assume, I’m sometimes surprised they don’t have marriage counsellors and divorce lawyers in their stores). Its all about trust and a break down in the relationship between workers and their bosses.

For example, another issue that came up in our union was some changes to the employee evaluation process. To cut a long story short, management told the union one version of why they wanted certain changes, which I have to say I thought seemed pretty reasonable. However, when one or two union members, who are also line managers of staff, went on a training course they were told a completely different version of why the management wanted these changes (to promote a more commercial style rank and yank system). Naturally they fed this back to the union who has now rejected these proposed changes.

And I’ve seen this happen in more than a few other occasions, both in the public sector and private. Management come across as two faced, they say one thing to the unions, then another thing to senior staff or the media, failing to understand that word will get back to the unions one way or another (such as by them reading a newspaper!). So you can see how, after being promised that they won’t be put out of a job, the conductors on southern rail assumed the worst when they learnt Southern was buying a load of driver only trains. And so they pushed the panic button.

If you go behind someone’s back and lie to them, they will generally assume the worst. Honesty is the best policy. If management really do want to bring about certain changes, then you need to get buy in from staff first. Trying to steam roller any opposition will just lead to the sort of chaos we’ve been seeing in Southern rail. In fact its worth noting that strikes in Scandinavia and Germany are less common, in part because there’s a much closer working relationship between unions and management, with union rep’s often sitting on company boards.

So a lot of the strikes we’ll be seeing may well start for seemingly silly or trivial reasons, but in many cases they’ll represent the straw that finally broke the camel’s back. And like I said, the bulk of that pile of straw represents the usual “we’re overworked and underpaid”. Pay staff more, hire more staff to take the load off and they’ll put up with a lot more hassle. That’s a big problem for the government (and the private sector) because it would mean them having to push up public sector pay (or hiring more staff). Whatever it costs to fund a hospital or university today, it could be 20% more expensive in five years time. And with falling tax revenue post-brexit those are bills the government can’t pay, nor can those in the private sector, so some union militancy is very likely.

Now the Tory reaction to all of this will no doubt be to look at ways of preventing strikes. For example, they might well ban public sector or workers in industries like power and transport from going on strike. Well let me head off that one, it won’t work. Other countries have similar laws and all that happens is you end up with more wild cat strikes. Keep in mind that all workers need to do is pull a bunch of sickie’s all at once. If management insist on sending in doctors, well its very easy to make yourself unfit for work, just don’t sleep or eat enough. In some safety critical jobs its actually illegal for a worker to attempt to work without getting a certain number of hours sleep first. If you work in the food and beverage industry you are supposed to avoid your place of work if you’ve been exposed to a food borne disease (so just visit a relative with a wee nipper with a tummy bug and you’re off work for 48 hrs!).

Also there’s the option of work to rules. We’ve got one of those running right now in our place and I think long term its probably going to be what forces a compromise from management far more effectively than any strike can. Work to rules can, over a long enough time period be crippling, as often there’s all sorts of things workers are expected to do on a daily basis, which their contract doesn’t even mention. For example a couple of years ago the Irish public transport workers noticed that there was nothing in their contracts that obliged them to collect fares, so rather than going on strike they simply refused to collect fares for a day, meaning the company had to pay for the whole system to run without any revenue coming in!

But perhaps the biggest danger for management is what if staff start leaving, either taking early retirement or immigrating to Europe. If I’m honest, the pay rates in Ireland look awfully tempting right now (thanks to the falls in the value of sterling). If I hadn’t bought a house recently, I’d probably be applying for jobs back home right now. And I’m guessing there’s plenty of junior doctors (who may not have mortgages) thinking the same thing, particularly given how horribly they are being treated by the government recently. The UK risks a brain drain post-brexit as workers move overseas. A situation that would not be helped if immigration is restricted. And this doesn’t just apply to highly skilled labour like doctors or lecturers. Keep in mind that even when it comes to say, train or bus drivers, its not as if a boss can wander down to the job’s centre and recruit a few dozen fully trained and qualified drivers right then and there. It takes time to teach such people and for them to build up enough experience to do their job effectively.

So I think the message is buckle up and get used to the fact we will see more in the way of strikes, work to rules and public serviced stretched. There is a way out (aside from the obvious, halt brexit), but it means management being willing to pay up, hire more staff to relief staffing shortages and increasing pay to match inflation. But that in itself will have a knock effect by making a lot of things much more expensive.

Delayed reaction

One of the problems with Brexit and Trump, is that while both are expected to cause serious economic damage, often to the very people who voted for such policies, but it might be sometime before the full impact of this is realised, as the primary risk is the long term damage.

cckapvnueaaevmg

Indeed we are already seeing the effects. For example, recent rationing of vegetables in the UK. The supermarkets blame unseasonal weather in Spain. However, relatives I have in Spain, Ireland and Germany and they report that while yes supplies are down and the price of certain vegetables is up, there’s no rationing. The obvious explanation is that the drop in supplies in Spain has pushed up the prices. But with the UK pound having dropped in value by 20% the UK supermarkets are being outbid by their competitors from the rest of Europe who can pay the Spainsh growers in euros.

Similarly brexit has been disruptive to businesses, 58% of firms say so. There’s been many job losses since brexit, the banks are already quietly moving out of London. But employers, aware of how politically sensitive any such claim would be, are going out of their way to avoid saying so, often blaming other factors instead. e.g. we’ve seen a few redundancies in the uni. The official reason is that the research units they worked for didn’t bring in enough money….what they don’t mention is that the main source of research money was from the EU! The UK government has promised to pick up the tab for research, but we’ve certainly not seen any of that money, so now people are losing their jobs.

In another example, we have the recent revelation regarding NHS overcrowding. Well in part this is due to the fact that the NHS has been chronically underfunded since the Tories took office. But brexit has made it increasingly hard for it to recruit. They, like universities (we’ve been unable to fill a number of vacancies since brexit), will find it difficult to recruit staff from abroad to plug staffing shortages, as foreign staff will be fearful of the impact of brexit. The reduced value of the pound makes UK salaries look less attractive (and the rise in racist incidents and xenophobia doesn’t help either!). So the end result, waiting times go up and granny’s reward for voting leave is she’ll be waiting longer for that heart operation.

Politicians are experts at taking credit for something that happens through no action that they have taken (often despite their policy rather than because of it). At the same time, they are also very quick to try and avoid blame for something that is very much their fault. But the problem is that a lot of the time the effects of their term in office don’t show up until after they’ve left office.

Case in point, the Great Recession. The Republicans have tried to blame everyone other than themselves for this, Bill Clinton, Obama, Hilary, working class people, the tooth fairy, etc. The reality is that the two people who have to take the bulk of the blame for the financial crisis are Ronald Reagan and Margaret Thatcher. Their policy of deregulation, neo-liberal turbo capitalism and the rat race “greed is good” attitude it brought with it, set up a massive bubble in the world financial system. A bubble that finally popped in 2007.

And the warning signs were there right from the start. There were numerous scandals, with companies going bust, billions lost and the government forced to step in, cheque book in hand to rescue reckless gamblers. LTCM (Long Term Capital Management), the Junk bonds scandal of the 80’s, Stratton Oakmont (of Wolf of Wall street fame), the Guinness trading fraud, the failure of Barings bank or BCCI, the American savings and loan crisis, ENRON etc.

Indeed, its worth noting that a number of these scandals and failures listed above occurred within the term limit of both Thatcher and Reagan, or their immediate successors. So nobody can plead ignorance and say they didn’t realise the dangers. And it was in this era that the concept of “too big to fail” was established. The lesson many on Wall street took away from these early scandals was that no matter how badly they screwed up, the government would bail them out. Profits had been privatised and risk had been socialised.

This is not to say all other presidents in between escape blame. G. W. Bush was clearly asleep at the wheel in the lead up to the crisis. There was a massive property bubble building and a huge rise in credit. A number of experts were warning that this wasn’t sustainable. He and his advisers should have realised the danger and taken away the punch bowl before the party started to get rowdy.

Bill Clinton often gets blamed for the crisis because he repealed the depression era Glass-Steagall act. However, we have to put this decision in the context that the banks were simply by-passing the act (via overseas subsidaires), in part thanks to legislation passed under Reagan and trading in derivatives had been left unregulated by the Reagan Adm. (which was ultimately the trigger for the financial crisis) Clinton’s options were to do nothing, or get rid of the act and then try to replace it with something that actually worked. So in and effort to get a GOP controlled congress to play ball with him and regulate derivatives, he signed a repeal as a concession (one that had been put on his desk by Republicans, i.e. they initiated the repeal, then pressured Clinton into signing it, not the other way around as its often presented). Of course Republicans being the backstabbing two faced gits that they are, they simply took the repeal and didn’t put in place any new regulations.

To draw an analogy if was Thatcher and Reagan who designed and commissioned the warehouse made of matchwood with no fire exits and crammed full of oil soaked rags built right next to an orphanage. Newly appointed fire safety officer Bill Clinton should have done something about it. But as it was already built and afraid of catching flak from the powerful builders lobby and their Mafia allies, he caved into pressure and just signed off on it without inspecting the building. It was however ultimately nightwatchman Bush, who was asleep on duty in the warehouse when it went up in smoke. And it was likely his habit of smoking indoors and his failure to extinguish his cigarette that caused the fire to start in the first place.

In short, yes it would be unfair to blame Reagan and Thatcher alone for the financial crisis, G. W. Bush, Gordon Brown, Blair, Clinton and anyone who with a credit card who spend money they didn’t have prior to the crash, we all need to take some of the blame. But clearly it was these two who set the world on the road to ruin. But the problem is that the bomb didn’t go off within their terms, hence they didn’t get the blame. Indeed there are (as noted) some Trump voters who blame Obama for the crisis, even thought he wasn’t in office until well after the crisis had started.

So one has to worry that history is about to repeat itself. Trump and Brexit will both have lasting long term impacts on the global economy. Potentially, we might well look back in a few decades time and point the finger at this moment as the point where Western capitalism and democracy failed. But it will take a while for such damage to appear. Indeed, given that Trump’s plan seems to be to cut taxes and increase public spending, we could well see a temporary jump in the economy, even thought he’ll just be starting another unsustainable bubble.

The US has a major problem with its national debt. As I discussed in a prior post, if something isn’t done about it, sooner or later the US government will go bankrupt. And Trump is talking about borrowing anything from $10 trillion to $20 trillion. This could potentially double the debt and push it to levels equivalent to nations like Greece or Italy. At the same time, his racist, xenophobic and anti-science policies will stifle investment. The next generation of investors and entrepreneur’s will bypass America and go elsewhere. Already in fields such as renewables or biotechnology America is falling behind its rivals. Tariffs and protectionism, will just make things worse in the long term.

In short, Trump policy will make it very difficult for the US government to raise tax revenue to pay off its debts. And with the baby boomers retiring the US needs to start raising income just to pay the pensions of those retiring. At some point, it could be a few years time or twenty, the US government won’t be able to raise the cash to pay its obligations, never mind service its debts and it will default. Of course the likelihood is the markets will see this coming and stop to lending any money to the US government, leading to a sovereign default.

Now Trump supporters will say, so what that’s only bad news for China and those pricks on wall street, isn’t it? Well two thirds of America’s debt is internal, that is to say held within the US. And American pension funds are the main holder of US treasury bonds. If the US were to default as Trump has implied, he’d be bankrupting every pensioner and saver in America. Print more money? That will destroy the value of the dollar, which is bad news for billionaires like him or anyone on a fixed income (such as pensioners). In short, there is no way that Trump or any of his successors (whether Democrat or Republican) can dig their way out of this hole without screwing over pensioners and baby boomers, or in other words the very people who put him in office. Trump’s economic policy is essentially the same as Argentina’s prior to the crash in 2001.

In Britain Theresa May has committed the UK to an economic policy that is also unsustainable. Brexit is going to be expensive, perhaps a cost of up to £66 billion just to leave and maybe as much as £25 billion per year to fund all those subsidies she’s promised to those who will lose out (car makers, universities, farmers, etc) as well as the loss of trade. Put quite simply that’s unsustainable. There was something of a stopped clock to Osborne and Cameron’s obsession with deficit reduction. In that they were doing it because they couldn’t bring themselves to spend public money on the poor and the needy (who’d just blow it all on stuff like pasties and rent). But that’s not to say that the UK hasn’t got a big problem here, one that will get worse with time as more and more baby boomers retire.

Digging the UK out of this hole becomes difficult post-brexit. Making it harder for young Polish workers to come in and take over paying the taxes that pay for the pensions of retiring British workers isn’t helping matters. Quite apart from making it harder for companies to recruit (i.e. longer waiting times in hospitals, you won’t be able to get a plumber, train and bus strikes and delays become more common, etc.). Letting the value of the pound slide leads to high inflation, which means pensioners take a hammering and workers start demanding higher wages (anyone paid in sterling reading this has essentially taken a 20% pay cut this year thanks to the falls in the value of sterling).

Cutting public spending? Well the two biggest line items in the budget are the NHS and the welfare bill. And pensions and working tax credits are the main source of welfare spending, not unemployment benefit (tiny by comparison). In short, there is no way the UK can dig itself out of this hole that doesn’t screw over the very pensioners who vote Tory and voted overwhelmingly for brexit. My advice to any pensioner is don’t retire....ever!

In fact here’s a prediction, my guess is that what will finally push the US over the edge will be its greatest ally the UK. You can just see the scenario. The UK, at some difficult to predict future date, goes broke as a result of brexit and defaults on its debts. American banks post huge losses. Worried the US might be next and needing cash in hand to prevent a run on their reserves, they all dump their holdings of US treasury bonds. The US government finds it impossible to obtain credit and defaults as well.

What about the IMF? Well do you think China or the EU is going to be terribly helpful after Trump and Brexit? They’ll rescue themselves and their own banks but that’s it. Keep in mind that some bankers may actually be able to profit handsomely from the crisis, the same way they profited during black Wednesday.

So the real danger with Trump and brexit is the long term lasting impact they will have, not the short term. Its important to realise this and when things do hit the fan, remember how we got here. And also as we go along, remember that while many may be reluctant to admit it (particularly those who voted for these clowns in the first place!), but both are already having an impact on the real economy and on people’s lives.