Local election autopsy

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With the local election results in, they make for grim reading for labour. They lost several mayoral election and 382 council seats. Should anyone doubt the disaster Corbyn is leading the party into, well here’s the evidence. Indeed you could tell it was bad by the fact that even before the counting had even started labour was already making excuses and had essentially already conceded defeat.

Firstly, the good news, UKIP were more or less wiped out, losing all but one of their seats. This to be honest isn’t that surprising, given that the Tories have spent the last few years turning themselves into UKIP. Voting for UKIP was always a protest, hence why they tended to do well in local elections or EU elections with low turn outs. However, once people had a UKIP councillor and realised what a total nob they’d voted for, they are forced to confront the fact that they voted for local government paralysis. The end result was they were always going to do badly in any election where people spent any longer than 5 seconds deciding who to vote for.

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Also it should be remembered that the far right parties in the UK (and the rest of Europe) do go through this cycle of doing well, then fighting with each other, imploding, only for another head of the hydra to rise up. Many UKIP members, including Farage himself are ex-members of the National Front or the BNP. So I fear rumours of the far right’s death in the UK are greatly exaggerated. Even if UKIP do now implode, I won’t be surprised if another racist party comes along to take their place, with basically the same people in it.

But back to labour, let us look at four areas, in Glasgow they lost control of the council to the SNP (thanks to a strong swing away from them towards the Tories), in Methyr a similar thing happened, and they lost two Mayoral elections in Teeside and the West Midlands.

Labour losing in Glasgow to the Tories? WTF! Seriously! This is the sort of town where even the Unionists don’t vote Tory. I recall a past EU parliament election where the Tories got just 2,500 votes. By law of averages, half of those were probably spoilt ballot papers. And most of the locals would see that many Tory votes as a reason to form an angry mob and hunt these Tory bastards down and run them out of town. When Thatcher died there was actually a party held in George’s square. Well under Corbyn, labour are now losing elections in Glasgow.

And they also lost control of Methyr Tydfil, the constituency of the labour party’s founder, down in the Welsh valleys. This area was devastated by the miners strike, so if you want to die quickly, go into a bar in Methyr and say something positive about Thatcher. I used to live down the valley from here and one of the reasons why they had to burn Thatcher rather than bury her, was because many of the miners in this part of the world were threatening to go and dance on her grave (or piss on her grave). So they’d have needed to build a dance hall and public toilet on her grave site! But labour now can’t defend seats in a place like this.

However, it is Teeside and the West Midlands that have me most worried. Here labour lost Mayoral elections they should have easily won. Both these areas saw a strong leave vote in the EU referendum (not everywhere, but in certain parts) and Corbyn’s whole justification for his brexit strategy is to keep voters in districts like this on side. And, much as I’ve been warning for some time now, its a strategy that has comprehensively failed. Labour support has gone down, not up. There was a swing in these districts towards the lib dems too (remainers turned off by Corbyn’s pro-leave rhetoric), although they didn’t win that many seats (overall they lost seats thanks to the strong swing to the Tories).

For those unfamiliar with Teeside or the West Midlands, these areas include a large number of people who I would describe as “working class social conservatives”. These are the sort of people who don’t like change, who are insular and suspicious of foreigners, go to church regularly and by and large they don’t really buy into the labour party’s socialist leanings, yet they still vote labour. They do so because they have bitter memories of the unholy mess Thatcher inflicted on them. The West Midlands is fairly multicultural, with a wide variety of ethnic groups, Irish, Nigerian, Asian, Middle Eastern, etc. Again, quite a lot of these would be regular church (or Mosque) attenders, they tend to be socially conservative, but they have also historically voted labour. And they do so because they are well aware of the racist undercurrents within the Tory party. The Tories might think that when they dog whistle with a nod and a wink nobody except their racists allies hear them. Well I’m afraid we all hear it. Hence why large blocks of people in the UK have historically voted labour, even those whom you would otherwise put in the “conservative” camp.

So what worries me, is that I would see these results as a sign that these communities, faced with the choice between UKIP-lite and a hard left Corbyn, are opting for the Tories. As they see it the choice is to be either shot by Corbyn’s red brigades or poisoned by May’s hard brexit. And they are opting for the poison, after all maybe they can find a cure to that later. And it is in districts like this, but with a stronger Tory base, where the general election will be fought. In short if labour is losing in these four districts in the local elections, areas where historically they won’t even need to bother campaigning, well what chance do they stand in other areas where support for them is historically only marginal?

And the response from Corbyn and his supporters? To make excuses and blame everything and everybody, the voters for a low turn out (actually a low turn out tends to benefit the smaller parties, not the bigger parties or the governing party), the Tories, the lib dems, even accusing his own party of disloyalty. Much as a bad tradesman blames his tools a bad leader blames his rotten luck and his own staff for his failings. A truly awful boss blames his customers (or voters). Is it fair the Tories are holding an election now? No, but in warfare you rarely get to chose the time and place of battle, fate or the enemy chooses it for you. Politics is much the same.

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And if staff are disloyal, well that does kind of suggests you ain’t very good at the job of being a leader. Only a bad leader spends all his days accusing his staff of disloyalty. As I’ve pointed out before its not Corbyn’s left wing views that are the issue. Most labour MP’s are not secret Blairites, Tories in all but name, with Thatcher tee-shirts under their suits (as Corbyn would have you believe). I’ve met MP’s before and most are actually fairly left wing, maybe not as left wing as Corbyn, but certainly more to the left than your average person. What puts them off Corbyn is that they see him as unelectable and utterly clueless when it comes to running a political party.

Case in point, the tale of lieutenant Sobel. He was the drill instructor who took easy company (of band of Brothers fame) through basic training. By all accounts he was tough on his trainees and drill them rigorously. Many veterans credit him with preparing them well for combat in Normandy. However, he was hopeless as a field commander. During training exercises in England, he got his men lost, marched the company into an obvious ambush and worse still he refused to listen to advice from others (a bit like Corbyn). As a result, on the eve of D-day, all of his NCO’s simultaneously resigned and requested transfers (again a bit like the labour party under Corbyn!). The Army promptly replaced him. Which might seem harsh, but if a leader is looking over his shoulder and questioning his men’s loyalty and the troops are starting to question his orders, before they’ve even made contact with the enemy, the worse thing you could do is send them into combat. That would be leading lambs to the slaughter.

And its kind of the same with labour. Corbyn has some excellent qualities. He’s a good orator and he’s good at calling out the Tories lies and hypocrisy. If I wanted to organise a protest, he’s the person to call. But he’s not a leader. While it might seem crazy for labour to change leader so close to an election, the truth is labour is doing badly because they don’t have a leader and haven’t had one for nearly a year.

In short labour faces a choice between two unpleasant, but distinctly different post-election scenarios. One where Corbyn remains leader, leads the party to its worse defeat in living memory and the Tories win with a landslide that exceeds Tony Blair. He then refuses to go and leads labour into political annihilation and obscurity, probably sinking left wing politics in the UK for a generation. Or he resigns, the party deputy leader takes over, they get a poll bounce and while I doubt they could win, they might just cut down that Tory majority. And that’s crucial because the smaller the Tory majority, the more leeway labour has to prevent a hard far right brexit.

An election nobody wants

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So May wants to have an early election, in one of the biggest political U-turns in recent history. We were assured for months that there would be no such thing, why the whole reason for the fix term parliament act, which the Tories brought in during the last parliament, was essential to ensure stability and continuity of government….which they now propose to ditch at one of the most critical moments in recent UK history (hence why the markets suddenly dropped today as result of this announcement).

However the massive Tory 20 point lead in the polls proved just too irresistible to ignore. But this polling lead is due to a key electoral asset the Tories possess – Jeremy Corbyn. The danger is that sometime between now and 2020, he’d be unseated. And the upcoming local elections, where its expected labour will do badly, could be exactly the sort of opportunity for Corbyn’s opponents to do this. The Tories didn’t want to wait and risk having an election without Corbyn as labour leader, so they’ve decided to pre-empt any move to topple him.

Also there’s a lot of bad news in the pipeline over brexit. Prices are starting to go up, its starting to dawn on people that it might not have been a great idea. The Tories will face pressure from both directions during the brexit negotiations. On the one hand, they’ll have to make a lot of concessions to the EU which will infuriate the little Englanders. And on the other hand, there will be further rounds of cuts to spending in keeping with the expected fall in tax revenue. The impact of all of this on a 2020 election is difficult to foretell, particularly when you factor in a possible 2nd indyref. So the danger of waiting is their poll numbers could slide and next thing you know they’d be kicking themselves for waiting.

And there is history here. Gordon Brown was urged to have an early election after he took over from Tony Blair. Labour had seen a bounce in the polls, it was expected he’d win easily, gaining a mandate separate from Tony Blair’s. But he hesitated, in part due to some polls suggesting their majority might be reduced. Then the financial crisis hit and the rest as they say is history. Churchill too, delayed an election due to some ongoing European matters. Only for him to then lose the 1945 election to labour. So waiting might not be a terribly good strategy.

So should there be an election? My view no, and I’m not just saying that because I expect the Tories to win. They are setting a very dangerous precedence. We were told when the fix term parliament act came in that fixed terms are important for stability. However they now seem to be saying bolix to all of that, we only brought that in to control the lib dems. So instead the stability of the country will be sacrificed for the short term internal politics of the Tory party. Much as the brexit vote was held not because it was a good idea, but to resolve an internal dispute within the Tory party. And brexit is being negotiated not on terms that are favourable to the UK, but on terms that will be acceptable to the different factions within the Tory party. And of course the miners strike under Thatcher, the decision to join and then leave the ERM under Major were all made, not in the best interest of the country, but to deal with short term issues within the Tory party.

So the pattern here is that the UK national interest comes secondary to the internal politics of the Tory party. Which ever way you vote in this election won’t really matter. We’d be better off circumventing the process and all of us just joining the Tory party…although to sign up you’ll need a quart of blood from a baby and a handful of soil from your own grave! So it might not be for everyone.

Aside from this short term thinking, there is a more fundamental problem here. The Tories are going back on what they said with regard to fixed term parliaments. There is a convention of government that succeeding parliaments do not repeal bills passed by prior administrations without good reason or cause. Otherwise, the end result is political ping pong. e.g. Tony Blair or Brown repeals all of Thatcher’s privatisation policies, then Cameron spends much of his parliament bringing them back in. Nothing ends up changing. Arguably if a party campaigns on an issue at a previous election, then that’s grounds for repealing stuff. But I see nothing about repealing fixed term parliaments in the last Tory manifesto (nor do I see anything about a hard brexit either!).

So while I doubt the Tories will be stopped, its clear this election is being held for the most cynical of reasons at a time the country can least afford it.

Send in the Clown

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As I mentioned in a prior post, its quite obvious the UK’s foreign affairs are going to suffer as a consequence of brexit. A situation not helped by the fact the UK is stuck with one of the worse people you could possibly pick for the job at one of the worse possible times in the UK’s history .

Boris Johnson spent the days immediately after America’s strike against Syria running away from reporters. There was a certain deer caught in headlights factor to it all. Then he announces he’s cancelling his scheduled trip to Russia “on advice from Washington”. This is an unprecedented move. While part of the EU it was generally expected that the UK will conduct its own foreign affairs. The EU would try to make sure we’re all on the same page and don’t contradict one another, but Britain’s foreign affairs was the UK’s business. Can you imagine the outcry if under Tony Blair, there was a crisis and we were told that the foreign secretary had cancelled a trip on advice from Brussels. It rightly led to Boris being labelled as Trump’s poodle. I mean what next, is he going to need a note from his mum any time he has to leave the country?

Next Boris came up with a ham-fisted plan for more sanctions against Russia, which were promptly rejected by the G7, leaving him standing there looking pretty stupid. The reality is that brexit doesn’t mean empire 2.0 it means the UK becoming not the partner of the US, but Trump’s sidekick. I don’t even mean we’re Robin (he gets the odd line and to fight occasionally), perhaps the word “minion” is better. Basically we’re mini-me or random task to Dr Evil.

Also one has to acknowledge that Boris Johnson was set up to fail. No doubt acting under advice from Cameron, May appointed him to the job in the full hope that he’d screw it up and destroy his chances of ever becoming PM in the process. But that said, he has made a number of unforced errors, and his floundering over this Russia/Syria issue is merely the start.

Firstly there was that whole flap about bringing back the Royal yacht Britannia, so that he could use it to negotiate trade deals with China. A couple of slight problems with that….not least that Bejing is about 100km’s inland! Then he began fighting a turf war with trade secretary Liam Fox (another one set up to fail). Then he picked a fight with Italy over Prosecco, made several very silly comments to the Germans and French (don’t mention the war!). And of course prior to the US election he managed to insult Trump, Obama & Hilary. The term bull in a china shop doesn’t quite cut it.

Given how highly the Tories were prioritising brexit and the delivery of article 50, you’d think he’d have put some thought into the likely consequences of it. The EU’s position on Gibraltar clearly caught the Tories by surprise, hence all the silly comments about going to war, or sending warships (you’re going to threaten a NATO ally, over the fact that they will impose the same customs and border controls on the enclave that the UK proposes to apply to the EU?). But you could see this one coming a mile off. The EU wants to at least give Scotland (and possibly other regions) the opportunity to join the EU, they don’t want the Spanish to try and veto that. So quite clearly, making a concession to the Spanish on Gibraltar was an obvious horse trade. Why didn’t Boris see that coming and try to head the matter off?

Normally at this point we’d discuss when should a lame duck minster like him resign, or when will he be sacked. But there’s the problem he won’t resign, because if he does his career is over. And Theresa May can’t sack him, well not until he really screws things up (starts a war with Brazil, tries to get to first base with Melania Trump, etc.), because sacking him would defeat the purpose of putting him in the job in the first place. Instead the UK will have to cope with the fact that we’ve got a upper class twit as foreign secretary at the very time we can least afford it.

Corbyn polling collapse

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We have local elections coming up in Scotland and the election junk mail leaflets have begun to arrive. And what’s the main point of attack for the Tories? yes Corbyn, even thought he’s not standing in Scotland and the one Scottish labour MP left won’t go near him with a barge poll. The Tories not only attack Corbyn for being soft on brexit (even though its obvious he secretly voted for brexit) but for being soft on Scottish independence. Meanwhile the lib dems attack him for being pro-brexit and an incompetent flip flopper. As I warned sometime ago, Corbyn has become an election liability for labour. And his pro-brexit stance has not won the party any votes, its probably costing them votes. Hence the recent terrible performances in by elections.

And polling from London puts Corbyn bottom of a table of party leaders, behind UKIP leader Paul Nazi Nuttall. His approval ratings are actually negative at -40%. And this is in London, the heartland of Corbyn support.

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Labour are looking at a collapse in the next election. My guess is that voters will split three ways, the Tories will probably end up with a majority, the anti-brexit voters will go for the lib dems and greens, while the hard brexiters who don’t understand why Theresa May didn’t just go to Brussels and urinate on Junker’s desk on June the 24th, will vote UKIP. The labour vote will be decimated .

Indeed, while the media were obsessing over the far right’s defeat in the recent Dutch elections, they missed the real story, the collapse of the traditional left wing vote in Holland, going from the 2nd largest party to only nine seats, slightly ahead of an animal rights party.

So what Corbyn’s supporters need to accept is that not only can he never win an election, but he is likely to put the party on a route towards eventual collapse and decline.

Trouble is brewing…

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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.

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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.

Blogging catchup

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There are dark clouds on the horizon…..

My travels down south

One of things you need to get used to in Argentina is the crippling bureaucracy, forms stamped in triplicate, checked, queried sent back and then recycled as fire-lighters. They say you have to be patient to be Argentinian. The brits could have stopped any invasion of the Falklands just by getting them to queue and fill out the appropriate paper work (trouble is the argie’s are so used to standing in large queues so they’d out queue the British!).

They do try to cut down the red tape at border control by streaming people into different groups, one for locals, another for those from neighbouring South American countries, another for everyone else and one for Americans (they implement the same harsh checks the Americans implement on Argentinians, so any American going to South America, bring a big book, expect a long wait and to be finger printed, photographed, body cavity searched and asked if your a terrorist/rapist/nazi or here to steal our jobs). Naturally one has to dread what will happen post-brexit if the UK tries to restrict immigration from its neighbours. The queues will be horrendous. As it was it took an hour to work my way through a half empty Buenos Aires airport and about four hours to go through the border into Chile.

Another little incident, on the taxi ride in London, the taxi driver saw a crash in the opposite carriageway. He dialled 999….and got put on hold…..for ten minutes before he had to give up and focus on driving (he was on a hands free btw). He was getting the same fobbing off from the cops as I’d been getting from BA. Imagine you’ve got an axe murderer breaking down your door and you’re on the line to the cops and getting put on hold like that. Britain truly is going to the dogs.

By contrast I lost my wallet. Within twenty minutes, as a result of a call to an non-emergency line (by someone else rather than me) there were two Argentinian cops outside. Granted there wasn’t a lot they could do and let’s face it a tourist losing his wallet is hardly a police priority, but its in stark contrast to what you’d expect in the UK. The fact is UK policing, like so many things in the UK (public transport, hospitals, roads, public housing) is kind of crap and no way near up the standards of those in other countries. We have public services many developing nations would be ashamed of.

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Of course Argentina is at the back end of a major economic crisis. Frankly all those brexiters whinging about how bad they’ve had it the last few years come across as a bunch of spoiled brats compared to what the Argentinians have been through since 2007. Are they voting for brexit from their South American neighbours? Are they blaming migrants from Chile for all their woes? No of course not. Yes the previous government Argentine did labour on about the Falklands (predictably), but the current regime’s gone quiet about that. In short it does tend to suggest Brits lack backbone.

Trump train wreck draws nearer

Trump hasn’t even been inaugurated and he’s already in a crisis. Normally a president gets a honeymoon period from Congress and the press. Even that’s run its course for Trump already. And some of those leading the assault are his fellow Republicans. It doesn’t bode well, particularly given his disastrous press conference. Then there’s him appointing his family members to senior positions and not putting his money in a blind trust fund.

All in all it leads me to the conclusion that Trump will probably be impeached at some point. For the moment the GOP will hang onto him, as they need him. But sooner or later, after a few scandals, after his supporters realise they’ve been had and start jumping on the anti-Trump band wagon, there will be moves to oust him.

Recall how all through the election he went through cycles of being denounced and disowned by his own party. That sort of cycle continues, things will come to a head eventually. And there’s several obvious flash points already, his differing views on healthcare reform, his sucking up to Russia, his dubious appointees, the very real possibility of corruption scandals and conflicts of interest, sex scandals, confrontations with China, etc. And keep in mind it doesn’t require a majority of Republicans, only enough to join with the democrats and swing an impeachment vote.

Tories let their brexit fantasies slip

A brain fart from the chancellor let slip the Tories post-brexit fantasies. He suggested that the UK could “punish” the EU for imposing tariffs on it by lowering its corporation tax. Let’s think about that for one minute. As noted in a prior post, the UK will probably have to in some way subsidise its manufacturing sector post-brexit. The governments overall costs will be up (by tens of billions), tax revenue will be down (no young Poles to pay for the NHS), so cutting taxes is not a long term strategy without some major cuts to public spending.

That means no subsidies to farmers, manufacturing, fishermen or the regions. It means big cuts in NHS spending and cuts to the welfare budget. Keep in mind that working tax credits and pensions are the main source of welfare spending (over 50% of total spending), unemployment benefits are less than 10% of the welfare budget. So any significant cuts to welfare would impact on pensions and working tax credits.

In short one has to ask how popular the idea of a massive tax break to corporations would be while manufacturers get hammered, millions lose their jobs. While those lucky enough to keep their jobs lose their pensions, benefits, tax credits and see big cuts to public services. It doesn’t quite tie in with the Tory mantra of looking after working families. So it is something of an empty threat.

Of course they can only make it thanks to their ally Corbyn. He’s rendered labour so unelectable that the Tories could conceivably get away with such a thing. It also betrays the reality that brexit will be negotiated to benefit only those in the UK who live within the M25. The rest of the country will get screwed.

True GDP

Speaking of London, its commonly stated how the UK is so much better off under the Tories. Actually, that’s not true, it depends on where you live. As the graph below shows, if you live in London or the South East then yes, the GDP in your region has gone up by rather a lot. However, in the rest of the country its a different story. Scotland and the South West has seen a decline and then a recovery (no thanks to the Tories), while the rest of the country has never really recovered from the crash. Northern Ireland has flatlined.

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So when you hear stories about how well the economy is doing, ask for a minute yes and for who?

Corbyn rebranded

Corbyn promised to rebrand himself as a populist firebrand prior to Christmas. To copy the tactics of Trump and co. to push labour to victory. So how is that working out? Predictably, not so well. Indeed, my suspicion is that this was a plot by some Blairite’s in his cabal to push the Corbyn train wreck over the edge.

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For starters what Trump calls “post-truth” the rest of us call “lying. Corbyn goes around promising the sun the moon and the stars and he’s going to be accused of the very thing he berates the likes of Tony Blair for. Recall that what got Tony Blair such a bad name with those on the left, was those lies over Iraq. While Trump and Farage might be able to stir up the laden racist living in some easily deluded fools, I’m doubting Corbyn can use the same tactic with those on the left. They like there “facts” too much.

And we’re ignoring the fact that the media are unlikely to give him a free ride. While they failed to take Trump and the brexiters to task for their numerous lies (perhaps because they were so numerous it was hard to keep up). But they are certainly not going to let Corbyn away with that. He says anything that sounds like a change in policy his flip flopping, he back tracks he’s dithering, he promises anything that’s probably undeliverable they’ll line up experts around the block to denounce him.

Is this fair? No, but its the reality that every left wing leader has had to deal with for some time. Brown, Miliband, Sturgeon have had to put up with the same. If you can’t take the heat, stay out of the kitchen.

And given that there’s two by elections coming up, at least one of which he’s likely to lose, it doesn’t bode well for Corbyn. Losing a byelection to a sitting and unpopular Tory government in a safe labour seat would be unprecedented and just plain bad. Losing one to UKIP would be disastrous and fatal. My guess is that if labour loses these next two byelections, we’ll probably see another leadership challenge shortly there after.

Perhaps more worrying for labour is the reasons for these byelections. Two MP’s simply up and quit. It suggests that many within the labour party are simply admitting defeat. They know Corbyn’s leading the party off a cliff but that they won’t be able to unseat him until its too late. They know he’s essentially allied himself with the Tories on brexit. Any political ambitions they have are about to be dashed. And come the next election a lot of them are about to find themselves unemployed. So yes, some are out looking for work already and if an opportunity comes along (such as to become director of the V&A), they are going to take it. So labour will probably face a dripping away of MP’s as they flee the sinking ship.

Cycle status

Chris Grayling, the transport secretary has shown himself to have some UKIP like views towards cyclists. Firstly he knocks one off his bike getting out of his ministerial car. Secondly he say’s they aren’t proper road users. I’m reminded of the the late (insane and drug fuelled) major of Toronto Rob Ford, who banned cyclists from the cities streets….then left wondering why there were so many new cars on the road.

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Any car driver who dislikes cyclists, just imagine he’s in a car instead. Do you want those tail backs to be even longer? More delays more misery. Cyclists are doing you a public service. And if you want to rant about them not paying road tax, well neither do you, there’s no such thing as road tax, roads are paid for mostly out of general taxation. And as for vehicle tax, cops, the queen and tractors (to name a few) don’t pay that either. Try screaming abuse at them and see what it gets you (about 6 months I’m guessing).

Either way, making Chris Grayling transport secretary is like making Jimmy Savile minster for children.

Brentry

On my travels I read an interesting article in the Economist about Brentry, that is the UK entry into the wider European economy. After the Romans abandoned the UK it had become a continental backwater, invaded and fought over by one group after another. By 1066, the rest of Europe had bounced back from the dark ages, international trade was expanding, new ideas from the east (well actually old ones that had be rediscovered) were being implemented and tried out. Britain however, was still essentially caught up in the dark ages.

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While William the conqueror and his methods were certainly brutal, one has to acknowledge the economic benefits the Normans brought with them. The UK started to trade with the rest of Europe. The Normans brought security as well as new technology and new ideas. They went on a building boom, castles, city walls, restored Roman roads and then later built many of the country’s now famous cathedrals. A sort of medieval Keynesian economics was at play. By the king’s death, Britain was booming. One is reminded of this Monty python sketch.

Indeed the Economist suggests that the Brentry might even explain the North/South divide. Its often forgotten that there were two invasions of Britain in 1066, one by the Normans, but an earlier unsuccessful one by the Danes (well more specifically the Norwegian king), that was beaten off. Much of northern England had been under Danish influence for sometime, so many supported this invasion. Needless to say they weren’t in a mood to bend the knee to a bunch of cheese eating surrender victory monkey’s. So they resisted, the Normans put down the rebellions with their usual brutality, but this put the north a good century behind the rest of the UK in economic development and they’ve been playing catch up ever since.

War of the worlds hysteria

I also came across a release of Orson Welles infamous War of the World’s broadcast. It is often remembered for the supposed national panic in unleashed when it was mistaken for an actual news broadcast. Well in truth this is mostly a fake news myth invented by the media of the era (sound familiar?).

While yes a small number of very silly people did mistake it for actual news, but these were isolated incidents. Most were quickly informed it was just a radio play of a book that had been available for several decades. There’s no evidence of anyone jumping from roof tops or being treated in hospital for shock, or mass evacuations of New York suburbs. The newspapers blew the story way out of all proportion. Why? Because they, in particular those controlled by Randolph Hearst (the Rupert Murdoch of his day) saw radio as a threat to their business. So the exaggerated the level of panic. And let’s face it, it sold lots of papers.

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Indeed, some pointed to how strange it was some getting in a tizzy over aliens from Mars while ignoring the very real threat from Hearst’s buddy Mr Adolf across the pond in Europe.

Nissan deal and humble pie

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I’m increasingly of the view that the fabled Nissan deal struck by Theresa May and Nissan boss Carlos Ghosn is never going to work. There’s clear blue water between what Ghosn is telling his company he got the UK to agree too (i.e that they will compensate Nissan if the UK leaves the single market) and what the government is saying (no payments were promised). Let me illustrate the problem with a thought experiment.

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Let us suppose the UK leaves the single market. While the Tories seem to think they can “have their cake and eat it”, the reality is somewhat different. Any sort of restrictions on immigration and the UK is out of the single market. All the other nations in the EU would have to agree to the UK staying in (or joining later) and there is no way that’s going to happen, not if you’ve been listening to what’s being said in other EU countries. Yes Canada can get such a trade deal, but they are the other side of the Atlantic and aren’t being run by a bunch of racist nutters.

Leaving the EEA trade area would create a whole host of problems. For example we’d still be subject to EU food labelling (contrary to current government claims) as that’s actually controlled by the WTO (a bilateral agreement which lets the EU export food to non-EU countries). We’d need to hire a shit load of vets or go vegan (something to do with the slaughter practice of animals, there’s not enough non-EU vets to monitor this and yes those rules still apply if you want to export food abroad), we’d need to hire a small army of trade negotiators before we can even negotiate a deal with say China (and we have barely enough to negotiate a deal with the Vatican). Oh and btw the Chinese are prevented from dumping steel in the EU thanks to another bilateral agreement which won’t apply to the UK after brexit, raising the risk of an immediate trade war (unless the Tories want to see the recently rescued steel mills shut). The banks will also move some of their operations out of the country and sack tens of thousands of UK staff.

Certainly thought, the UK will forced to revert to WTO rules (if the UK can qualify as a member otherwise its chaos), which would slap tariffs of up to 30% onto all UK trade with the EU. UK cars will be hit by a tariff of 10%. A tariff of that scale on every car coming out of the Nissan plant would mean a government subsidy to the tune of several thousand per car and the plant produces about half a million of them per year. So that’s a billion or two a year to keep one car factory going.

Think about that, Theresa May is proposing to spend a few billion a year to keep 7,000 workers employed. That’s between £100,000-£200,000 per worker per year (depending on the breaks). And this could go on for many years (and it could take a decade to sort out any sort of deal….and there’s no guarantee of success at the other end). It would actually be cheaper for the government to simply buy the factory off Nissan, close it down and hand each worker, say half a million each on their way out the door, telling them to use it to sort their life out (pay off the mortgage, retrain, retire).

Even ignoring such absurdities, what about the other car makers? Do you think JLR, a direct competitor with Nissan in the SUV market is going to be happy with them getting a subsidy? No, they’ll sue the government and demand the same for themselves. Now if every UK car maker got the same deal, and really if one gets it they’ll all be entitled, that’s a subsidy from the government of say £3,000 per car (for some vehicles it will be higher, others it will be lower, this is about what you’d expect at 10% on the average cost of UK vehicles sold). The UK makes 2.5 million cars a year, so that’s a cost to the government of £7.5 billion per year!

Oh, and that assumes the EU doesn’t decide that this subsidy is unfair under WTO rules and doesn’t lodge a dispute with the WTO. That would see putative tariffs imposed by the WTO and the EU at a rate of up to 30%, so it could cost the government three times this amount in such a scenario.

And even this £7.5 billion figure is of course slightly less than the current cost of the UK’s EU membership. Add on the costs of propping up the UK’s R&D and universities post-brexit (up to £8 billion), the farmers (£3 billion), the fishermen, the regions (Cornwall and Wales, both in receipt of billions a year in EU structural funds), and we’re looking at a frighteningly high bill, probably tens of billions a year, certainly many times more than it cost to be in the EU.

And these are not one off payments, these are yearly costs. The one off costs of leaving the EU could be as high as €60 billion, if you listen to what the EU is now saying. And with falling tax revenue and a growing deficit problem, quite simply put, these are cheques Theresa May cannot afford to write. Because the banks who lend the government money (and in future they’ll be doing that from Dublin and Paris) will let those cheques bounce.

The UK cannot buy its way out of brexit. There will have to be some pain. And my guess is Nissan workers are going to be those how have to take some of it. Which begs the question, what class of a moron is Carlos Ghosn? Was he always this stupid or did he have to take lessons? (from Trump university I assume). How do you know a politician is lying too you? His/her lips are moving. And if Mr Ghosn is reading this and think’s I’m not being a bit mean, I’ve some magic beans I could sell him, plus a mate of mine is looking to sell the Forth road bridge, I’m sure we could do a deal…..

…..Or perhaps we need to consider the possibility that Mr Ghosn is a little smarter than the average bear (to be honest, falling for such and obvious con trick is entirely out of character for him). Let us consider the following, he knows he was lied too, but that’s okay. He knows the Sunderland plant might not be viable outside the EEA. He’ll have to undertake massive layoffs or shut it down entirely. Its just he’d rather see the government be the bad guy and explain all of this to the plant’s militant workers, as well as helping to pay for the close out costs if the plant shuts.

So the sequence of events will be, he waits until towards the end of the brexit negotiations and its clear the UK is going to leave the EEA. He pops up waving his little letter from the PM and demands she pays up as promised. Given that she can’t afford to do that (as explained above), she’ll hum and haw and backtrack. He’ll say, you lied to me you lied to the Nissan workers, the deals off, I’ve no choice but to shut the plant down (on the eve of an election) and I’m suing the government for the costs of doing that. The government will make a show of resisting this, but then quietly settle the case out of court (they don’t want to face a scenario where a sitting PM has to testify in court, not least because of the political crisis that would emerge if she perjured herself in the witness box a few months before an election).

And we have to consider that Ghosn might be acting under orders from Paris and Tokyo. Nissan is after all a joint French and Japanese operation, which has close links to both of these governments. They know that if the Nissan deal were to collapse like this in the middle of brexit negotiations, it would be setting off a bomb under the UK economy. There would be a chain reaction of other car makers and companies effected by a potential hard brexit coming forward and warning their work forces of looming mass redundancies.

The Tories would be facing going into an election with falling poll numbers. And there ally Corbyn will be gone. Any significant threat of mass layoffs and his pro-brexit stance means he’ll face a rebellion from the labour party’s union supporters, who will hold another leadership contest and see someone else elected leader. Likely this new leader will come from the hard left of the party as a compromise (Owen Smith, Tom Watson, may be even Ken Livingstone). Naturally said leader can expect an immediate polls bounce and the Tories will be faced with the very real possibility of losing an election to a hard left candidate.

Hence they will come crawling back to the negotiating table and take whatever deal the EU offers that keeps them in the single market. They’d sooner face a backlash from the swivel eyed UKIP loons than see the loss of large chucks of the country and numerous marginal seats to militant and recently unemployed workers and a hard left labour party coming to power.

So the Nissan deal means Theresa May won’t be having her cake and eating it. It means she’ll be getting a double helping of humble pie.

Exit through the wingnut shop

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There’s some brexiters who argue that the UK doesn’t need to trigger article 50, nor spend two years negotiating leaving the EU (and thus its all just a big conspiracy to keep the UK in the EU). We just tell the EU we’re leaving and that’s that. Ah…..no!

To draw an analogy, this would be like quitting your job by just not bothering to showing up for work any more. Okay, so you’ll be leaving without a reference, without your pension contributions, without reimbursement for any outstanding expenses, without your next pay cheque and without the protections afforded by the law. You’d be at risk of your employer suing you for damages (generally your contract of employment will specify an agreed period of grace either side must give before the contract can be terminated) and you’d also not be eligible to claim unemployment benefits. Does any of that sound like a good idea?

The whole point of negotiating is that its a two way street, you reach an accord which gives both sides an acceptable agreement. Perhaps this is the problem of course, the Brexiters think that they can have their cake and eat it and thus the idea that they have to “negotiate” or “compromise” is alien to them. However by refusing to negotiate the UK would essentially be a conceding the field to its opponents. In other words the EU will decide the terms of the UK’s exit, without the UK being consulted.

Naturally the consequences of this could be quite serious. There’s a long list of issues that needs to be resolved and not just with the EU. The UK is doing something that isn’t really governed by existing legislation, so in theory it could leave the country in legal limbo if other nations don’t co-operate. Keep in mind article 50 was originally written by a British lawyer to provide some semblance of an exit mechanism, should it become necessary.

For example that 60 billion the EU says they will charge the UK as its exit fee from the EU. Now I’d consider that at present a negotiating position that they’ll likely horse trade away in exchange for the UK making certain favourable concessions (although the UK will inevitably still face some sort of bill in the end and it will probably be in the tens of billions). However if the UK doesn’t negotiate its exit, then obviously they’ll just slap that bill onto the UK and give the country 30 days to pay, perhaps they’ll even make it higher.

What’s that you say? You’ll refuse to pay? Okay and then the EU starts ceasing UK government assets, freezing bank accounts, imposing punitive taxes on UK companies and businesses or ceasing goods at Calais. Recall that a few years ago, after the Russians reneged on their debts (under Yelstin) it lead to them facing all sorts of sanctions from creditors. At one point a bunch of lawyers showed up at a French air show and tried to impound a group of Russia airforce planes. The Russians actually took off and fled back to Russia to avoid being impounded. That’s the sort of stuff the UK would be facing. The UK’s failure to pay this bill would technically count as a sovereign default, which would mean the UK’s credit rating would be cut to near junk status which would cause a whole host of financial problems.

Ask any lawyer and they will tell you that if someone is suing you in court for money, the worst thing you could possibly do is ignore it. They’ll win by default, the court will appoint a bailiff who’ll come round to your house or place of business and start impounding goods. You can make all the excuses you want at that point, they won’t listen and they don’t have too (they have a county court warrant in their hand). If they are in a good mood they might give you an hour or two to come up with the cash, before then start loading your stuff into their van. And they’ll keep coming back and coming back until you pay up. That’s what the UK would essentially be facing.

And then there’s issues like the WTO. The UK’s membership of the WTO is in a state of limbo. Now in theory so long as nobody kicks up stink it should be easy enough to straighten that out. However, if we’ve left the EU without agreement and are now locked in a trade dispute with them, quite obviously that will have to be resolved first. Without WTO membership the UK will find it quite impossible to trade abroad in any meaningful way.

Then there’s the status of UK citizens in the EU. Without an agreement it will be up to the EU, if not individual EU states, to decide on their fate. My guess is they’ll offer some sort of duel citizenship to the UK citizens they want to keep (i.e. the working age taxpayers living in their countries) while kicking out the pensioners who they want rid of (more precisely, they’d refuse them health care and hit them with a massive punitive tax on their pensions to force them to return to Britain). The French will no doubt withdraw the current border arrangements and simply wave through masses of refugees straight onto Ferries bound for the UK. So we’ll see a drop in east European workers replaced by hordes of pensioners and Syrian migrants.

But we’ll be able to send all them Polish people back right? No! You can’t deport someone to a government whom you don’t have relations with. This is exactly the problem with refugees, they’re in legal limbo and thus can’t be deported back to their country of origin. If the UK left the EU without triggering article 50, then all of the EU citizens would fall into the same category. It would be legally very difficult if not impossible to deport them, or any Syrian refugees for that matter.

And it won’t just be people coming in but goods too. As I’ve pointed out with regard to the post-brexit Irish border, its not people you need to worry about but contraband. Without a bilateral exit agreement from the EU the smugglers will be having a field day. They’ll be shipping in truck loads of tax free booze, cigarettes and petrol, undermining UK businesses and depriving the treasury of valuable tax income. As it is there needs to be some sort of an agreement reached to prevent this becoming a major problem.

And they’ll also be shipping in drugs too. Ireland is already a known transit route for drugs into Europe and in particular shipments into the UK. Our rugged West coast with its countless inlets and bays is virtually impossible to defend and patrol. And the Irish countryside, with its rabbit warren of narrow boreens and remote farm houses, gives smugglers plenty of places to hide stuff. Currently intercepting such shipments is a major focus of attention by customs officials both sides of the border. And its achieved by mutual trust and co-operation. Destroy that agreement and the only winners are the smugglers. In short, leave the EU without triggering article 50 and the only think that will get cheaper in Britain afterwards is the street value of heroin and crack.

So no, the UK can’t leave without triggering article 50. Doing so would be the height of irresponsibility and grossly stupid. Yes article 50 is designed to basically let the EU screw over the country that is leaving. But that’s still better than the alternative, leaving and getting screwed over by the rest of the world permanently.

Tories favour diesel farms over wind farms

Reblogging this from my energy blog….

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There are no sliver bullet solutions to the UK’s current energy problems. Wind power can certainly help, its led to big drops in the UK’s carbon footprint already, but only as part of a balanced energy diet within a grander overall energy strategy. However the Tories are hostile to wind power, preferring instead foreign owned nuclear and fracking, even thought neither is in a position to deliver any significant quantities of energy for some time to come.

This raises the risk of black outs if something isn’t done to plug the gap. So what is the Tory solution to this looming energy gap? Well instead of wind farms they favour diesel farms, clusters of diesel generators in fields up and down the country, subsidised by taxpayers I might add. If you ever want an illustration of everything that’s wrong with UK energy policy this is it, where to start with this one.

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Well for starters, diesel generators, while cheap to install are expensive to run. That’s why they are only ever used for generating electricity where there’s no other alternative (e.g. off grid power generation or backup generators). And with oil prices now on the way back up, those costs will start rising. They aren’t very efficient either. Yes a diesel engine in a car is more efficient than a petrol engine. But for power generation CCGT or IGCC plants have significantly greater efficiency. Potentially up to 55% efficient v’s at best 35% for diesel (and more typically 30% once the BoP is accounted for).

This also means that diesel generators are far more polluting, both in terms of carbon emissions and in terms of all the other gunk that comes out a fossil fuel plant. It beggars belief that someone can object to a wind turbine, yet look the other way to a bunch of these noisy beasts belching out carcinogenic fumes morning, noon and night. And again, if you are a UK resident, your paying for em. Carbon capture and storage is also a lot harder to implement with diesel farms than with the aforementioned gas cycle plants. So we lose that option too.

The irony is that I’ve long favoured the idea of distributed power generation, over centralised power stations. However, my preference is for CHP systems. They can run on a variety of fuels, including biomass or hydrogen (as a long term replacement for natural gas). And as we make use of the heat to meet winter heating demand (which represents a greater proportion of the UK’s energy demand than electricity remember), they are much more energy efficient, up to 85% efficiency is possible (so even running on fossil fuels, they’re 2.5 times better than diesel farms and nearly twice as efficient as a gas turbine plant).

So it would be all too easy to alter this policy slightly and achieve a similar result, just one that promotes renewable energy, cuts emissions, lower energy costs and helps keep homes warm in winter. So why is the government opting for diesel farms over CHP? Because CHP plant would be based in cities were the plebs live. You think home county toffs what money spent on keeping the great unwashed warm in winter! When instead they can earn a nice pot of cash putting a few diesels in some idle corner of their estate. Furthermore CHP might actually work (up to 40% of some European countries installed capacity is CHP), hence they’re will be no need for fracked gas or new nuclear plants. They are picking the worst possible energy option not despite it being so awful, but because it is so awful.

Any semblance of sensible energy policy has long been abandoned by the Tories. I think the UK’s post-brexit motto has to be go sell crazy some place else, we’re all stocked up here!