Garvan Walshe: The time for fine-tuning Brexit is over. The Government needs to focus on making the most of their own deal.

6 Jan

Garvan Walshe is a former national and international security policy adviser to the Conservative Party.

It’s a year since the entry into force of the “Trade and Cooperation Agreement” between the UK and the EU, in which the Government chose one of the most decisive forms of Brexit, with Great Britain leaving the Single Market and Customs Union.  And the UK declining to participate as associates in Europol, the Erasmus programme, and the European Defence Agency.

The Government took the view that the terms offered weren’t good enough to satisfy the grievances of those who votedLleave in 2016, and nor, indeed are the terms of the deal it itself negotiated: that’s why it is trying to revise the Northern Ireland Protocol.

But it is now five and a half years since the referendum vote, and even Leave voters are tiring of this approach, with only 48 per cent endorsing the government’s handling. Its time would be better spent making the most of the situation they have crated, instead oftrying to fine-tune the Brexit deal further. Two areas are in particular need of attention.

First, Brexit entails a restructuring of the British economy: the Government needs to focus on maximising economic advantage, rather than seeking to address the grievances that led to Brexit.

And second, now that the UK has left the EU, it needs to exploit its diplomatic relationship with a still reasonably friendly bloc to its maximum, rather than re-fighting the Brexit negotiations.

Economically, new barriers to trade in goods and services have been erected, and the net loss is projected to amount to four per cent of GDP each year in the long run.

Making good this annual loss requires dramatic improvements to productivity. Long term economic growth depends on equipping people with the skills for tomorrow’s economy. This cannot be achieved by policies to improve the conditions for people who lack those skills and are unlikely to acquire them, or be in parts of the country where they could take advantage of them even if they did. Rather, levelling up will only be affordable if productivity can be enhanced elsewhere.

As Richard Baldwin argues in The Great Convergence, modern industrial goods are manufactured in three main geographically concentrated clusters: south-east Asia, North America, and continental Europe. Leaving the EU’s Customs Union is a decision to uncouple the UK from pan-European supply chains.

Leaving the EU has also made it harder to access customers there, limiting Britain’s access to the high-earning part of the European value chain. This leaves two possibilities for profit, increasing access to other parts of the world, and taking new steps in design and invention.

Trade deals alone cannot make up the loss of leaving the EU, because trade is inversely proportional to distance, and the rest of the world is far further away than Europe, but ways of reducing other aspects of what trade economists call “trade resistance” can.

Having cut itself out of the only manufacturing cluster within reach, the UK has to rely on its dominant service sectors. Differences in regulations impede service sector trade, and this is hard to reduce without the sort of enforceable agreements to harmonise them that this Government considers an infringement of sovereignty.

This leaves travel costs and cultural difference. Travel to Europe apart, costs are largely a matter of airport infrastructure and, in the medium term, decarbonising air travel. Reducing cultural difference means persuading more British people to learn languages and about other cultures.

Another aspect of services is people. If more aviation and languages boost service sales abroad, effective immigration policy can boost their creation at home, with the proceeds (because immigration is in virtually any circumstance economically beneficial) being used to build up domestic human capital too.

As David Willets has argued, we should build more universities in places that lack them, so that more young people can participate in the international service economy. All this will better equip the UK economy to thrive outside the EU’s trade structures.

When it comes to relations with the EU itself, the Government should start with an accurate understanding of the organisation it left. The EU is not merely an association of member states, but has acquired some of the powers and apprutenances of a state. That is why British voters wanted to leave, after all.

Yet the Hovernment persists in focusing on bilateral realtionships at the expense of that with the Commission. Even when it does not descend into the absurdity of Lord Frost refusing to call the EU by its name, this fails to recognise the reality of the Commission’s power in trade and economic policy, let alone the fact that the countries still in the EU have decided to pool their powers in Brussels.

So rather than wishing the Commission away, the government needs to seek out a real, mutually beneficial, relationship with it, in areas like research, and security and defence policy, even if closer trade policy is currently off the agenda.

Anti-Brexit opinion, which is concentrated among the young, has consolidated, rather than faded with time. Though it will take some time to work through, the weight of that opinion will eventually be felt, and take Britain back towards a closer relationship with the EU. If the Government wants its Brexit legacy to stand, it had better start thinking how to make it work.

Gerard Lyons: We must rise to the challenge of dealing with China. Here’s a strategy for doing so.

14 Dec

Dr Gerard Lyons is a senior fellow at Policy Exchange. He was Chief Economic Adviser to Boris Johnson during his second term as Mayor of London.

Last week, the Foreign Secretary gave a powerful speech at Chatham House on “Building the Network of Liberty.” One of its central theme was that “now is the time for the free world to fight back, and to use the power of economics and technology to promote freedom not fear.”

It was the prelude to a successful meeting in Liverpool of G7 foreign ministers and those from other democratic countries.  What then is the ‘power of economics’ referred to and its implications?

The UK can have a global influence through its own actions and via global institutions. This can include its hard power, namely defence spending or sanctions; soft power through speeches, wider diplomacy; and participation in global institutions and foreign aid, all of which shape global perceptions of the UK, as well as help it take a leading role in framing the terms of debate on specific issues; and then there is sheer economic clout, particularly in terms of bilateral relationships with other countries or regions.

This is of utmost importance as the UK repositions itself globally post-Brexit, and is of immediate relevance for our relationship with China.

The UK is the fifth biggest economy in the world. The largest seventeen are each more than $1 trillion dollars in size, and of these it is China (second) and Russia (11th) which are most visibly in the G7’s focus, not just in terms of their size, or how free their societies are, but also because of their manoeuvres regarding Taiwan and Ukraine respectively. Others in focus include Saudi Arabia (19th), Turkey (20th), and Iran (26th).

While the Government can’t micro-manage bilateral economic relationships, it can set parameters and incentives that influence behaviour.

Our relationship with China has cooled since President Xi’s state visit in 2015. The UK has rightly opted to highlight human rights abuses, notably with the treatment of the Uyghurs, and has become wary of China’s increasing military might and actions in Hong Kong.

Yet, at the same time, our economic ties with China remain significant and cannot be ignored. It is now one of our biggest trading partners, and has invested heavily in a broad range of UK assets.

Equally, China has a huge presence in the City of London, which the UK should be keen to grow to further cement the capitals’s position as one of the world’s top two global financial centres. Notably, the Chinese continue to rate the UK’s education and university sectors highly.

What then should we do? How to deal with China is not a challenge unique to us. The EU has described the country as a ‘cooperative partner, a negotiating partner, an economic competitor and a systemic rival.’ Furthermore, no one doubts the US’s tough stance on China regarding defence and security, but this is not at the expense of US firms doing business with China. Such stances are not contradictory.

The UK needs a fresh, robust template in its relationship with China. The Government should outline its red lines, so that business and finance can continue to operate. Central to this should be a differentiation between strategic and non-strategic areas.

Strategic areas could include those in which we perceive China as a threat to national security, including defence, intelligence and telecommunications. This might require clarity over the scope of the National Security and Investment Act, and a fresh look at the relationship that certain universities have. Non-strategic areas would be those parts of the economy in which firms and the City can interact and compete with China, freed from politics.

China is also viewed as being ahead of the race towards a central bank digital currency, likely to aid its global influence.  As it seeks to grow its economy and move up the value-curve, there will be opportunities for UK business.

For example, there are areas, such as the green agenda, in which we can be partners. China may be building more coal fired stations, but it is a global leader on renewables.

Equally, globalisation has boosted interdependencies with links across countries and regions. Indeed, we should ask ourselves in the West why it is that the technology for giga factories, which many European governments have been subsidising to attract this year, lies with China, South Korea and Japan. The lesson is to focus on research into the next generation of batteries.

Recent developments suggest a shift in strategic thinking across the globe. For instance, as part of its “dual circulation” economic policy, China is seeking to reduce its dependency upon imports of food, fuel and technology. In contrast, recent months have highlighted the EU’s dependency upon imports of Russian gas.

Strategic dependency on other countries has thus become an important consideration to address, without undermining economic growth and future cross-border investment flows.

Working with others at the World Trade Organisation, we should ensure that protection of intellectual property and fair trade.

The West has been somewhat slow to rival China’s Belt Road Initiative (BRI), and it will take them to see if the G7 can provide an alternative with enough financial power. Positively, the UK recognises the need to act and has revamped its British finance development institution. For many countries the BRI has triggered significant investment and economic growth but at the same time, it has been dubbed a form of financial colonialism with many countries incurring debts.

Last year, the UK announced a temporary cut to its overseas aid from 0.7 per cent to 0.5 per cent of GDP. While understandable given the fiscal hit from the pandemic, reversing this cut as soon as possible makes sense. Not only will it make a much needed difference on the ground, but it will give weight and credibility to the UK’s rhetoric on the global stage.

Indeed, prior to this, the UK had been the only country in western Europe to meet the two international commitments of spending two per cent of GDP on defence and 0.7 per cent on overseas aid.

We should also continue to cement stronger economic and financial ties across the wider Indo-Pacific region, stretching from India in the West to the US in the East. This region is set to be the dominant driver of future global growth. This shift in the balance of economic power to the Indo Pacific is one of two pre-pandemic trends likely to dominate in the future.

The other is the fourth industrial revolution that is already underway. Both of these featured heavily in the Government’s Integrated Review earlier this year, and leveraging off both will make an important contribution to our future economic and diplomatic success.

Post-pandemic, the world will naturally change. This can be summarised by three G’s: grassroots, green and geopolitics. Grassroots goes to the heart of an ongoing debate about whether globalisation has reached its limit. I don’t think it has, but more firms will onshore some operations closer to home in light of supply-chain disruptions. The green agenda will continue to be at the fore of international fora as countries meet ambitious net-zero targets.

Alongside the need for a sensible future working relationship with the EU and delivering upon a pro-growth economic strategy, the UK has the ability to punch its global weight in strategic and economic terms.

Ben Roback: The economy, stupid! A bounce back would be Biden’s biggest strength; failure his downfall

1 Dec

Ben Roback is Vice President of Public Affairs at Sard Verbinnen & Co.

The political strategist James Carville is by no means a household name, but the phrase he coined has become gospel in political campaigning. “The economy, stupid!” became a central pillar in Bill Clinton’s 1992 presidential campaign.

The unique economic context laid the groundwork for Clinton’s execution of Carville’s strategy. The recession of the early 1990s was gripping much of the western world and threatened not just their economies. Unemployment in Finland surpassed 20 per cent, riots spread across the United Kingdom, and in Canada forced Brian Mulroney’s resignation as Prime Minister.

As the debate around the state of the American economy rages, these are all consequences Joe Biden is desperate to avoid.

The opportunity to take credit for rebuilding the US economy following the pandemic is arguably the President’s greatest political strength when it comes to his (presumed) re-election campaign. But inflationary concerns, labour market shortages, and long-term supply chain problems could equally be not just his downfall, but also his party’s.

A pre-Thanksgiving speech last week gave an insight into the most pressing economic concerns at the top of Biden’s list.

First, inflation. Workers’ wages are up 4.9 per cent year on year, clear cause for celebration in the White House and around kitchen tables across the United States. But that only tells half the story. Wage growth has been offset by a meteoric increase in the cost of living: 6.2 per cent in the last year. The one figure published by the US Bureau of Labor Statistics that should worry the White House more than any other is 1.2 per cent, the amount by which average hourly earnings have decreased from October last year to this when inflation is taken into account.

There is not much that Biden and Donald Trump agree on, but one is placing faith in Jerome Powell to run the Federal Reserve. Last week, Biden nominated Powell for a second term as Chair of the Fed, a remit that includes financial regulation and managing inflation.

The decision was the latest example of progressive Democrats falling out with the White House. The left of the Party had lobbied for the appointment of Lael Brainard instead, citing Powell’s apparent weakness on climate change policy, income inequality, and banking power. Powell is, given his incumbency, the safe choice, but progressives in the Senate have threatened to oppose his nomination during the senate confirmation process, which must take place before February 2022.

Powell’s task is monumental, but he needs a disunited Democratic Party to come together if he is to even have the opportunity to carry it out.

Second, supply chains. Chronic supply chain issues have become one of the most critical political backlogs that the White House is desperate to clear, and fast. Ongoing supply-chain problems have helped contribute to inflation reaching its highest level in 30 years, erasing wage gains and denting consumer confidence.

The sight of shipping containers piled high on docksides awaiting processing has become depressingly familiar the world over. The United States is no exception, where ports like Los Angeles have become symbolic of the gummed-up system that threatens the supply of familiar Christmas favourites as the holiday season nears.

The Port Authority of LA has gone as far as threatening to fine businesses who do not process containers quickly enough, but that negates the wider supply chain shortages like insufficient truck driver numbers, lingering shipping delays caused by the Ever Given grounding in the Suez Canal, and perpetual COVID concerns.

The White House acknowledges the severity of the subject. Supply chain issues are complex in their very nature, making the problem a difficult one to solve, let alone explain to voters. This week, the President called in CEOs of major retailers and grocers to discuss these supply chain concerns amidst the customary frenzied period of shopping between Thanksgiving and Christmas. A snappily titled speech on ‘The economy, supply chains and lowering costs for the American people’ is expected later this week.

Biden has sought a delicate balance between optimism and caution thus far. At the roundtable, he said that Americans have “a little more hope” about the holidays compared to last year, which was about as confidence-building as Boris Johnson saying this Christmas will be “considerably better” than last year. The measure for comparison could hardly be lower.

It is not commonplace for the White House to have to reassure the American people that they will be able to buy Christmas presents and put food on the table. But White House press secretary Jen Psaki told reporters this week that “throughout the holidays, products will be on shelves and consumers will be able to purchase what they want and need.” ‘There is no need to panic buy’ usually prompts panic buying.

Soaring demand, supply chain delays, labour market deficiencies, shortages in key materials and logistics essentials like wood pallets – it is a vicious cycle that could limit consumer choice this holiday season and the American public will look for a political scapegoat. As George Bush found out to his chagrin, and Clinton to his benefit, under such circumstances the sitting president is usually in their sights.

David Willetts: New businesses, faster connections, better data, tighter security. There are so many reasons to commit to Space.

19 Nov

Lord Willetts is President of the Advisory Council and Intergenerational Centre of the Resolution Foundation. He is a former Minister for Universities and Science.

Britain can emerge from Covid more confident of what our scientists can do, more innovative, and hence more prosperous. That means backing the key technologies of the future. In the past, we have failed to exploit them.

One reason is that public funding has stopped too soon, before a new technology is fully commercial. Other countries, notably America, continue to provide public backing to support new technologies for much longer, reinforced with smart procurement. I have met American tech entrepreneurs with a contract to sell their new product to the Federal Government long before the first one had been successfully produced. It is all part of securing America’s lead in key technologies.

As Science Minister, I identified eight great technologies where Britain had a comparative advantage and there were global business opportunities. We backed them with funding to help get them to market and several unicorns, worth over £1 billion, have emerged as a result. They would not be thriving today in Britain were it not for that early support. Now Kwasi Kwarteng has identified seven key technologies which I hope he will be backing after the boost to science and technology funding in the Budget.

Space is a key one of these commercial opportunities in high tech for the UK. There is something special and exciting about space. Look at how Tim Peake has become a national hero. Attitudes to space tell us something important about a country’s willingness to look outwards. Britain was one of the original leaders in the space race. The Americans launched our first satellite for us 60 years ago (and subsequently disabled it with an atmospheric nuclear test). We launched our own satellite for the first and last time from Woomera 50 years ago.

Sadly, we then made the mistake of thinking of space as a useless luxury which wasn’t for us. You can still see on the Isle of Wight the decaying remains of a British rocket testing facility.

But Space is actually a key part of the infrastructure of a twenty-first century nation. Satellites collect the data that determine our weather forecasts. They enable us to track climate change and monitor natural disasters like floods. They give each one of us accurate information about exactly where and when we are. They synchronise financial transactions. They help our utilities to operate. They enable us to communicate across the globe.

Even through the decades when public interest and support was low, Britain’s entrepreneurs continued to do their bit. We don’t have the capacity to launch any rockets – at least not yet. So we had to hitch a ride on someone else’s launch vehicle (no wonder a Brit was the author of the wonderful Hitchhikers Guide to the Galaxy). That meant we had an incentive to develop lighter cheaper satellites where we are now a world leader.

And this gives us an opportunity. The new space race is to launch constellations of small satellites – hundreds if not thousands of them in low Earth orbit (LEO). Tomorrow marks the first anniversary of the Prime Minister’s boldest move to get us ahead in that race, when the deal was concluded taking a stake in OneWeb which is developing such a constellation.

These LEO constellations have crucial advantages. Because they are much closer to Earth than traditional big satellites much further away, the signal travels so fast that the problem of the slight time delay, latency, disappears.

This matters if you are running a B and B in the Scottish Highlands or starting a business in the West Country – or indeed if you are a teenager in Cumbria trying to play a video game with a broadband link only available by satellite. OneWeb has entered a partnership with BT to deliver the manifesto pledge of broadband access in remote areas.

OneWeb was put on the market because of the financial difficulties of its main investor SoftBank. More than ten percent of its constellation was already up in orbit – putting it ahead of the competition. And its headquarters are not in the American West Coast or a corner of Shenzhen, but in that hot-bed of high tech Shepherds Bush, London W12.

The Prime Minister decided that the British Government should bid and, in partnership with the Indian mobile phone operator Bharti Airtel, together paid $1 billion. Investors from France, US, Korea and Japan followed Britain’s lead, and now OneWeb has $2.6 billion of funding so it can complete its first constellation.

It is already more than halfway there, so the UK is now second only to the US for the number of satellites we operate. OneWeb should be providing a service North of 50 degrees in the next few months and a full global service by the end of next year.

The deal is already paying off, and the Treasury has made a healthy profit. But, even so, is it a dangerous encroachment of the state into business? We are only doing the kind of things America does all the time. Elon Musk is a great entrepreneur, but look at the funding he gets from the American Government in grants, soft loans and guaranteed contracts.

Governments can’t plan the economy sector by sector and intervene in every one. But it is an important role of Government to make some big strategic decisions about key technologies to invest in. They won’t all come right, but when they do they yield fantastic long term benefits. And these technologies are inherently disruptive – they aren’t propping up old industries. Indeed, they are often a new competitive threat to big incumbents.

The first generation of the satellites are being manufactured in Florida, but the real opportunity comes with the second generation planned for service in the next five years or so. Developing these could create a British supply chain. We need big UK-based primes which can place the contracts that help our successful small start-ups to scale up and reach the big time.

Becoming a serious player in Space is the kind of strategic decision which governments have to take. The Prime Minister may have been inspired by the example of his great predecessor, Benjamin Disraeli who faced a similar choice. The Egyptian Khedive, owner of the Suez Canal, had gone bankrupt. The Canal had been constructed by the French and the expectation was that they would obtain it.

But Disraeli swooped and bought half the company from the Khedive for £4 million (borrowed from Rothschild’s). It was a crucial reinforcement of our links to India. Gladstone was outraged, of course – but Queen Victoria loved it and the bold strategic move commanded wide support and helped keep Britain as a global power. Now there is a similar chance to be a world leader in today’s most important space race – for small satellite constellations.

There are national security angles to this. American and China have long seen technology this way, but we have been wary.  Last week’s test by Russia of an anti-satellite weapon was a signal to the West that it sees our capability in this area, which it cannot match, as of real strategic significance. The Prime Minister’s new Science and Technology Council crucially brings security and economic aspects of technology together.

We have a space industry stretching from Goonhilly in Cornwall to the North of Scotland. It encompasses Guildford Harwell, Leicester and Glasgow. It is a truly national endeavour and, with this investment in a world-leading LEO, constellation it achieves global significance.

Interview with Tobias Ellwood: Johnson lacks “serious expertise, people with political acumen, over in the Number 10 machine”

11 Nov

Boris Johnson does not have the advisers he needs at Number 10, has exposed himself to comparison with the Hungarian leader, Viktor Orban, and is “losing sight of what parliamentarians and the Conservative Party would naturally do and see as right to do”.

These are among the lessons drawn by Tobias Ellwood, Chairman of the Defence Select Committee, from last week’s debacle on Commons Standards, when Tory MPs were whipped to vote in support of a course of action which only hours later the Government abandoned.

Ellwood, who abstained in that vote, has sat for Bournemouth East since 2005. He protests at the sacking of Robert Buckland in the last Cabinet reshuffle, and laments that the Government is failing to use the talents of the 2019 intake of Conservative MPs, and indeed has no idea how to set about doing so.

As a specialist in international relations, Ellwood is deeply worried by the lack of resolve shown by the United States in Afghanistan, and by the West’s lack of strategy in the face of Russia and China, but sees opportunities for British leadership.

He warns against allowing the argument over the Northern Ireland Protocol to become a running sore which prevents the much needed defence co-operation between Britain and France:

“There’s a 1930s feel to the world. Weaker international institutions, countries weaponising, the authoritarianism on the Right, lack of western leadership.”

ConHome: “In your Sun on Sunday piece last weekend you wrote,

‘the Government thought it acceptable to overrule the punishment [of Owen Paterson] and rewrite the rules. If this happened in Poland or Hungary, we would not be surprised. But in Britain?’

“Orban is corrupting Hungarian government and society. Is that an apt comparison to make about Boris Johnson and the Government?”

Ellwood: “It’s a warning. It’s to say, ‘Is this who we want to be compared to?’ That itself can’t be a good thing. In that article I mention a couple of times ‘the mother of Parliaments’, how proud we are of the journey we’ve taken over centuries.

“But that journey of advancement has actually almost stopped. We’ve refused to look at further ways we can continue that journey on.”

ConHome: “What are the most dangerous things Number 10 is doing?”

Ellwood: “It’s losing sight of what parliamentarians and the Conservative Party would naturally do and see as right to do. Clearly there was something wrong with this decision. You yourself pointed that out.

“So our loyalty was tested, 250 of my colleagues actually held their noses and walked through those lobbies because they somehow assumed it was in the interests of the party, and clearly it wasn’t.

“So two questions there. Why, first of all, did the executive think they could do this?

“And secondly why weren’t more of my colleagues willing to stand up and say ‘No, this is actually wrong’?

“To give them their due, I can’t actually find a single Member of Parliament who did not express views to the Whips’ Office that this was completely wrong.

“So somehow something went wrong with the reporting mechanism to Number 10, to say ‘Don’t pursue this route’.”

ConHome: “This is part of a wider pattern?”

Ellwood: “That’s the concern I have. It’s part of a wider pattern, of us veering away from sound policy, of explaining to the British people what needs to happen, the difficult decisions.

“And two great examples where you could win over the public, actually I can think of three.

“Firstly to do with Trump and Afghanistan. Much easier to say ‘Bring troops home’ – that’s a vote winner – rather than explaining to the American people why keeping 2,500 troops there is actually in our longer-term interest strategically.

“Bringing troops home shows success, job done. Clearly it’s more complicated to explain to the electorate that keeping troops there, in that neck of the woods, between Russia, Iran, China, not a bad bit of real estate to keep control of, it will take time though, it’s going to take much more patience than we’re currently showing at the moment.

“That’s one example. The other one is DfID, the cuts in that. You explain to the British people, as has been done since that cut was made, that actually we lose leverage, we get replaced by Russia and China with their projects, or extremism then fills in, because of us pulling out.

“The British people would actually say, ‘Well, that’s wisely spent.’ But if you sell to the British people, ‘We’re going to take that money and we’re going to slide it to Red Wall seats,’ well which is going to win?

“Now ultimately the needle has moved on the support for DfID funding, because it’s actually part of our DNA, it’s what we do on the international stage.

“It’s a wiser, more cognitive approach to taking the electorate with you. It’s more complicated, it’s more taxing, it’s not simple, it’s not banner bumper stickers or banner headlines, but it’s what we should be doing.”

ConHome: “You also wrote that ‘at every reshuffle, MPs who have become experts in their fields are demoted or sidelined in favour of the uber-loyal.’ Who were you thinking of?”

Ellwood: “I mentioned Robert Buckland. Everybody was astonished by this decision. Everybody expected him to become potentially Home Secretary or certainly to stay in Cabinet.

“Go back to balance if you like of the spectrum within our party, he’s seen as a moderate, a sound voice, willing not just to toe the party line but occasionally to add another dimension to it.

“That’s just one of many examples. I’ll just mention another. A Cabinet member, now doing brilliantly, but it took 11 years to get there. What a lot of patience you have to go through. How many sycophantic, underarm-bowling questions do you have to ask?

“What often happens is that people lose patience with the machine itself.”

ConHome: “Are we not recruiting enough high-grade candidates? Because this will put good people off.”

Ellwood: “It will put good people off. I won’t make a judgment about not recruiting them, because I think we’ve got some really good talent on our backbenches.

“But they’re not utilised. And the difference between this new intake that’s just come in, particularly as we suddenly got all these Red Wall seats, so these are people who are running businesses, they’re doing, you know, exciting things.

“If they are not utilised, you know, they’ve come in to be part of politics, to represent their constituents, but to affect the political agenda.

“And if all they’re doing for years is just ask simplistic questions which are just handed out by the Whips’ Office, that’s not really utilising their strengths that they bring to the Chamber.

“So what I’m suggesting is this, which I think there would be a lot of appetite for. You come in and you’re invited to suggest a spectrum of interest for your career.

“It might be local government, it might be health and social services, it might be education, it might be science, it could be in my case international affairs.

“And within that spectrum there are things that you could do. Not necessarily being a minister, but certainly things which will allow you to advance and progress with an interest, and to influence policy.

“But no. There is no HR. There is no managing of anybody’s career whatsoever.

“So you end up, and this leads into the very topical debate at the moment, with people finding outside interests, and that also affects how this place looks.”

ConHome: “Were you thinking of yourself? You’re an expert in your field, you were a minister, you’re now not a minister.”

Ellwood: “No, not at all, because being on a committee is another great way in which you can affect the agenda, hold Government to account, and come up with ideas.

“And certainly being the chair of that. If you are a round peg in a round hole you are very, very lucky indeed.”

ConHome: “Can Johnson revive his Government, though. He’s just had a reshuffle. But can he revive it without sweeping changes in his team, both his team in Cabinet and in Downing Street, to take more account of what the backbenchers are now thinking and saying?”

Ellwood: “I think we do lack some serious expertise, people with political acumen, over in the Number 10 machine. It’s a tough gig, but you need to have your political antennae about what does and doesn’t work.

“Now on the actual team of the reshuffle, it’s that wider picture of making sure you take advantage of the skill sets that you actually have.”

ConHome: “Fundamentally, do you have confidence in Boris Johnson’s leadership?”

Ellwood: “I worked for Boris Johnson in the FCO, and he brings an element of energy and vibrancy to the party which I’ve not seen for a long time.

“And in today’s cut and thrust of 24-hour news that’s actually important, that he’s actually inspired a lot of people to vote Conservative, in a way that many other leaders have actually failed to do.

“But you need to be supported then by genuine strategy, when it comes to policy formation. For me there’s a gap in the market in the area I’m particularly interested in. What is Britain’s place in the world? What does global Britain mean?

“There is a leadership role, I think, that the world is calling out for.

“He needs the team around him to support the energy he provides.”

ConHome: “After David Amess was murdered, you said that MPs should pause holding face to face surgeries. Do you think that pause should now cease, and if not, when should it cease?”

Ellwood: “I look from a security and defence perspective. Clearly the situation has changed, we can reassess, and everybody has taken stock of their own situation, so it’s right that we can then downgrade or reassess the situation.”

ConHome: “You’ve been a soldier, and soldiers have to confront danger and death, but you’ve had two very personal encounters with it.

“You wrote last weekend about shaking hands with the Taliban, who were harbouring the group who killed your brother. What effect did his murder have on the way you think about security?”

Ellwood: “I don’t go past a barrier now outside the gates here without thinking about the wider security environment. I think the sadness of the 9/11 anniversary with all those documentaries we saw again – we are no better at tackling extremism, if we’re honest about it.

“We’re no better at dealing with the ideology that encourages somebody to put on a suicide vest to kill themselves, to kill westerners in the belief that they’re going to be rewarded with a place in paradise.

“And until we deal with that – and that’s not for us so much to deal with the interpretation of the Koran, that’s actually a wider theological challenge for the Islamic world to deal with too, but until we’ve done that then I’m afraid ISIS-K, Boko Haram, Al-Shabab, Al-Qaeda, they will continue to be able to recruit.”

ConHome: “You also fought to save the life of PC Palmer.”

Ellwood: “That happened in 2017, it was a reminder again. Bali was 2002, 9/11 2001, David Amess 2021. There is a correlation between all those events, which link myself and indeed other people in our community together, and shows you what an enormous challenge still exists.

“We’ve now absented ourselves from Afghanistan, handing the country back to the very insurgents that we went in to defeat. When I met the Taliban it was very, very clear why they are trying to still pursue a ruthless, quite a tough interpretation of Sharia law, because if they didn’t they would actually haemorrhage more people to ISIS-K.”

ConHome: “You’re an interventionist, both for security reasons and for moral reasons: you’re helping to spread and sustain liberal democratic values by intervening.

“Do you feel that you’re part of a beleaguered minority now – that the trend here in Britain as in America has been to withdraw, to try to cut ourselves off from the rest of the world?”

Ellwood: “We’re feeling very, very bruised. It’s been provoked by Covid as well, our retreat from global exposure, becoming more isolated, more protectionist.

“Populism also is on the rise – why should we have a responsibility for what’s going on abroad? Let’s look after ourselves. Times are tough here.

“From where I sit, we’ve got a bumpy decade ahead. There’s a 1930s feel to the world. Weaker international institutions, countries weaponising, the authoritarianism on the Right, lack of western leadership.

“On top of that you’ve got three other factors. Climate change, which is going to bring its own scale of problems. Biblical movements of people that are displaced.

“Advances in technology that then allow non-state actors to incite real harm onto communities. And the rise of extremism.

“And if Russia wants to harm Britain, it can just play with the gas taps and watch the prices ripple through and cause problems.

“Look how that one ship caught in the Suez Canal caused problems across the world. I tried to get my lawn mower repaired the other day, and they couldn’t get the parts. They said, ‘You take your choice, it’s either Covid, Brexit or it’s that Suez Canal blockage.’

“How easy it is to cause harm to economies using non-military means.

“And there’s a gap in the market for international leadership. We’ve seen America retreat slightly, give up essentially in Afghanistan. This was the biggest military alliance arguably ever formed and we were defeated by an insurgency armed with AK-47s and RPGs, and we just decided to go home.

“So where is America’s commitment? If they’re not going to step up, we had to do it a couple of times in the last century. Different circumstances, I recognise that.”

ConHome: “What about NATO?”

Ellwood: “I was in Norfolk, Virginia only two weeks ago, headquarters for NATO in the US, scratching their heads, what is their purpose?

“We don’t do out of area operations any more. So there is a purpose, you go to Latvia, Lithuania, Estonia, they’ll say absolutely, NATO is critical. NATO itself will retreat to what it knows best, dealing with the old Cold War-esque challenges.

“Putin has a strategy. President Xi has a clear strategy on the international stage. The West lacks one. We don’t have a strategy. We have an attitude towards China, towards Russia, but we don’t have a strategy.

“And again, this is Britain, going back to Boris Johnson and what Britain can actually do, this is where we normally have an insight and an understanding, a means, a desire to help shape the world.”

ConHome: “Our relationship with France is currently extremely bad. We and the French are the two military powers in Europe. How bad is it and what should we do about it?”

Ellwood: “So this is a great example of us enjoying an old rivalry that goes back centuries. What we forget is that as we fail to reconcile our differences with continental Europe, our adversaries are enjoying this blue-on-blue, which is essentially what it is.

“We and the French are not working together to recognise what Russia is doing in the Arctic, what China is doing in the South China Sea, and AUKUS was a great illustration of how things could have been done better.

“Absolutely right for Australia to move from diesel electric to something better, you’re offered a Ford Focus and suddenly you see a Ferrari, which one are you going to take?

“You’re going to go for the upgrade nuclear deal, nuclear powered, so France should accept that. But if you want a strategy to deal with the South China Sea, finally standing up to what they’re doing in that neck of the woods, which is pretty concerning, then include Japan, India, include the United States, Britain and France, and that’s the quad that should be invited, allowing AUKUS to be a procurement process.”

ConHome: “If we’re going to have a better relationship with the French, is that really consistent, given the French view of themselves as one of the guardians of the integrity of the EU, with moving Article 16 of the Northern Ireland Protocol?”

Ellwood: “You then move into a very awkward space. This was always going to be a problem. I served in Northern Ireland and it’s not until you go there that you realise how critical trade of the entire island is in keeping the peace and helping both economies.

“We need to make sure we solve this, because it’s turning into a sore, which is then used by other countries to prevent us drawing a line and finally moving forward and advancing, where we don’t then say I’m a Brexiteer or I’m this, but this is the norm.

“We are still in transition, I’m afraid. And as long as that is the case, it will poison discussion on other, bigger issues, such as our reflections on international security that we need to be having with our continental partners.”

Bim Afolami: After the Budget, we won’t deliver levelling up without putting economic growth first

1 Nov

Bim Afolami is MP for Hitchin & Harpenden.

In the wake of another Budget, I have been wading through the Red Book and the other documents. One word keeps coming to my mind. Growth.

Why has it been stubbornly weak? What can the Government do about it? What are the political consequences of low growth over the medium and long term?

Growth has been stubbornly weak across most of the Western world since the financial crisis. Britain’s economic performance has been even worse than those of our main competitors, such as Germany, the US and Canada.

Between 1979 and 2010 (including three recessions), growth averaged 2.3 per cent each year and, if you exclude the major recession years of 1980, 1991, and 2009, growth averaged 2.8 per cent.

But since the financial crisis up and until Covid hit in early 2020, growth has averaged 1.8 per cent – with no recession during that time. If you look at the Office for Budget Responsibility’s forecasts for the coming years, you will see that it predicts the medium term outlook for growth is 1.7 per cent per year, in line with the post-financial crisis growth pattern. Why do we accept this?

I am boring you with these statistics to evidence a simple point. Our growth is a lot lower than it used to be: roughly 30 per cent to 40 per cent lower than it used to be, every single year. There are lots of purported reasons for this low productivity – and hence low growth: over-reliance on foreign labour, preventing investment in automation; regional inequality; poor skills in middle management and SMEs; the over-allocation of wealth in housing; low private capital investment levels; weak exports; poor numeracy, poor transport infrastructure, and many more.

The Chancellor is acting to fix the problems. The Help to Grow scheme is specifically focused on improving the management capability and outcomes for thousands of SME owners across the country. We are investing record amounts into R&D and reforming R&D tax reliefs, taking us forward to being a science and tech superpower. We are continuing to deliver on our promise on investing record amounts in infrastructure. We are maintaining such tax reliefs as the Enterprise Investment Scheme and Seed Enteprise Investment Scheme, which encourages those with capital to invest them in fast-growing British businesses, rather than buy property or land. The Chancellor launched a new £500 million scheme, Multiply, designed to target one of the biggest complaints from business owners:the poor numeracy of many staff entering the workforce.

I strongly support what he is doing. We should hope that all of these measures have an impact over the medium term. However, I have a nagging sense that, despite our best efforts, these policies alone will not move the dial on growth sufficiently. Let me explain why.

A few months ago, I finished the books of the brilliant economic historian, Deirdre McCloskey, whose trilogy (Bourgeois Virtues, Bourgeois Dignity, Bourgeois Equality) incessantly remind us of the exceptionality of economic growth.

The three books comprise an intellectual journey which aims to answer the great riddle of modern economic historians: why did the Industrial Revolution, with its immense economic growth, take off precisely when and where it did? Why Britain? Why the eighteenth century?

Her answer is that it was culture that needed to change so that the economy eventually could tpp. Materialistic enrichment had non-materialistic causes. She argues that “talk and ethics and ideas caused the innovation”. In particular, “ordinary conversation about innovation and markets became more approving”. Wealth could be created on a grander extent than ever, but only as soon as wealth creation was no longer deemed a filthy purpose by the educated elite.

It was the championing of innovation (not merely capital accumulation) which fundamentally transformed our economic prospects as a nation, and we led the world. Ideological and societal changes were the sine qua non of transformative growth of the eighteenth and nineteenth century, not tax policies nor our legal system nor stable national institutions (though these were all undeniably helpful).

Margaret Thatcher’s governments understood the importance of boosting economic growth and dynamism in that era. Nigel Lawson’s Chancellorship was pivotal for the pro-enterprise policies and tax rates that he introduced. However, a huge element in our success during the 1980s was the social change that saw innovation and enterprise and getting richer as an unambiguously good thing – particularly for the working classes.

This social change was partly driven by the atmosphere, rhetoric and tone of the Government, backed up with concrete pro-growth policies. Looking at a very different society to ours – China – one sees that the 40 year explosion of its economic growth was not just about legal and policy changes.  The Communist Party allowed a new spirit to sweep the country: soon after Mao Zedong’s death, Deng Xiaoping declared that “to get rich is glorious” and “it doesn’t matter whether a cat is black or white – so long as it catches mice,” which was indicative of his view that socialism was not incompatible with a market-economy. These sentiments had a huge impact.

We need two things if we are to have a hope of reviving our growth rate.

First, on the technical side, we are going to need to continue the many pro – growth policies that this Chancellor has introduced and, in addition, significantly reduce the tax and regulatory burden for SMEs – which are far too high at the moment.

Secondly, we will need to shift the whole focus of the Government’s energy towards a pro-growth mindset overall, not just a redistributive one with regards to levelling up (important though this is). Conservative politicians should champion the nobility of wealth creators, work with those in universities and civic society to promote a more positive image of innovation, and praise these things because they are a good in themselves – not just because their taxes help the Exchequer.

Perhaps by linking innovation to the green agenda, and the unifying cause of saving the planet from gradual decline, we can actively argue that more economic innovation is a social good because it enriches society.

What would all this look like? It could mean a reshaped honours system – to champion innovators and wealth creators much more. It might mean Government policy in all areas being publicly changed to optimise for growth as the primary goal above all else (i.e: universities policy and regulatory policy). It could mean a shift in the national curriculum to teach children the positive virtue of setting up a business with clear, ethical goals, and that this is a positive way to help your community.

If we fail to significantly lift our growth rate, we will have a growing list of problems. There will be an ever-increasing tax and debt burden, because demographic changes mean that our public services (particularly NHS) will need more money every year. It would mean the failure of levelling up, because redistribution of a stagnating cake is not politically sustainable in the medium term. Finally, it would mean continuing generational inequality, because the tax rates of working (younger) people will be so high that they will have no ability to build up capital assets; and any attempt to tax older generations to a much greater degree than today will be politically tricky.

Much higher growth is the necessary condition for us as a country to be successful in the future. This Chancellor has diagnosed the problems, and is acting to fix them; but the Government overall will need to take a lead to make this the central rhetorical, atmospheric, policy focus of the country as a national mission.

Ben Roback: How Critical Race Theory is haunting Virginia. And could lose the Democrats a contest they should win.

20 Oct

Ben Roback is Head of Trade and International Policy at Cicero Group.

Election day is nearing in the Virginia gubernatorial race, in what is shaping up to be an early electoral test of Joe Biden’s presidency and the Democratic majority in national politics.

It is of course important to separate the national and the local. Ralph Northam, the Governor of Virginia, is no more responsible for the decisions made by Joe Biden in Washington than Andy Street in the West Midlands is for those made by Boris Johnson in Westminster. That does not stop parallels being drawn.

On November 2, an election will take place to elect the next governor of Virginia. Northam is ineligible to run for re-election, as stipulated by the Constitution of Virginia, which prohibits the officeholder from serving consecutive terms.

In theory, Democrats should be in a confident mood. The Commonwealth of Virginia has leant more and more blue in recent years, and the Democrats have won 13 out of the last 14 races for President, Senate and Governor since 2005.

The demographics of the state ought to shift the momentum firmly behind the Democratic candidate, Terry McAuliffe. But the race comes against a backdrop of a dismal summer for Biden, whose popularity has fallen by 11 points since March in the aftermath of the Afghanistan withdrawal, and amidst a slowing Covid recovery plan, rising inflation, and a stalling legislative agenda on Capitol Hill. Now only 44 per cent of Americans approve of the job he is doing.

The Trump factor

Donald J Trump has played a limited role in the race so far, though his presence was delicately welcomed last week by the Republican candidate, Glyn Youngkin.

Trump called in to a gathering of Virginia supporters, urging them to vote for Youngkin and calling him “a great gentleman”. Youngkin accepted Trump’s endorsement, saying he “represents so much of why I’m running”.  Flirting with the Trump wing of the party in order to win over their support, Youngkin initially refused to admit that Biden legitimately won the 2020 election, or to say that he would have certified the victory.

This represents a risk for the Republican campaign. After all, Virginia is not Oklahoma, Tennessee or Mississippi: this is not Trump country. Joe Biden’s approval rating is lagging in the state (49 per cent) but he is nonethless seven points more popular than Trump was (42 per cent) at this stage of his presidency in 2017. Biden won the state by a resounding 10 points in 2020 presidential election.

Whilst Trump may be far from universally popular in Virginia, he doesn’t need to be in order to make a decisive difference. Motivating Republican voters to turn out on election day is likely to be the 45th President’s most potent weapon in shaping the outcome of this race. The strength of feeling about Biden suggests that Trump could be deeply effective here.

Just 46 per cent of Democratic voters in Virginia “strongly approve” of Biden’s performance as president. On the other hand, 80 per cent of Republicans “strongly disapprove”. Combine that with the fact that Youngkin is doing better amongst independent voters, and you can see a path to victory for the Republican candidate, fueled by a Donald Trump-shaped intervention.

A sign of things to come?

Extrapolating the Virginia race to a national level provides a useful first look at how the next presidential election might play out. More immediately, we are just one year away from the midterm elections for Congress, which historically see the sitting president’s party lose seats.

Democrats will get their first chance to test whether Biden is rewarded for his turbocharging of the vaccine rollout, or else punished for insisting on a federal vaccine requirement and lingering mask mandates. Republicans, who have inserted President Trump into the middle of their candidate’s campaign despite his relative unpopularity in the state, will be able to test whether his divisiveness and occasional toxicity can overcome a decline in Biden’s headline popularity.

The dividing lines on which this race is being run are largely to be expected: presidential approval, the state of the local and national economy, and the ongoing impacts of the pandemic. But three words that have become central to this election are also likely to grow in importance in national US politics as the midterms and the 2024 presidential election nears: Critical Race Theory.

In July, Youngkin said “We actually have this Critical Race Theory moved into all our schools in Virginia.” The educational policy teaches a broad set of ideas about systemic bias and privilege, which has prompted some parents to allege that white children are being painted as racists through no action or fault of their own.

It is the kind of issue that can alter the course of an election, and it divides the country far beyond Virginia’s borders.  Northam said last yer that Virginia needs to “build anti-racist school communities.” Aiding the claims of the Youngkin campaign, the Virginia Department of Education cites the book “How to be an Antiracist,” by Ibram X. Kendi, a professor at Boston College, and an advocate of Critical Race Theory, in a segment on “Anti-racism in Education.”

There is no evidence to prove Youngkin’s claim that Critical Race Theory has moved into “all our schools in Virginia”. But the inability of the Department of Education to refute that claim entirely has provided enough oxygen for the issue to become a key pillar of this election – one that Trump will exploit.

The Virginiana gubernatorial is currently more unpredictable than perhaps it should be. A state recently won in a presidential election by 10 points should not be within the margin of error.

And yet FiveThirtyEight’s latest forecast puts McCauliffe (D) just 2.9 points ahead of Youngkin (R). An unexpected victory for the Republican will be received by Donald Trump as a sign that he retains a Midas touch, and that no state or district is beyond his reach in an inevitable 2024 presidential election run.

Ryan Bourne: Cut immigration to raise wages? If only it were all so simple.

20 Oct

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Will reducing the immigrant labour flow raise living standards for low-paid workers? Boris Johnson thinks so. In his Conservative Party Conference speech, the Prime Minister claimed: “We are not going back to the same old broken model with low wages, low growth, low skills and low productivity, all of it enabled and assisted by uncontrolled immigration.”

Worker shortages in hospitality, farming, and for HGV drivers have bumped pay for some workers already. This has been held up as reflecting the seeds of a new economic model. Restricting immigration is now even seen by some Conservatives as a key tool to force businesses into investments in automation that will make British workers more productive.

It’s difficult to overstate the shift in thinking necessary for Tories who grew up under Thatcher to believe that “supply-side restrictions are good for the economy, actually.” But whether out of genuine conviction or just putting a positive spin on events, Conservatives should beware of using today’s disruption as signalling a desirable paradigm shift in wage-setting.

Not just because the pandemic is driving many current labour market problems, with little indication these trends will deliver lasting real wage gains. But because there is scant evidence that restricting the flow of EU workers will result in rising pay overall.

First of all, labour markets are largely out-of-whack because Covid-19 and lockdowns have severely shaken up consumer demands, work locations, and people’s career goals. Activity is gradually migrating to reflect these new trends.

In the U.S, we’ve seen high vacancies and spiking wages in industries such as hospitality, farming, and trucking for months too. So, clearly, what’s happening today is not primarily about Brexit or immigration policy.

I called this Covid-19-related process “the reallocation economy” in my book. The shock of the pandemic has altered many households’ decisions on when to retire, whether to go into higher education, or the desirability of staying in their current commuter jobs.

Yes, there has been an exodus of EU-origin workers due to this turbulence and to Brexit, too, which has heaped pressure on certain sectors with large immigrant workforces. Wages and prices, though, were always going to be volatile as these supply and demand mismatches played out across the economy.

“Simply raise pay and invest in workers to solve shortages!” say keyboard economists to industries struggling to hire. A shortage of labour (other things the same) will indeed raise compensation within affected markets, as we’ve seen on chicken farms and for HGV drivers.

But wages are a business cost, not just something employers can adjust without consequence. In reaction, profit-seeking firms will raise prices, cut worker benefits, slash services, or leave the sector entirely if profits are squeezed tightly by a higher price for labour. This is capitalism: there is no free lunch.

This is the crucial mistake made by those who believe cutting off access to workers for certain industries will somehow be “good” for the economy. It’s a half-baked examination of the effects.

A policy-induced shortage of HGV drivers may raise pay rates for HGV drivers. But more expensive HGV drivers means increased transport costs, resulting in higher consumer prices of goods, fewer deliveries, or substitutions away to other transportation methods. The HGV drivers employed may well end up better off in real terms. But others in the economy will be worse off, facing higher prices or less reliable services. The very poorest could well end up subsidising these higher driver wages if they result in, say, higher food prices.

In response to this argument, some claim that only migration restrictions will induce companies to invest to deliver future productivity growth that ultimately benefits everyone. But encouraging otherwise uneconomic investments by creating shortages of workers clearly makes us worse off overall, not better off. Profits drive the adoption of efficiency-enhancing technologies. Forcing businesses to cope with a lack of inputs by tilting the deck against the most profitable business practices cannot be “good” at an aggregate level, or else businesses would have changed in that direction already.

In suggesting otherwise, Conservatives risk falling for the sort of supply-side fairytales of the left, who talk of regulation as a source of innovation. It’s the thought process that says that the minimum wage can be raised to £15 per hour, and that this will somehow be a boon for productivity growth (something yet to be observed after over a decade of minimum wage hikes).

To be clear: migration restrictions may well raise real pay rates in some sectors. This is more likely to occur in industries where EU labourers directly competed with British workers and where the presence of more EU nationals did not significantly raise demand for the goods or services in question.

But there’s not a fixed amount of work, nor reason to believe EU migration reduced wages meaningfully in aggregate. Where foreign workers complement existing skills, fill shortages, or create new products or demand, they can also boost productivity and wages. That’s why, overall, studies regularly found little effect of EU migrant flows on native wages.

Even the famous Bank of England study that broke down the impact by skill group implied that immigration over a decade may have lowered real pay for low-skilled service workers by around one per cent percent. That’s against benefits from the free-flow of people, including cheaper produce and enhanced productivity from the entrepreneurship brought by other migrants.

Immigration’s static effects on wages simply pale by comparison to other supply and demand factors. Median cash pay across the whole economy has grown by 9.8 per cent between September 2019 and 2021. For all the talk of the effects of shortages, there is scant indication of a broad wage boom in low-skilled sectors yet. HMRC’s PAYE data shows a much lower 5.9 per cent growth in median “transportation and storage” pay and a mere two per cent increase in “accommodation and food services” during the last two years, the latter of which is a decline in real terms. Yes, the labour supply obviously affects pay levels, but this shows the power of demand shifts too.

Deep down, most Conservatives know this. The Government has already relented on poultry workers and HGV drivers, taking steps to liberalise at least some visas in recognition of the ongoing disruption. But they are setting a rod for their own backs in implying that ending free movement is key for rising low-skilled wages. Not only will any restrictions that deliver higher pay in some sectors lead to offsetting price rises for others, but the short and long-term evidence gives no indication that migration changes will meaningfully boost compensation for the low-paid as a cohort.

Virginia Crosbie and Bill Cash: We need nuclear to lessen the UK’s reliance on imported gas

12 Oct

Virginia Crosbie is MP for Ynys Môn. Bill Cash is MP for Stone.

It turns out the winter crisis we’ve all been expecting might not be the one we turn out to have. The current chatter about natural gas prices is pushing Covid temporarily to the side and is conjuring up memories of winters’ past, namely 1978-79s Winter of Discontent. Will Britain really run out of power in the depths of winter?

The Government is delivering assurances that all will be OK on supply, despite the concerns of the head of OFGEM. Whoever’s right, it is beyond dispute that Britain is heavily reliant on foreign gas imports. That we have had to restart coal-fired power in the run up to COP26 is a worrying sign.

Nor is it just Britain in distress; our partners on the continent are also feeling the pinch. It turns out a lot of our gas eggs are in Russia’s basket.

The goings on in the gas market have focused a lot of attention on alternative energy sources, including renewable energy like wind and solar. Make no mistake, these technologies are promising but they are also clearly not the answer, at least not yet.

So, what will it take to secure our energy supply, to make it affordable, secure and reliable for the long term?

The good news is the answer exists. Moreover, it is already deployed around the world, including here in Britain. The answer is nuclear energy. Indeed, Boris Johnson recently returned from the United Nations General Assembly, where he reaffirmed this country’s commitment to nuclear energy as part of his government’s ten-point Green Plan to reach our emission reduction targets.

It will have to be more than words, however. While nuclear power currently provides approximately 20 per cent of our electricity, all but one of our existing nuclear power plants will close this decade. We need to build more facilities, and quickly.

One site that shows promise is called Wylfa, on the island of Anglesey in Wales. Many in the industry view it as the ideal site on which to build nuclear technology. It is currently owned by Hitachi but several developers, including a consortium involving Bechtel and Westinghouse, have plans to bring Wylfa online. Installing the American-owned Westinghouse’s world-leading AP1000 reactors on Anglesey would go a long way to meeting our emissions targets while also providing power across Wales. It would also improve our sovereign nuclear fuel capacity via facilities in Lancashire.

Most importantly, proceeding with the modular-based AP1000 reactors would also set Britain and Britons up to compete in the nuclear near future, where so-called advanced and small modular reactors will play a pivotal role. Gaining the experience and know-how on modular reactors now will help Britain’s workforce steal the march on others as more nations turn to nuclear to secure their energy supply.

Put differently, this goes beyond the estimated 10,000 high-paying jobs involved in developing the Wylfa site; embracing nuclear technology will position Britain favourably for thousands of more high-paying jobs in the future.

The development of nuclear power – particularly in Wales – will also go a long way to achieving the Government’s objective of ‘levelling up’ economic opportunity across the United Kingdom. Every corner of the land needs power, and local businesses and apprentices are the prime beneficiaries from large-scale builds like the one proposed for Anglesey.

Proceeding with nuclear builds would also help strengthen the transatlantic alliance at a time of significant geopolitical stress. Anglo-American cooperation on nuclear power would provide confidence to regulators as well as consumers. It would also reassure citizens disappointed with politics that important infrastructure projects can move forward and be delivered if we put our minds to it.

Today, The Welsh Affairs Select Committee has heard the case for Wylfa. One of the arguments made is for a new approach to taking such projects forward. As we heard throughout the course of the hearing, the technology and the experience to deliver exists, but a new financing model led by the Government would go a long way toward securing investment in the project. It would present a strong signal from the government and instill confidence in the private sector to proceed with such projects.

Going into COP26 with a green light on Wylfa would demonstrate the Government’s seriousness on its climate and leveling up agendas. In Wales, we are ready and eager to put our shoulders to the wheel and put thousands of Britons to work.

Orban says he’s defending Christian civilisation. His opponents say he’s subverting Hungary’s democracy.

24 Sep

Will the European Union hold together? Or is Western Europe going one way and Central Europe another?

Viktor Orban, Prime Minister of Hungary, is perhaps the most eloquent exponent of, as he put it in a recent lecture, “a Central European cultural, intellectual and political entity that is growing more and more different from Western Europe”.

Orban has many critics, but his lecture was directed against one in particular, Timothy Garton Ash, Professor of European Studies at Oxford.

There was a time when they were on the same side, for as Orban says:

“The professor has an excellent knowledge of Central Europe and used to inspire many of us during our years of resistance against communism and the Soviet occupation, in the late 1980s.

“What’s more, members of the current Hungarian political leadership had the chance to personally attend his lectures, which took a stance for freedom, at the University of Oxford.”

Orban, born in 1963, sprang to fame in Hungary in June 1989 by giving a speech demanding the withdrawal of Soviet troops and the holding of free elections, after which he studied for a few months at Pembroke College, Oxford, on a scholarship awarded by the Soros Foundation.

He returned home in January 1990, was elected to the National Assembly, became the leader of Fidesz, which he led in a national conservative direction, and served as Prime Minister from 1998-2002 and again since 2010.

Garton Ash has become, as in this interview with Euronews on 8th September, an unsparing critic of Orban:

“we do have European Union values which are being massively violated in countries like Hungary and Poland, and I think we need to stand up for those values…

“Viktor Orban is having his cake and eating it. He’s winning elections by saying ‘Stop Brussels’, campaigning against the European Union, but taking billions of European taxpayers’ money.

“Therefore the key to an effective response is to establish a linkage between the Europe of values and the Europe of money. And that’s what the European Union has so far failed to do…

“It is absolutely outrageous that you have a member state of the European Union which in my view is no longer a democracy, which has destroyed media freedom, which doesn’t have fair elections, free but not fair elections, which has kicked out the best university in central Europe, which has indulged in outrageously xenophobic propaganda, the treatment of migrants and so on, which is still receiving billions of euros in the EU funds, that is an outrageous state of affairs.”

When asked whether Orban’s illiberalism is a real threat to the EU, Garton Ash replied:

“Without question… One has to go back a long way to find a period when a Hungarian leader was so important in European history…

“And that is because he has become the symbolic leader of the other Europe, the conservative, anti-liberal, ethnic nationalist, Christian, socially conservative Europe.

“And Matteo Salvini, Marine Le Pen, Nigel Farage, Geert Wilders, are all with him.

“So he represents not just one medium-sized member state of the European Union, he represents a very important tendency in the entire European Union.”

Orban maintains that on the contrary, his conservatism is “a blessing for the European Union and even Western Europe”, because the West, he contends in his lecture, has lost the convictions which lay behind its success:

“I understood that beyond and behind all the technical equipment, novel institutions and scientific discoveries, there was also the West’s sense of its exceptionalism and mission, which gave it inspiration and confidence. The conviction that Western man has a mission in the world and with the world, and must act in order to accomplish that mission.

“Naturally, we do know that the Western mission has intellectual and spiritual foundations that should be sought in Christianity. ‘Go, and make disciples of all nations’, Matthew says. This mentality, even if in a changed form, survived in the West also during the Enlightenment, the periods of the humanist ideal of man, human rights and the discoveries of modern science.

“During a period of unquestionable development and brilliant success – despite evident mistakes, blunders and grave shortcomings – the conviction that the overall balance of the mission of Western civilisation and the West was fundamentally positive held for a long time.

“However, something had changed by the beginning of the 21st century. And this happened just at a time when the West, led by America and Britain, had scored its most brilliant victory, having won the Cold War…

“It no longer seeks meaning in its own history; instead, it keeps saying that it will end soon. It re-interprets or deletes entire chapters of its history, finding them shameful and so to be cancelled, and in the meantime, it is unable to replace them with anything else. And those who are not paralysed, but in fact very much active, are such deconstructive, negative forces that they would be better off paralysed…

“the concept of open society has deprived the West of its faith in its own values and historical mission, and with this now – at the time of the Muslim flood and the rise of Asia – it is preventing the West from setting its own mission against the rising intellectual and political power centres…”

Orban contends that in Brussels, and the West generally, “a sense of mission shared by a political community, a nation is now unacceptable, even suspicious.” Hungary, on the other hand, still has that sense of mission: hence Budapest’s disputes with Brussels.

To Garton Ash, speaking on Tuesday to ConHome, Orban’s essay amounts to “a brilliant exercise in ideological distraction”: Orban says “let’s have a really interesting intellectual conversation about the future of western civilisation”, and the disreputable methods by which Orban stays in power are forgotten.

ConHome suggested two questions arise: one is whether Orban himself is a reputable person, the other is whether it is permissible for anyone, no matter how reputable, to hold Orban’s views.

Garton Ash replied:

“You can be a Conservative nationalist party continuing to govern in a country which is still an excellent liberal democracy – we live in one.”

Orban, he went on, has instead subverted liberal democracy, by gerrymandering, by pay-offs to friendly oligarchs, by getting the media under control: “That’s the problem, that’s why I’m so angry.”

And Orban then distracts attention from his destruction of liberal democracy by reframing the whole battle as an ideological clash, so that people say “maybe I agree with him about immigration” or “maybe I agree with him about Islam”.

Garton Ash went on to say that “characterising Muslims as invaders” (as Orban has done) “is in my view beyond the pale”, and that “some of the election propaganda against Soros is borderline anti-semitic”.

He urged British Conservatives to be cautious about embracing Orban: “It’s the difference between Farage and Johnson.”

And he pointed out that while Orban attacks Brussels, he also accepts very large sums from Brussels: “Viktor Orban is a master of cakeism.”

For a long time Orban managed to keep Hungarian MEPs in the European People’s Party in Brussels, before at length they were eased out of it.

David Cameron, one may note, promised that British MEPs would leave the EPP, and at length kept that promise. British Euroscepticism, leading to Brexit, is in some ways more straightforward than Hungarian and Polish Euroscepticism.

In Hungary and Poland, with their recent history of Soviet occupation, there are still large majorities in favour of EU membership.

Orban wins elections by playing the nationalist card, but one should not imagine that this card does not exist in Western Europe. The EU is paralysed by the fear that taking the great leap to becoming a federal state comparable to the USA  would provoke a nationalist backlash in most if not all of the member states, including Germany and France.

The German Constitutional Court stands as the most reputable though so far reticent opponent of a federal Europe. Alternative for Germany, founded in 2013 by learned men opposed to the policies required to prop up the euro but soon degenerating into a xenophobic movement, is one of the least reputable opponents.

It is now 21 years since Larry Siedentop pointed out, in Democracy in Europe, that no Madison, Hamilton and Jay have stepped forward to compose Europe’s version of The Federalist Papers.

The euro remains a currency unbacked by a government. Perhaps under the pressure of some great crisis, surmounted by leaders who rise to the occasion, that government will be conjured into existence.

But in the meantime, one cannot help being struck by the persistence of the nation state as the fundamental political reality. Nations may be good or bad, reputable or disreputable, democratic or authoritarian.

Perhaps the ultimate function of the EU, towards which Garton Ash points the way, will be to keep its members democratic. But what an opportunity that offers to demagogues to blame the nation’s woes on Brussels.