The world food system is imperilled by sanctions which owe more to feeling good than doing good

29 Jun

Dr John C Hulsman is the Founder and Managing Partner of John C Hulsman Enterprises, a global political risk firm. He is also a life member of the US Council on Foreign Relations.

True to form, the G7, meeting in Bavaria, have just concluded with another sanctions-fest. A majority of the advanced industrialized countries curtailed all Russian gold purchases and are examining a cap on the price of Russian oil.

The previous sanctions on the Russian economy have led Moscow to default on its debt for the first time since the Russian Revolution. But the question remains, are these strictures hurting the rest of the world as much or more than the Kremlin?

During my Washington days, I always knew we had strayed from the serious when, flummoxed, my fellow decision-makers would look bleakly around the room at the Council on Foreign Relations, and then invariably recommend the same, one-size-fits-all policy; the great and the good would advocate sanctions as an all-purpose answer for dealing with any particularly knotty problem.

While such a policy suggestion almost never worked, it made political sense in a Washington sort of way. The beauty of such an outcome is that countries that enact sanctions are seen to be ‘doing something’ about an important foreign policy problem while at the same time what they were doing was sure not to basically alter the balance of forces involved in a particular crisis.

It was the best of all worlds for feeling good, rather than taking the risk of doing good. As a realist, I always hated when such an outcome (as it often did) came to pass.

Presently, you see a lot of this sort of posturing over the European response to the Russian invasion of Ukraine. It has triggered a virtual torrent of economic sanctions that have been imposed by Western countries against leading sectors of the Russian economy, as well as many specific officials and entrepreneurs.

Some of these sanctions have had an immediate effect on Russia’s economy, though none has of yet has caused Vladimir Putin to change his overall strategy in country; only military facts on the ground have done that.

As such, it is fair to say that the sanctions have yet to ‘work’ in policy terms, though they still might over the long term.

However, what is not in doubt are that the unintended consequences to Europe’s sanctions-happy approach are growing with each new round of sanctions. In general, a policy problem is becoming more and more apparent: Profligate sanctions are beginning to boomerang, affecting the state of the European and world economy at least as much of that of Russia.

Sanctions, like all policy alternatives, must be judged on their specific policy merits; they are neither always useful nor always counter-productive. However, a Western Europe less keen than the US and others to help Ukraine in the armaments sphere must not substitute inaction in one policy area with hyperactivity in another.

For example, the prospects for a food crisis – caused by unthinking sanctions unwittingly damaging the fragile global food eco-system – are increasingly being discussed, caused by both a reduction in grain exports from Russia and Ukraine and even more so by an unprecedented increase in prices for fertilizers previously supplied from Russia and Belarus.

For the facts make it clear that present EU sanctions are exacerbating an already dire situation regarding ongoing threats to the global food ecosystem. Presently, global hunger levels are at a new high. In just the past two years, the number of severely food insecure people has doubled, from 135 million (pre-Covid) to 276 million.

More worryingly, more than one half of these live in famine conditions, an increase of an astonishing 500 percent since 2016.

Into all this real peril, mineral fertilizer has played a decisive role in alleviating disaster. In fact, its global use over the past sixty years has been a significant buttress for the global population increasing from three billion in the early 1960s to the eight billion of today.

A decisive 50-70 percent of the people on the planet are currently being fed as a result of mineral fertilizer use. There is no getting away from its importance, or from the fact that at present Russia and Belarus are both key players in the global fertiliser market, with a combined share of 16 percent of global pro-duction of mineral fertilizers and 22 percent of their export.

The EU’s feel-good sanctions have already heavily affected the global supply of mineral fertilizers. One example will suffice. Eurochem, is the world’s second largest (by sales) mineral fertiliser company. Headquartered in Switzerland, the company was founded by Russian businessman Andrey Melnichenko. Eurochem is one of only three companies in the world that presently produces fertilizer in all three nutrient groups: nitrogen, phosphate and potash.

European sanctions have hit the company at almost every conceivable level, in terms of finance, sales, logistics, production, and procurement, decimating this vital conduit for food production.

For, contrary to the EU’s insistence, all of these sanctions have obviously materially affected the company’s prospects. In fact, EU sanctions have led to a decrease in overall mineral fertiliser sales sufficient to feed 30 million people.

And this is only as of now. Overall, due to EU sanctions, more than 20 percent of the global fertilizer trade is under threat, potentially affecting an astounding 750 million people.

Of course, there is a distinct geopolitical component to such folly. Limiting the supply of the industry could lead to the threat of crop failures and famine in the most fragile countries in the Middle East and North Africa, with catastrophic consequences.

Refugees could well flood across the Mediterranean, leading to further political radicalization in an already politically shaky southern Europe. As for North Africa, anarchy and chaos worse than the 2011 Arab Spring could easily take place in famine-stricken countries if the food crisis gathers pace. Radical Islamists under the banner of jihad may well come to power there, a nightmare scenario for a world that presently has more than enough problems.

Beyond the horrendous human suffering, Europe may well come to reap the whirlwind of its sanctions-happy folly.

What should the UK do about all this?

First, it should encourage its European partners (and to do so itself) to look specifically at every sanctions plank and package from the common-sense, realist notion of whether it helps or hinders global stability.

In the case of indirectly sanctioning the mineral fertilizer industry, London should strongly encourage Brussels to look at fertilizer and food security as a humanitarian issue and remove such strictures from imperilling the global food ecosystem.

Second, if the EU fails to do so, the UK – freed from going along with the EU’s often nonsensical, Wilsonian foreign policy initiatives – should chart its own course, making it clear that it will not follow the folly of its allies in thinking that all sanctions are somehow inherently good, effective, and in the UK’s interests.

No one is doubting that the Putin regime must be checked, due to its tsarist revisionism. The question is one of policy, of how to do this in the best, most effective way, one which will not leave millions of people in danger of starvation.

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Lord Ashcroft: My new polling from Eastern Europe shows both Ukraine and Russia optimistic about victory

28 Jun

Lord Ashcroft KCMG PC is a businessman, philanthropist, author and pollster. For information on Lord Ashcroft’s work, visit www.lordashcroft.com.

Below is the text of my presentation to the International Democrat Union Forum in Berlin: Regional Views on the War in Ukraine

Over the last three weeks I have conducted polls in both Ukraine and Russia, along with 11 other countries in the region: Finland, Sweden, Estonia, Latvia, Lithuania, Moldova, Slovakia, Hungary, Poland, Serbia and Georgia.

Let’s start with the conflict itself. In Ukraine, people are digging in for a long war. More than two in three Ukrainians expect the conflict to last at least another four months – more than in any other country we surveyed. A quarter expect it to be going on more than a year from now.

At the same time, they seem undaunted. 60% of Ukrainians told us they were more confident of defeating the Russian invasion now than they were when the conflict started. This compares with just 37% of Russians who say they are more confident that the “special military operation” will be a success than they were when it began.

In both Ukraine and the neighbouring countries, we asked whether various states and institutions were doing enough to help. The general response was that people thought their own country was doing terribly well.

Figures were much less good for NATO. Though it’s hard to define its role given the limited appetite for military involvement, which we will come to later, fewer than half of respondents in most countries thought NATO was doing enough. Figures were slightly better for the European Union.

When we asked the same question of Ukrainians themselves, the picture was stark. Fewer than one in four thought France or Germany was doing enough, one in 3 said the same of NATO and just over 4 in 10 were satisfied with the EU. The United States was thought to be doing better, and top of the list, I’m pleased to say, was the UK. I’m told it really is true that Ukrainian soldiers shout “God save the Queen” when firing their British anti-tank weapons.

Accordingly, President Biden is more highly regarded than President Macron or Chancellor Scholz, and we have the rather extraordinary finding that Boris Johnson is nearly as popular as President Zelensky himself. Which leads to the idle thought that if Boris is to face another confidence vote, he should ask that it be held in Kyiv rather than Westminster.

We asked Ukrainians in more detail about their perspective. More than two thirds said they would feel safer if they knew their country had nuclear weapons, and more than 8 in 10 said they would like Ukraine to join NATO. A sign of their determination is that only 12% said they would leave the country tomorrow if they could. Remarkably, more than half said there was more that united ethnic Russians with other Ukrainians than divided them – though this was down from two thirds compared to my earlier survey three months ago.

In the neighbouring states, we asked how willing or otherwise people would be to help in various ways. Few objected to the idea of sending aid, such as medical supplies, but other measures were more controversial. In Lithuania, Estonia, Poland and Finland, around two thirds were prepared to impose further economic sanctions on Russia even if this had an impact in their own country. This compared to around 3 in 10 in Moldova, Slovakia and Hungary, and only 12% in Serbia. 79% of Lithuanians would be prepared to accept large numbers of Ukrainian refugees, compared to 34% of Slovakians. And while more than three quarters of Lithuanians and Poles were willing to provide weapons and ammunition to Ukrainian forces, only 23% of Hungarians and Moldovans, and 6% of Serbs said the same. Support for direct military intervention was lower across the board, though Lithuanians were once again the most willing: 43% of them said they would be prepared to send troops to fight alongside Ukrainian forces.

We saw a similar divergence of opinion on other issues. Clear majorities in most countries thought Ukraine should be allowed to join NATO if it so wished – the exceptions being Slovakia, Hungary and Serbia. Most populations thought sanctions against Russia were justified – though people in Moldova, Slovakia and Hungary were ambivalent, and most Serbs were opposed.

Perhaps surprisingly, a fair proportion of respondents – and a majority in some countries – agreed that Russia would be justified in seeing the expansion of NATO as a threat to its security.

In the NATO countries we surveyed, we also asked whether a no-fly zone should be imposed over Ukraine, even if that meant forces from their home country shooting down Russian military aircraft. In Poland and the Baltic states, not far off half of respondents said they approved of the idea – though again support was much lower in Slovakia and Hungary.

In most countries, overwhelming majorities said they thought no part of Ukraine was rightfully part of Russia, but again there were exceptions. Nearly one fifth of Slovaks, 3 in 10 Hungarians, one third of Moldovans and 41% of Serbs think Russia has a legitimate claim to Ukrainian territory.

By the same token, there was scant support for any of Putin’s scenarios for ending the conflict. Poland and the Baltics were particularly opposed both to official recognition of Crimea as part of Russia, and to NATO scaling back its troops and weapons in countries bordering Russia. There was little support for a ban on Ukraine joining NATO. But in Serbia, a majority found all three proposals acceptable, and there was substantial support for these compromises in Moldova, Slovakia and Hungary.

Evidently feeling that they have no option but to fight, Ukrainians were the most likely to believe that the conflict would only be ended by the military defeat of one side by the other. The Baltic states were the only other places to think a military solution was the more likely outcome. Everywhere else, including Russia, people were more likely to think the war would end through diplomacy.

Another striking finding was that barely half of respondents across the board believed the military conflict would remain between Ukraine and Russia. Around one third – and nearly half of Ukrainians and Poles – thought it would either spread to other countries in the region or develop into another world war.

Not at all surprisingly, some populations in the region saw Russia as a serious threat to their own country. This was especially true in Georgia, Estonia, Lithuania and Poland. People in Moldova, Hungary and Slovakia were less convinced, while a majority of Serbs said Russia was not a threat at all.

Equally notable was that while our Scandinavians and respondents in Moldova, Slovakia and Hungary tended to think that any threat was mostly down to Putin, those in Poland, the Baltics, Georgia and – especially – Ukraine were more likely to believe that Russia would continue to be a danger to its neighbours even after Putin had left the scene.

That being the case, clear majorities in Georgia, Finland and Sweden said they would like to see their countries join NATO – though the answer from Moldova and Serbia was a resounding “no thank you”.

We also looked in more detail at opinion within Russia itself. Externally, we found people believing that most Russians support Putin, or are at least evenly divided. In the countries we surveyed, few believed that a majority of Russians opposed the Putin regime.

From our own evidence, they’re right about that. We found 85% of Russians saying they had a favourable view of the president, a result unchanged from my survey in March. (In other words, Putin is nearly as popular in Russia as Boris is in Ukraine). The very positive view of China is also worth noting.

Polling in Russia comes with the obvious caveats that the regime effectively controls what Russians see and hear on the news, and that people might be cautious in talking about their views to a stranger. Nevertheless, the research from other sources is fairly consistent, and shows little change since before the clampdown that followed the invasion.

It is also instructive to note the different responses from different groups. For example, those aged under 25 – while almost as favourable towards Putin – were more than twice as likely as Russians as a whole to have a positive view of NATO, the EU, and the western countries we asked about.

We found three quarters of Russians saying they supported the “special military operation” in Ukraine – a figure unchanged overall since my survey in March, except that there had been a slight shift from strongly supporting to only somewhat supporting the invasion. Again, notably, fewer than half of 18 to 24-year-olds said they supported the invasion, compared to 84% of those aged over 55.

Asked who they thought was to blame for the current conflict, Russians were most likely to name Ukraine, followed closely by the US and NATO. Only a minority said they thought Russia itself had any responsibility.

91% told us they thought Crimea was rightfully part of Russia, a figure unchanged since March. Three quarters of Russians said they felt Donetsk and Luhansk were also part of their country – both of these figures have edged up by a few points since we asked the question three months ago.

Further questions showed how far Russians support the Putin narrative. More than three quarters agreed that military action in Ukraine was necessary to protect the security of Russia, and that the expansion of NATO is a threat to Russia’s security and sovereignty. Fewer than 3 in 10 see President Zelensky’s government as the legitimate authority of Ukraine.

While those under 25 were as likely as others to see NATO expansion as a threat, only just over half agreed that military action in Ukraine was necessary to protect Russia’s security.

Support for the invasion remains strong even though half of Russians told us economic sanctions had started to affect them or people they know.

In fact, when we asked the question a different way, we found two thirds of Russians saying they supported the invasion despite the sanctions, and 15% saying they would oppose it whether there were sanctions or not. Only 1 in 10 said they would support the special military operation, but the sanctions meant the cost was too high and the action should end.

Looking at their wider view, we find 86% saying they trust Russia’s current leadership to make the right decisions for the country, and 79% saying they believe Putin has the best interests of ordinary Russians at heart. While 4 in 10 say they think Russia’s international reputation has been damaged in recent years, that figure has actually fallen by 5 points since the invasion. More than 8 in 10 say they think Russia will emerge from the current conflict stronger than it was before – though more than half also admit that Ukraine seems to be resisting Russian forces more strongly than they would have expected. Once again, if you have the chance to study the detailed figures later, you will see that the youngest Russians took a more sceptical view of the Kremlin line than their older counterparts.

Finally, a finding which I must admit took me slightly by surprise. We asked which was more important – ensuring the media are free to report without restrictions, or ensuring people are not exposed to misinformation. I expected the Russians to choose the second option and endorse Putin’s control of the media. When we found an identical result in Ukraine, I reasoned that they would want to prevent the spread of enemy propaganda in wartime. What I did not expect was to find the pattern repeated throughout the region. In fact, of all the countries we surveyed, Georgia was the only one where people said media freedom was the more important priority. We can debate what this means and what the implications are, but I certainly found that a striking result in the current climate.

Overall, then we see that opinion in the region is far from monolithic – with variations probably explained by each country’s historic ties and loyalties, demographics, and current political and commercial realities. We see Russians still largely in support of their leader and his policies. And we see Ukrainians determined and optimistic, digging in for a long war, and with a clear view of who is helping and who isn’t – together with a widespread expectation that the conflict could spread beyond its current borders.

Full data from the 13-country survey are available at LordAshcroftPolls.com

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James Baillieu: The West must negotiate with Russia over Ukraine – rather than court nuclear war

27 Jun

My earlier piece on May 9th gave three possible outcomes for this conflict which can be summarised as follows:

1. A negotiated peace, in the absence of which there will be continued fighting to establishing a new Russian border incorporating the Donbas and the southern (Mariupol) corridor to Crimea. This contested stalemate would likely continue for many years.

2. Western involvement, NATO troops engaged on the ground, likely leading to a nuclear conflict with unpredictable results and long-term consequences for a very changed world.

3. Some form of regime-change in Russia. This is unlikely, given Putin’s position and the steadfastness of his ‘electorate’. Any such change would therefore have to take place with his consent. This option can be dismissed.

Many press editorials and letters advocate Option 2, which would lead to an escalation and an expanded conflict. Supplying longer range rockets and more complex weapon systems are direct forms of escalation which could set us on a path either accidentally or deliberately toward NATO troops on the ground, and from there to nuclear war.

If complex weapons are fired at Russia they will respond. If missiles are launched at Russia, their systems will detect the launch and they will fire missiles in return. An accident or a nervous commander too near the firing codes, and the whole thing could go nuclear. This revisits the military doctrine of the 1970s known as Mutually Assured Destruction, where peace was maintained in the knowledge that if they launched missiles at us, we would retaliate and totally ‘nuke’ them. The acronym ‘MAD’ said it all.

The Ukrainians are already running into problems in that they are reporting shortages of ammunition. President Biden said on 3rd May that his government had “nearly exhausted” Congressionally approved funding that could be used for more help. Time will also be needed to train Ukrainians to operate newly supplied weapon systems.

If negotiation is a viable route, how do you arrive at a solution? There are three sides of this conflict, Ukraine, Russia, and what could be termed ‘the West’, and each side has a very different viewpoint and perception. But differences in truth and perception can be resolved. The task here is to find a solution which is simple, and clear for all to see.

The ongoing tragedy of this war is the cost of at least twelve million displaced persons, of whom seven million are refugees. In addition, the cost of rebuilding cities and infrastructure will go on for years.

So how can this be resolved? The Ukrainians want this bloody and destructive war to end so they can rebuild their country, and with this they want a return to the status quo ante, membership of the EU, the return of Ukrainians evacuated to Russia, and accountability for war crimes. Russia wants to retain the Crimea and the Donbas, and now wants the ‘Southern Corridor’ which connects with Crimea. The West wishes to inflict some kind of ‘accountability’ on Russia

There are a series of trade-offs here. Ukrainian and Russian aims are not incompatible or as far apart as commentators may think, and such trade-offs and compromises can address Western concerns. These negotiations would require very delicate handling.

In his much-misquoted speech at Davos on 23rd May, Dr. Henry Kissinger said that the West should stop trying to inflict a crushing defeat on Russia and suggested that Ukraine should be prepared to give up territory. He advocated a speedy return to the status quo ante ‘before it creates upheavals and tensions that will be even harder to overcome’.

What is left out here is the Russian demand for the ‘Southern corridor’ to Crimea, and an as yet unspoken Ukrainian demand for money to rebuild a shattered country. In terms that both Russians and Ukrainians would very easily understand, there is a trade-off or a series of trade-offs that can be entered into in terms of who gives, and who pays. Delicate negotiations would have to be carefully handled. Problem somewhat over-simplified, but the argument (again) is for a negotiated solution (and this is achievable) rather than a nuclear holocaust.

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David Willetts: We aren’t getting an explanation from the Government of its pay policy that is honest about the coming pain

21 Jun

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

Paul Goodman’s excellent piec on this site yesterday admitted that he was so old that as a student he remembered the Battle of Orgreave. I’m even older. I was working for Margaret Thatcher at the time, and remember meetings punctuated with messengers straight from one of Shakespeare’s history plays: “Nottingham is with us.” or “Kent is hostile”.

We wrestled with inflation and pay demands then. There are some lessons which are still relevant today.

First, there is still some truth in the economic proposition that pay increases on their own do not cause sustained inflation which can be brought down by a tight financial policy. Monetarism is often seen as some esoteric economic doctrine, but it was actually a political strategy as well.

If you believe pay demands cause inflation, then the Government has to tackle inflation by doing deals with workers on their pay. Back then, Labour’s links to the trade unions meant they were better placed to do such deals than Conservatives.

So Tories needed a credible way of controlling inflation that did not depend on their relationship with trade unions. The refusal of ministers to get involved even in public sector pay negotiations today is a version of the lesson that was learnt then.

There was a second Thatcherite insight which is relevant today. Inflation is not just a matter of economic theory. It is also deeply political. It is how a society reconciles inconsistent and over-ambitious claims on resources.

Thatcher saw it as the evidence of a moral failure – a failure to recognise we had to live within our means. If we all promised ourselves more than the economy could afford, then one way to reconcile these conflicting claims was to reduce their value by inflation.

Some people and organisations with incomes set in cash without inflation protection lose out. Responsible Government has to deliver the unpalatable but honest message that we are not as rich as we think we are. That is key to Britain’s problem today. We are poorer than we hoped because of a combination of the costs of Russia’s invasion of Ukraine, the higher cost of energy including the costs of the investment to move to Net Zero and the economic effects of Brexit.

So if you were to add up the incomes we all think we are going to get next year, that figure is ahead of the economic reality, and inflation is the only way to make the figures add up. Thatcher’s stern Methodist explanation of these truths barely appears in modern politics.

Apart from these enduring insights the parallels with the 1970s and 1980s are very different from today. Trade unions have much lower membership now. Indeed compared with the 1970s employers and capital are stronger and workers are weaker. That is one reason a lower proportion of GDP goes on wages. Trade union power is almost entirely in the public sector – there are few private sector strikes.

The public sector is much slower-moving and less responsive to economic shifts than the private sector. So when Covid hit us, public sector employees were more likely to keep their jobs and pay – also, partly, because more of their jobs deliver essential services. Public sector workers have more protection of jobs and pay in a recession.

But when inflation is rising fast then lagging, public sector pay puts them at a disadvantage. Public sector pay loses out when inflation is high. So at the moment total private sector compensation including bonuses is rising by eight per cent. Basic pay in the private sector is rising by five per cent. In the public sector that is closer to three per cent. So the sector of the economy with higher rates of unionisation also has lower increases in pay. Strikes are the result.

Ironically, inflation may reduce real pay in the public sector whilst also in the short term boosting public revenues. More people are pulled into higher rates of tax. Public budgets set in cash terms lose some of their value.

Overall, pay is rising less than inflation. This is not some inflationary spiral. It looks as if the adjustment to our being poorer is partly happening through pay rates. The disappointment of expectations which inflation brings is particularly felt amongst workers. They are unhappy, but they are not getting an explanation of what is going on around them which is honest about the economic pain and recognises who is bearing it.

The Government has indeed belatedly tried to protect people, especially those on the lowest incomes from rising energy prices. But it still needs to pull all this together in an account needs to show the scale of the adjustment we are going through and that whilst the sacrifices will be widespread there will also be some protection for the groups worst affected.

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Johnson evades the Northern Research Group, but one can only visit Ukraine so often

19 Jun

Boris Johnson’s decision to blow off the Northern Research Group for a secret visit to Kiev is the latest sign that we’re probably in the autumn of his premiership.

It is, after all, fairly common for prime ministers facing trouble at home to become gradually more enamoured with the world stage, where they get to play the statesman rather than get shouted at by disgruntled backbenchers.

Much more pleasant to be the hero of the hour, whether that’s taking a lead in assisting Ukraine against Russia’s invasion or, in Gordon Brown’s case, ‘saving the world’, or at least the global financial system.

The official line from the Defence Secretary is that the trip needed to be secret because “Russia is still launching missile strikes right across Ukriane”, although it stretches belief a little that Moscow – which is trying to dissuade western nations from backing Ukraine – would do something so escalatory as risk killing the Prime Minister.

And indeed the visit itself is perfectly defensible – although the has a fascinating account of how frequently a call between Johnson and Volodymyr Zelensky coincides with a moment of political difficulty for the former.

But it still seems a little gratuitous to cancel on the NRG with no notice. Surely some other pressing diary commitment could have been invented instead?

Regardless of the justification, the response from MPs tells its own story. Whilst Ben Wallace insists that as a northern MP he isn’t offended and Johnson’s non-attendance at the conference can be made up, other attendees sound absolutely furious. A few more enemies made, a little more ground lost.

It won’t tip the balance, on its own. But it is another sign that the party is drifting back towards the factionalism that broke out under Theresa May. The European Research Group’s decision to reform their ‘Star Chamber’ to review the Government’s plans for the Protocol is another.

Johnson’s problem is that whereas Brown at least could expect to be fêted in any number of nations, with the right crowd, there are only so many times one can make an urgent visit to the Ukraine. At some point, if he wants to make a long-term prospect of his premiership, he is going to have to do the long and often tedious work of building trust with his parliamentary colleagues.

He has never shown much inclination to do this, and it is late in the day to learn the skill.

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Stephen Booth: Brexit is a process, not an event. So it’s far too early to judge whether it’s working.

16 Jun

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

Next week will see another Brexit anniversary as we reach six years since the 2016 referendum. Meanwhile, the UK-EU Trade and Cooperation Agreement (TCA), which marked the beginning of the UK’s new relationship with the EU has been in place for nearly 18 months. No doubt we will be debating the merits and consequences of Brexit for many years to come, but what can be said at this point?

Much of the Brexit debate has focused on trade and the economy, and the deteriorating economic situation has prompted some commentators to lay the blame squarely at the door of Brexit. However, it is almost impossible to disentangle any Brexit effect from the much larger economic shock resulting from the pandemic, and now the war in Ukraine, which have taken a heavy toll on the global economy.

Due to the volatility caused by these global events, it is difficult to make short-term comparisons across economies. However, according to OECD figures, the UK economy exceeded its pre-pandemic (Quarter Four, 2019) level of GDP for the first time in the first quarter of 2022, by 0.7 per cent. I

By contrast, German and Italian GDP was still below pre-pandemic levels (by 1.0 per cent and 0.4 per cent respectively) in the first quarter of 2022. And while UK inflation is at the high end compared to other economies, the Netherlands and Poland are both experiencing higher levels, illustrating that the UK is not a particular European outlier.

Given the degree of change to the UK’s trading arrangements, it would be a surprise if Brexit had no impact. At the time of the Spring Statement, the Office for Budgetary Responsibility noted that UK trade had not recovered as quickly as other advanced economies and that the trade intensity of the UK economy had fallen as a result. However, looking beyond the headline figures presents a complicated picture, not easily explained by Brexit alone.

The biggest contributors to the UK’s decrease in trade intensity are from a decline in imports of goods and services from the EU, even though the barriers to trade have overwhelmingly been erected on the EU side of the border (the UK has delayed imposing checks on EU goods entering the UK).

Equally, UK exports of goods to the EU have recovered more strongly than UK exports to non-EU countries. The reorientation of supply chains may have played a role in this. However, much of the global demand for goods was generated by US consumers, and the UK is not a major exporter of the products (computers and electrical equipment) that the US imported over this period.

Finally, the UK’s export mix is more dominated by services than its competitors. The pandemic has had far-reaching consequences for trade in services and, paradoxically, again it is imports rather than exports of services to the EU that have seen the biggest falls since the pandemic. This evidence would suggest that greater barriers to exporting to the EU seem to be playing only a limited role in the UK’s disappointing post-pandemic trade performance. This shouldn’t be cause for celebration, but it is important to diagnose the problem properly.

On the question of immigration, which dominated political debate prior to the referendum, it is notable that the UK has remained open to global talent and skills. The tight labour market is primarily to do with older UK workers exiting the market rather than the loss of EU workers, the vast majority of which have been replaced from outside the EU under the UK’s liberalised visa system.

Net migration to the UK was estimated by the Office of National Statistics to be 239,000 in the year ending June 2021 and work-related immigration to the UK has recovered strongly in the wake of the pandemic. There were 277,069 work-related visas granted in the year ending March 2022 (including dependants). This was a 129 per cent increase on the year ending March 2021 and is 50 per cent higher than in the year ending March 2020.

It is also clear that despite continuing high numbers of arrivals, public attitudes on immigration have softened significantly now that the UK is able to devise its own policy without the strictures of EU freedom of movement. According to Ipsos-Mori, the proportion of people wanting to see immigration reduced has fallen from around 65 per cent in 2015 to 42 per cent in 2022. The share saying immigration levels should stay the same or be increased has risen to 50 per cent from around 30 per cent. Those dissatisfied with the Government’s handling of immigration are largely concerned with illegal Channel crossings.

Meanwhile, there was a fear that Brexit would consign the UK to geopolitical irrelevance on the global stage. However, the UK entered into the new AUKUS security partnership with the US and Australia and it has played a leading role in the international effort to support Ukraine.

The crisis with Russia has not united the EU behind a common foreign policy to the exclusion of Britain. As I noted in a previous column, Emmanuel Macron’s drive for EU “strategic autonomy” on foreign and security policy has been severely undermined, probably fatally, by the fact that many in Northern and Eastern Europe have concluded that the US and the UK are more reliable partners in this field than France and Germany.

This is not to suggest that Brexit has been plain sailing or that the UK does not face significant difficulties. Clearly, the row between London and Brussels over the Northern Ireland Protocol has the potential to escalate and fundamentally destabilise the UK-EU relationship yet again. The domestic economic and political challenges of increasing productivity, improving economic performance across the entire country, and reforming public services pre-date Brexit.

Some Brexiteers are impatient for greater divergence from the EU. Some Remainers will continue to see Brexit as the root of every problem. However, Brexit is a process rather than an event and the experience of the past six years should demonstrate that the UK’s decision to leave the EU does not in of and itself mean it is on the road to success or failure.

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Andrew Bowie: I’m a Conservative MP, and I ask. Where’s the big idea? What’s the offer to the country?

10 Jun

Andrew Bowie is MP for West Aberdeenshire and Kincardine, and a Vice-Chair of the Conservative Party.

“People in this country are crying out for a Conservative party that is decent, reasonable, sensible, commonsense, and in it for the long term of this country. And that is the party we are going to build, and I want everyone to join in.

“If you want to build a modern, compassionate Conservative party, come and join us. If you want me and all of us to be a voice for hope, for optimism and for change, come and join us. In this modern, compassionate Conservative party, everyone is invited. Thank you.” – David Cameron, 6th December 2005

When I am conflicted about an issue, a policy or a vote; when I, not infrequently, question why I do what I do, why I am here, what drove me into politics and particularly, into the Conservative Party, I recall the words above.

I first heard them sitting in my mum’s car outside Morrisons Supermarket in Inverurie, the town I grew up in. I was 18 years old, had passed the Admiralty Interview Board for the Navy and was awaiting entry. And as the rain came down on that car in that supermarket car park, I heard on Radio 5 Live the result of the Conservative Party leadership election.

No one in my immediate family were Conservative voters in the 2000s. Not one of my friends voted Conservative in the 2000s.

But I heard those words from David Cameron. And I knew then that the Conservative Party was my party. I knew then that the country I wanted to see: a country built on positive, optimistic, compassionate, foundations, could only be built by a Conservative Party that spoke to a new generation – a generation fed up of Labour’s failures but unsure of the Tories; built with the words and actions of a new generation of Conservative MPs – Cameron, Osborne and a guy called Boris Johnson.

And that’s why I’m a Conservative. Because of those words and those people.

In 2010, I was so excited to read the foreword to the Conservative Manifesto

“A country is at its best when the bonds between people are strong and when the sense of national purpose is clear. Today the challenges facing Britain are immense…But these problems can be overcome if we pull together and work together. If we remember that we are all in this together.

Some politicians say: ‘give us your vote and we will sort out all your problems’. We say: real change comes not from government alone. Real change comes when the people are inspired and mobilised, when millions of us are fired up to play a part in the nation’s future. Yes this is ambitious. Yes it is optimistic. But in the end all the Acts of Parliament, all the new measures, all the new policy initiatives, are just politicians’ words without you and your involvement.”

This is what I believed. It is what I still believe. And those words inspired me not only to vote for, in my first general election, but to join the Conservatives.

But something has gone wrong.

Charlotte Ivers recently wrote a Sunday Times column headlined “The Tory party hasn’t had an idea since 2005.” In it she suggested that, secure in power for over a decade, we in the Conservative Party have no motivation to innovate.

Sadly, I cannot disagree.

We see evident now in the Conservative Party, my party, a strange mix of complacency, entitlement, fear and exhaustion.

Complacency bread from the fact that the Labour Party, after more than a decade in turmoil and opposition pose no electoral threat.

Entitlement bred from the comfort of office and power.

Fear bred from the nagging doubt that we might actually be wrong, and that years on the opposition benches await.

And exhaustion from twelve hard years of Government that have seen economic crises, migrant crises, an independence referendum in Scotland, Brexit, snap elections, a global pandemic and war in Europe.

It is a toxic combination. Made even more difficult by the need to keep on side the majority of that unwieldly coalition of electors that returned the Conservatives to Government in 2019.

So we end up here. Talking the talk of lowering tax whilst increasing National Insurance. Giving investment incentives to increase our domestic oil and gas production whilst imposing a windfall tax. Making the right noise about cutting the size of government not recognising it was our party that created two new departments in the last six years. Espousing the values of Global Britain whilst shrinking our diplomatic presence overseas.

Entering into a race with the Labour Party about who can spend more on x.

Where’s the spirit of 2005? Where’s the big idea? What’s the challenge to us? What’s the offer to the country?

I often say I am an optimist. Being an Aberdeen Football fan, a Scotland Rugby fan and a Scottish Conservative, I have to be. That’s why I backed Johnson for leader in 2019, because I knew he was too.

And I firmly believe, whoever is leader of my party, the Conservative and Unionists remain the only party capable to tackling the challenges that face us as a nation.

But we need to rediscover that confidence. We need to look back to our recent past. We need to reach out, think radically, be bold. Explain, again and again, that to taking our country forward requires all of us, not just Government, to make a difference.

That chucking money at a problem rarely solves the issue but that targeted investment can.

We need to be proud of ourselves and our past, but understanding of different opinions of it.

We need to build a new, positive relationship with the EU. Never compromising on our sovereignty or the integrity of our union, but working with them to resolve issues and together to tackle our shared challenges.

We need our Foreign Office to shout from the rooftops in every capital in the world how great a country, how great an enabler for change, how positive a force the United Kingdom is.

And we need to talk to a new generation in the same way Cameron, Osborne, and yes for eight great years, Boris did in London.

That is why I am a Conservative. That is why I joined this great Party – the most successful political party in the history of the world. Because I truly believe, if we start doing all this, now, our future is bright. And it is Conservative.

The post Andrew Bowie: I’m a Conservative MP, and I ask. Where’s the big idea? What’s the offer to the country? first appeared on Conservative Home.

Peter Franklin: Five tests for the next Prime Minister

6 Jun

Peter Franklin is an Associate Editor of UnHerd.

The Jubilee was wonderful, but it’s time to start planning for the succession. No, not our next monarch, for whom arrangements are in hand, but the more pressing matter of our next Prime Minister.

We can’t assume that today’s vote of no confidence means the end of Boris Johnson,  but clearly the party must be prepared for a leadership contest. Furthermore, in the absence of an heir apparent, there’ll be no foregone conclusion to the race, let alone a coronation.

Since the implosion of Rishi Sunak, there’s been no heir apparent. So if Johnson does go before the next general election, there’s no guarantee of a speedy leadership contest, let alone a coronation.

Furthermore, it would be the third time since 2010 that the party has chosen a new Prime Minister for the country — so, if it comes to it, we’d better be sure what we’re doing. The voters are in an unforgiving mood right now — and certainly won’t forgive us if we pick a dud. So whether or not you want to bin Boris, it’s important that we give his replacement some serious thought.

But how? Right now, the field of possible candidates is wide open. With no clear front runner, there are — according to the bookies — at least ten candidates in with a significant chance. Jeremy Hunt, Liz Truss, Tom Tugendhat, Penny Mordaunt, Ben Wallace, Rishi Sunak, Nadhim Zahawi, Sajid Javid, Michael Gove, Dominic Raab: I wouldn’t bet my house against any of them.

Choosing on the basis of personality isn’t much help. Most of those mentioned above do have one, but not the stand-out charisma that Johnson brought the fight in 2019. Ideological criteria won’t be of much use either; I’d expect every candidate to toss some red meat to the right of the party while also signalling their acceptability to Red Wall voters in the North and to Liberal Democrat leaners in the South.

Instead of a test of personality or ideology, what we need is a test of seriousness. Each candidate should be asked a series of questions that require properly thought-out answers, not sound bites. After all, if it’s just bluster and balderdash that we want, we’ve already got the master-of-the-art in situ. There’s no point in swapping him for someone else unless the substitute can offer substance in place of stardust.

There are hundreds of questions that could be asked, but here are five to get the ball rolling:

How will you reform the Downing Street operation?

Though the detritus of Partygate forms the most recent layer, the mess at the heart of government has accumulated over decades — not just the tenure of the current inhabitant. Unless a new broom can put this house in order, then how can we trust him or her to make a difference in the wider world?

My advice would be to get government out of Downing Street altogether — and establish a professional operation elsewhere in Whitehall. But I’d love to know if the leadership candidates have other plans. Any or all ideas for cutting through the chaos are worth listening to.

On the other hand, a preference for the dysfunctional status quo would instantly mark out a candidate as undeserving of further consideration. But at least that would save time.

What is a woman?

Yes, I know I said no ideological tests. However, this question is about observable reality not ideology. If a candidate can’t reply with the words “adult human female”, then I want to know why.

I’m prepared to respect — if not agree with — candidates who can set-out a logically coherent alternative view on this issue. But, again, there’s time to be saved here if a would-be-leader of the Conservative Party has nothing but nonsense or evasion to offer.

Will you maintain the UK’s support for Ukraine?

The greatest irony of Brexit is that when “European values” truly came under attack, the leader who stood shoulder-to-shoulder with Volodymyr Zelensky wasn’t Emmanuel Macron or Olaf Scholz, but Boris Johnson.

If the latter is forced out, then the most urgent question for the world is whether a new PM would maintain, strengthen or weaken British support for Ukraine. Looking at the current field of possible candidates, there’s scope for all three outcomes — and that could have an impact not just on the UK’s position, but that of the West as a whole.

Foreign policy issues rarely make much impact on Tory leadership contests, but this one should be an exception. Beyond the warm words and empty platitudes which the French and Germans indulge in, each of the leadership candidates would need to tell us exactly where they stand on the most important European conflict since the Second World War.

What explains Britain’s terrible record on productivity?

I fear that any debate on economic policy would degenerate into an auction of tax cut promises. Then again, spending promises might predominate instead — especially on measures to tackle the cost of living crisis.

Either way, we need to remember that tax cuts and spending sprees ultimately have to be paid for — and, for that, we need economic growth. So in the event of a leadership contest, what I’d really want to hear from the candidates is an explanation for why UK growth has been so slow for so long.

In particular, I’d like them to explain why Britain’s productivity collapsed after the financial meltdown of 2008 — and why it’s never properly recovered. Of course, it may be that they have no thoughts on this matter at all, in which case we’ll know we have an economic illiterate on our hands.

Are your proposals for solving the housing crisis substantially different from what’s been tried so far?

Any Conservative leadership contest is about the future of the Conservative Party — but without a solution to the housing crisis we don’t have one.

You only have to look at party support by age group to see what’s heading our way if we fail to make the dream of home ownership a reality for Generation Rent. This problem has been staring us in the face for more than a decade, and yet successive Tory governments have stuck to counter-productive policies that have pushed house price inflation higher and higher.

Reform does not guarantee success, but we can either give change a chance or continue down the same road to oblivion. It would be good to know which of these options each candidate prefers.

Steve Barclay: My fellow Conservatives face a choice. Look outwards, and follow Johnson. Or look inwards – and tear ourselves apart.

6 Jun

Steve Barclay is Chancellor of the Duchy of Lancaster, Minister for the Cabinet Office and Chief of Staff at Ten Downing Street.

Over the weekend, the whole country came together to celebrate Her Majesty the Queen’s 7

years of selfless service.

I very much enjoyed the special events put on to celebrate this remarkable occasion, and I know that my parliamentary colleagues – and readers of ConservativeHome – were participating in celebrations in communities across the country.

As we return to Westminster today, the Conservative parliamentary party faces a choice: we can focus on delivering the policies needed to meet the challenges faced by those communities – and of people across the whole United Kingdom.

Or we can choose to waste time and energy looking backwards and inwards, talking to ourselves about ourselves.

In my view, politics is always about the future – because the people who elect us are focused on the challenges and opportunities ahead, not the debates of yesterday.

That is why the next general election will be decided on who offers the best vision for the future of the United Kingdom, not on prior mistakes or successes.

Our remarkable vaccine rollout – the fastest in Europe – and our unprecedented economic support during Covid helped save lives and livelihoods. But that won’t form the basic choice in front of voters next time.

Equally, nor will the mistakes – for example, the contents of the Sue Gray report.

We have lost half of this Parliament to Covid. That is not the fault of the Prime Minister or of Conservative MPs – and our constituents understand that. But it will be our fault entirely if we choose to waste the remaining half of the parliament on distractions over leadership.

The country faces many pressing challenges right now – so we must focus on what matters to the livelihoods of constituents rather than the obsessions of those on social media. My colleagues understand from their constituency work and surgeries just how much the cost of living situation is impacting hardworking people. Pressure on energy bills and food prices is causing real stress and anxiety across the country – and this will continue into the winter.

It is crucial that we show people we are delivering on the change they voted for in 2019.

If we continually divert our direction as a Conservative Party – and by extension the government and the country – into a protracted leadership debate, we will be sending out the opposite message.

Our Prime Minister, Boris Johnson, has shown in his leadership on Ukraine, in getting Brexit done, in protecting jobs from the pandemic and resisting the repeated calls for a lockdown in the summer, that he is the right person to make the bold calls needed to respond to the economic challenge we now face. He is dedicated to unlocking talent across the UK and levelling up, and to delivering on our promises to the people who elected us. That is at the heart of the Cabinet’s agenda.

Rishi Sunak is fast tracking reforms to enable our pension funds and insurance firms to unlock billions in capital for investment in places that have felt ignored in the past. These are the big-ticket changes Brexit offers to communities like my own, who voted strongly to leave.

Priti Patel is ahead of our target to recruit 20,000 police offices to make our streets safer, and Sajid Javid is rolling out community diagnostic centres around the country to help clear the Covid backlogs.

Grant Shapps has set out reforms to help rail commuters who have to pay higher fares due to out-of-date trade union working practices. Jacob Rees-Mogg is reducing the size of Whitehall, ensuring we deliver more efficiently for everyone.

In all this, we are saying to people: we will support you. To get the skills you need. To get the investment your area needs. To ensure your local streets are safer and your health is supported.

And later this week, the Prime Minister will set out plans to expand home ownership to Generation Rent – building on our core Conservative belief that people aspire to own their own homes.

He and I are instinctive tax cutters: we know the tax burden as a result of Covid  is high and we know this would be the most benefit to the majority of our constituents. Money left in people’s pockets helps them plan and grows the economy.

The Parliamentary majority we hold is incredibly rare. To waste time now on continued internal factionalisaton would be indefensible to many of our party members – given how hard they worked to secure that majority.

I first stood for Parliament in 1997, when John Major had been hamstrung with a single figure majority. We then endured 13 years of Blair and Brown with no majority, before the frustrating constraints of coalition. We must not squander the enormous opportunity we have with our majority now – to make real Conservative change and deliver across the country.

The Queen’s Speech set out the government’s top priorities for the year ahead: growing the economy to address the cost of living, making our streets safer, funding the NHS to clear Covid backlogs, and providing the leadership needed in challenging times.

The problems we face aren’t easy to solve. Democracies around the world are all currently facing similar challenges. But under Boris Johnson’s leadership, our plan for jobs shows how we are navigated through these global challenges. To disrupt that progress now would be inexcusable to many who lent their vote to us for the first time at the last general election, and who want to see our Prime Minister deliver the changes promised for their communities.

The war in Ukraine is reaching a stalemate, and all involved face the question: how will it end?

5 Jun

Friday marked 100 days since Putin’s invasion of Ukraine began. Don’t worry if you didn’t notice. What with Her Majesty’s jubilee, the fallout from Depp vs Heard, and the second day of the New Zealand Test all competing for our attention, it was easy for something like the largest land conflict in Europe since the end of the Second World War to be missed

Alas, sarcasm is the lowest form of wit, but I hope my point is obvious. Since those dark days in late February when this conflict erupted, it has progressively fallen off our  radars. Yes, I’m sure we all follow a bloody siege here, a rousing speech by Zelensky there, and gave the Ukrainians a vote at Eurovision. But those first few days, when the rolling parade of shocks and horrors gripped our collective attention? As much history as the aforementioned Second World War.

Even here at ConservativeHome, it hasn’t often graced our ToryDiaries. So this seems an ideal chance to review the progress of the conflict so far, and assess what the options are for Ukraine, Russia, and the wider world going forward. The course of the war has habitually surprised and confused various armchair military analysts – usually because they were so busy being expert epidemiologists until February 24th.

Initial predictions suggested the sheer size and strength of the Russian military machine would soon crush the token Ukrainian resistance. Expectations of Kyiv falling within 48 hours were soon proved wrong. The excellent military machine that many Western commentators assumed Russia possessed turned out to be little of the sort.

The attack on Ukraine’s capital was abandoned after forces ran out of food and were forced into retreat. A similar situation developed in Kharkiv, the country’s second city. Although these retreats were accompanied by Russian atrocities, Zelensky’s leadership, the Ukrainian resistance, and the united Western response shifted the war’s dynamics rapidly. Ukraine appeared to be winning.

Yet this success bred over-confidence in Whitehall and Washington. Talk rapidly turned to no-fly zones, regime change in Moscow, or a push to remove the Russians from the Crimean Peninsula they have occupied for eight years. All these outcomes are highly unlikely, threaten serious escalation, and will only strengthen Putin’s resolve to continue with his folly.

All of this has resulted in a downgrading of Russian war aims from a decapitation and occupation of Ukraine to a strengthening of her hold on the separatist regions in the east of the country. This has coincided with a shift in the war’s favour back towards Moscow. Even Zelensky now admits Russia holds around a fifth of his country and is unlikely to be removed. Stalemate looms.

Of course, Western support will continue to pour in. America has already committed $40 billion dollars to supporting Kyiv: larger than the entire defence budget of Australia. If Russia chooses to continue this war, it will only add to the circa 15,000 personnel it has already lost in the last three months.  That is more than died in the nine-year Soviet occupation of Afghanistan.

And yet the costs are hardly one-sided. Zelensky estimates up to 100 Ukrainian troops may be dying per day, and Ukrainian estimates suggest the war has caused $600 billion worth in infrastructure damage so far. Civilian losses are in the tens of thousands, and millions have been made into refugees. The Ukrainian economy is expected to shrink by almost half. This is not a war they can fight indefinitely.

So that raises the question of how this war will be ended if not on the battlefield. Pursuing delusions of a total Ukrainian victory may have consequences far too awful to contemplate. As the historian Niall Ferguson has argued, Western commentators have significantly over-estimated the potential for Russian regime change – and under-estimated the potential for nuclear escalation.

In which case, one turns to the recent comments at Davos by the subject of Ferguson’s excellent ongoing biography: Henry Kissinger. Though criticised by a few zealously hawkish voices for saying so, Kissinger made a point that should be obvious: that we have little idea of how this war will end, but an obvious negotiated solution would be a return to the status quo ante.

Returning to the situation on the ground before the 24th of February has clear disadvantages for both sides. Russia would have to acknowledge it has lost huge amounts of blood and treasure in the pursuit of little. Ukraine, meanwhile, would have to acknowledge the loss of areas like the Donbas and Crimea that have been occupied by Russia since 2014 but which Kyiv of course still claims.

Then again, there are also clear benefits. Russia would see Ukraine and the international community tacitly agree to its annexation of eastern Ukraine, and both sides would see the end of an extremely costly and bloody few months of fighting. The West would also have the opportunity to sufficiently arm and train Ukraine’s forces to prevent this invasion from ever being repeated.

More importantly, this would allow us to face up to a reality that we in the United Kingdom have had little interest in addressing in recent months: how we will deal with Russia in a post-war world. Our EU counterparts have paid $40 billion to Russia since February for gas and oil, but plan to reduce imports by up to 90 percent by the end of next year. Russia is being cut off from the Western economy.

Yet Russian exports to China have increased by 56 percent since late February That reflects the changing geopolitical balance of power, and raises the question of Western priorities. Putin’s regime is awful. But China has over a million Uighur Muslims in detention, has ended the freedoms of Hong Kong, and acts aggressively towards Taiwan. It has ended US hegemony, and tilted the future towards the Pacific. It is a far greater threat to the West than Putin.

We may scorn Germany and France’s attempts to maintain a political and economic relationship with Russia. But they are being more realistic, whatever their motives, about the geopolitical future we face. What ever the outcome of this war, Russia will remain. Like it or not, it would be preferable for it be our ally rather than China’s. And as hideous as this invasion is, that imperative will not change.