I was given my Labour Party long service award to recognise 50 years of membership, I was able to make a speech of thanks, and I have posted my notes overleaf/below. …
50 years hard labour
The Newsagents on Trump, Trade and Debt
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. …
Starmer’s choice
I wrote something on JD Vance’s speech to the Munich security conference. This was part of the series of policy repositioning for the trump administration. My article was published on labour hub, in it I reference Vance’s speech to the Munich Security conference, i note the oligarch’s hypocritical and fascistic agenda, the foreshadowing of the crippling of NATO, and talk of the UK’s alternatives pointing out that we seem to be re-joining the EU one agency at a time.
I reference reports of J D Vance’s speech to the Munich security conference, where he criticised the EU and member state governments for suppressing free speech, failing to halt illegal migration and running in fear from voters’ true beliefs. He refused to meet the German Chancellor and yet met, during an election, with the leader of the far right AfD (Alternative for Germany).
I note his arguments on free speech are partisan; US oligarchs want American rich people’s voices to be heard and amplified by privately-owned social media companies and fear Europe’s regulation of them being based on a demand for truth. We also note the hypocrisy of the US free speech advocates’ attacks on ideas, books and teachers in schools, universities and libraries in the US. His comments on not relying on foreign technology providers by which he meant China, may come to haunt him as Europe examines its defence supply chains.
Trump’s call for European NATO to increase their defence budgets to 5% of GDP is a naked attempt to build budgets for the US arms industry, just as the UK’s requests to have a side treaty on defence and security with the EU is also at least partially based on the economic interests of BAe.
Trump’s arguments about what does his money, that is, the arms shipments to Ukraine, buy, has a moral vacancy but it is clear that the view that ‘the business of America is business’ has returned to the White House. The crudity with which Trump pursues his views of US fiscal and commercial interests is echoed by the UK Labour Government in positioning its ‘EU reset’, arguing for changes in agreements which only benefit Britian from their limited, primarily electoral, point of view.
In the Labour Hub article I suggest, the choices facing the Starmer administration are bleak while Starmer seems to be seeking to avoid Trump’s tariff increases, on defence the choice is stark. The UK can either continue to act as a vassal state of the United States or develop more effective partnerships with the European Union. It should be noted that Vance has questioned the need for NATO joint command. Labour’s foundational commitment to NATO, is looking weaker than it once was.
Starmer’s ambition on EU cooperation is limited, I have argued that the UK should use the withdrawal agreement review clauses to re-enter the customs union and the single market. The suspicion is that for the Starmer Administration, the single market is a step too far because of its requirements for a free movement of labour and Labour’s fear of the Tories and Reform UK.
Today’s military questions and the need for ‘security of supply’ strongly imply that the UK should join the European Space Agency and possibly the European defence agency.
The proposed military and security side treaty is looking less and less attractive to both sides because in order to protect our democracy against the attacks from US social media companies and US owned AI search engines, the UK needs the umbrella of the EU’s competition & digital regulators, this needs membership of the single market. We have already rejoined Horizon (the R&D programme) and the Euro HPC joint undertaking, and Northern Ireland is still part of the single market. At what point do we say, we need our MEPs, Judges, Commissioners and Council seats back or will we just be rejoining the EU an agency at a time. …
The pan-European Mediterranean convention and EU/UK relations
In January, Marco Sefcovic, suggested that the UK as part of the negotiations to improve relations between the UK and the EU should consider joining the pan European Mediterranean convention (PEM); he also stated but the EU would consider such a proposal seriously. Sefcovic is the commissioner responsible for trade.
Mark Pennycook, the minister for housing, was asked to the same day what the government’s response was and repeated the redline mantras stating that the government had no interest in signing up to PEM. The following day he was contradicted by an anonymous government source who said that PEM would not breach Labour’s red lines. It was later stated by Reeves, that she would be happy to consider membership of PEM, although how this is part of her portfolio rather than a Cabinet Office matter I am unsure.
The PEM is an agreement on rules of origin, the effect of which is that assembled goods, using EU components do not have to pay a customs duty on the EU inputs when exporting to the EU. The Guardian have published an explainer, with two quotes, one suggesting it’ll have little effect and the other suggesting it’s an important and useful reform. It is hard to see how it will reduce paperwork and trade friction, in some cases it will reduce the sale price within the EU making British exports more competitive. It’s not a customs union.
Membership of PEM had been pushed by the LME, both at labour’s national policy forum in 2024 and they attempted to get it on the agenda of labour’s conference in 2023. The party leadership rejected these proposals and ensured the international trade with the European Union was not debated at conference. Even LME’s moderate, some might say fig leaf, pro-Europeanism seems unwelcome to Starmer’s Labour.
The Government policy consists of three proposals articulated in the Labour manifesto: a veterinary agreement, mutual recognition of qualifications and help for touring artists (& their crews and equipment). These positive proposals are underlined by three noes, no to the customs union, no to the single market and no to free movement of people.
The government also seems to be uninterested in clever hacks to the treaties and they seem to ignore the fact that the EU also has an agenda, and a stronger negotiating position and more expert negotiators. The EU will require that the UK meets all the terms of the withdrawal agreement, and there are eight disputes open at the moment. On top of this, there is the UK reluctance to talk about the EU’s proposal for a youth mobility scheme and the EU are also keen that the fishing agreement is rolled over. …
An AI prosecutor?
I wrote a Linkedin an article called an AI prosecutor. In it I say,
The problem with modern software is much of it is inference, and completely unsuitable for “beyond reasonable doubt”. It’s also opaque and likely to fail the tests around if it returns popular vs accurate and authoritative results. It’s often wrong and arguably a bullshitter. The EU’s GDPR introduced the right to freedom from profiling, which means a freedom from being processed automatically by computers. This is an important barrier.
This is my first written declaration that that the GDPR’s “freedom from profiling” is a crucial defence of humanity against the machines.
My alarm about the consultation was probably unnecessary. …
Regulating Social Media
Steve Bannon boasts that the incoming Trump administration has tamed the social media sites. The ex-prisoner uses typically intemperate language and remains an important instigator of far-right virtual organisation. Questions remain about the power relationship between Trump and Musk, as we are unsure as to who is in the driving seat, so whether the right Republicans have actually tamed the social media sites is an outstanding question.
Concurrently with this story, the US Supreme Court have refused to block legislation forcing Bytedance to sell it’s US interest in TikTok to a US buyer. The law and many commentators focus on the national security implications of Chinese ownership of such a major social media site. The US government Is particularly concerned that the Chinese government have the ability to direct the affairs of Bytedance’s owner, a Chinese corporation.
Despite the US claiming the strongest free press rights in the world, rights granted in the US constitution belong to its citizens alone and are only enforceable within the United States. The US’s historic regulation of foreign media, much of which remains in place today, includes the licencing of foreign journalists and the statutory requirements the significant media organisations are owned by U.S. citizens.
In fact, U.S. politics confuses the freedom of the press, with the right to platform. U.S. law acknowledges now the rights to freedom of speech is restricted by safety, conspiracy, anti-corruption and defamation laws. Little discourse in the US recognises that the United Nations declaration of human rights criminalises hate speech and that the US legal system has a duty to suppress it.
If the US can claim that the Chinese owned company Bytedance is a threat to national security, then it is clear that other democracies have the right to take similar decisions with respect to the privately owned US social media companies. It is clear the individuals and states have been misusing the social media companies to influence the political governance of the democracies. Some are taking this action already such as Brazil and at a much slower pace the European Union, it’s not as if these states don’t have the laws they need, what’s missing is will.
The oligarchic capture of the US government has never been more obvious. It’s time to organise. …
Are there any public sector efficiencies to find?
In order to prop up the markets, Kier Starmer wrote an article in the FT, once again extolling the need for public sector reform. His article covers more than that, it seeks to address innovation & growth, and public sector reform, yet misses the implications on industrial policy, university investment and local authority services. I explore these themes in more detail overleaf ...
Growth, institutions and Brexit
Several commentators on the UK budget, including the OBR, have suggested but there’s insufficient growth stimulus planed. The OBR predict that the economy will grow slightly less than under previous plans; I don’t know how this can be when the proposed deficit is £89bn. They also however predict that the effect of Brexit his -4% of GDP and yet no one in parliament, except for Ed Davey has mentioned this as a growth opportunity.
The OBR and the Bank of England are both institutions designed to protect economic policy from democratic control. Time to abolish one and reform the other. …
More on growth & debt
The problem with the Truss mini-budget was not that they had an ‘unfunded’ deficit but that there was no mechanism between the deficit and investment. Rich people tend to save and for the deficit to do any social good, the banks would have to lend to investors i.e. entities looking to buy or make capital goods; which they have never done. Private sector domestic investment has usually been funded by retained earnings!
The lesson here is that the markets were not frightened of the deficit, just its purpose.
See also Growth vs public debt management on this blog. …
Growth vs Public Debt management
You don’t have to be a modern monetarist to believe that the UK has a debt crisis. There are a number of well evidenced and widely believed economic theories that support the use of a Government deficit to induce growth which is the surest way to reduce national debt. Those that argue austerity is a choice are bang on the money.
Debt fetishists need to get this, but so do those who argue that we should fund some desirable programme, be it pensioner’s winter fuel allowances, doctor’s recruitment or student debt forgiveness because we can fund a defence budget. How we use and deploy our military is of course a matter of other priorities but arguing we need to accept austerity by applying the cuts elsewhere is ignorant.
Investment led growth requires expenditure in increasing the productive capacity of the techno-economy, although there is some recent writing and research that traditional industrial policy focused on startups and R&D doesn’t work and that looking at public service outcomes is a more effective growth measure. I’d add that investment in labour force skills is another investment which means that University [& FE] funding and student finance should be considered investement, although none of this seems important to this Government who are prioritising reducing the public debt before investment. Housing is not an investment in productivity; the reason for doing this is social, and not based on macroeconoic policy goals.
You can’t grow the economy while reducing the deficit! It works the otherway round. …