Richard Holden: Three opportunities that open for us in an Australian trade deal

20 Jul

Maddisons Coffee Shop, Front Street, Consett

On Saturday, I did my sixth “Lockdown Litterpick”, around the beautiful Bollihope Common. A group of us bagged up five bin bags full of cans, bottles, pizza boxes and the general detritus that had been dumped in one the most beautiful spots in my constituency.

While chatting to my Association Chairman as the rubbish was collected, one of the volunteers revealed that she had emigrated from Canada to marry a Brit almost 40 years ago. Later that afternoon, I spoke with an old friend who had worked with me when I was a Special Adviser, before getting married and returning ‘down under’ to work for the Australian Government.

And later that afternoon still, on my way to my constituency office, I listened with interest to Times Radio as one of their correspondents gave an update on the New Zealand election – where the newly-elected National Party leader, Judith Collins, seems to be clipping the wings of Jacinda Ardern in an election that had until a couple of weeks ago looked as though it was shaping up to be a Labour landslide.

I mention these things because they to remind us that the ties that bind the United Kingdom with Canada, Australia and especially New Zealand are incredibly strong. Yes, they’re linguistic and historic, but they’re also based on families and friendships, and shared mature democratic systems of government underpinned by the rule of law.

As has been seen in recent years in both Australia and the United Kingdom, our Parliaments are more powerful than their premiers and the people aren’t afraid of switching out either if they’re not getting what they want. While Britain has spent the last few decades concerned over and trying to reform the nature of our relationship with the EU (which in 1980 made up 30 per cent of global GDP, but has shrunk to just under 15 per cent today) our CANZUK allies have been reaching out into the world.

I am very aware of how much with the grain some of these thoughts are in traditional conservative circles. But it’s increasingly clear to me that the opportunities presented by closer bonds with our Commonwealth allies are not some nostalgic pipe dream, but instead absolutely central to our future global ambitions, as well as the fillip our post-Coronavirus economy will need.

Our trade deal with Australia looks a though it might be one of the most comprehensive of the ones currently on the table, and there are three aspects of it that I’d like to flag.

First, Australia currently has a 20 per cent tariff on imports of luxury cars. Like the UK, the country is also right-hand drive. With our Range Rovers, Aston Martins and other top marques, surely this must be top target for negotiations.

Second, we’re much more understanding of Australians who want to come and work in the UK than the other way around. As we end our open borders with the EU and look at our Australian-style points-based immigration system, more mutual measures with our cousins in this regard must be a basis of future agreements.

Finally, Canada, Australia and New Zealand are all very developed service sector economies, but even our biggest companies are dwarfed by those of our American cousins. By opening our services sectors up to each other, we’ll drive competition, lower prices, increase productivity and, crucially, enable the formation of global firms with the diversity and reach across the globe.

That’s not to mention the new security integrations between our counties as the power structures of the globe tip towards the Pacific more generally and in which Canada, New Zealand and Australia all have a massive stake. We should be looking to leverage our foreign, defence and international assistance policies more generally on these security and international arrangements, as well as looking to build closer ties with an old ally of manufacturing in the North East of England – Japan.

China’s recent actions towards Hong Kong, the Pacific island nations, the South China Sea and, domestically, to its ethnic minority populations should give us all pause for thought. At the forefront of the minds of our allies across Asia and the Pacific is Chinese outward expansionism, control and internal repression

For Britain, out into the world is our call now. The tectonic plates of geo-politics have shifted to the Pacific; away from Europe to the wider globe. The world, not just the continent, is where Britain is at home. Now we’ve got to make the most of the opportunities on our global doorstep – and that starts with building our relationships with our old allies facing a new world on the Pacific rim.

Neil O’Brien: No, more economic prosperity doesn’t depend on more social liberalism

13 Jul

Neil O’Brien is MP for Harborough.

Danny Finkelstein took issue with Boris Johnson’s idea of “levelling up” in the Times the other day. He reviewed the work of Richard Florida, a thinker dubbed the “patron saint of avocado toast” for highlighting the role of bohemian urbanites in driving economic regeneration.

Danny concludes from his work that, “Social liberalism and economic prosperity go together.” He argues that: “in order to match the success and power of metropolitan areas, non-metropolitan places need to become more… metropolitan.  The problem with the metropolitan “elite” isn’t that there is too much of it. It’s that there aren’t enough members of it, drawn from a wide enough background and living in enough places.”

I hesitate to disagree with one of the smartest columnists on the planet. But economic growth and social liberalism don’t always go together.

What about the Victorians, combining breakneck growth with a religious revival and tightened public morals? What about Japan during their postwar decades of blistering growth and conservative “salaryman” culture? Over the last 70 years, Britain has become more socially liberal as our growth rate has slowed.

Even in Britain today, it’s highly questionable. London is the richest and fastest growing part of the UK.  But where is opposition to homosexuality and pre-marital sex strongest? London. Where is support for censoring offensive speech highest? London.  The capital mixes liberal metropolitan graduates with religious immigrants. Its success is shaped by both.

Danny’s other argument has more important implications. Is it really the case other places must emulate London to succeed? Like other capital cities across Europe, London has grown faster than the rest of the country since the 1980s. The shift to an economy based on “office jobs” over has favoured the centres of larger cities.

But we shouldn’t get too carried away by the idea that hipster-powered megacities are sweeping all before them. For starters, there are successes elsewhere. Cheshire has high tech in a rural setting, with productivity and wages above the national average.  Milton Keynes likewise, because it’s easy to build there. Productivity in Preston has grown faster than average because it’s a transport hub with advanced manufacturing.

On the surface, large cities outside London have done well.  Since 1997, our 16 largest cities grew their GDP faster than their surrounding areas: Leeds grew faster than West Yorkshire, Manchester faster than Greater Manchester, and so on.

But on average, those cities saw also slower growth in income per head than their surrounding areas. In other words, people became more likely to work in city centres, but that growth was fuelled by people commuting in from smaller places around them. Their growth has been powered more by smalltown commuters than flat-cap wearing uber-boheminans.

It’s right that there are cities outside London that have things in common with it, and might benefit from similar investments. Lawyers in London will soon get Crossrail. So why have lawyers in Leeds waited 20 years for a tram?

But too often Richard Florida’s work leads politicians to focus on shiny cultural facilities. A cool art gallery in West Brom.  A national museum of pop music in Sheffield. It’s not just that these projects flop and close. It’s that they distract from two bigger issues.

First, most people aren’t graduates – so we need a plan to raise their productivity and wages too.

Second, places outside urban centres are perfectly capable of attracting high-skill, high income people – with the right policies.

Britain’s economy is unusually unbalanced compared to other countries.  Pre-tax incomes in Greater London are nearly 60 per cent higher than the national average, but more than 20 per cent below average in Yorkshire, the North East, Wales and Northern Ireland.  These imbalances mean our economy is overheating in some places and freezing cold in others, slowing growth overall. There are no major economies that are richer per head than Britain which have a more unbalanced economy.

But these imbalances don’t represent pure free market outcomes. It’s true that low-skill, low wages places can get stuck in a vicious circle. True that some places on the periphery have very deep problems. Nonetheless, the British state doesn’t do much to stop that – in fact it does a lot to unbalance growth.

Consider how we spend money. Capital spending on transport infrastructure in London is nearly three times the national average. Research funding per head is nearly twice the national average. Nearly half the core R&D budget is spent in Oxford, Cambridge and London. Spending on housing and culture per head in London is five times the national average. We’re “levelling up” the richest places.

We’ve rehearsed these problems for years, but not fixed them. Instead of chasing flat white drinkers, we need to find a cool £4 billion a year to level up R&D spending in other places to the levels London enjoys. Fancy coffee can come later.

Consider our tax system. Overall, the tax rate on business in the UK is about average.  But we combine the lowest headline rate in the G20 with the lowest capital allowances. The combined effect of this is a huge bias against capital intensive sectors, particularly manufacturing.

That in turn has a regional impact, hurting places more dependent on making things: manufacturing accounted for only five per cent of London’s productivity growth since 1997, but nearly 50 per cent in the north west. A hostile tax system is one reason Britain has deindustrialised more than any other G20 country since 1990, and why manufacturing’s share of the economy is half that in Germany or Japan.

Manufacturing should be a key part of levelling up outside cities: it needs space, not city centre locations. In English regions outside London, wages in manufacturing are about nine per cent higher than in services, and manufacturing productivity grows faster than the economy as a whole.  But Britain’s excessive focus on professional services makes it harder to grow high-wage employment in non city-centre locations.

Consider where we put our key institutions. In Germany the political capital was Bonn, and is now Berlin. The financial capital is Frankfurt. The Supreme Court is in Karlsruhe. The richest place is Wolfsburg, home of Volkswagen. There are major corporate HQs spread across the country. TV production is dispersed because central government is banned from running it.

In Britain, all these things happen in just one city. We’ve talked about this for years, but made little progress.  In recent years, we managed to move one chunk of Channel 4 to Leeds, and a bit of the BBC to Manchester. But that’s about it. Whitehall only wants to move low-end jobs.

The debate on levelling up is frustrating, because we know some things work, but we don’t do them. “Regional Selective Assistance” boosted investment in poor places with tax breaks and subsidies.  Thanks to evidence from natural experiments, we know it boosted growth. Yet it was allowed to wither.

I don’t want us to be just another government promising the world, then not delivering. Politically, it’s vital we deliver. Lots of people who haven’t voted Conservative before put their trust in us last year. It’s telling that the centre point of the seats we won is just outside Sheffield.

We won on a manifesto combining centrist economics, (50,000 more nurses) mild social conservatism, (ending auto early release) and national self-confidence (Getting Brexit Done).  Levelling up is central to all this. We promised voters steak and chips.  We could serve up avocado toast instead, but we shouldn’t be surprised if the voters don’t thank us.

Roderick Crawford: We have interests in the rest of Europe, but must be free to run our own foreign policy

6 Jul

Roderick Crawford works on conflict resolution in countries such as Yemen, South Sudan and Iraq, and on Brexit-related matters. He is a former editor of Parliamentary Brief.

One could be forgiven a sense of déjà vu as we enter the second round of accelerated talks, this time in London. The high hopes of breakthrough at the start of last week’s talks were dashed as they broke up on Thursday last. The same sticking points remain: the legal structure of the agreement, level playing field commitments, including state aid, and of course fisheries. Specific details have not been released, so it is hard to comment on why the progress on getting agreement on underlying principles has failed to materialise.

Though working through the underlying principles of the agreement should help identify where the barriers to agreement lie, a look at the overarching principles of the negotiating positions of the two parties may throw better light on the lack of progress.

Last month, Der Spiegel ran an interview with the Anglophile former German Ambassador in London, Peter Wittig; he provided a revealing glimpse into the EU’s perspective on the negotiations. Asked whether, in effect, the EU should accept a hard Brexit and let the UK go, he says, no:

‘We should continue to endeavour to tie Britain as closely as possible to the European Union. Europe can only survive in the competition between the USA and China if it is strong and united. I always thought it was good that the Federal Government was the voice of pragmatic reason in all these difficult negotiation phases. I advise everyone not to think about the short-term effect, but to keep a strategic eye on where Europe should be in five, ten or 15 years.’

The quote is interesting because it is part of an intra-German conversation from a friend of the UK expressing pragmatic views on the big picture in which Brexit sits. While the UK has been caught up in its own arguments and political storms – and of course running ourselves down – we have lost sight of the impact of Brexit on the EU: it has been considerable.

The EU has lost its only global city, its only global finance centre, its most dynamic services economy, 12 per cent of its consumers – more when weighted for income – and its only universities ranked in the world’s top ten. It has lost a major pillar of good governance (the UK was a consistent upholder of the EU’s rules-based system) and a source of sound counsel.

As the EU looks to develop its common foreign policy and defence co-operation, it does so now from a far weaker base. The UK was one of two EU permanent members of the UN Security Council, one of two nuclear powers.

It had the only blue-water navy capable of working with the US; China has just achieved a two aircraft carrier capability – the UK will soon be there, too. It has a battle-tested professional army and air force. The UK alone had the capability of power projection across the world – albeit with limitations – and the will to do so. The Foreign Office, despite its shortcomings, is still world class and the UK’s influence is, arguably, stronger across the world than any single EU member state.

The EU is diminished, while the fault lines on which it sits become more unstable. To its east, Russia is reviving in confidence as its actions in Ukraine, Syria, and its challenges to the West demonstrate. Turkey has become a regional player, outside of the NATO fold, and looks to a future untied to the EU. The Middle East and North Africa are unstable, and a source of potential and probable mass migration to the EU driven by demographics, economic and political failures and climate change.

The UK looks out across the North Sea to Norway, Denmark and the Netherlands, and across the Channel to Belgium and France; to our west lie the USA and Canada. It is an envious position to be in, though not one deserving of complacency: we still want a secure and stable EU. We are committed to the peace and security of Europe through NATO; in these respects, our interests and obligation in NATO, we are tied in.

One of the problems in the current negotiations is that the EU has re-written history to build up its own role in keeping the peace of the last half century. One of its foundational myths is that it has been the EU that has kept the peace in Europe. It even claims responsibility for the Belfast Agreement.

But its claims to success are absent of evidence. It is the transatlantic partnership that has kept the peace in Europe; it was the Northern Irish, London and Dublin – with US support – who brought about the Belfast Agreement. The EU forgets its role in the break up of Yugoslavia, and the subsequent wars and civil wars ended only with US engagement. Its diplomatic bungle over Kosovo, when it resurrected the July 1914 ultimatum to Serbia, ended likewise – and at great cost in civilian lives. The EU has not kept the peace in Europe.

The EU’s ambitious partnership proposal is overly ambitious, based as it is on inflated ideas of its own story and present capability; the ideas of uniquely shared values and interests ignore that they are shared with the English-speaking world and beyond. When the myth is removed, and the reality of the EU’s position is seen — its risk levels, its lack of investment in NATO and its own level of defence preparedness, and its poor relations with its neighbours — it is hardly an attractive partner; more of a liability.

The EU, quite understandably, wants the UK as closely tied in as possible to its defence and foreign policy (and economy). The UK, quite understandably, does not. Present commitments through NATO provide sufficient security to the EU’s members and help balance much, though not all, of their security concerns. The UK will do more, through co-operation bilaterally with members and freely alongside the EU too.

The EU and UK can co-operate to secure shared interests, but ultimately, though the UK wants a stable and secure EU and stability and security for its member states, there are differences in interests. The UK must be free to run its own foreign policy, champion alliances that may take precedence over that with the EU and policies that the EU will oppose — even the freedom to support member state interests against those of the EU institutions. It cannot be tied-in to a punitive governance structure to prevent it exercising such choices.

The overarching principles of the EU and the UK as regards governance of the future relationship are in conflict — we can’t be tied-in and free simultaneously; papering over the differences would breed confusion and likely lead to fresh upsets in the future. The UK cannot afford to accept a single overarching governance structure or claims upon it in the field of the EU’s common foreign policy and defence.