How much has Brexit cost us?

Reuters Square, if its still called that in black and white.

While posting my notes on my reference back for Labour Conference I fell back on the OBR statistic that Brexit had cost the UK 4% of GDP. I thought a chart would have been helpful and so went looking for one.

The NIESR published an article, Revisiting the effects of Brexit, which now they’ve archived it, no longer has the chart they made from the model, but google search can still find it today.

Their model tries to disentangle the effects of the COVID slump, and the article, dated 2023, says,

These estimates suggest that Brexit had already reduced UK real GDP relative to the baseline by just under one per cent in 2020 as consumers and businesses adapted their expectations even before the TCA came into force. Our estimates further suggest that three years after the transition period, UK real GDP is some 2-3 per cent lower due to Brexit, compared to a scenario where the United Kingdom retained EU membership.

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On the necessary regulation of AI

a robot issuing a parking ticket, generated by deepai.org

I wrote a piece for Chartist on AI & its regulation, which I have signposted on LInkedin. I look at its likely macro-economic effects and the essential defence of Article 22 of the GDPR, where I say,

… the most important defences that we as citizens, workers, and consumers have is the EU’s GDPR, which in Article 22 & Recital 71 establishes what they call a right to “freedom from profiling”. This, through the rulings of the CJEU, has become quite extensive and now prohibits such things as ‘general monitoring’, a legal protection brought forcefully to light by the French supervisory authority fining Amazon €32m for violations of the GDPR within their workforce management regime.

In the article, I talk about the problem of Authority vs Popularity, the need for open source, and source citation. I also review the need for some innovators for privacy and competitive advantage and the possible future of regulation of AI to ensure decency and accountability. I also look at the patchy European response and the paradoxical attitude of the US.

I conclude.

In summary, there are plenty of laws to ensure that AI and its owners behave decently, and in some European countries, the will and resources to enforce them, but it’s not universal. Also, there are important economic countervailing forces opposing the creation of a privately owned “Global Intellect” even if the current technology is capable of such a task.

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Tariffs and other trade barriers

image of the alaskan highway

Last night I watched a video about Canada raising a large toll on lorries travelling from the Lower 48 to Alaska, and it documents and forecast the impact on the fragile Alaskan economy. It reminded me of the trade barriers that the UK has put in place due to Brexit. This is potentially disastrous for Alaska, and is clearly so for the UK where today the FT reports that according to the ONS, the UK economy shrank for the second quarter in a row.

The trade to GDP rate in the UK is 63%, which seems enormous to me, but it seems to be merely above average and yet it illustrates the UK’s dependency on the rest of the world to feed itself and keep itself warm and sheltered. The US rate is 25% which is low by international comparison and may be one of the reasons that Trump can afford to be as foolish as he is with his tariff policies, noting that it’s the US consumers who ultimately pay his tariffs. Source: World Bank.

The EU flag, before castor and pollux,

But for the UK, this is another piece of evidence that the UK needs to rejoin the EU’s single market, but even if this common sense actually strikes this Labour government, I doubt that the Eire/Holland/France traffic will return to the UK. …

Creative incompetence

Creative incompetence

I wrote a piece on the Peter Principle and Creative Incompetence on my LinkedIn blog.

The Peter principle, suggests that people are promoted to levels of incompetence. I the article I argue that this is aggravated by the fact that management values management and often values task and financial management more than people management skills.

The overpromoted are often unhappy and the insightful are either lucky and work for organisations that seek to avoid these traps by recognising and rewarding individual contributors or employ a strategy of “creative incompetence”.  …

Universities at GMB25

a group of people from above wearing U. of Bradofrd academic gowns

I moved a motion entitled higher education, knowledge and funding.  In my speech I placed the crisis of HE funding in the context of macro-economic policy and as the results of Labour’s hostile environment. I had been inspired to write the motion as a result of Rachel Reeves autumn statement 24 and after reviewing the industrial policy white paper. The seconder of the motion made what I believe is a powerful statement in favour of universal access to higher education. In this article, below, you will find a video clip of the debate, the words of the motion and my notes, that I used to make the speech.

In this article, below or overleaf, you will find the words of the motion and my notes, that I used to make the speech. …

Best for Britain on Trumps trade war

Best for Britain logo

I subscribe to Best for Britain’s news letter and they sent me the following. I can’t find it on their web site and so I have posted it here. Their front page has a comprehensive response to Trump’s trade war and is worth a look. Unlike me they are not focusing on the need for the single market to access the protection of the EU’s Digital Services Act and in fact are fundamentally in the “Fix Brexit” campaign, but what they say is interesting.

quote

As you’ll no doubt have seen, the UK joins Brazil, Australia, and the uninhabited Heard Island – along with almost every other country in the world – in being slapped with a 10% tariff on all imports to the US. The EU has fared even worse, as they stare down the prospect of a 20% tariff. Unaddressed, this unprovoked and punitive move by Trump could wipe out all efforts to grow our economies, both here in the UK and in the EU.

We knew this was coming. Which is why we asked Frontier Economics to model how a better UK-EU trade deal could minimise the impact of Trump tariffs. The results should spur a simultaneous sigh of relief across Whitehall.

Not only would a common sense deal between the EU and UK cancel out the economic hit to the UK from Trump’s tariffs, it could also grow our economy by up to 1.5%. And those areas hit hardest by tariffs – manufacturing hubs like the Midlands and North East England – would see the greatest benefit. A deal that includes deep alignment between the UK and EU on goods and services would also shield the EU, reducing the impact of tariffs on the bloc by around a third. 

Those sighs of relief should ripple around the Cabinet table too when you add in the results of our latest polling. Three times as many people think we should increase trade with the EU in response to Trump’s tariffs, compared to just 14% who say we should be sucking up to Trump in the hope of an exemption.

If there was any doubt, Trump is no friend of the UK. His unprovoked trade war will be felt by ordinary people across the country, in our pockets and in cuts to public spending. Anyone seeking to spin this slap in the face as a ‘Brexit win’ should remember the thousands now at risk of losing their jobs, and that Brexit itself has caused far more economic damage than Trump’s tariffs ever could.

But if we tear down barriers to UK-EU trade, we can gain significantly more from our largest trading partner than we stand to lose as a result of back-of-the-envelope calculations made in Washington.

In these choppy geopolitical waters, we’ll keep pushing the government to make the right decision and seek stability for us, and for our EU neighbours. Thank you for your support in helping us do it. …

Liberation Day

A night time shot of Baltimore harbour

Today, or Yesterday depending on where you are the US announced a series of tariff increases around the world.

The FT explains how they calculated the tariffs; they engineered a number from the balance of trade deficit between the US and their trading partners. This has been a big surprise to most international trade economists. This is written in an amusing style asking questions on economics and supply chains, since the calculation method penalises, those countries supplying goods that the US cannot fulfil domestically, such as bananas and coffee.

In an article called, the stupidest chart you’ll see today, which I cannot understand, but they observe that a floor value of 10% has also been set, and comment,

One last thing not widely mentioned yet — there is also a baseline 10 per cent minimum tariff. Without this minimum, the UK would be treated with a negative tariff. So much for special treatment.

The original article points at the book Trade wars are class wars, where on its hosting page, they say,

Trade disputes are usually understood as conflicts between countries with competing national interests, but as Matthew C. Klein and Michael Pettis show, they are often the unexpected result of domestic political choices to serve the interests of the rich at the expense of workers and ordinary retirees. Klein and Pettis trace the origins of today’s trade wars to decisions made by politicians and business leaders in China, Europe, and the United States over the past thirty years. Across the world, the rich have prospered while workers can no longer afford to buy what they produce, have lost their jobs, or have been forced into higher levels of debt. In this thought‑provoking challenge to mainstream views, the authors provide a cohesive narrative that shows how the class wars of rising inequality are a threat to the global economy and international peace—and what we can do about it.

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The Newsagents on Trump, Trade and Debt

a picture of

In this podcast at the newsgents, the presenters talk about Trump’s tariffs and his liberation day and the impact on the UK’s public finances. This article is a reply.

The guardian reports US Department of State, channelling JD Vance, has raised the issue of “freedom of speech” in the current trade negotiations and are ‘concerned’ about the possible sanctions against an anti-abortion demonstrator who has been convicted of demonstrating too close to a clinic. The identification of ‘free speech’ as a trade issue is not just caprice. It was raised dramatically by JD Vance at the Munich security conference earlier this year.  It is part of their pro-oligarch agenda; they are frightened of European regulators and the massive fines levied on the US high tech firms and now that Musk has bought twitter, the social media companies and their ‘freedom of speech’ is a tool by which they seek to maintain their power.

I was curious that they identified the fact that Trump respects those that strike back and yet spoke favourably of Starmer’s weak response, particularly when compared with both the EU’s and the US’s neighbours.

While they spoke of the short term economic results as a possible constraint on Trump’s behaviour, I suggest that the only constraint that concerns him is his popularity which since he can’t run again is of limited use to him. Curiously, I read an article by Lawrence Lessig today suggesting the founding fathers deliberately excluded term limits on the grounds that a desire for re-election would act as a moderator on behaviour. They were particularly concerned about kleptocracy, although Hamilton used the word plunder.

In the second part of the interview, they speak to Andy Haldane, once Chief Economist of the Bank of England. He argues that the trade war will blow Reeves’ plan off course as it lacks what he and others call fiscal head room. He argues that higher taxes will need to be raised but that the bond markets will live with a plan that works i.e. delivers growth, which he argues needs to be based on defence industries.

Itr was always unlikely that Haldane would argue that since the purpose of the golden rules and even the growth strategy is to reduce the national debt, what needs to change are the rules, the independence of the Bank of England and Office of Budget Responsibility (OBR). The progressive inventors of the fiscal golden rules argued that that their purpose was to protect investment. The purpose of Reeves’ iteration of the rules is to pay off the debt.

One justification against borrowing to fund investment, is the interest costs but Google reports that “As of 2023, Japan’s government debt to GDP ratio was 255.20%, while the UK’s was around 98.5%.” How can Japan fund their debt while the UK cannot?

I also question the efficacy of the government’s proposed industrial strategy; historically private sector capital has not invested in UK innovation which has been funded by retained profits.

It is frustrating that commentators like Haldane can’t or won’t mention easing trade barriers with Europe as a means of stimulating export led growth and that no digital liberty campaigners are arguing to rejoin the single market in order to implement the Digital Services Act which the US social media companies rightly fear.

Reeves’ rules are aimed at the wrong policy outcome, and her capitulation of judgement to the OBR is a democratic mistake which merely constrains her room for manoeuvre. In my view its time to review the independence of the Bank of England and the existance of the OBR. Economic policy should be the outcome of a democratic process, not a technocratic black box built by the dead.  

I say more at this article on my blog, and on industrial policy at Chartist Magazine.  …