The Autumn Statement

Yesterday the Chancellor Philip Hammond gave his Autumn Statement to the Commons in which he outlined his current view of the UK economy and what his dispositions would be to deal with the way ahead as we prepare for Brexit and so forth.

Of course there is no way he was going to please anybody, for the ‘Remain’ camp still licking their wounds, his picture couldn’t be depressing enough, for the Brexiteers, not optimistic enough but his real target were the people who buy UK Government debt. For them he had to present the face of a Government that was responsible and prudent but also nimble enough to seize whatever economic opportunities may present themselves.

Pure Pantomime

Of course this is a charade that must be played out, a performance upon the stage that must be given if only because it is expected but in reality, what does it amount to ? Not a lot if the truth is to be known. If in today’s environment we treat all polls and polling agencies as little better than tribal witch doctors, then financial forecasts are hardly more reliable. Whisper it not too loudly but the truth is that this is all meaningless. To put a ‘price’ on Brexit of £60 billion as some clown did the other day is equally nonsense because it assumes that there is a definitive price to be calculated when any clear eyed observer would say that this is impossible, there are far too many imponderables in play to make such a calculation.

Where We Are

If you take Brexit out of the equation which you may as well and assumed that Remain had won, as far as the UK economy is concerned, our current situation would be just as parlous or not today Brexit or no Brexit.

Oddly one could argue that the reason for this is exactly the same argument that the ‘Remainers’ quoted as to why we should remain in the EU. Their proposition was that as the EU was our single most important market, we HAD to remain within the EU but the truth is, that was always a fatuous argument because within the EU, there are some countries with whom we do a lot of trade but this is not true of the majority of the 27 member states. For many of these countries, the only value of the UK is as a job/career opportunity, remove that with ending “free movement of people”and all they will want to see is a ‘hard Brexit’.

However and even if the UK had voted to remain within the EU our economic situation would be the same because the EU is in a mess of its own making which centres on the Euro, the contradictions of which remain unresolved today and are unlikely to be resolved until the day they dissolve the currency or the currency dissolves the EU. To promote the idea that in leaving the EU, the UK is leaving an economic paradise dripping in honey is nonsense, in economic terms the EU has allowed itself to become a stagnant pool because of a non functioning currency which it refuses to deal with.

It was always quite right to say that the threat of a federal ‘United States of Europe’ would never materialise simply because apart from a few idealists, the practical barriers could never be overcome. The proof of this is the Euro which if it were to be saved, would require eurozone countries to integrate tightly with unified tax and welfare systems, centralised budgets, a proper central bank and mutual debt to cover all borrowing within the eurozone. Clearly this will never happen, the Germans will not accept mutual debt and the French will not give up what they see as their “way of life”. Personally I don’t have an issue with this but what I do reject is their lack of honesty, they should all just admit this publicly and then have a proper debate about what can actually be achieved in the real world.

As I have written before, I voted for Leave, went to bed early and expected ‘Remain’ to be the majority verdict come Friday morning. This didn’t bother me, being on the losing side that is because it was my firm conviction then and remains the same to this day that the EU as we know or think it to be, will not exist in 5 years time because of the above. There was no one more shocked than me with both the turnout and the verdict, for a vote to have gone from a 60/40 in favour of remain to a ‘Leave’ victory was just amazing. True with the UK leaving, the demise or metamorphosis of the EU into something more viable, might well expedite the time frame a little but it doesn’t alter that substantial change has to happen.

Our Real Problems

The supposed ‘vitality’ of the UK economy is due to a combination of the British being good consumers rather like the Americans and an historic lack of investment in job training, career development and investment in the latest technology. The consequences are that wages are low and getting lower for many plus industry has an insatiable appetite for cheap labour.

The biggest weakness with British industry generally with too few exceptions has been the same since the 1960s, an unwillingness to invest in training staff and implementing new technology before a skill shortage forces them to do so. To be fair, this is not just the fault of the business managers and owners, they have been aided considerably in this by unions keen to protect their positions in the workplace, a truly unholy alliance on the road to commercial Hell.

The consequence is low productivity and therefore an insatiable demand for cheap labour be it in picking vegetables or, writing computer programs. Given that we now have a generation in their 50s that have never known a workplace where actually making things locally was dominant, they are all too eager to buy in from abroad without a thought. Intelligent importing is a good thing, unthinking because you don’t know any better, bad.

It will take a very long time for the UK to sort this out because the culture not only in those running businesses but those working within them has to change dramatically, this will be no easy and quick fix. However and as part of the jigsaw and as a first step, controlling our borders could be highly beneficial and even the EU erecting trade barriers of various kinds against us might prove very helpful too. The thing that we forget often is our very strength as a marketplace and given the size of the domestic UK market, whilst demand might fluctuate, it will still be strong.

Clamping down on the supply of cheap labour may well lead to price rises but in turn that may well start a process of increasing wages and therefore a willingness on the part of industry to invest in better technology as labour costs increase. Despite the rantings of the left wing press and The Economist, if our friends in the EU don’t wake up and start talking common sense soon, the result may be a hard Brexit which could turn out very well for the UK economy and living standards generally.

However, you might conclude that what I’ve written is just an opinion, rather like the Chancellor’s Autumn Statement was, a best guess.

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