MICHAEL WHITE: Brexit is distracting politicians from finding solutions to other issues
PUBLISHED: 11:16 23 August 2018 | UPDATED: 11:16 23 August 2018
Michael White says all political parties have an as-yet-unfulfilled duty to think much harder about reforms.
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Have you had time in your busy week (busy relaxing, I hope) to spare a kindly thought for Elon Musk’s problems? Me neither. But it seems that the Tesla squillionaire has been struggling a bit.
He’s had an “excruciating” year, so he confided to liberal readers of the New York Times. When not abusively trolling he’s falling foul of US stock exchange rules about taking his company private again.
Poor Elon. I mention it not to garner sympathy for Musk, who has been making an expensive fool of himself on multiple fronts this summer. I do so because his over-entitled concern for himself is symptomatic of a wider dysfunction that affects us all – and is certainly central to the tragedy that is Brexit.
Growing public disquiet – anger in many quarters – over the widening gap between the poorest and the richest is not confined to Britain, either in terms of wealth or income. Far from it. Globalisation creates winners and losers everywhere. Many of the foot-soldiers of Brexit feel they have been let down and sold out, despite wealthy Jacob Rees-Mogg mysteriously feeling the same thing.
Gaping gaps in wealth and income is well documented over the past 40 years since the post-1945 North Atlantic boom ended, wage growth stalled and tech-driven oligarchy burst exponentially on the scene. In the US and UK the gaps are wider than in most EU states. Germany and Scandinavia are relatively egalitarian on many tests. But ex-Soviet Russia and nominally-communist China now offer notorious examples of doubtfully acquired riches on a scale rarely seen since the late 19th century’s Gilded Age.
And New Zealand? In the same week that Mr Musk was sharing his sorrows – he worked a 24-hour shift alone on his 47th birthday, poor chap – the fiercely egalitarian Pacific island nation, a pioneer of the welfare state and votes for women (1893), announced that it is clamping down on foreign property ownership because Kiwi home ownership has plummeted to just 25% – half what it was in 1990.
The new rules promised by new mum, Jacinda Ardern’s minority Labour government won’t prevent PayPal Trump-backer, Peter Thiel, and other plutocrats – many are now Chinese – hanging on to their Kiwi pads, which are as much fantasy safe havens from the apocalypse as a locally-filmed Lord of the Rings hobbit house.
But, as elsewhere, hostility to rich and mobile foreign buyers is a a distress symptom for a wider problem in society. Overseas rich are just more visible or – rather – invisible because they tend to leave their boltholes empty. Swathes of Mayfair (and the Venetian Grand Canal) are dark at night in consequence, generating only low-paid jobs in security.
Mrs W is a Kiwi and when I was last there in 2013 (for a delightful beach wedding, wouldn’t you know), Auckland was already being reported as one of the most expensive cities in the world – not as dangerous as Johannesburg or London either. Once-modest seaside Kiwi summer homes (known locally as “baches”) were increasingly being replaced by glass and steel swank.
On staycation seaside holidays in Cornwall, Sussex and Essex this year I’ve seen the same process at work – same architect too, by the look of it. Plonk such an expensive weekend home next to a loved-but-battered ex-railway carriage (a 1930s choice in Sussex and New Zealand) and it’s hard not to notice the contrast. St Ives has voted to curb second homes too.
Seaside resorts are Brexit country. So back to Brexit. Last weekend Julian Dunkerton, co-founder of the hip British clothing brand, Superdry (a trendy branch in St Ives), announced that he is giving £1 million to finance a polling operation in support of the People’s Vote campaign for a second referendum on Theresa May’s Brexit terms (if any).
Twitter reaction? More of the same. Remainers are rich people who don’t care what poor Brexit voters – “plebs” as some insist on calling themselves – worry about. They want only to overturn the “democratic will of the British people” (exactly what will? fill in the gaps however you please) and keep us all as slaves in a vassal state under the heel of Brussels.
It’s painful, self-lacerating stuff, but it’s heartfelt. The sight of Tracy Ullman joining the People’s Vote campaign – she did last week – only served further to enrage critics of the “rich elitist Remain” crowd. It cuts no ice to say – yet again – that there are rich people on the other side too, Fleet St’s tax-shy oligarchs, the Rees-Mogg dynasty, Arron Banks and his exotic Russians friends in the gold business, Trump too.
This is about feeling, not about evidence. It’s about ‘sovereignty’ over our borders, our laws and our taxes. ‘Take Back Control’ was a slogan of genius, pretty meaningless in real life, but potent, especially to people who feel they lack much control over their own lives – or hanker for the days when they had more.
But inequality is not about mere feeling.
People see it in the falling purchasing power of their wage packets, in their rents and inflated mortgage burdens, in their kids schools, their hospitals and boarded-up high street shop fronts. They see it in potholes where once the roads were better mended, in the cavalier response to theft or assault from an over-stretched, demoralised police force, in the grasping fees and fines which shore up depleted revenue streams, private and public.
They see it in the collapse, not of manufacturing firms these days, where survivors of Margaret Thatcher’s monetarist squeeze (it was opposed by Keynsian Tory grandee, Peter Tapsell, who died this week) are more robust. This time it’s the turn of Thatcherite outsourcing firms like Carillion (bankrupt) and faded high street retailers like BHS (bust) and – this month – House of Fraser when they finally run out of credit.
In a country that runs on credit – households borrowed more than they saved last year – £80 billion against £37 billion for the first time since the bankers crash – it is a double irony. We don’t even recycle the borrowing through House of Fraser. More and more of it goes to tax-shy Amazon.
But in successive retail collapses customers, suppliers and staff get shafted while the likes of Sir Phil-Yer-Boots Green (who offloaded BHS for £1) or Sports Direct’s much-criticised boss, Mike Ashley, get House of Fraser’s empire for a mere £70 million – but not £1 billion worth of discarded liabilities, including now-threatened pensions. Protect pensions or even Germany will end up with a Donald Trump, Angela Merkel’s SPD deputy warned the other day.
In battered Britain this week it was the turn of G4S-privatised Birmingham jail to follow the East Coast rail service and collapse back into public control, another reminder that there are no panaceas in life – not privatisation, nationalisation or Brexit. Our unruly jails are overcrowded, but not with dodgy bankers or partially-blind accountants.
Unfair, isn’t it? Yes. Much of this distress is routinely blamed on austerity since the bankers crash of 2007-9. Conservative politicians in the US, Britain and Germany successfully reframed the argument so that austerity was simply the consequence of fiscal irresponsibility – too much spending and borrowing by Greece or Gordon Brown – rather than of reckless, sometimes criminal banking.
Did any banks CEOs go to jail? No, most of them got their bonuses funded by taxpayers’ bailout money, as small businesses in search of loans did not. In the boom years the excess profits had been privatised, the losses were now socialised. Politicians – most conspicuously Brown who had handled the bank crisis well – lost their jobs and took the blame. Bankers took some blame but mostly share options. Voters lost jobs and their local department store.
Meanwhile Britain’s richest (£21 billion) entrepreneur, Ineos’s Jim Ratcliffe, trousers his new knighthood are decamps to the tax haven of Monaco. We expected an ex-council house boy to have more class, Jim. But the High Pay Centre reports that the median income of senior FTSE executives rose by 11% last year while most people’s pay stayed flat or fell back. The 1%’s share of UK income has doubled to 13.9% since 1975, the year Margaret Thatcher launched her campaign to overturn the post-war consensus. The 0.1%’s share (mostly hereditary) went bonkers.
All this is awful. No wonder people rage and turn to populists peddling simple-minded panaceas and channelling anger against easy targets like the EU and the ‘liberal metropolitan elites’ (no, not you, Jacob and Boris). That’s what angry, frightened people have always done in a crisis.
This crisis is exacerbated by differences between regions, classes and – very important – between generations. If you bought your house 30 years ago and managed to hang on to a decent pension – public sector executives as much as private – the monetary policy of quantitative easing (QE) that saved the banks has probably done well by you. If not, join the Millennials at the food bank.
Brexit is supposed to remedy these manifest failures of economics and their devastating impact on trust in politics by restoring the dignity of self-government and reinvigorating the economy. “It’s finally given us back some hope,” as they say on Twitter. Liam Fox is unveiling plans this week to make Brexit Britain “a 21st Century exporting superpower”. Wouldn’t that be nice?
Why such optimism should be credible to anyone who has ever listened to Nigel Farage, or read a hastily food-processed column by Boris Johnson, is not clear to me, not when exports are stalling again. But the feeling of frustration is real – and free market purists backing Brexit certainly have Singapore-style plans, as well as a running alibi for failure: Brexit will have been “betrayed”.
What should the rest of us do, the ones who don’t believe in glib panaceas of nationalism and untrammelled free markets, which are in any case mutually contradictory. Globalisation, nationalism and democracy are very hard to reconcile without sensible compromise.
So what should we do? “Fight for a second referendum to reverse the Brexit folly,” cry some. I’m not convinced that’s likely to happen, let alone that it would produce the desired result. “Join the push for a new party of the moderate centre that will push extremists of both right and left back to the margin of politics,” cry others.
The political distress of the Dominic-Grieve-to–Chuka-Umunna segment of the electorate, virtually homeless in the Mogg-McDonnell era, is such that there is renewed speculation about a new centre party. I’ll believe it when it happens which (I suspect) won’t be until after Brexit day – March 29 – if at all. New polls suggest Jeremy Corbyn’s fence-sitting will pay a price sooner or later. But will a new party precipitate or postpone the day of reckoning?
Meanwhile sensible people who feel themselves in internal exile should stimulate debate on likely remedies, the kind of work being solidly developed by non-political think tanks like the Institute for Fiscal Studies (IFS) and the Resolution Foundation – chaired by Tory exile, David “ Two Brains” Willetts and run by Labour exile Torstein Bell, who has three.
Raising the skills base so that young workers at every level are equipped for tomorrow’s jobs, not yesterday’s. They will exist, but we must learn to be more flexible and nimble. We need to build in more security in the workplace, better wages – which means an end to barriers which trap so many in low productivity employment – and an economy where manufacturing is more important and we are all less in hock to banks.
Familiar problems, familiar remedies. Chancellor Churchill (1924-29), who mistrusted bankers, faced the inbalance challenge almost a century ago. Brexit is unlikely to help, but it’s where we’re likely to be quite soon, whether we like it or not. We don’t but it’s where the inequality issue which too many of us neglected has left us.
The jobs-devouring growth of algorithm-driven tech is not so familiar unless we look back 200 years to the disruptive power of steam-driven machines in the first industrial revolution. Eventually new jobs and skills, better wages and conditions, emerged, but only after radical political reform. It can be achieved without violence – sometimes.
As a reformer (aka “centrist dad” in Corbyn-Speak), one who doesn’t much rate the quasi-revolutionary posturing of Her Majesty’s Loyal Opposition, I think all political parties have an as-yet-unfulfilled duty to think much harder about reforms to taxation, spending and the appropriate scope of state action in the 21st century.
We need some form of wealth tax on that inflated property pile which (in the immortal words of a French finance minister) plucks the goose feathers without unduly upsetting the goose. That will need a more grown-up conversation than we usually manage at election time. So-called “fiscal conservatives” are becoming as irresponsible as idealists and lefties at dumping debt on future generations.
So tax evasion and egregious forms of legal avoidance must be tackled at international level. Beggar-my-neighbour tax cuts – as practised by most of us, but especially by Jean-Claud Juncker’s Luxembourg – are self-defeating. Like outdated corporation tax (too easily evaded by large foot-loose corporations) it should be replaced by a locally based levy on sales.
It all takes time and cooperation in unpromising, nationalistic times. But there’s nothing to prevent a bold UK government tackling council tax injustice, a shocking scandal which favours the rich and punishes the poor. Then there’s a fairer and more realistic system of student loans, most of which won’t be repaid anyway. Nothing wrong with “co-payments” which share the costs between taxpayer and user – as in higher education – but it’s got to be fairer.
By the same token the screamingly urgent problem of social care, especially for the rapidly rising numbers of frail elderly (1.6 million over 85 today, 5 million by the 2060s), needs to be sorted out after shabby delays. Ministers have just proposed an elderly ISA which helps, just like raising the pension age helps: sly Vladimir Putin raised it for Russians during the World Cup even though their life expectancy is actually falling.
But it’s not enough. We need a compulsory but capped form of contribution, an insurance pool that most of us hope never to need. The old T-shirt joke about “I’m spending the kids’ inheritance” isn’t funny any more. The kids have realised that spending it on cruises and expecting them to nurse you through your dotage is another unfairness.
So is a system where the prosperous elderly (the IFS makes this point) die with two-thirds of their pension pot unspent. By the time the kids get it, they’re OAPs too.
I could go on. So could you, but Brexit distracts us all from these urgent tasks. We have both to expand the tax base into new and productive areas (bad taxes make everyone poorer) and to look at what we spend public money on. As a mere bloke I sympathise with talk of “period poverty” bat also wondered what that Scottish council, the one now promising free tampons, cut from its tight budget to pay for the kindness.
There is lots of low-hanging fruit like that if we take a serious look. In our house we nobly decline our free TV licence and (I think) the winter fuel allowance, but use our old folks’ free bus passes all the time. I’ve never met a member of the House of Lords who didn’t.
Public money is short and Brexit is likely to make it shorter. That also means we are all going to have to target spending better and do more for ourselves, even if it’s only walking up the hospital stairs instead of taking the lift. Every little helps.
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