Lord Frost’s opening speech to Königswinter Conference, June 17

18 Jun

As delivered, 1330h

It’s conventional at this point at events like these to reflect on the strength of our bilateral relationship.

But I hope that for the UK and Germany that hardly needs doing. The events, the connections, the reality all speak for themselves.

Let me give a few examples.

Germany, which we described as our “essential ally” in the IR, was the only country in the world in 2020 to receive visits from the Prince of Wales, the PM, the Foreign Secretary, and the Chancellor. And we were delighted to have Chancellor Merkel here for the G7 in Cornwall last week, with a very warm and friendly bilateral meeting with our Prime Minister too.

We will have soon a Joint Declaration on Foreign and Security Policy, to complement the existing Joint Defence Vision – and, I hope, with more to follow soon. I agree with Ambassador Michaelis that there is room to make the governmental relationship a bit more structured and we should work on that in the months to come.

There are 1800 cooperation projects between our universities.

We have huge investment in each other’s countries – 1400 British companies in Germany, 2500 German companies in the UK.

And cultural exchanges are equally rich. Neil MacGregor’s role at the Humboldt Forum is well known, as is Hartwig Fischer’s at the British Museum – but there is much more.

I could go on. But there is no need to. The short version is that this is what you would expect between two great European countries. There’s a rich set of contacts at all levels – government, business, broader civil society, and beyond.

And of course KW itself is part of that and has been since the beginning. And let me put in a plug here for not just the main event but for YKW. My own engagement in KW is actually framed, until today, by 2 YKW events – my first involvement, in 1995, in Berlin, and my last, as a speaker at YKW in Frankfurt in 2018, where HansHenning was present, where I fear I shocked some of our German friends, and quite a few Brits too, with my views on Brexit. So I’d like to say thank you and well done Annika Muller De Vries and everyone else who has kept YKW going and to underline my hope that we can keep and intensify the pipeline of people from YKW to KW proper. It’s crucial that KW makes an effort to be representative of all parts of our societies – by generation, by profession, by political views.

I want to say a little more on that last point. This is a UK-Germany event, not an EU one. All the same obviously Brexit has been a matter of huge controversy at KW over the years, even if the 52/48 split in British opinion hasn’t generally been reflected in the perspectives of the British guests!

This isn’t the moment to go over the arguments – they are done. It’s time to look forward and I want to set out how politics now feels here, and why, to help frame our discussions in the next 24 hours.

First, a reflection on the current situation. Our relations with Germany are, I think, good. Our relations with the EU collectively and with the institutions are a bit more bumpy. Obviously no one is happy with that situation.

Indeed I would go further. I think those who campaigned for Brexit wanted and expected genuinely friendly and free-trading relations between the UK and the European Union – and still do. Nothing was further from our thoughts than the current fractious and friction-filled relationship that we seem to have now.

Why is that?

  • Some of the current difficulties are teething troubles.
  • Some of it might relate to what happens when people can’t travel, can’t meet,
    have no real means to discuss things informally or to defuse arguments.

But I fear some of it goes deeper.

  • Some of it stems from lack of trust, for our part from the legacy of what seemed to be attempts to frustrate our referendum result during what seems to us to have been a period of British intellectual and negotiating weakness in 2018 and early 2019, which this government has had to spend a lot of time trying to correct.
  • And finally some also stems from what we see now. We have been surprised by the EU’s willingness to resort quite quickly to threats when problems arise – over vaccines, over fish, over financial services, and indeed over Northern Ireland.
  • I didn’t want to speak about Northern Ireland in any depth, but I do need to respond to Ambassador Michaelis’s comments. We are spending hundreds of millions on operating the Protocol, and that is the source of the problems, so we take no lectures on this. I am afraid the idea that we could take the politics out of Northern Ireland and the Protocol is not exactly realistic. We agreed the Protocol to deal with a very particular and delicate situation, and the best thing our European friends can do is to respect this delicacy and to work with us to find a pragmatic and negotiated solution.

So I want to be clear – we don’t wish for difficult relations, we look for this time to
pass, we will work to make it better – but it takes two.

Second, a reflection on why Brexit matters so much to us. It’s worth saying perhaps to our German friends that there is no longer any serious debate on the subject in Britain. No major political party advocates EU membership, and, while a proportion of the public may still regret Brexit, there is no energy behind a rejoin movement. Overwhelmingly we are now looking forward.

That matters. Those of us who became convinced, publicly or privately, in the years after 2010 of the need to leave the EU did so not because of some obsessional attraction to sovereignty. We did so because we believed EU membership had been detrimental to the UK, had sapped our energy and ability to solve problems for ourselves, and had stopped us making hard choices and clear decisions about how we wanted to run our country.

I think it’s worth making clear that this is not just a Brexit of the right. We’ve seen perhaps the most significant change in British politics for a generation – a profound shift towards Brexit, and the Conservative Party, from parts of the country which have traditionally leaned left.

Some are inclined, even now, to dismiss this as a cry of anger against “being left behind”. That is far too dismissive. What we have seen is a call for the country to be run in a different way, injecting new ideas into the political class, creating alternative possibilities, and crucially, holding politicians to account for different things, against different standards.

The point I want to make is that leaving the EU wasn’t the final goal – it was a doorway, a portal through which we had to pass, the beginning of a journey to national renewal and a repositioning of Britain on the world stage. I think it’s because people sense those possibilities that the mood in Britain is better than many thought it would be.

We think we have made a fairly good start to that renewal process, with a world class vaccination programme and indeed vaccine – as indeed does Germany. The predicted collapse in trade has not happened. We are putting in place a programme of reforms – to subsidy policy, to procurement rules, to agricultural support programmes. We are establishing genuine freeports to encourage investment and rebalancing around the country. We are setting up our own pure scientific research agency, ARIA. On the global stage, we are putting our money where our mouth is on defence, with spending going up to 2.3% of GDP, well above the NATO target. And just this week we agreed our first FTA, with Australia, showing as we always predicted that the ability to tailor agreements to our own needs would mean we could agree them more quickly.

All this is why, for those sitting in our government, it is hard to feel anything other than a profound sense of responsibility to deliver upon the trust bestowed upon us. And if you will forgive me a few personal remarks at this point – it is also why we must be vigilant. We do have a challenge as we take our programme forward as a Conservative Government. It is to respond to the new political configuration here without falling into the trap of statism or the intellectual fallacy that a big state, high levels of public spending, more regulation, and government-determined goals and investment plans can build sustainable economic growth over time. Germany demonstrated this was a false path in the Wirtschaftswunder and I think we could do worse than refresh our knowledge of the Ordoliberal tradition, weakened though it may be in the context of broader European policy-making, as we make our plans.

We must also avoid being too influenced by the current pandemic situation, that Ambassador Michaelis referred to. . The pandemic has ushered in a range of measures literally unprecedented in a free society – indeed for the last year or so we have not really lived in a free society. We now know governments can act decisively when there is a genuine crisis – but we always knew that. I personally don’t want to accept that the levels of state involvement in our lives and in the economy we have seen in the last year are in any way normal. I want to get back to the old normal as soon as we can. To me and to many Brits it is striking that it was in Germany, that has learned to be vigilant about these things, that we saw the first, and still in many ways the strongest, protests against lockdowns. As we emerge from the pandemic, we must not lose our conviction that individual not collective rights are paramount, that living with risk is inevitable, or our belief that free debate and free expression of opinion is the right way forward for a free society.

Of course we 100% do not have all the answers. As I hope I’ve made clear, I personally think we have a lot to learn from Germany. What we do have is the ability to make our own decisions, and yes our own mistakes, but also to correct errors and make changes. That is a crucial advantage in developing good public policy.

So, although we are rebuilding our relationships beyond Europe – and as the Integrated Review showed we are going to be putting lots of effort into that – relationships with Germany, and our other great European friends, remain crucial to us. We recognise we have to manage them not just bilaterally but through the EU institutions – but events like today show that the bilateral remains crucially important.

To conclude – as you may be able to tell I am profoundly optimistic about this country and our future. This is an optimistic government and we believe in the ability of the British people to recover from the setbacks we’ve all faced over the last year and to turn our country into something special. In doing so, we look for friendly collaboration wherever that is possible; with Germany I am confident it is possible; and KW has a huge role in keeping it possible. Thank you.

Roderick Crawford: The Northern Ireland Protocol. The EC’s latest proposal is a trap – designed to tie the UK into its regulatory orbit.

16 Jun

Roderick Crawford edited Parliamentary Brief 1992-2012 and currently works in conflict resolution. He is director of If You Are Safe I Am Safe.

Though the UK agreed the Northern Ireland Protocol it did not design it. As the party responsible for its implementation — as well as the good governance of Northern Ireland — it has every right and obligation to use safeguards to make sure that the protocol achieves its stated aims, as set out in Article 1 and the extensive preamble of the protocol and to argue for the changes that will make it work.

The Government has been accused of breaking international law by not implementing the protocol in full whereas in fact it is implementing the protocol in line with the stated aims of the protocol and its own wider obligations, it is just that this requires — indeed triggers — the use of safeguards.

The EU, on the other hand, wants the protocol fully implemented first and then it will discuss any changes that are needed. However, full implementation would cause considerable disruption to the everyday lives of the people of Northern Ireland, and cause further social and political disruption that no responsible government can be expected to allow.

The UK has always been clear that it would prioritise the upholding of the Belfast Agreement above the protocol — an objective the protocol arguably supports. It does so at considerable cost diplomatically but with no selfish gain in mind. It is admirable and right to do so.

The EU — Commission and member states — see things differently. There may be a large element of the dialogue of the deaf about this, but there is more to it than that. Take the Commission’s proposal that the UK enter into a temporary Swiss-style SPS agreement with the EU, promoted by Maros Sefcovic. He argues this would deal with 80 per cent of the problems being faced on GB-NI trade and that this agreement could be suspended if the UK needed to do so in order, for instance, to conclude trade deals with others.

However, if such an SPS agreement made the protocol work effectively, how could we remove it? There could be no US-UK trade agreement built on this formula. It does not take much thought to realise that this approach would achieve EU aims of tying the UK to the EU’s regulatory orbit and hamper the future of an independent UK trade policy and thus much of the rationale for the type of Brexit that has been achieved. It is not a solution to the better working of the Northern Ireland protocol: it is a trap, and a rather obvious one at that.

Rather than look outside of the protocol we should look within it to see if we can re-engineer the text to better accomplish its aims. There is an article in the protocol that could provide a considerable contribution to a solution. It would contribute not only to an easing of the trading difficulties but also of the social and political ones. It could reset the mood in Northern Ireland. And because it is in the protocol, the re-engineering can be argued to be a technical fix, not a renegotiation.

The 900 words of Article 5 of the protocol makes up a considerable amount of the articles 5-10 that deal with trade related issues. This article provides for special treatment for goods not at risk of entering the single market; specifically, it states that customs duties will only apply if goods are deemed at risk of entering the single market.

Because the Trade and Co-operation Agreement has created customs free trade in goods between the UK and EU the easements that this article would have provided are redundant. The 35 words of Clause 4 of this article apply the regulations of the single market (as set out in annex 2) to all goods, regardless of whether those goods are at risk of entering the single market or not. Article 5 therefore plays no part in making the protocol work effectively and acceptably.

Given that the Commission accepts that there are goods not at risk of entering the single market — goods that the Joint Committee were obliged to identify by the end of December 2019 — why should such goods have to comply with EU regulations at all?

If clause 4 of article 5 was amended so that EU regulations were not applied for goods not at risk of entering the single market (or in the case of processing of goods, not applied at the discretion of the Joint Committee) then the protocol would have much of the flexibility it needs to work to the satisfaction of all parties — bar those elements playing silly games. This would, for instance, allow the retail sector to work without hindrance from the protocol — and after all, unlike manufacturing, the protocol offers it no upside).

We don’t need a new protocol — though we might want one; we need it re-engineered. The problem with describing the protocol as “international law” is that you are either obeying the law or breaking it. In reality the protocol is as much policy as law. It attempts to address a unique situation; it has never been done before; it was not road tested and those for whom it was applied were only partly and imperfectly consulted.

The UK wanted to await the results of the EU-UK future relationship before finalising the framework for Northern Ireland; had we waited it is hard to see how Article 5 would have been worded as it is in the current protocol. The idea that the protocol would or could work without re-engineering along the way was unrealistic in the extreme and surely arrogant too. We are living with the consequences.

The Commission has claimed that there is no alternative to the protocol, that it cannot be amended and that any failure to implement in full is a breach of the UK’s international obligations. None of this is the case. If we cannot sort out the design faults in the protocol then the UK will have to use Article 16 safeguards to ensure that Northern Ireland is protected from the serious economic and political consequences of the protocol’s failings; that is what they are there for.

This would not be ideal, but the UK government has to have the power as well as the responsibility to govern properly in Northern Ireland. The publication in this last week of Northern Ireland Life and Times annual survey, the most reliable survey of public opinion there, shows only 26 per cent supporting a united Ireland: 55 per cent supporting the continuance of the Union. This reaffirms the necessity of ensuring the long-term stability of a workable protocol and the moral and legal authority the UK brings to the table as it works with the EU to achieve this.

Frank Zilberkweit: Say no to the wardrobe police – the damaging impact of banning natural fur

9 Jun

Frank Zilberkweit is Chairman of the British Fur Trade Association.

On May 31, a bank holiday, the Government slipped out a four week call for evidence on the UK fur sector that could be the precursor to restrictions or a complete ban. We welcome this opportunity to contribute, and we will set out in detail the exacting animal welfare standards and extensive laws and regulations that govern the sector, and why fur remains popular – with sales increasing by 200 per cent in the last decade. We will also set out the many damaging consequences that implementing a ban on fur would have including why it would do nothing to improve animal welfare.

Let’s be clear, if the Government decides to introduce a ban on the sale or wearing of natural fur it would effectively be telling us what we could and could not wear, and what we should have in our wardrobes. We would have the unpalatable prospect of millions of people being criminalised for choosing to buy a particular natural material. Such an intrusion would be an unprecedented step for a government to take and would be a significant curtailment of consumer choice and individual rights. Unsurprisingly, with a third of Brits owning an item of fur, there is no majority for a ban on humanely produced fur in the UK and we strongly believe that informed individuals should be free to make up their own minds.

It is also clear that restrictions on fur would be the thin end of the wedge and would simply open the door for bans on other animal products including wool, leather and silk as well as modern farming and field sports. Animal rights activists, who have long campaigned for a UK fur ban and have done much to use their links with unelected individuals close to the Prime Minister to push this call for evidence, want to see an end to the use of all animal products or materials including in food consumption. Their agenda is clear, but their narrow views do not represent the silent majority and nor do they care about the consequences.

There are exacting standards and laws in place governing the fur sector, banning natural fur would damage, not improve, animal welfare and would be a purely symbolic move pushed by animal rights activists. George Eustice, the Environment Secretary, confirmed as much in 2018 when he said in Parliament “It is not possible to make a difference just through the restriction on trade to the UK, because we represent a tiny portion, about 0.25 percent, of the entire global market. We would probably be more effective agitating for change through international forums such as the World Organisation for Animal Health, CITES and others.”

A ban could not work and would be unenforceable placing huge burdens on law enforcement to try to stop imports at the borders and then police it within the country. It would simply push sales online, untaxed and unregulated and to those who care little about animal welfare. It would also impact on the indigenous groups, who still depend on fur for their survival in places like Greenland and Canada, and on religious groups who wear items of fur.

It would lead to thousands of job losses and closed businesses in the UK. It would also damage London as a global fashion hub with many designers and brands using fur and it would disrupt trade relations with some our closest allies who are major fur producing and manufacturing countries including Canada, the United States and many EU states. What does it say about Brexit Britain and its commitment to free trade if one of the first things it does is to ban a highly regulated, international trade? Hardly a “Brexit Bonus”, as some have claimed.

A ban could not operate in Northern Ireland, that remains part of the EU Customs Union, and it is noticeable that the call for evidence only covers Great Britain. We would therefore have the prospect of one part of the UK being free to trade and sell fur including exporting its goods to Great Britain thanks to the Internal Markets Act, and commitments of ministers in guaranteeing the free movement of trade between the four UK nations, again, making a mockery of any ban.

Fur is a natural, sustainable material, far better for the environment than oil based synthetic fast fashions. It would be entirely illogical and counter productive for the Government to move forward with restrictions on a natural material that would lead to an increase in the consumption of synthetic materials in the same year as it is hosting COP26. It sends out entirely the wrong message for a government that wants to be seen as global leader in tackling climate change and improving the environment.

Banning natural fur is a retrograde, damaging step and no sensible government, particularly given the scale of other priorities including the pandemic, would consider implementing such a draconian and pointless policy. Increasingly, it is clear that one part of government, Defra, with its unelected supporters appears to be operating in isolation to the rest of Whitehall. I would therefore urge everyone to get involved in the call for evidence and take the opportunity to say No to a Fur Ban: Take Part: Government Call for Evidence – British Fur Trade Association.

There are vaccine shortages worldwide. Is it really more important to inoculate children here than adults abroad?

7 Jun

In the last few days, the UK regulator has approved use of the Pfizer-BioNTech vaccine for children who are aged 12-15. The MHRA said that after a “rigorous review”, it found that the benefits outweighed any risks. It has also been approved for the same age group in the US, Canada and the EU – with the Moderna jab approved in the US, and Germany planning to start vaccinating children over 12 from today.

One newspaper has reported that, in the UK, vaccines could be administered to children from as early as August as part of plans being drawn up in Whitehall. Currently ministers are waiting on advice from the Joint Committee on Vaccination and Immunisation (JCVI), which will make the final decision on whether inoculations become routine for the aforementioned age group.

Even before the regulatory approval came through, the subject of whether to vaccinate children has been incredibly controversial. Twitter isn’t always the best metric for understanding public sentiment, but you only had to look at the reaction to Jeremy Hunt’s recent post – a video of himself asking whether it was time to vaccinate children – and Lisa Nandy’s similar call to see how many are opposed to the idea.

The main concern that people, parents or otherwise, have is that, in general, children’s risk from the vaccine could outweigh that of getting Coronavirus, which is extremely low. Although scientists did not find any major side effects in vaccine trials, these involved 2,000 children, whereas very rare side effects – by their nature – tend to be found when a vaccine gets rolled out to tens of thousands more people.

Worries about the risk ratio are not a “fringe” or anti-vax view, but shared among medical practitioners. For instance, Professor Russell Viner, former President of the Royal College of Paediatrics and Child Health, has said: “Having a license doesn’t mean the vaccine should be used for all teenagers… Decisions about wider use in teenagers need to carefully balance the benefits and risks and the ethical issues involved in vaccinating children. The early reports about myocarditis in young men need to be properly investigated and may not be related to the Pfizer vaccine, however they provide a warning that we should not rush into these decisions.”

Another reason we have seen some strong reactions may simply be from people who didn’t realise that vaccinating children was an option. Even Kate Bingham, the Government’s vaccine tsar, warned in October 2020: “People keep talking about ‘time to vaccinate the whole population’, but that is misguided… There’s going to be no vaccination of people under 18. It’s an adult-only vaccine, for people over 50, focusing on health workers and care home workers and the vulnerable”.  So it’s not surprising that many were not prepared for the idea.

There will be lots of reasons the Government is thinking about vaccines for children. For instance, although rare, some children have suffered from long Covid – there’s no doubt that high risk children need vaccinations – and there have additionally outbreaks among children in certain areas (Blackburn with Darwen).

The JCVI will also consider what’s best for wider society in its decision (for instance, whether vaccinating children will bring transmission rates to a more manageable level). On this note, it’s interesting that Israel stopped short of vaccinating its young, as it inoculated so many adults that it eliminated cases in children. Maybe in August we will face a similar situation.

Another big reason the Government will be thinking about vaccinating children is because of the educational disruption that Covid has caused. Throughout the pandemic, unions have been perhaps the most demanding group when it comes to calling for Covid measures – and are now calling for vaccinations for pupils “as matter of priority“. Saying that, they might now find themselves up against an even louder group: parents! As plenty don’t want their kids to have the jab.

One of the most important arguments to consider in this debate – which experts are increasingly pointing out – is that there are parts of the world suffering far more than the UK, the US or otherwise with their Covid rates. Is it moral that Germany is getting on with inoculating children when there are countries with high risk populations that aren’t vaccinated? It doesn’t seem right.

Dr Kate O’Brien, the World Health Organisation’s top vaccine expert, has warned that immunising children against Covid is not a high priority, and reminded politicians that there is insufficient vaccine supply for the whole world. “Immunisation of children in order to send them back to school is not the predominant requirement for them to go back to school safely,” were her words. “They can go back to school safely if what we’re doing is immunising those who are around them who are at risk.” Somehow, with the panic about variants and June 21, we seem to have forgotten that.

Matt Kilcoyne: The G7’s aim to establish a global tax cartel is at odds with national independence. It deserves to fail.

6 Jun

Matt Kilcoyne is Head Of Communications at the Adam Smith Institute.

In a statement immediately following his meeting with Finance Ministers from the G7, Rishi Sunak said an introduction of minimum corporate tax rates will “finally bring our global tax system into the 21st Century.”

It’s a curious phrase. We don’t operate a global tax system. There isn’t one, we operate national governments, and sovereign states set tax rates within their borders. A quarter of a millennium ago the Americans famously broke from Britain to make the point that you can’t set the tax policy of others without their consent, and just five years ago the British decided that the prospect of sharing tax policy and ever closer union with the Continent was to be taken off the cards. And yet, seemingly, that has just changed.

A decade-long debate by the world’s most powerful western countries has broken through to set the terms of taxation that will see competition between states diminish. The reform to force corporations to book their tax in the places where they take revenues is seen as an immediately popular policy.

It is intuitive to people that if you’re selling a good in Britain, you have to book the sale in Britain and tax be levied in full here.

Yet little thought is given to what got the good to you buying it in the first place: the investments, the logistics, the marketing, the IP, the trade, the staff, the pensions and various insurances. Booking activity and cross-subsidising operations across jurisdiction has led to us having the greatest living standards and the greatest variety of choice in human history.

The cost of thinking simply and trying to straightjacket every company into operating as global finance ministries desire will be borne by the likes of you and me through higher prices, and via lower choice as firms decide to shift operations and cut operations.

It is one thing to say something out loud and another to implement it. Any changes to our legal system will require Parliamentary consent, anything that could even possibly represent a powergrab over devolved laws will undoubtedly see resistance from Sturgeon and Drakeford.

A policy being announced as a fait accompli on a sunny Saturday afternoon via social media does somewhat undermine the convention that Parliament hears its matters first.  While the Treasury’s usual response to those inquiring about their works is to say that “tax matters are for the Chancellor,” Sunak may find that backbenchers remind him that tax matters are actually for them.

And of course the Crown Dependencies and Overseas Territories that have just seen, without so much as a by-your-leave from UK Central Government, their independent fiscal policies smashed to pieces. Our Caribbean states help drive the global system of trade. They’re not just brass plates, ask The Guardian about the benefit of being able to move investment offshore to ensure the continuation of the free press.

That’s just the internal battles. The G7 is a bit of a misnomer, because it includes the largest seven free world nation states (the USA, UK, Japan, Canada, France, Germany, and Italy) but also the EU as a whole. It is unclear if the EU can sign up its members to a new tax reality when fiscal powers are explicitly reserved by its member states.

Ireland has come out already to say that they expect to lose around 20 per cent of their corporate tax revenues under the reforms agreed at the G7 — about €2.2 billion. With Sinn Fein on the rise in the South and desperate to secure largest party status in the North, despite their historic left-wing positions, we await to see how they will respond to this curtailment of Irish sovereignty and prosperity.

When Estonia was acceding to the bloc in 2002 Mr Vahur Kraft, Governor of the Bank of Estonia, said:

“In my view it is obvious that as long as the European Union remains to be the alliance of independent member states, there will be neither need nor possibility for any additional communitisation.”

Either the alliance is transformed without treaty to the status effective of a nation state or the Council President Charles Michel and Commission President Ursula von der Leyen have spoken without authority. Whether they have the power to force the issue is very much questionable. Can the bloc carry the likes of Ireland and Cyprus and Hungary while sticking two fingers up to the model on which they’ve built their economy in recent decades?

The UK itself of course already has a corporate tax rate above 15 per cent, and the Chancellor presumably sees little threat in letting our competitors agree to raise those under their thumb to that level (including our nearest and of course dearest neighbours Ireland) to give him a bit more room to raise our own rate back to 25 per cent by April 2023. But that might not always be the case and why should a Conservative want to create a ratchet effect that only ends up with higher tax rates?

The crux of the matter for all cartels is what mechanism keeps them all pulling in the same direction. Finance Ministers have the dual responsibility and joy of having to maximise the revenue that they take from their citizens to finance the projects that their fellow politicians push, but also for promoting and inducing economic growth.

While all the stars have aligned and G7 Ministers managed to agree for once to work together to extract a little bit of extra tax revenue from the likes of Facebook, Google and Amazon the consensus is unlikely to hold between states that are friendly but highly competitive.

When it is to be implemented too is debatable. The Treasury insists it’s after the issues of superdeductability have passed and so our investment strategy is sound, but the tax cartel has to hold for a long time to work. Consensus requires trust and that’s short between Britain and the EU, it was non-existent between Trump and the EU. There’s little to say it will be there with the next occupant of the White House.

Chris Giles, Economics Editor at the FT, recalls a G20 meeting where a deal restricting profit shifting was announced. He asked them to commit to a date he voiced for full implementation. Only the Chinese Finance Minister half raised a hand to agree to it, realised he was alone and dropped it. The idea is back at a smaller scale. Which tells you that it failed once to get traction with more competitive partners, partners that are on the rise and which will be eyeing up business that is looking at less onerous markets elsewhere. But also that it’s taken a decade to get to this point suggests it’s weak in its current form too.

The mood of Sunak’s announcement was upbeat but the tune we are asked to dance to is miserable. The West’s states are closing ranks against the private sector that is the cornerstone of our prosperity just as we need it most to build back better after the pandemic.

 

Clive Moffatt: The Government should come clean – and explain that reaching the net zero target by 2050 may not be possible

4 Jun

Clive Moffatt is an energy market analyst and former chairman of the UK Economic Security Group.

Back in April, the Government set the world’s most ambitious climate change target to reduce carbon emissions by 78 per cent by 2035 (compared to 1990 levels) with emissions targeted to fall to net-zero by 2050.

Cutting out coal from the electricity generation mix was the main reason why in 2020 the UK was able to slash emissions to a level 51 per cent below 1990 levels, but this had little economic impact and was only made possible by the existence of plentiful and cheap natural gas. The next stage will be far more difficult and costly.

Realising the targets will require nothing less than a complete overhaul of the energy network, the removal of natural gas from the energy mix – not to mention the plans to change dramatically how we move about and what we eat.

Looking at the energy sector alone, there are so many technological uncertainties that estimates of the costs of transition to zero vary considerably, with capital cost estimates alone ranging from £50 billion per annum for the next 30 years (Climate Change Committee) to £100 billion per annum (National Grid). Furthermore, the bulk of the costs in terms of consumer levies and/or taxation is likely to fall on those less able to pay.

What has been sadly missing from the debate so far is a clear and agreed set of policy guidelines and criteria to evaluate policy options and replace advocacy at any cost.

For a start, the UK cannot afford to go it alone and what we do should be based on what others do to meet the global challenge.

Second, there is no point transitioning to net zero if there is an increased risk of energy shortfalls – heat and light – and so the security of affordable supplies must be considered.

Third, the Government’s does not have a good record at picking technology winners and so the market must be allowed to deliver least-cost solutions.

Finally, natural gas supplies the bulk of our domestic heating and power requirements and will continue to have a critical role to play in the energy mix up to and beyond 2050.

On this basis, a slower but more secure and affordable route to net zero is possible and the following 10 action points could form the basis of a detailed policy framework to be announced in a white paper ahead of the next General Election in 2024 or earlier.

  1. A longer and more gradual rising CO2 price to underpin new investment in “green” energy and allow time for industry to become more energy efficient.
  2. Incentives eg tax rebates and/or subsidies to allow heavy industry to cut emissions – based on agreement at a sector or company level.
  3. Carbon equalisation tax on imports – to offset unfair competition to UK industry from imports from countries with less onerous emissions restrictions.
  4. No more nuclear fission after Hinkley C – the costs of large scale nuclear far outweigh the economic benefits in terms of both additional baseload capacity and emissions reduction.
  5. Cut wind capacity target from 40GW to 20 GW by 2040 to avoid incurring massive transmission constraints and system balancing costs associated with intermittency.
  6. To underpin baseload power security of supply, use capacity payments to support the construction of efficient CCGT capacity with potential for carbon capture but not imposed at the outset.
  7. Gas (without CCS), Demand Side Reduction (DSR) and batteries to compete in open cost/reliability based auction to deliver peak flexible supply at key points in the local distribution network.
  8. Evidence to date suggests that Carbon Capture and Storage (CCS) would increase power prices sharply, The Government should support prototypes pending a more detailed impact assessment.
  9. We will be reliant on imported natural gas for heat and power up to and beyond 2050. So we need to underpin new investment in flexible gas storage – currently less than two per cent of annual gas demand.
  10. Date for outlawing new gas domestic boilers to be no earlier than 2035 and dependent on a detailed welfare assessment of the reliable options available to replace natural gas.

Looking ahead to COP26 later this year, the UK and a very hesitant EU are the only ones among the world’s 18 largest greenhouse gas emitters to have submitted detail emission reduction plans.

So now would be good time for the Government to come clean and “tell it how it is”, namely that for very good reasons – such as technological constraints, security of supply, industrial competitiveness and especially affordability – reaching the net zero target by 2050 might not be possible.

Boris Johnson would be criticised for being a COP26 “party pooper”, but industry and consumers would probably breathe a sigh of relief.

Stephen Booth: Switzerland’s painstaking negotiations with the EU tell us a lot about our future relationship with Brussels

3 Jun

Stephen Booth is Head of the Britain in the World Project at Policy Exchange.

Is the EU making a habit of alienating its neighbours? Last week, the Swiss government informed Brussels that after seven years of painstaking negotiations it was unwilling to sign a proposed “Institutional Framework Agreement” designed to consolidate and govern the Swiss-EU relationship. The breakdown between Bern and Brussels has obvious parallels with Brexit and has to some extent become intertwined with it.

Switzerland’s bespoke and often fraught relationship with the EU has developed more by accident than by design. In a referendum in 1992, Swiss voters rejected joining Norway, Iceland, and Liechtenstein in the European Economic Area (EEA). At the time, the Swiss government saw EEA membership as a precursor to joining the EU – a Swiss application for full EU membership remained dormant and was only officially withdrawn in 2016.

In the meantime, Switzerland and the EU concluded a patchwork of around 120 bilateral treaties, resulting in a high degree of Swiss integration into the Single Market – a bit less than those countries that joined the EEA but more than under the UK-EU agreement reached last year. Generally, while EEA countries are obliged to dynamically align their legislation to the evolving EU acquis, Switzerland’s arrangements have given it more autonomy over whether to adopt EU law, or equivalent standards, in order to access the Single Market.

The EU has long seen the Swiss arrangement as a problem, since it requires permanent political negotiation and, in Brussels’s words, “leads to a lack of legal homogeneity and uncertainty and ultimately to an unequal treatment of economic operators.”

Switzerland’s prized national independence and system of direct democracy notably clashed with the EU in 2014, when Swiss voters narrowly backed a referendum initiative to impose quotas on EU immigration, in violation of the Swiss-EU agreement on free movement. The Swiss government managed to implement the 2014 vote without too much collateral damage to the EU relationship (critics argued the referendum instruction was watered down), and a subsequent 2020 referendum backed free movement.

However, the 2014 episode spurred the EU into pushing for an overhaul of the Swiss relationship. The Brexit referendum and its aftermath probably encouraged the EU to be even more hard-nosed in its negotiations with the Swiss, particularly since Theresa May’s “Chequers plan” proposed a package of pick-and-choose alignment with the Single Market comparable to the “Swiss model”.

In 2018, after four years of talks, the EU informed Switzerland that it considered negotiations to have concluded. The proposed deal would see Swiss laws change in line with EU legislation, while an arbitration panel would resolve Swiss-EU disputes and, crucially, include a role for the European Court of Justice (ECJ) for the first time.

Mindful that the agreement would likely need public approval in a referendum, the Swiss government asked for more time to consult domestically, which resulted in additional demands, including exemptions from EU state aid and freedom of movement rules.

During the sporadic talks that followed, the EU sought to put pressure on Switzerland to ratify the deal by, for example, letting the “equivalence” status granted to Switzerland’s stock exchanges expire. Guy Parmelin, the Swiss President, said last week, however, that the Swiss government had concluded that the “necessary solutions” could not be reached, which is why it “decided to terminate the negotiations.”

What happens next is unclear. The Swiss say they wish to continue and develop the bilateral approach, even without an institutional agreement, which seems unlikely, since the EU appears confident it can exert further pressure to bring the Swiss back to the table. Brussels has said, that without the deal, new access to the Single Market would be impossible to negotiate and existing access agreements will “erode” over time as the body of EU law develops.

The conclusion of the UK-EU trade agreement has also changed the landscape. The UK does not have the same level of market access as Switzerland, but the UK-EU deal, with the important exception of Northern Ireland, sees no role for the ECJ or dynamic alignment with EU rules. If the post-Brexit UK is seen to be a success, Switzerland may ultimately judge that the “UK model” is better than accepting the EU’s current terms.

What lessons should post-Brexit Britain draw from the Swiss experience? Some Brexiters will feel vindicated in their view that the EU is ideological, uncompromising, and bullying. Some Remainers will no doubt say they always warned that the UK wouldn’t be able to pick and choose its access to EU markets. Ultimately, whatever one’s emotions, the effect is the same.

Unless there is a sea change in Brussels, the EU has demonstrated via its actions that the political bar for substantially closer UK-EU economic cooperation is likely to be a high one for any future UK government to pass. Now that Brexit is fact, few in the UK appear confident to make the political argument that the UK should submit to UK-EU arbitration arrangements involving the ECJ to remove some of the new trade barriers that have arisen.

Therefore, greater divergence with the EU is likely in the future, whether we like it or not. EU law will continue to change without the UK. The UK can seek to coordinate with Brussels but its agreement cannot be guaranteed. The UK should focus on exploiting the levers it can now control, be it using its own subsidy regime to encourage inward investment or to ensure the City is a leading non-EU financial centre (the UK has already reversed the EU ban on trading Swiss stocks).

Meanwhile, the UK must continue to cultivate its diplomatic relationships outside the EU. Among other things, this means implementing the Indo-Pacific tilt by developing the relationship with India and concluding trade deals with Australia, New Zealand, and acceding to the CPTPP. Yesterday, the CPTPP nations agreed to the UK’s bid to begin the formal accession process.

The UK might also find common cause closer to home with the Swiss. Not least in trying to convince EU nations that the European continent would be better served by a less short-sighted policy towards countries that have chosen a different path, but nevertheless should be some of their closest partners.

Steve Baker: The UK almost certainly needs an Electoral Integrity Bill. The question is whether it goes far enough.

3 Jun

Steve Baker is MP for Wycombe, and served as a Minister in the former Department for Exiting the European Union.

It is easy for people living in small, stable communities to wonder why the Electoral Integrity Bill is needed at all. For those campaigning in urban areas, the answer will be obvious.

I am certain votes are being cast which ought not to be cast, votes which ought to be cast are being cast by those who ought not to be casting them, votes are being cast in particular ways as a result of treating and intimidation and, for various reasons, prosecutions are not forthcoming.

The Government is absolutely right to propose no party campaigners should handle postal votes. I know of cases where a person has turned up at a polling station several times with a clutch of postal votes in their hand. I have received accounts of candidates visiting electors’ homes, demanding postal votes are completed in front of them and then taking them away. I know these are not isolated incidents. We cannot assume voters enjoy secrecy and freedom when marking a ballot paper at home.

Our current electoral system has not caught up with population growth and the realities of modern life. Our procedures have become somewhat quaint, a point which struck me when I looked at the rules for candidates entering polling stations to check for personation. While I know many of my constituents, I do not know a sufficient number that I can go into every polling station and have any chance of spotting personation.

Those opposing the need to have photo ID when voting at a polling station say the number of people prosecuted for personation is low. I would agree. But the reason it is low is because all too often no prosecution is made despite overwhelming evidence being presented to the authorities.

Far from saying the provisions in the Election Integrity Bill are unwarranted, I would say they do not go far enough.

When Individual Voter Registration was introduced, I was pleased that, at last, it would not be possible for people to register more than once in a constituency. I quickly became wise to the fact it was still possible for people to vote more than once. In the 2017 election, an opposition activist was registered twice in a small street at different addresses. He voted at one address in person, and at the other with a postal vote. This was not a mere slip-up. He did the same at the General Election a few weeks later.

In urban areas, where there is a high churn of registrations, and where people live in houses of multiple occupation, it is not easy to determine who is entitled to be on the electoral roll and who isn’t. At one address in my constituency, a small three-bed Edwardian terraced house has 12 adults registered to vote. Either this is house is grossly over-occupied, or people are registered who have no right to do so. It just so happens that all those 12 voters regularly vote at election time.

I know of landlords who register to vote at properties they own, but where they do not reside. We have found foreign nationals on the electoral roll living legally in the United Kingdom, but who are neither nationals of the UK or the Commonwealth, nor EU citizens. Nevertheless, they are on our register to vote.

My election agent found out the hard way that if you want to object to a person’s name being on the electoral roll, your name is disclosed to the person to whom the objection is being made. Surely it should be possible to challenge an entry on the roll without disclosing who has made the complaint so long as there are reasonable grounds to do so?

I know the law allows people to register legally at more than one address, and that it is legal to vote in different elections on the same day. But the time has come to put a mark by people’s names showing which address is their principal residence, and therefore entitling them to vote at parliamentary elections, and which is a secondary address which will allow voting in local elections only.

The law is often very clear, but what is not clear is that appropriate importance is always attributed to each and every vote and to prosecuting offences. I am clear that when one vote is stolen, or otherwise corrupted away, it is not just a pencil mark on a piece of paper but the inheritance of a tradition of liberty and equality fought for at great cost and handed down over centuries.

If we fail to understand the magnitude of the corruption of even a single vote, we are a politically bankrupt nation.

Here is a link to Steve Baker’s recent speech on the Electoral Integrity Bill.

The Government’s most politically challenging travel list turns out to be amber

26 May

For many people, May 17 was an exciting date – not only signalling that we could go inside a pub again, but giving people the chance to go abroad too. That’s until the Government released its “green” travel list of safe destinations to visit.

Only 12 countries made the cut, but some of them were/ are so difficult to get into that they might as well have been on the “red” list. 

It turns out, however, that the holiday list causing the most political controversy is “amber”, which lots of people took as an indication they could go abroad. Thousands of Brits, in fact, booked holidays in amber countries, including France, Greece, Spain and the US, only to find out that they shouldn’t have under the guidelines.

The Government has given fairly mixed messages on the subject. George Eustice, the Environment Secretary, said people could go to amber list countries to see friends, so long as they quarantined upon their return. (Currently anyone who goes to an amber destination has to take Coronavirus tests and self-isolate for 10 days at home. If they leave, they face a fine of up to £10,000.)

But soon afterwards, the Prime Minister warned that an amber country “is not somewhere where you should be going on holiday”, and added that the only suitable explanations were “pressing family or [an] urgent business reason”. Keir Starmer grilled him on this in last week’s PMQs, saying: “I think everybody would agree that, having moved 170 countries to the amber list, absolute clarity is needed about the circumstances in which people can travel to an amber country.”

Starmer had a point (and it’s not often that this happens). It seems that the Government might as well have placed these countries on the red list, too, for all the trouble caused by uncertainty. Travel insiders have said that the lack of clarity is damaging – and several companies have refused refunds to customers who’ve booked holidays to amber destinations, only to find out that it’s not feasible.

Hopefully in the next few weeks the Government will be able to give more clarity to the situation. The next review is on June 7, a fortnight before more lockdown restrictions are lifted. Grant Shapps has suggested today that islands to which there are direct flights, including Mykonos and Ibiza, could be added to the list for quarantine-free travel next month.

There’s even more pressure on the Government to speed up after the EU revealed it would be introducing a bloc-wide EU Digital Covid Certificate on July 1 – to ensure that people can move around quickly. Travel organisations hope that this will encourage the Government to be more flexible.

At the same time, it has been criticised for not being tough enough on border control (Dominic Cummings said in his hearing that the controls are “deja vu all over again”). Trying to navigate this area is intensely complex, not least because it also relies on other countries’ travel requirements – and the status of the vaccine around the world. Yes, the amber system has caused big problems – but it’s a fallacy to think there are simple answers to travel.

Patel’s tough talk on immigration could be undermined by Johnson’s leanings

25 May

Yesterday Priti Patel set out a new vision for immigration in a speech for Bright Blue, the liberal conservative think tank. It was timed alongside the publication of the Government’s New plan for immigration: legal migration and border control strategy statement, and covered an enormous amount of ground, from the UK’s new points-based immigration system to the British National (Overseas) visas. Ministers have completely overhauled the system – to make it “simpler”, “fair”, “secure”, and, as they see it, more just.

The part of Patel’s speech that caused the most controversy was around the Government’s Introduction of Electronic Travel Authorisations, which will be used to create a “fully digital border” by 2025. Already there are concerns about how much this will cost visitors to the UK, and Labour has said that there are “serious questions” about how it will be delivered (never mind that EU countries plan to implement this too next year). But the speech was ultimately designed to reassure the public that the Government is “taking back control” of a system Patel described as “broken” – and echoed the pledges made in the Brexit referendum.

Will it do the trick in terms of pleasing Conservative voters? It certainly showed a government that is ambitious in its aims on immigration, and Patel was characteristically commanding in her delivery. However, some of the tough talk on “control” in the speech could actually be undermined by the policies that have been introduced by Johnson’s government.

To understand how this could happen, one first of all needs to look at public sentiment on immigration. Although it has become less of a pertinent issue to voters since Brexit, polls suggest that there’s still a sizable part of the population who want immigration levels reduced. In 2019, for instance, the Migration Observatory found that 44 per cent of respondents on its survey wanted this (39 per cent wanted it to stay the same), and Ipsos MORI found the same for 49 per cent of people it asked in November 2020 (compared to 12 per cent wanting an increase). This percentage has gone up and down over the years, and could go in either direction very quickly.

At the same time, Johnson has quietly shifted to a more “permissive migration policy”, as I have previously written for ConservativeHome. Soon after becoming Prime Minister, he scrapped several of Theresa May’s immigration policies – such as the net migration target, the £30,000 minimum salary threshold for immigrants and the Government also increased the amount of time that overseas students can stay once they graduate in the UK. These policies, in turn, could increase immigration levels rapidly.

There are lots of reasons that could explain why Johnson abandoned May’s targets. For one, he has said he believes the Australian point-system will help the Government to control numbers. There was also a large drop in net migration over the course of the pandemic – which will worry the Government. But the most obvious explanation is Johnson’s personal philosophy, as he is more liberal on immigration than his predecessor, and thinks numbers are arbitrary.

The issue here is that the Government has not always got it right in its calculations of how many people will move to the UK. One newspaper recently found, for instance, that the Home Office underestimated (by over a million) the number of EU citizens who would apply for settled status here post-Brexit. In short, it did not appear to know how many had been living here in the years before.

On a similar, but more delicate note, the Government has offered British citizenship to nearly five and a half million Hong Kongers. Leaving aside the reason for this decision – it is the UK’s moral obligation to help – there has been little discussion over what would happen if most of those eligible arrived. As Paul Goodman has written for this site, the Home Office estimates that nearly “300,000 Hong Kongers will take up the new visa route over the next five years”, but nothing is certain – and no backbencher wants to be the one who asks “what if the estimate is wrong?”

In essence, immigration could easily become more salient to voters if we see the levels of it rise substantially. The simplest explanation for why levels come up on polls is to do with infrastructure. Take the housing crisis. Already there are signs the Government will fail to get its Planning Bill through – and build the millions more homes this country needs. Yet the Government is relaxing the aforementioned controls. Liberal policies should go hand in hand with practical considerations.

The Government’s new measures – from the Australian-style points system to the digital border – may sound radical, but if they do not tackle the root of voters’ concerns, then there will be electoral trouble.


The speech here: