Brexit Titanic Now Boarding

This is a response to the article published in the Telegraph on 24 February 2016 by Gerard Lyons, economic advisor of Boris Johnson, entitled “The EU is like the Titanic, and we need to jump off before it sinks“. The extracts of the text of Dr Lyons are in italics.

The European Union is like the Titanic. Imagine being in Southampton harbour the day the Titanic set sail. Its size gave the impression of invincibility: safe and secure. It wasn’t. Despite receiving warnings of impending danger it didn’t change course, hit trouble and sank.

Because it is huge, some in the UK feel we would be safer and economically stronger in the EU. This is wrong. We now have the opportunity to jump ship to safety. An opportunity we are never likely to have again. Not a leap into the dark, but for those able to look ahead, a move to safety.

It is true that the EU is complex and needs deep reforms for it to be more democratic and effective, but let us ask ourselves this question: who are about to board on a very proud and apparently seaworthy vessel, full of enthusiasm and self-belief, in search for better seas away from the European mainland? The Brexiters.

I love metaphors, but only when they are used with care and wisdom. The Titanic was a British RMS ship.

In so far as the substance of these claims by Lyons, I would say that the EU is home to countries like Germany or Finland where the standards of living are higher than in the UK and whose enterprises in a number of key sectors are better equipped, technologically and financially, than their UK’s counterparts. They have to work under the same EU regulations than us, but they know how to deal with them.

These include returning sovereignty and having a meaningful immigration target that can be met.

On EU matters, sovereignty is shared. By being part of the EU we extend our sovereign powers to the rest of the Union. It is called influence and co-responsibility. EU Treaties are approved by national governments and parliaments, including ours. There is not a single piece of legislation in the EU that does not stem, originally, from a British-backed rule.

Immigration is the result from British firms not being able to find sufficient workers to fill in positions. Immigration is fuelled by the stupidity of our establishment, the functioning of the markets and the inability of successive UK Governments to get things right on a number of policy areas. Here are three sectors, not the only ones, where immigration is a necessity for the UK:

1) Health: The lack of Government investment in training doctors and nurses is the direct result of Britain being a “low tax” country for invisible entities of all types.

2) Services: The wages of UK working classes in relation to the cost of living are very low. A waitressing job in London is only suitable for people who don´t have a family to look after and are “happy” to survive in shared low quality accommodation.

3) Education: The stress of school teachers, widely reported by Unions, and the failure of our system, is motivated by a managerial approach to Education, by an excessive workload and by a plethora of rules and protocols that do not allow the professionals to get on with the jobs of educating young people. These rules do not come from the EU, but from the department that Mr Gove, another Brexiter, was running until not so long, and from previous governments, to be fair on him. Regulatory diarrhea (from the Spanish “diarrea legislativa”, used by the Spanish liberals to mock over-regulation) is also a UK home grown disease.  Teachers from abroad are in high demand as UK teachers are increasingly dismayed and not many young people pursue a career in education.

So, will there be an army of UK public servants telling UK employers how many people from abroad they can hire in each case, in each type of business, in each city? Is this the idea of a free-enterprise Britain? How many regulations, quotas and forms will this generate? Will they be second class workers, with less rights for similar positions?

We can focus attention on what is needed for small firms and for ordinary workers across the whole country. Outside the EU we can position the UK to be outward looking.

No way. You cannot trust the Tories on this. Ordinary workers in the Northern and Central countries in the EU are better off than their UK counterparts. If it was not for the European regulations, UK workers would be even worse than now in terms of social rights.

Leaving the EU will come with transition costs. While the UK public may want quick wins, the most important thing will be stability, a road map for the future and a clear strategic vision. Just as a new government may require one or two full terms to implement its manifesto […]

Brexit will be an economic shock. We encounter such events throughout our own lives, when we move house or change jobs. Unless planned for they can be disruptive. That doesn’t mean growth will contract or jobs will be lost, but investment plans may temporarily be put on hold.

Well, at least the author of the article is honest on this, but does he have a figure for the transaction costs? Are we going to pay it pro-rata, or would there be job losses resulting from these costs? Is he offering himself to give up his job as economic advisor of Boris Johnson so that we can cover them?

One way to picture this growth is the letter “V”, or better still, a tick – a short fall in growth followed by a much larger rise. Pre- and post-referendum would resemble the downward stroke of the V. A rebound would follow later.

A Churchillian slip there with the “V”. Perhaps it is a V of another kind what we would get. This is all speculation. Hot wheels on thin ice.

The first stage will be an agreement on our terms of exit. We could invoke Article 50 that triggers a two-year process. Or, depending upon the politics, engage in a major renegotiation. As we are the EU’s biggest export market, economic incentives suggest they will negotiate sensibly and agree a deal on goods and new guidelines on movement of people. However, the EU has not acted sensibly in recent years and they might not do so in any exit negotiations. This fear of a tough negotiation should not be a reason to vote to remain in the EU, but highlights the difficult near-term path ahead. But many countries outside the EU trade with it, we would be another, and one with a very competitive service sector. This renegotiation period also allows time to put in place other necessary Brexit measures. One is a timetable to repatriate powers.

Well, on paper it looks great. It is like one of these rehearsed moves in football. Or like the famous run of the minies out of the Italian vaults with the gold, with the “self-preservation society” song in the background”. Now, the politics of these negotiations are not so cinematographic. This article by Dr Lyons in the Telegraph is being read by thousands of people abroad, including negotiators from other EU countries, so this is no slick cunning secret plan any more, I am afraid.

Also, after so much disrespect shown to EU governments, after so much British supremacist claims about democracy and self-reliance from people like Janet Daley, or so many unfortunate statements like the one by Boris Johnson, who said in his Brexit article of 22 February in the Telegraph that “We have spent 500 years trying to stop continental European powers uniting against us”, does anyone think we can have a normal friendly negotiation on Brexit? It will be harsh. The outrage in the continent about the arrogance of Brexiters is growing. Try to see it from their point of view: Cameron goes to Brussels to meet 27 heads of government. He shows a half-baked shopping list of reforms aimed at appeasing the right-wing media, rather than improving the working of the Union. His vision of the EU membership is purely economicist. He insists on slashing workers rights. Then, on his return to London, half of the country, full of pride, wants to leave, ignoring what the EU means in terms of cooperation, inter-cultural understanding, solidarity and friendship and belittling the efforts that those other governments of those countries have made to allow the UK to get some of its demands, in the way of a especial status, in a complex scenario.

Between 2013-14, Whitehall produced 32 detailed reports on the competences that the UK has transferred to Brussels in different areas. This provides a basis from which to work.

Whitehall? They love regulations as much as the EU Commission. 32 reports! The transferral of powers will be simply a change on the header of the documents from the EU. Rules are necessary, unfortunately. Any exports to the EU, even if we are totally out of the EU, will have to comply with the consumer protection standards and safety rules of the EU. Repatriation of powers is a copy and paste job of EU law.

Another is to how better spend our EU contribution. This should go towards funding our public services properly. We also need to identify areas where EU funding may be withdrawn, such as scientific research, on students and the arts, and ensure this is covered fully with some of our previous EU contribution earmarked for these.

One of the beauties of the EU research funding schemes for universities is that they emphasise cross-border collaboration between different institutions. That type of research is highly valuable because a diverse pool of expertise can be shared at European level. Synergies. Economies of scale. By having UK only research funding, we would be killing another hen of golden eggs. We would end up cooking ourselves in our gravy, freshly prepared in the kitchens of the Titanic, of course (we shall have no stock cubes).

We have a great opportunity to make trade deals that boost exports, but first we would need to rebuild the skill set to do so. Inside the EU our demands are only one of 28 when it comes to trade. Outside, we would have to replicate existing deals, and learn from the likes of South Korea and Singapore, and make trade deals that play to our strengths, that are iterative and are with the fast-growing regions of the world.

Again, this is hot air. It sounds very good, but we have to understand that the success of any trade deals between the UK and other countries is also determined by the deals that those countries have already with our competitors. Brexit means that the list of our rivals will include the EU itself, and everyone else, for that matter. What we need is more influence in the EU to ensure our interests are respected there. But for that to happen, we need to be a serious partner.

With Brexit we have the opportunity to safeguard workers’ rights, ultimately determined by Parliament and by UK voters, not bureaucrats in Brussels. It is not possible to protect workers’ rights with mass migration.

This is the most cynical claim one can imagine. The tendency of the UK Governments since the 1980 has been to stop employment laws from the EU, depriving British workers of rights. Blaming mass migration for the lack of willingness by UK Governments to protect UK workers’ rights is tantamount to racism. It is like saying, “we would give you better rights if we did not have to give those same rights to the foreigner workers in the UK too”.

But low migration does not mean no migration. An excellent Civitas report last December by Cambridge Professor Bob Rowthorn showed mass migration suppresses low-skilled workers’ wages, and adds to pressure on housing and public services. The gains go to the migrants and to the employers. We need to control the scale and ensure we let in only the skilled migrants we need.

As I said before, workers with all types of skill-sets come here insofar as they are actually needed. If there were no jobs, they would not come. Are you going to force employers not to take the best person for the job?

We should not kid ourselves that the City of London is somehow safe in the EU when we did not achieve a veto to protect it from greater control by the eurozone and from decisions of the European Court of Justice. Leaving creates initial challenges over passporting of financial services, and possible loss of euro clearing, but I am optimistic. London is so much more competitive than any other financial centre in Europe, with its concentration of skills, knowledge and expertise. Also, more regulation is being set at an international level, which is important as London’s competition is global.

Well, parts of the City are starting to brexit Brexit. The London Stock Exchange (LSE) is again negotiating a merge with the main German Stock exchange to become one single entity. With the Germanisation of the LSE, as the German partner would have 52% of the shares of the new company, an important British institution will protect itself from Brexit. They are clever. I am sure they have great economic advisors. Will there be other companies, or institutions or people allowed to opt-out Brexit without having to physically leave? I don’t think so.

The vision is to be a globally competitive economy, based on low taxes for firms to succeed, leveraging off our universities and talent, and founded on rising productivity through increased investment, infrastructure and innovation.

Low taxes? For whom? I can see no chance for working people to prosper in a low-tax Brexit. How will investment in education, in infrastructure or in research and innovation be paid for? Those are essential ingredients for increased productivity. Ask the Germans.

Brexit is a neo-victorian, romantic, unrealistic, ill-informed, overconfident outburst of the wrong type of patriotism that has been brewed for a number of years by irresponsible media. Call it off. Let us concentrate our energy and our patriotism in building together a better Britain as part of a better Europe where working people do not see themselves forced to migrate or rely on tax credits to meet ends, a Europe with fruitful and responsible trade focused on innovation, sustainability and quality of life, more democratic European institutions accountable to the European people. This would deliver long-term stability for Britain and the continent. I would be happy to join that romantic, yet safe enterprise. No life jackets required.

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