Brexit and the waning days of the United Kingdom

[Sheilbh]

Interesting to see Rachel Reeves, who is Labour's Shadow Chancellor, in Washington saying that "globalisation, as we knew once it, is dead". She's very much centre left/on the right of the party and wouldn't accept any front-bench role under Corbyn. She's also apparently Starmer's most trusted shadow minister.

Now unfortunately she's talking about all of this under the phrase "securonomics" which makes me want to cry (the argument is basically about resilience and security for liberal democracies as well as households), but from what I've seen there's lots of interesting stuff. Very heavily borrowing from Biden but also, at last, someone saing the UK should start by working with our existing strengths energy, life sciences, professional services, creative industries and higher education rather than Johnson-style bluster that boils down to simply being Germany.

Summary from Guardian - but again for all the moaning about Starmer not quite doing the vision thing yet, which I think is true and fair, the bit where it seems most developed is Reeves on the economy and, I'd argue, Streeting on the NHS:

Pay attention to Rachel Reeves: her economic thinking is a return to sanity
Martin Kettle
The shadow chancellor has a vision for social democracy in an age of economic shocks and uncertainty – New Labour this isn't
Wed 24 May 2023 16.30 BST

The mythology of political history insists that politicians' speeches are important. A lifetime in political journalism tells me different. Political speeches have got to be made, and some politicians are good at them – Michael Heseltine, the best I have ever heard – but most speeches are events of the moment. They are decorative, not determinative. Most do not matter much and are rightly forgotten, even the good ones.

There are, though, occasional exceptions. Rachel Reeves' speech to the Peterson Institute in Washington DC on Wednesday has a claim to be one of those with a longer shelf life. Not because it was an oratorical tour de force stuffed with smart lines. It wasn't. Some of Reeves' terminology, such as her embrace of what she calls "securonomics", is a distracting barrier to understanding what is otherwise a key idea. But that's a small point. This speech matters a lot. It matters because the ideas and commitments it contains are serious – and because it addresses something indisputably important.

What it addresses is the long-term dysfunction of the British economy, now accentuated by Brexit. Inflation may have dropped to 8.7%, but it is still higher than expected – and food, services and underlying inflation are all still growing. Interest rates may rise again and are unlikely to fall soon. Britain's economy is walking wounded. The cost of living crisis remains acute for millions. Optimism is in short supply.

Reeves' speech was partly a response to the national imperative to put that right. But it was also about Labour's familiar need to prove to voters that it can be trusted with the economy. Unsurprisingly, support for the Tories as the best party for the economy has tanked. But economic confidence in Labour, though greater than for the Tories, still remains low. The issue is Labour's achilles heel. With an election now possibly less than a year away, the shadow chancellor needed to make a seriously big pitch. Hence the journey to New York and Washington DC for her keynote speech.

That speech, which also marked the publication of a Labour pamphlet titled A New Business Model for Britain, repays careful reading. It does so because it contains a structured – and, in significant respects, new – argument about the British economy. As such, it lays out Labour's direction of travel on the dominant issue now facing Britain, and the one by which a future Keir Starmer government will ultimately be judged by voters. Such is the depth of mistrust in politics today, it is tempting to say it makes an argument by which the very future of credible democratic government of any kind in Britain may stand or fall. It's as important as that.

At the heart of the shadow chancellor's argument are four core principles. The first is that the rules of the global economy have changed because of repeated shocks since 2008. The second is that government has to be more proactive in order to establish the economic order that is so conspicuously under threat from those shocks. The third is that liberal economies must work together to do this, not against one another. And the fourth is that all this must happen within effective national fiscal rules – and not by allowing debt to balloon.

In the wake of the economic and political tumults of the past seven years, this reads very much like a return to sanity. Some of the building blocks that Reeves proposes may have been touted occasionally during the Conservative years, as when Theresa May argued for more active government, for instance. But they remained words not deeds, not least under Rishi Sunak, who is opposed to the idea of industrial strategy.

But what Reeves now advocates is definitely not a return to the past. Her long-term aim is to restore growth to the UK economy. But Reeves' approach is a world away from Liz Truss's slash-and-burn dash for growth. It would also propel a Labour government into a very different place from that adopted after 1997 by New Labour. In some ways it would be more New Deal than New Labour, and the whole project owes a lot to Joe Biden's administration in Washington and the government-led investment that marks Bidenomics.

In Reeves' strategy, the state would play a more overarching role and would not vacate the territory of decision-making to the banks and to business. An industrial strategy – focused above all on the green investment programme, worth £140bn over five years – would dare to speak its name again for the first time since the 1970s. And supply chains would be made more secure, even protectionist in some respects, by lessening dependency on China, and by a more active, pragmatic alignment with Europe.

Reeves is traditional in one sense. She is trying to carve out a middle way between free-market globalism and state control of the economy. This is something that every social democratic party in western Europe has attempted to do, albeit within various different national traditions and with changing shibboleths, since the 1950s. Hers is a 2020s version, and although it owes much to the US Democrats, it also has things in common with the German SPD's programme. To dismiss all this as Blairite would be trite.

A week ago, the New Statesman dubbed Reeves the most influential person in British progressive politics today, with Starmer relegated to second place. Her Washington DC speech lends weight to that case. If nothing else, it is the most substantial answer that Labour has yet offered to those who claim they do not know what the party now stands for.

    Martin Kettle is a Guardian columnist

[Admiral Yi]

I'm under the impression that the economies that went with stimulus rather than austerity performed better.

Which countries are you comparing to?  I'm assuming not Greece.

[Jacob]

I'm under the impression that the economies that went with stimulus rather than austerity performed better.

Which countries are you comparing to?  I'm assuming not Greece.

UK vs the US, Canada, Northern and Western Europe. I think those are the broadly comparable economies.

... but I admit I speaking of the impression I've developed over the years rather than from cold hard data, so it's possible I'm just making assumptions to fit my preconceptions in this case. But it's an honestly held impression at least

[Josquius]

Yes. The US is doing significantly better than those places that pushed austerity.
And that's just looking at economics. The true damage of austerity lies more in the penny wise pound foolish nature of hollowing out the state. You can usually get away with this for a little while but after 13 years the damage is clear to be seen.

[Admiral Yi]

You both seem to be operating under the mistaken assumption that the goal of deficit reduction is to increase economic growth.  It is not.  It is a lesson of Intro Macroeconomics that increasing a deficit will, under conditions of less than full employment, lead to increased growth, and conversely that decreasing the deficit or running a surplus will decrease growth or contract the economy.

The point of deficit reduction is to avoid a reduction in your perceived creditworthiness, i.e. the willingness of lenders to provide funds at lower interest rates.  That is what happened to Greece.  Their hinky financial data was revealed, everyone saw that their debt was larger than previously  thought, and the bond market responded by not lending.  Avoiding that fate seems like common sense to me.

It's common sense because there are times, like major wars or other catastrophe's, when deficit spending is extremely useful, so it's helpful to have the ability to borrow in those times.  But this ability is finite.  It's not a God given gift that one can use without limit.

There is also the intergenerational moral issue.  Every dollar of current deficit spending is a dollar that your kids or grandkids will have to repay.  They will be the ones paying for your police, or education, or health care.

[Josquius]

You both seem to be operating under the mistaken assumption that the goal of deficit reduction is to increase economic growth.  It is not.  It is a lesson of Intro Macroeconomics that increasing a deficit will, under conditions of less than full employment, lead to increased growth, and conversely that decreasing the deficit or running a surplus will decrease growth or contract the economy.

The point of deficit reduction is to avoid a reduction in your perceived creditworthiness, i.e. the willingness of lenders to provide funds at lower interest rates.  That is what happened to Greece.  Their hinky financial data was revealed, everyone saw that their debt was larger than previously  thought, and the bond market responded by not lending.  Avoiding that fate seems like common sense to me.

It's common sense because there are times, like major wars or other catastrophe's, when deficit spending is extremely useful, so it's helpful to have the ability to borrow in those times.  But this ability is finite.  It's not a God given gift that one can use without limit.

Keeping your credit rating as high as possible in the short term at the expense of both the same rating in the long term and everything else in the country  is pretty shit prioritisation.

There is also the intergenerational moral issue.  Every dollar of current deficit spending is a dollar that your kids or grandkids will have to repay.  They will be the ones paying for your police, or education, or health care.

IIRC something like a quarter of the budget is spent on pensions, with a large chunk of the half spent on healthcare also going to the old.

But sure. People who are working today should feel guilty about anything spent on making the country a better place beyond the immediate next 5 years.

You also seem to be missing the fact here that austerity is actually worsening the situation for future generations whilst spending is creating a better situation and less debt to worry about for future generations.

[Tamas]

Where Yi has a point is that deficit spending should not be used to cover recurring expenses, if it can be helped. But it definitely should be used for improvements such as better infrastructure and such.

[Sheilbh]

Net migration figures are lower than the pre-briefing at about 600k net immmigration - although this in part seems to have been driven by a methodology change by the ONS which started this year, using the previous methodology and it was about 750k net immigration. It is also still a record high following last year's record high of about 500k.

It'll be interesting to see more breakdown by Migration Observatory who are normally reall good on this. But it's large driven by non-EU migration which breaks down into about 250k for work, 350k for studying, 50k for family reasons as well as 175k through the Ukraine and Hong Kong scheme (not sure they should be counted together - seem quite different) and 75k for asylum. There are still EU immigrants - especially about 150k to study - but EU migration has now moved to net emigration.

There are signs that the numbers are reducing. But this is broadly the system (implemented under Johnson's government) working as designed - plenty of students and lots of workers (particularly in healthcare, social care and IT).

[Tamas]

Maybe working as designed but definitely not working as advertised.

[garbon]

Maybe working as designed but definitely not working as advertised.

Common fun thing to demonize immigrants while also having systems that appreciate them.

[Sheilbh]

I know people just take the piss out of it but I think it is possible that the slogan reflected what people wanted (and would have been fiercely focus grouped). That it was always more about "control", which is not necessarily the same as numbers. Even now if you give people a choice in polls over 60% will still choose that the UK government controls who is or isn't allowed in over increase/reduce options. And that's what this looks like. The system is what the Tories promised in their 2019 manifesto - though it's fair to say they've failed in their commitment to bring "overall numbers" down (though that was less precise than Cameron or May's manifesto pledges to reduce immigration to under 100k pa which were always impossible hostages to fortune).

There is majority support for all the big drivers of immigration right now. So people wanted control, but support skilled workers migrating (particularly into the NHS), students and the Ukrainian and Hong Kong routes - this system is delivering that.

There's a general view in the polling that migration is too high, but only a minority agree with that and think we should cut any of those routes/drivers. A larger group feel that migration is too high but support all of the routes that covers about 90% of people moving into the country. It feels like yet another example of the British public opinion strongly holding x view but equally strongly opposing all practical measures that could deliver it.

I think it's why when Braverman presented the cabinet with 12 options to reduce legal migration they only supported one of them - on dependents of taught masters students, which I think is likely to have a relatively small impact. Although there are signs the numbers are falling from a peak now as fewer Ukrainians are moving to the UK. I think it also shows the mistake of Sunak deciding to prioritise small boats so much is that in all of those stats, they're about half of the asylum figure so 40k or so. They're unlikely to be able to stop them fully and even if they succeed it won't really change the headline figure that much. It feels more likely that it'll just draw attention to their failure to stop them/deliver and to the headline figures for anti-immigration voters.

Separately I just saw this and am going to spend the day furious again now

Hugo Gye
@HugoGye
Is it well known that Pen Farthing's charity Nowzad has reopened its operations in Kabul, with the permission of the Taliban, and is still housing Afghanistan's dogs and cats?

[garbon]

The UK took back control so well that at my job we have one English person in our UK team.

[Tamas]

Come on lets stop pretending people wanted control for anything else than to cut back on immigration. Bloody hell I was being blamed for traffic jams on account of being Eastern European, among other colourful things. Although my favourite being the Indian immigrant Uber driver hating on East Europeans for coming in and taking free housing and free perks for nothing.

[Syt]

The UK took back control so well that at my job we have one English person in our UK team.

In our office we have 7 natives out of 27. Well, technically 9, but 2 have, though born and raised in here, no Austrian citizenship (Austria is making it kinda hard for people to get an Austrian passport, esp. if you have non-EU citizenship).

[Sheilbh]

The UK took back control so well that at my job we have one English person in our UK team.

Exactly.

Johnson's government abolished quotas on work visas, got rid of the requirement to do an assessment of whether a Brit could do the job (pre-Brexit, a European) and basically mean that just over 50% of vacancies in the UK since that change would be open for someone applying from anywhere else in the world and getting a visa. According to the OECD assessment of attractiveness for "top talent", the UK is now in the top ten most attractive destinations in the OECD (and rose more than any other country since the last assessment). The big area we still fail on is costs and income requirements.

But it is fully within the control of a British government/democratic politics - just like, say, Canada or the US visa systems are - because criteria are set and visas are issued on that basis.

Come on lets stop pretending people wanted control for anything else than to cut back on immigration. Bloody hell I was being blamed for traffic jams on account of being Eastern European, among other colourful things. Although my favourite being the Indian immigrant Uber driver hating on East Europeans for coming in and taking free housing and free perks for nothing.

Yeah I agree. Many of the people who voted did so to reduce immigration. But I think there is a difference between what motivates people to vote and what they're voting for. There is a reason it was pitched and the line of the campaign was "control" not numbers. And there was plenty of stuff about immigration being based on the skills people have/what they can contribute, rather than where they're born.

But immigration is at its highest level, the number of people who care about immigration is at its lowest levels in 20 years and there's more support for immigration in polling than ever recorded. I think a part of that is because of the sense of control v free movement. Though I'm not sure how much (yet), for example I think the pandemic shifted opinion too). But I always thought that post-Brexit Britain would have as much or more immigration, just from different locations, I think this is good but also broadly what I expected. That was also the bet of a not insignificant number of minority communities in voting leave - and I think they're possibly the only Leave voters who are fully happy that they got what they expected.

Having said all that, I take Tom Forth's point, the two big reasons people object to immigration in polling is public services and housing - given the state of both, I'm not sure they're mad to worry. I fully support increasing immigration but we need to invest in housing, infrastructure and services to keep pace with growth and I'm very worried about that bit - without it I think there will be a (justifiable) public trust issue and it will cause social issues if we don't invest. I'm not sure the UK's experiment of, for example, record high immigration and record low housebuilding is sustainable.