Will Brexit succeed in reducing immigration?

One of the many justifications offered by advocates of Brexit is that it will allow the UK to "regain control of it's borders".  I am doubtful that this is the case; it may do so, but if so it will come at a price.

Following Brexit, should that be the electorate's verdict, supporters and opponents alike will be hoping that the UK's economy continues to grow (as measured by GDP - the sum total of the nation's economic output).  For a nation's GDP to grow either the existing workforce needs to become more productive (generate more output, in terms of goods and services, at a lower unit cost) or the workforce needs to grow.  In the UK over the last 20 years or so, this demand for more labour has been met by immigration.  The UK's unemployment rate currently stands at 5.1%.  In such a low unemployment environment if a company wants to expand it's business but access to immigrant labour has been removed it will need to raise wages in order to hire more people - to poach them away from other employers.  This may appear superficially attractive, giving workers a pay rise, but in the long run it is bad news.  The UK has a long running productivity problem (currently worse than France's), which makes our exports relatively expensive.  This has led to us having the worst trade deficit in our history - we import massively more goods and services than we export.  If wages rise we become more unproductive and the deficit becomes worse - a situation which in the long run is not sustainable.

So, post-Brexit, wages will tend to stabilise at a level at which our productivity does not worsen and as a nation we are able to continue to compete.  Competition for employment is what constrains wage growth - when we no longer have immigration to provide that competition it will be provided instead by an increase in unemployment.  The market will drive up our productivity through the mechanism of falling exports leading to higher unemployment.  The final result of a Brexit followed by closing the borders will be a shrinking GDP, falling wages and higher unemployment.  That increase in unemployment has associated welfare costs which will have to come out of a smaller tax take due to the smaller size of our economy.

Overall post-Brexit Britain is not an attractive prospect, which is why I think those who vote for Brexit in order to reduce immigration will find themselves disappointed.  No government wants to preside over a shrinking economy, permanent recession and falling living standards - for this reason I believe Governments will continue to listen to the demands of business and the borders will remain open.  Globally, mass immigration is here to stay and our time would be better spent in finding ways to live with it.

Election 2015 - It's grim for Labour

Originally published May 2015.

Well what a depressing result that was. It is of little consolation but I called the result almost exactly back in March 2013 - http://theviewfromstalbans.blogspot.co.uk/2013/02/the-2015-general-election-is-far-from.html - I should have had the confidence of my own predictions to back it with money. Even Nate Silver got it wrong this time. What an opportunity missed!

So what of the future? We now have 2 years of uncertainty while the Tory party debates with itself over our future relationship with Europe; Labour's position is clear, as is that of the SNP, the Greens, the rump of Lib-Dems and of UKIP - it is only the Tory party that doesn't yet know where it stands on this key issue. In 2017 we could face the situation where the UK as a whole votes to leave the EU while Scotland wishes to remain in; that will be the final nail in the coffin for the Union - as the SNP will certainly demand another referendum at that point.

I see two major issues on the economic front - the first being the UK's continuing productivity puzzle and the second the build-up of private debt. Since 2010 wages have stagnated, though they are starting to rise again now, but our GDP per capita has not improved - our productivity is still awful (we are still behind France on this score). This harms our exports which is partly why we currently have the worst trade deficit ever recorded. This needs to be addressed by investment in infrastructure and by improved education and training to up-skill the workforce; the alternative is a low-wage economy which continues to drive wages down. But given that pressure on pay is now upwards, our productivity and exports may just get worse. Osborne needs to do what Labour proposed which is to allow himself to borrow for investment where the investment can be shown to have a positive impact on productivity; unfortunately this has been ruled out so he would need to break an election pledge to do this - but seeing as the Tories happily abandoned pledges made in 2010 when it suited them (no increases in VAT, no top-down NHS reorganisations, eliminating the deficit, reducing the debt, reducing immigration, rebalancing the economy, etc), I look forward to seeing Osborne wriggle his way out of this one too.

However, a bigger issue is the nature of the current 'recovery'. Thus far it has been driven by consumption paid for by a build up of private debt - the UK has the largest private-debt-to-GDP ratio on the planet, bar Japan. It is now back to pre-crisis levels. When interest rates start to rise this debt will become unaffordable and we will start to see defaults - just as we did in 2007-8. House prices will fall and the Banks' balance sheets will be impacted - we may we well see bank failures and the need for bailouts once again. The situation may be made worse by an additional surge of unsustainable pseudo-growth fuelled by people bringing forward their pension savings spending and a subsequent collapse in demand further down the line. We'll know whether this has been the case in a few years' time.

Another concern is for the future of the NHS. There is a financial crisis building, with 98 trusts thought to be close to insolvency. I fear that the Tories will use this as an excuse to privatise large parts of the service to reward the healthcare firms that have helped to bankroll their election campaign. This will be a disaster for the future of the service as study after study has shown that outsourcing to the private sector consistently provides worse value for money. Numerous studies show that our NHS as currently constituted is one of the most efficient and best value for money in the world. Outsourcing will therefore lead to less money begin available for front-line services, but on this point the Tories' policy decisions are likely to be ideologically-driven rather than evidence-based - a large proportion of the party has long wanted to privatise the health service in the name of shrinking the state. I fear for the future of our NHS.

So the banks and hedge funds got the government they wanted but I look forward to seeing how the Government now attempts to square the circle of their contradictory electoral pledges - slashing welfare while protecting the vulnerable, child benefit and pensions, achieving a budget surplus while cutting taxes, cutting immigration while remaining in the EU, growing the economy without immigration and without investment to boost productivity, keeping Britain open for business and investment with one foot in the door out of Europe - the list goes on and on. There'll be plenty to write about.

Cameron's utter failure over immigration

Originally published November 2014.

“Net migration to this country will be in the order of tens of thousands each year, not the hundreds of thousands every year that we have seen over the last decade,” he said.  “With us, our borders will be under control and immigration will be at levels our country can manage.  No ifs. No buts.  That’s a promise we made to the British people.  And it’s a promise we are keeping.”

David Cameron, April 2011

"Net migration to the UK rose to 260,000 in the year to June [2014] - an increase of 78,000 [43%] on the previous year ......  The figures show rises from both inside and outside the EU ......  Net migration is now 16,000 higher than it was when the coalition government was formed in 2010."

BBC News, November 2014

The Tories' ridiculous 2010 election promise was never remotely achievable and they knew it.  They never had any intention of honouring it - it was merely another of their deceptions (alongside, for example, the notion that public spending caused the financial crisis) designed to get them into power.

Cameron and company are guilty of deception and utter hubris.  No ifs. No buts.

How UKIP misleads voters on immigration

Originally published November 2014.

Back in 2013 I wrote a blog post in which I predicted that UKIP's surge in popularity would fade before the 2015 election and that the Conservatives would win with a small majority.  It is looking increasingly likely that I got that badly wrong, though the Tories may still turn out to be the largest party in May.  I have to admit though that I am perplexed by the persistence of UKIP because as far as I can tell they are conning their potential voters on numerous fronts - in this case on immigration.  According to a recent YouGov poll, immigration is the top issue concerning most UKIP voters with the economy in second place.  This is interesting as the two issues are inextricably linked but UKIP's views on the two issues seem completely contradictory.

For instance one of the reasons UKIP supporters cite for their support is that foreign workers drive down wages.  This is true, but driving down wages is surely an objective of UKIP and Conservative economic policy - this, as they see it, is the route to increasing Britain's productivity and competitiveness.  This has been one consequence of the emasculation of the trades unions and the reduction in their ability to maintain wages through the lever of collective bargaining.  I would expect UKIP, as the self-proclaimed heirs to Thatcher, to support this.  Lower wages are the expected outcome when the Conservatives talk of creating a 'flexible workforce' - a workforce with no rights and no representation.  For 'flexible' we should read 'exploitable'.  Marx wrote of capital's need for a 'reserve army of the unemployed' for this purpose - what the Tories are creating, and which UKIP would presumably support, is a 'reserve army of the low paid' ie. people working part-time/zero-hours and competing with each other for the right to increase their hours - with no chance of instead increasing their rates of pay.  One way to prevent this undercutting of wages would be to implement a mandatory living wage - do UKIP support this?  Of course not - because it interferes with the free-market and makes us uncompetitive apparently!  UKIP can't have it both ways over this - they can't support right-wing supply side policies and then complain about the inevitable outcomes - to do so is to treat the voters as though they are idiots.

So instead of a living wage UKIP urge us to stop immigration, but I wonder whether their supporters are aware that almost the entire growth in GDP since 2010 has been due to an increase in the working population - ie. due to immigration.  We now have more people in work in this country than ever before but our productivity has remained constant despite higher (though now falling) levels of unemployment and static/falling wages.  What this means is that without immigration our GDP would have been lower, therefore the tax take would have been lower and so either taxes would have had to rise or even deeper cuts in services would have been required.  I wonder whether UKIP supporters understand this.  Going forward the same argument applies - if we want to keep taxes from rising and services from being decimated we need to maintain immigration - ie. we need people coming into this country who pay taxes and place few demands on public services.  To give Nigel Farage his due, he has acknowledged this and has publicly stated that he is willing to live in a poorer country with a lower standard of living if that is the price of controlling immigration - but I am not sure his supporters have taken this fully on board.

As alluded to above, migrants to this country, taken in aggregate, are net contributors to the country's finances - paying more in tax than they take in services.  This is logically obvious as it tends to be those that are young, fit and healthy that are the most willing to take the risk of moving to another country to live and work.  However to hear UKIP supporters talk (and also many Conservatives) you would think that most migrants that come here are a burden on the country - for instance you hear them talk of 'benefit tourists' ie. those that come here solely for the purpose of claiming benefits.  The reality is that unemployment amongst migrants is lower than amongst the indigenous population, which means that taken as a group the immigrant population more than pay their way.  In the case of any in-work benefits (tax-credits, etc) that immigrants may receive this is again a function of low wages - any tax credits or other benefits paid to people in work is a direct subsidy to the profits of exploitative employers.  If the employer isn't prepared to pay the level of wages their workforce need to live on then the taxpayer has to step in to make up the difference; the problem that needs addressing here is corporate welfare, not immigration.  I don't think all UKIP supporters understand this and instead believe that immigrants are a drain on the country; the question that needs to be asked of them is whether they are are willing to live with poorer services as a result of curtailing immigration in order to address a non-existent problem.

Another argument frequently used is that we are small island with finite space - immigration puts a strain on local infrastructure and drives up rents and house prices.  This is true.  However what is also true is that as immigration makes a net positive contribution to our economy we are perfectly able to build housing and infrastructure to cope with the additional demand if we want to - we just need to set the appropriate level of taxes to make it happen.  If instead we insist on slashing taxation on the indigenous population and therefore also on immigrants then the infrastructure will inevitably suffer.  Again this is the logical outcome of right-wing thinking - and it doesn't sit well with UKIP's plans to cut taxes - for example removing the top tax band and abolishing inheritance tax.  We should instead be embarking on a program of housebuilding and refurbishment for rent to rebuild the stock of social housing depleted over the last 30 years.

So in summary what UKIP supporters should think about is that a withdrawal from the EU and a halt to immigration will lead to Britain having a smaller economy and thus becoming a poorer country with a lower standard of living and worsening public services.  Do they understand this and is this what they really want?  I am not sure that the answer is 'yes' on either count.

Mandela - The Tories still owe him an apology

Originally published August 2013.

We have lost one of the greatest men of our time. I can't match the numerous tributes in the media over the course of the last few days but can reflect that from a personal point of view that his cause clarified the difference between left and right in the politics of my generation.

When I was at university in the early 1980s the anti-apartheid movement and the ANC were our cause celebre. The governing Conservatives and their disgusting student wing, the Federation Of Conservative Students, saw fit to defend the minority regime. The Tory party at that time had absorbed large numbers of the defunct National Front, attracted to Margaret Thatcher's particular brand of nationalism and racial prejudice. A large chunk of the party was therefore made up of closet, and not-so-closet, racists. We on the left campaigned for recognition and support for the ANC, but the right continued to condemn them as terrorists.

We saw a manifest injustice that needed to be swept aside, but the right insisted it would lead to a bloodbath. We argued for one person one vote, but the right insisted that 'blacks' were incapable of self-government. To us there was no reasonable objection to international action against Pretoria, but to the right hesitation, obstruction, delay and undue consideration given to white interests was the preferred approach. While we boycotted Barclays, they refused to join international sanctions. We sang "Free Nelson Mandela", they sang "Hang Nelson Mandela".

It makes me uncomfortable and a more than a little angry now to see Conservatives joining in the tributes and quietly forgetting their party's past behaviour. To be fair to David Cameron he did apologise back in 2006 but with his 'modernisation project' now proving so unpopular with the grass roots and his party's consequent lurch to the right it no longer suffices. A large number of those former FCS members who called for Mandela's execution are knocking around in the higher echelons of government and the Tory party now. They should take this opportunity for an up-front, unambiguous, front page apology undersigned by all past offenders for their profound lack of judgement, and for delaying the process of reform. They should ask themselves how many extra people suffered needlessly or even died as a result of their continued support for the apartheid regime.

Until I see that apology I won't believe the rank and file have really changed. I am not holding my breath.