Friday 18th January, 2013: The Prime Minister proposes a ‘fresh start’ on the arrangements which govern Britain’s relations with the EU. He intends to emphasise the importance, for this country, of free trade and seek to repatriate powers which more properly belong to the UK. But, as the economist Prof Tim Congdon warns, we may have to look beyond the single market and the body of EU law and directive, to negotiate a free trade agreement with our European neighbours.
Over the historical long run Britain has been a champion of free trade. To their credit most Westminster politicians are today in favour of free trade between Britain and the European Union’s member states, and see this as the vital part of the larger relationship with our neighbours. But that admirable belief has made these politicians vulnerable to a trick of words and led them into a serious misunderstanding.
The phrase ‘the single market’ has been part of the lexicon of European integration since the 1980s. Indeed, the Single European Act of 1986 was marketed to the then Prime Minister (Margaret Thatcher) and her supporters on the basis that it facilitated ‘the single market’. The phrase has a clear connotation. A nation that belongs to and fulfils the conditions of the EU ‘single market’ thereby achieves free trade with other EU member states. By implication, EU membership is desirable if both the ‘single market’ can be retained and the many acknowledged disadvantages of membership can be somehow jettisoned. These acknowledged disadvantages include the intrusive and burdensome regulations contained in the massive corpus of EU legislation known as the acquis communautaire. Even worse is Britain’s subjection to the European Court of Justice, a foreign court with foreign judges, in disputes relating to the acquis. The ideal would surely be for us to combine ‘the single market’ (which we want) with escaping from the acquis , the ECJ and the associated mistakes (which we don’t want at all). Of course, the word acquis is French and in this context it could be translated in several ways. But it can be characterized, in a nutshell, as ‘the body of foreigners’ law that the UK must accept under the terms of its current EU membership’.
Friday 11th January, 2013: Following the debate in the Commons over capping rises in the rate of benefit, Politeia Director Sheila Lawlor argues that reform of the welfare system does not go far enough.
The Bill to cap benefit rises at 1 per cent prompted a row during the second reading in the Commons. For Labour the one per cent limit was unfair on poorer people. But for the Coalition tackling Labour’s 2010 deficit remains paramount and a one percent rise – in line with public sector wages - is hardly hairshirt territory.
However a more radical change will be needed to cut the overall level of debt (now through the £1 trillion barrier) and the high levels of public spending (c. 50 per cent of GDP) along with the taxes to fund it. Otherwise UK recovery will remain a distant aspiration with less and less to help the poor. The evidence is onthe side of cuts: Cutting public spending has helped to turn a number of ‘crisis’ economies around –along with reforms for sound legal and financial institutions or to protect property rights (see Going for Growth: The Best Course for Sustained Economic Recovery, by Ludger Schuknecht, Norbert Hoekstra and Holger Zemanek).The current battle to cut the Work and Pensions Bill therefore matters for recovery, but to win the battle the widespread culture of dependency must be tackled.
That culture emerged from the late 1940s particularly with welfare benefits. Sir William Beveridge, the welfare state’s founder, had insisted that benefits must be paid for by people themselves paying contributions during time of work. Benefit would then be drawn as a right as people in work had ‘insured’ themselves against lean times (topped up by the employer and the taxpayer). Those who did not work or contribute enough would be given a smaller, means-tested sum for subsistence –for shelter, clothing and food.
Friday 21st December, 2012: As new evidence emerges in the Andrew Mitchell affair, Politeia Director Sheila Lawlor argues that there must be change within Britain's police force.
We end 2012 with Britain’s police force in the dock. The arrest of a police officer in the wake of the ‘plebgate’ affair in Downing Street has now been followed by a second arrest. The evidence which led to Andrew Mitchell’s resignation as Chief Whip is under suspicion. The police appear to have leaked their internal logs to the press, fabricated evidence and attributed it to a fictional bystander. Though reports that he insulted the police – who prohibited him from cycling out of Downing Street – were said to be backed up by onlookers, CCTV footage shows no one standing by.
This is the third scandal to tarnish the police force in as many months. That they leak internal, unverified documents has already come out in the Leveson Inquiry. That they manipulate or falsify evidence was revealed in this year’s report into the Hillsborough tragedy. Indeed the account pieced together by the Bishop of Liverpool should have left us in no doubt of the degree of corruption and dishonesty which taints the police. At Hillsborough, innocent young fans lost their lives due to the initial incompetence and bad judgement of the police, compounded by a callous abrogation of their responsibility to ensure help reached the wounded and dying. What then followed was systematic abuse by the police of their own powers to falsify statements, lay a trail of false ‘evidence’, and falsely blacken the characters of the catastrophe’s victims.
Monday 10th December, 2012: Sheila Lawlor writes This week's pre-Budget Report indicated the extent to which the public finances must be stabilised if economic growth is to return. The evidence appears to be that the deficit will take longer to eliminate and UK public debt longer to shrink.
Although the Office of Budget Responsibility suggests a bleak picture with weak growth at home, and an economy not helped by the crisis in the Eurozone, all is not bleak. There is more to be done. First public spending must come down, having spiralled after 2006-2007 to around 50 per cent of GDP. The evidence from a number of economies which have been here before is that tough fiscal policy combined with market liberalisation and structural reforms can help economies recover reasonably rapidly.
Wednesday 28th November, 2012: As a new Governor for the Bank of England is announced, David B Smith welcomes the appointment. But he reminds the incumbent that if the financial sector is to play its role in getting money and credit to flow freely, he should resist popular or political pressures to play to his strengths as a hardline financial regulator.
Mark Carney had been a strongly tipped candidate at the start of the recruitment process. If his appointment came as a surprise, it’s because he seemed to rule himself out of the running. His reward package – including salary and the shortened five-year contract – suggest he could name his price, probably to compensate for the domestic upheaval.
Carney has much to recommend him, strong academic credentials and wide international experience. But the appointment also has another appeal: it sends a clear signal about the UK’s openness to global talent when one of the top jobs in British public life is thrown open to the world.
What about Carney’s record as Bank of Canada Governor? The contrast between the strong Canadian economy of recent years and the poor UK performance may explain Mr Osborne’s choice. However, the Bank of Canada was helped by its banking system being less open, competitively and internationally, than the UK’s. It was also helped by having a far stronger fiscal background than Britain currently experiences. Nonetheless, the international reputation of the new Governor will help restore the credibility of UK macroeconomic policy ahead of the Chancellor’s Autumn Statement on 5th December, when we will most likely learn that fiscal policy is badly off course.