Friday, December 08, 2017

No island is an island entire unto itself...

OK so there has been a breakthrough apparently...

But the breakthrough is not that a framework agreement to start substantive talks is kinda, sorta, done, maybe...

It is that now the UK public knows that the leaders of the "Leave" campaign were a bunch of charlatans. 

David Davis took "hapless" to new lows with his "my dog ate my homework" explanation of why -in fact- no impact assessments of the single most important economic policy change in 60 years, were made. Whether you choose to believe or disbelieve the shifty excrescence is a matter for you, because its all the same to the Secretary of State as to whether you believe him or not.

Meanwhile the refusal of the Conservatives to recognise that Ireland is a separate and sovereign state, and that therefore of course the UK has a land border with the EU, nearly brought the whole process to a shuddering halt. In fact that actions of the DUP have now, for the first time brought the departure of Northern Ireland from the United Kingdom of Great Britain and Northern Ireland to the point of being more likely than not, but that is not a breakthrough either.

The breakthrough is that there is no way to avoid a national humiliation. A humiliation that the Conservatives are wholly responsible for and which is the result of their arrogance and ignorance.

The disaster will continue to unfold until either the UK, probably shorn of territory as well as billions of pounds and vastly diminished international standing, emerges into the cold world of a post EU economy; or the British people revolts against their incompetent and dishonest government. At the moment either is possible in the short term, with a slight edge towards revolt. 

In the medium-to-long term a major reset in the UK is now looking very likely indeed.  

The anti-modern Imperial measurement, Imperial mindset of the Conservatives is growing ever more absurd. Clinging to their vision of a better yesterday, the Tories refuse to face up to the fact that their vision of the country is deluded.  Socially more divided than ever, the public realm, from the Houses of Parliament to the underfunded infrastructure, is increasingly squalid. The moth eaten relics of Empire now simply look absurd in the increasingly cold light of Brexit day.

This starts with the system of government that has delivered a government of incompetence and an opposition of fools. The government gets away with lies because they face no opposition from a House of Commons which they can whip to their service and an essentially toothless House of Lords. Neither can the Monarchy control the evil nor the idiocy.  In the name of the venerable Queen Elizabeth II baubles called the "Order of the British Empire" are still handed out to the great and the good- irrespective that the Dutch, let alone the French, have empires rather more impressive than the speckle of rocks that is the last inheritance of the moth eaten Land of Hope and Glory. The flummery of orders of the Bath or the Garter should fill any modern democrat with amusement, but for the fact that people take this dross seriously. The pageant of Monarchy "brings in the tourists", but fails to protect the rights of British citizens- it serves no useful purpose, unless you are a London hotelier. Yet still Prince Andrew and other highly intellectual, charming, and modest members of the Royal family are appointed counsellors of state with significant political power, on the clear understanding that if they use this power in public they will be swept away. The answer is clear: the substantial reserve powers of the Crown should be placed under public, not personal, control. As with the accession of King Karl Gustav XVI of Sweden in 1973, the accession of the heir of Elizabeth II should be marked by the end of the political power of the Monarchy.

The modernisation of Britain- with or without Northern Ireland- should then proceed. Not merely the long overdue constitutional reform, but economic reform. Burn the current tax code and start again. This is the only way we can then begin to tackle the catastrophic public finances of the country. Promote savings over consumption- and yes that means a prolonged and deep restructuring of the entire economy. Times will be really tough, but instead of trying to save the outdated tax-and-borrow-for-current-consumption-and-forget-about-the-future model we have now, we can start to think long term and strategically. Infrastructure spending must increase and pensions and welfare made sustainable.

So let us hope this "breakthrough" finally causes the British voters to understand the fact that the government system is broken beyond repair. Any government that has been so reckless as the Conservatives with their wealth and well being should be eviscerated and the political party responsible should be liquidated.

For the fact is that unless we punish the guilty at the next election we will continue be complicit in our own decline. A radical change of direction is not merely desirable, it is essential, and understanding that is the only way to make any kind of breakthrough and ultimate recovery.

Thursday, November 23, 2017

In praise of off-shore tax havens

The last few years has seen a spate of "scandals" about the use of off-shore tax havens. The hacking and subsequent leaking of data about who does and does not hold assets in off-shore jurisdictions has become an old perennial in the British press, rather like the "COLD weather happens in winter and QUITE HOT weather happens in summer", whose alarmist capital letter laced headlines are such a lazy part of contemporary "journalism". 

The increasing sophistication of the hackers, whether Russian-inspired or not, has resulted in a steady trickle of information becoming a torrent. After the relatively filleted release of data in the so-called "Panama Papers", the data release of the "Paradise Papers" is even larger.  Of course, just natural curiosity dictates that the off-shore ownership, or even just "ownership", of assets is of general public interest.  Celebrities, from the Royal family to the cast of Mrs Brown's Boys, are shown to wealthy, which may not be such a surprise, and to hold assets in places like the Cayman islands or Bermuda, which might be more of a surprise.

The UK press, in one of the more spectacular episodes of hypocrisy to which they are regularly prone, affects to be shocked and appalled by the fact that so many people "avoid tax" by holding assets in multiple off-shore and international jurisdictions. Just to remind the public at large: Rupert Murdoch, an Australian who naturalised American for tax purposes, holds assets in multiple off-shore jurisdictions. Lord Rothermere, living in Wiltshire, but legally domiciled in France for tax purposes, holds the Daily Mail and General Trust through off-shore holdings in Bermuda.  The owners of the Daily Telegraph, the rather sinister Barclay Brothers, domiciled off-shore in Sark, control their empire though the Channel Islands. The pornographer Richard Desmond controls the Express group through a series of off-shore holdings, as does the Russian Evgeny Lebedev, owner of the Evening Standard and the Independent. Bluntly, the off-shore ownership of media assets is quite legitimately a matter of public concern, especially given the occasionally important business relationships that their owners have with anti-democratic regimes, such as Russia or China.

Neither is there any doubt that off-shore holdings are routinely used by criminal organisations to hide the sources of wealth acquired by crime. Mind you the fact is that all jurisdictions are used by criminals- there is no single crime-free jurisdiction in the world, not even the Vatican. There is no doubt that some of the tax avoidance schemes operated in certain jurisdictions, even if they may be perfectly legal, are nevertheless extremely questionable on ethical grounds.

The fact is that the overwhelming amount of money and the overwhelming proportion of transactions are undertaken in off-shore tax jurisdictions for entirely legitimate reasons. These could, for example, include the establishment of a single neutral jurisdiction for a corporation which has conflicting tax or compliance requirements in different countries where they operate, or to hold assets that are involved in international M&A.

Nevertheless there is no doubt that the off-shore world exists because of tax, and that is a scandal. However it is not the scandal that the public imagination believes.  The scandal, especially in the UK, is not the off-shore tax code but the on-shore one.

The United Kingdom now has a tax code that is 27,000 pages long.  In the past two decades the standard political solution has been to promote certain policies through tax incentives. The result is a massive and unwieldy tax code which is literally impossible to understand, let alone to comply with. Last night I had a small dinner with a UK government Minister and the subject of export support came up, and with it the suggestion of... you guessed it... tax incentives. Yet at every further release of off-shore data the asinine politicians demand tougher regulation and more tax inspectors.

The result is not merely the longest tax code in the world: as a result HMRC is one of the largest tax bureaucracies in the world with over 120,000 employees. The cost of administration of the Revenue is over 3% per annum, which is over  £21 billion every year, and that does not count the tax credit system, which is a further cost. Neither does it count the cost of compliance in the economy at large: the massive number of tax accountants that are needed to submit a return for even the most basic tax matter. The fact is that tax collection and administration is one of the biggest businesses in Britain and it adds exactly nothing to our national wealth. The annual budget never simplifies, it only complicates.

The scale of this failure is what has created the need for off shore holdings. The fact is that the very offices that  HMRC works from are owned by funds who are legally based in off-shore jurisdictions. The HM in HMRC also invests using off-shore holdings: she, like most of the rest of us, is compelled to do so by the drastic negative effect on investment returns if she does not.

So when you see more blazingly hypocritical headlines in our off-shore owned press about the iniquity of holding assets off-shore, spare a thought for the real scandal. The fact that politicians have given up any idea of real tax reform. This utter failure of leadership is yet another example of the UK at its very worst. Off course it is "difficult", but unless it is tackled, all value-added businesses will end up off-shore and all that will be left will be estate agents and tax inspectors: not a recipe for the dynamic post-Brexit future that the off-shore, hypocritical, extreme right-wing, verminous British press insists is the coming future, against all evidence to the contrary.           

Monday, November 13, 2017

Putin over reaches himself- but the West must respond.

In espionage the standard of proof is a variable measure. There are very few times that information can be said to be "beyond reasonable doubt". Nuances and circumstances acquire great significance and it requires an analyst with a deep sense of intuition to piece together an accurate narrative from small pieces of partial information. There may be much data, but to find the information it contains is like putting together a shattered mirror, where you do not know whether you have all the pieces. Thus intelligence can be a double-edged sword, and it is dangerous to rely purely on secret intelligence without bringing one's own sceptical biases into the equation.  Spies are much given to using two quotes from Sherlock Holmes: the first dictum is about positive truth: "once you eliminate the impossible, what ever remains, no matter how improbable, must be the truth". The second is "the curious incident of the dog in the night time" "the dog did nothing in the night time" "that was the curious incident". This second refers to how positive information can be determined by things missing or absent.

I point these things out because the growing awareness of Russian subversion and propaganda in the democratic world is being played out against a very strong background of secret services involvement.  Yet the Russian secret services are rather different from their rivals in the West. As we have seen from the Steele dossier, the primary purpose of MI6 is to acquire secret information from a variety of sources in order to build up an understanding of the direction of Russian actions. The document is written in the fairly standard format of MI6 reports, with as much cross referencing as may be available. By definition it is not a document intended to prove beyond reasonable doubt. Nevertheless the emergence of other source material has substantially corroborated the dossier. By the standards of secret intelligence the dossier is very strong evidence indeed. Where there are faults, they have tended to be the result of caution. For example, Steele writes of a five year business relationship between the Trump organisation and Russian money, the evidence now suggests that the relationship is both deeper and longer -as long as fifteen years- than first alleged.

The Russian security apperat: Internal FSB, external SVR, military GRU and SigInt SSSR, has two mandates. The first is the gathering of secret intelligence. The second is the active disruption and subversion of critical targets. Of course, Western agencies have attempted to disrupt certain targets: terrorist cells, for example, but the difference is that Russia has devoted substantial resources to the disruption of western democracy. This is no longer a matter of opinion: as the evidence grows of Russian government support for an army or information trolls, including millions for false Facebook posts, and the direct financial support for far-right political parties, this is not even a matter of reasonable doubt, it is a matter of fact. Russia is actively campaigning to undermine Western democratic values and norms.

There is now substantial evidence of Russian support for the election of Donald Trump. The fact that Donald Trump says that Vladimir Putin told him that there was no such collusion can be safely put into the "he would say that, wouldn't he" box of political scandals. In intelligence terms the evidence is extremely strong that Donald Trump's campaign self consciously accepted substantial Russian support and that he did this because a large part of his supposed wealth is in fact Russian money and the Russian intelligence services hold kompromat including personally and sexually compromising material on Mr Trump himself.

Meanwhile, it grows increasingly clear that the election of Donald Trump was not the only campaign waged from the Kremlin in the last two years. It is a matter of proven public record that Russian finance supported the election campaign of the far right Marine LePen in France.  The other, far more successful, Russian intervention in European politics was the British referendum vote of June 23rd 2016. Although there is some evidence that Russian money was involved in the Scottish referendum vote of September 2014, the evidence for the EU vote is much stronger. As with the US Presidential election an army or twitter-bots and Facebook propaganda was deployed in support of the Leave campaign. 

Nor was the support simply external to the UK. As we now beginning to understand about the Russian subversion campaign against the US, there were several agents of influence who provided secret back channels of communication and of finance. One of the leading financial backers of the Leave campaign, Arron Banks, has a Russian wife and has publicly praised the Putinist government in Moscow. More to the point, the sources of his apparent  wealth are not transparent. Insurance is a business where changing actuarial assumptions can allow significant changes in the financial position of the company.  Were Russia to wish to launder large sums into British politics, it could be a fairly easy way to do it. 

Although poo-pooed by the Brexit camp, the connections between Nigel Farage and Julian Assange, and his partner, suspected Russian agent, Edward Snowdon, are clearly suspicious in intelligence terms.  The inquiries now underway on both sides of the Atlantic have already proven the intent of the Kremlin to subvert the US and the UK. There is substantial circumstantial evidence that suggests they succeeded in their attempts.

So what now?  Putin played and he won.

Not so fast.

There are material differences between the shallow and weak rule of law in Russia and the entrenched strength of wealthy and powerful western democracies. The appointment of Bob Mueller as special counsel to investigate Russian interference in the Presidential election not only brings one of the world's leading figures in counter espionage to the inquiry; it also brings one of the straightest arrows in US law enforcement.  Mr. Mueller believes in the government of law, not of men, and he clearly considers it is patriotic duty to uncover the whole plot and clean the stables, no matter what. Although Mr. Mueller is working to the highest standards of proof: "beyond reasonable doubt",  it is becoming clear that, as with the substantial corroboration of the Steele dossier, such proofs do indeed exist, as the guilty plea by George Papadopoulos indicates.

The wheels of justice may grind slow, but they do grind fine and eventually, if Bob Mueller has his way, the truth will prevail.

What then?  Russia is already exposed as a hostile power, attacking the West directly or by proxy in Ukraine, Georgia, Syria and any other place they can. Russia has been waging a war directly on Western democracy, largely without the notice of all but those most closely involved.  However, as with Japan in 1941, it is very dangerous to launch a surprise attack. The election of Donald Trump and the subversion of the British referendum are, in my view, the equivalent of the burning battleships of Pearl Harbor. However, Russia is weak and poor, and getting poorer.  Even China is cautious about accepting such an unstable and disruptive ally. In Chinese eyes the model is not the Second World War, but the First, with Russia playing the role of Austria Hungary. 

Putin will not survive a determined push back from the West. He has drastically overplayed the hand of a weak, corrupt, poor and divided country: Nigeria with nuclear weapons.

The recent release of the Kennedy papers has shown one critical thing. That Lee Harvey Oswald kept in touch with his KGB handlers, and that the CIA hid this information in order to avoid emotional demands that the Soviet Union be punished, which in the aftermath of the Cuban missile crisis could have led to nuclear confrontation. It maybe that certain circles in Washington would like to avoid revealing the full scale of the possible involvement of the Trump organisation in what is, after all the most heinous of crimes: treason. This could be for reasons of national prestige or to avoid the threat of a similar nuclear confrontation as might have occurred in 1963.Nevertheless, it is clear that the much of America now clearly understands the direct threat of Putinism to Democracy.

The United Kingdom must now also understand what has been done to them and to respond accordingly.  Ben Bradshaw's request for an enquiry is only the beginning of a process that needs to clean the British stables of corrupt money and Russian influence. 

The circumstantial evidence that secret intelligence relies on already points to something a lot bigger than covert Russian funding of the Leave campaign.  There are significant issues of intelligence interest that demand answers even from serving ministers.  We cannot exclude collusion by figures well beyond the names that are in the public domain.      

            

Monday, November 06, 2017

Tory Leadership Vacuum

In Brexit Britain, there seem to be few aspects of human behaviour that do not seem to be in some form of crisis.  The return of the Conservative party to the sleazy days of yore is not exactly a surprise. What is a surprise is that it the rather clumsy Sir Michael Fallon who was forced out, rather than the considerably more predatory Boris Johnson.  The fact is that with sleaze, as with everything else, the Conservatives are engaging in a vicious kin strife.

Fallon had to go because he was loyal to Theresa May. Johnson stays because he isn't. That the odious Andrea Leadsom was the occasion of Sir Michael's fall merely underlines her ambition and her utter absence of any wider loyalties at all. She is, of course not very good, which is why her perfidy was quickly revealed. In fact her aspirations are way beyond her skills. I encountered her at Perpetual, which she "administered" and it was clear that this was a pretty unhappy ship, with good asset managers over ruled by a woman with little understanding of the investment process. She has, I judge, "delusions of adequacy" rather than grandeur particularly, but whereas Theresa May now inspires little but pity, Mrs. Leadsom is increasing the object of hate from her own back benches.

Meanwhile Jacob Rees-Mogg, who I also encountered when he was investing -again rather ineffectually- for Lloyd George Asset Management similarly over estimates his own skill set. Although the Rees-Moggs are not especially grand by the standards of Eton, Jacob has affected a false persona of unfashionable suits and deeply reactionary opinions. he gets away with not because he was a star fund manager- he was actually pretty useless- but because he acquired a great deal of wealth the old fashioned way: he married it. His wife is widely believed to have been worth over £ 300m upon their marriage. His ultramontane religious ideas - extreme though they are- is not why Rees Mogg is as dangerous as he is loathsome. The reality is that under the urbane Etonian charm, Rees-Mogg is about as right wing and reactionary figure as Nigel Farage.  It is not merely a taste for unfashionable and ugly clothes that unites these two figures, but a similar contempt for those who disagree with them.  Farage over the weekend declared that he would "pick up a rifle" if Brexit was overturned. Yes he would- that's what fascists do when they lose the argument and their madness is overturned. Rees Mogg shares this intolerance of the true fanatic. There is no negotiation with such people. Farage has finally left his long suffering wife, but Rees-Mogg's views on women, despite his own famously uxorious life, are at least as primitive as Farage's- arguably more so. 

So the Conservative Party, at a time when the UK faces an extraordinary crisis- which is largely the result of the Tories sacrificing the national interest for their own sectional advantage- is turning to a bunch of duds.  Gove and Johnson are hugely overpaid journalists in the pay of the borderline criminal Rupert Murdoch organisation, and of the senior cabinet  ministers only David Davis has any significant business experience at all. May is a broken reed, Any loyalists are being broken by the 80 or so Tories who insist that the only way forward is a suicidal hard Brexit.

The economy- as long predicted- is now beginning to splutter alarmingly. There is now less than 2 months before British business must know at least the kind of transition that the incompetent Tories are aiming for. I predict they won't get it, and that starting in January and through the whole first quarter that many of the strongest businesses in Britain will be relocating tens of thousands of jobs offshore. National moral is going to take one hell of a beating- and the b*******s who delivered this disaster will finally start to face their judgement. 

Mene mene tekel upharsin


Sunday, October 22, 2017

Cicero ReDux

By Special Request of Baroness Scott and Mark Valladares... Cicero's Songs returns: bigger, longer and uncut.

October 1st marked the half way point of the Estonian Presidency of the European Union.  Perhaps for many people such an anniversary is of passing interest at best.  Yet the conduct of the Estonian Presidency is reinforcing just how forward looking and innovative the most northerly of the Baltic States has become.

Estonia is a country that wants to live in the future, and with its openness and innovation, that future seems a lot closer than almost anywhere else in Europe

It is not that Estonia does not “do” the past: the picturesque cobbled streets of old Tallinn have tourist crowds a-plenty enjoying the mediaeval architecture in an Indian summer of sunshine and blue skies.  The real point is that Estonia refuses to be a prisoner of its past.
Lennart Meri, Estonia’s President in the 1990s- who spent years of his childhood in Siberia- once told me that the country had to concentrate on the future, “because the past is so terrible”. Certainly the past could indeed have been a terrible burden when the country emerged from the near half a century of Soviet occupation.

A country that in the 1920s and 1930s was wealthier than its Finnish or Norwegian neighbours was utterly crushed by Stalin in 1940. The reign of terror that was unleashed from that time until the late 1950s saw atrocities from both Soviets and- in their occupation from 1941-44 by the Nazis too. Even as most of the rest of Europe greeted the end of the Second World War with exhausted relief, Estonia saw purges, arrests and a guerrilla war that continued into the 1950s. Tens of thousands were killed, imprisoned, tortured.  Even more were sent to Siberia where thousands more died.  It is estimated that nearly a quarter of the population was killed, exiled or fled over the course of the first fifteen years of Soviet rule. In 1938 88% of the population was Estonian, by the end of the Soviet rule the population had fallen to less than 70% Estonian, and the total number of people- 1.3 million had not changed at all over that time. Even to be Estonian was suspect in the eyes of the Communists. Terror gave way to stagnation, but even under Brezhnev Estonians could face a 10 year gaol sentence for flying the banned blue-black-white national flag, and any more outspoken opposition to the regime was met with psychiatric hospitals, imprisonment or even torture and death.

After the joyous liberation of the Singing Revolution, and the difficult years of the early 1990s, Estonia has been transformed.  Thanks to a young generation of leaders, mentored by Lennart Meri himself, the closed and backward Soviet systems have been replaced by open and forward-looking policies. The primitive Soviet sclerosis has been replaced by an open and technologically advanced, globally competitive economy.  By independent measures the country is a leader in the freest press, the most open economy, and the most digital society in the world.  Leadership, in business and in politics has a vision of the future.
Estonia has developed a mania for excellence.  The Estonian school system is regularly at or close to the top of the OECD’s PISA rankings. Nor are such skills merely theoretical, for, according to the World Economic Forum, Estonia is Europe’s most entrepreneurial country.  The burgeoning technology sector has already produced Skype, the pre-eminent Internet telephony service, and Transferwise, a foreign exchange market, but a whole eco-system of innovation and development now finds homes at techno-campuses in different parts of Tallinn or the university city of Tartu.  ICT businesses are growing rapidly and partly as a result, new construction cranes dot the horizon. After a blistering second quarter growth of 5.7% the country is on course for growth for the year of above 3.6%, with more to come in 2018.

The fiscal discipline that has been the primary feature of successive government policy since 1991 has been rewarded by a further upgrade in the country’s credit rating, with S&P it now stands at AA- and a stable outlook.  By contrast the credit rating of the UK, the country that virtually invented the international financial system, has fallen from AAA to stand now at only one notch above that of Estonia, AA, and even that is with a negative outlook.  Twenty five years ago the idea that Britain and Estonia would have the same credit rating would have been dismissed as absurd, yet we now seem to be on the brink of that reality.

Estonia was forced to take on the Presidency six months earlier than planned. For, of course, the second half of 2017 was scheduled to the UK’s seventh Presidency, not Estonia’s first.  With only a year’s notice (usually these things are planned several years in advance) Estonia was forced to reschedule and re-plan a Presidency that had been long designed to coincide with the centennial of the proclamation of the Estonian Republic in February of 2018. Undaunted, the Estonian government ditched what was impossible, and focused on the achievable. There has been little sense of panic, just quiet organisation and discipline.

As a British citizen and President of the British-Estonian Chamber of Commerce, it is increasingly hard to avoid painful comparisons with the UK.  The political discourse in London seems to be simply debating a better yesterday. In the face of a print media that is feral in its negative energy, and absurd in its simplistic agenda, it is hardly surprising that at Westminster and Whitehall politics is a distracted and detached business. The suggested reintroduction of Imperial measurement, cheered on by the tabloids- is a system not used anywhere else in the world and not taught in most British schools for nearly 50 years. Its reintroduction would be an absurd waste of political energy and carries real and huge economic costs.  Those who advocate it, however insincerely, are foolishly and cynically devaluing our national debate. The shrill vituperation that now passes for political debate in British politics seems determined to make a fetish of the irrelevant and ignore the real crisis that is descending on British business.  Hugely complicated and inconsistent policies are developed with little or no thought for the medium term, still less the long term consequences. These burdens are foisted on an economy that continues to lag in both investment and productivity.

A clear example is the UK tax code, which at 26,000 pages long is the largest and most complicated code in the world. It is essentially impossible to understand and requires over 56,000 employees of HMRC in order to be enacted. The cost, at about 3% of revenue collected, is over £20 billion. On top of this, it fails the most basic fairness test, being highly regressive. Despite the declared objective of successive governments’, the rich still pay a smaller percentage of tax to the exchequer than the poor. In Estonia the simple tax code is progressive, as a result of the tax-free allowance on the flat income tax, and drastically cheaper to collect- 0.07% of revenue.  Incidentally the tax collecting authority is one of the most trusted state institutions in Estonia, with an 80% approval rating.

As Estonia plays a full part in planning and executing the future of the European Union, there is a great sense of regret in Tallinn that the United Kingdom does not plan to be a part of the future of the EU.  Britain and Estonia are seen as not merely historic partners, but also united by bounds of friendship. Certainly the British community here has been growing in size, one estimate now suggests that the number of Brits are now based in Estonia has more than tripled in the last three years, though many are not officially registered.  Transferwise, as Skype before it , has significant operations in London, and several other ICT sector companies are interested in investing in the development of operations in the UK either to develop the British market or as a platform for wider, global operations. Even after whatever Brexit ends up being, the UK will still be an important place for Estonians, just much less important than when the UK aspired to be a global and open economy.
The Estonians were incredulous when I explained that the British Parliament still has its hereditary vestige, with one hereditary member of the House of Lords replaced by another, through the most exclusive electorate in the world- the other hereditary peers of the same party. It is hard to avoid the thought that the UK now needs radical reform. The political discourse is broken, at least partly because the institutions are broken.  The pillow fight of the narrow elite represented in the British political class is a consequence of a failure to modernise.  The lack of vision is an inevitable consequence of the self-selecting political class isolating itself from the rest of society.

Meanwhile the British business community in Estonia is finding that we are ignored by British officialdom and our legitimate concerns fall on deaf ears. I suppose it is inevitable that we find a far more informed and supportive stance from the Estonian government.  Yet what is true in Estonia seems to be true in wider Europe and indeed in the UK itself.  The theatrics of political plotting and personal vengeance that seem to form the bulk of the British political discourse is the enemy of informed and thoughtful debate. “Hard Brexit”, especially one that takes place in less than 18 months can only be massively disruptive to any kind of business planning, and the brinkmanship and posturing that threatens this outcome is incomprehensible to both overseas governments and British business alike. Meanwhile the studied ambiguity of the Labour party raises further fears in the Business community that we would be turned into the whipping boy of any future Corbyn government. Business is growing frustrated and fearful at the astonishing lack of maturity and wilful irresponsibility of UK politics. In a world where NAFTA, the Shanghai cooperation agreement, ASEAN, the Andean Pact and several other blocs embrace the largest economies of the world, it is clear that the UK must compromise, whether that compromise is a reformed EU or a reformed EFTA. 


Winter is coming.  Yet, whereas in Estonia the snow season is greeted with optimism and plans for skiing and mulled wine, in the UK the atmosphere is growing darker.  Estonia looks to the future with energy and determination, Britain seems full of regret and dreadful imaginings.  It is surely time for the UK to recover a deeper political vision and to find leaders that understand that they must be confident in defying the feral press and actually start to lead. Estonia is shaping the future with confidence; the UK can only do that if it embraces radical political change.

Saturday, June 24, 2017

Britain Adrift

A system where the choice of British Prime Minister is Theresa May or Jeremy Corbyn is -self evidently- a system that needs reform.  

Despite the humiliation of a hung parliament, the current Prime Minister, Mrs. May, has nevertheless started the negotiation to leave the European Union. The Conservatives do not intend to stop at any halfway houses, but to leave the jurisdiction of the ECJ, and so withdraw from the customs union, the single market and essentially all the institutions of the EU. Although Brexit will cause major economic damage- not to mention trashing the national brand of the UK- it is not the most immediate problem the country faces right now. Britain is sailing into the mother of economic storms with the engine stopped and a huge argument on the bridge.

The "sombre national mood" identified by the venerable Queen Elizabeth II is rightly named.

The sense that the Brexit vote has cast Britain adrift in uncertain international waters has grown over the past year since the result became clear. yet the fact is that the vote itself was the result of clear national unease. The fact is that for decades the UK has been facing a leadership crisis.  Theresa May is hardly unique in being essentially unqualified for the job of Prime Minister. She has chosen to deal with her party's problems rather than the national interest, and so did David Cameron when he called the referendum in the first place. Both are guilty of a betrayal of the national interest, even when they proclaimed their supposed devotion to that interest. Gordon Brown, suspicious and belligerent, was equally not up to the task. Tony Blair, whatever the hope and determination he brought into power, left office reviled. There are few Prime Ministers who can be said to be truly successful, and this is not always due to their own characters. The fact is that the system of British government is not able to deliver what the politicians and the voters expect. Without wholesale reform the political system will grow ever weaker and more discredited than it is now.

The need for political reform is already obvious, but the fact is that it is already too late to avoid the economic crash. The level of household debt at around 87.6% of GDP  is still close to all-time highs, yet the ability to support this level of debt is being squeezed by surging inflation, as Sterling continues to be marked down on the basis of Brexit. The problem is that Britain now faces a triple whammy: a collapse in confidence, a rapid acceleration in inflation and a squeeze in real incomes. 

In order to stabilize Sterling, it is pretty clear that interest rates ought to rise. Yet if the Bank of England takes that decision, then house prices and consumer spending will face drastic and painful adjustments at a time when confidence is already weak. The past few months have seen a significant fiscal contraction as the impact of various tax changes has hit the market, and some consumer sectors are already reporting sharp falls in activity. Anecdotal evidence suggests that pub spending, for example, has fallen 25-30% year-on-year since the beginning of the summer. The government is taken more tax out of the economy than before, and this at  time when confidence in the UK has taken a sharp turn for the worse. If monetary policy were to turn too, then a sharp and deep recession would be unavoidable.  It may already be happening.

The problem is now that the UK economy is on a knife edge. Stagflation- that curse of the 1970s- is back, and again, as in the 1970s, the political will to tackle the crisis has been lost. All of the activity of the Conservative government, when it has any to spare from fighting itself, is focused on the 18 month timetable until Brexit. Yet the economic crisis is even more immediate. 

There is a sense of drift, that all of the comforting and familiar scene we have known since the 1980s is about to be wrecked. Some changes, the passing of the Royal generations, for example, are inevitable, but nonetheless unsettling for that. Some- our membership of the EU- are being willfully destroyed. The indifference shown by the Conservatives to the fate of the residents of Grenfell Tower until it was too late is not merely the callousness of a particular political brand, but the incompetence of an entire system. Austerity is not merely a failed policy, it is a dangerous failure. Andrea Leadsom has the gall to demand "patriotism" -the last refuge of a scoundrel- from the BBC. Yet now one year on from the Brexit fiasco it is clear that people are voting with their feet. A crash dive in the number of people wanting to come to the UK is now being coupled with large numbers of well qualified Brits choosing to leave. On top of everything else, the UK will now have to deal with labour shortages in critical sectors- truly back to the 1970s once more.

It is clear that Britain stands leaderless and bereft on the brink of a future it does not wish for and does not understand. She stands adrift on the brink of storms that will transform her  -or destroy her. 

Tuesday, June 13, 2017

After the Earthquake

When the Exit poll arrived I was, for a moment, utterly elated. 

The Conservatives had finally done enough to alienate even their most die-hard supporters. Fox hunting, grammar schools, dementia tax and above all the Kamikaze Brexit -not to mention all the other festering, broiling drivel of their brain dead manifesto and vacuous campaign- had finally brought the Tories to defeat. Yet, and yet, Theresa May, in all her tin-eared, out-of-touch, arrogance remains the Prime Minister. Despite Boris Johnson's transparent moves- as George Osborne noted, Johnson has a permanent leadership campaign- in fact Mrs. May, despite electoral embarrassment bordering on humiliation, remains Prime Minister and will probably survive for far longer than the chimpanzee cage of the British press currently thinks.

The fact is that after the biggest scare of their lives the Conservatives are in the same mind set as Dr. Johnson: "When a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully". If they do not focus now, then a second election would lead not merely to defeat, but to utter rout. by Sunday, Labour were already 5 points above the Tories in the polls and a second election can only have one winner.

Many of us were outraged by Theresa May. 

Her "Citizen of Nowhere" speech was the most disgraceful, provincial, no-nothing speech I have ever heard a British Prime Minister make. It was close to a rejection of the values of the enlightenment as any UK leader has made in 200 years and once made, the rest of the May disaster was sown: the rejection of any compromise over the EU and the only deal being no deal.

Of course any thinking person must gain a certain grim delight from the failure of the feral, ultra-right British press pouring buckets of manure over the Labour leader- and being roundly and totally ignored. The satisfaction that the hate goblins of the Mail, Express, Telegraph and Murdoch have lost their power to lead public opinion is the greatest joy of this election. Yet Paul "vermin" Dacre retains his privileges, rather than being tarred-and-feathered, as you might think common justice might command.     

Yet the choice of Mrs May or Mr. Corbyn is a choice of being shot or being hanged.

Corbyn's vision of the future is in fact the vision of a better yesterday coated in a a sickly syrup of special pleading and willful ignorance. His cowardice in failing to challenge the kamikaze Brexit of Theresa May is as laughable as it is contemptible. His vision of nationalized, subsidized Britain is as provincial and out of date as Theresa May's fox hunts and grammar schools. Some people with only 2 "E"s a A level go on to educate themselves- Mr. Corbyn never has. Although he began life as a trade union organizer for the tailors trade union, in fact he never qualified as a tailor, only as an agitator.  His policy prescriptions are as intellectually empty and as uncosted as those of the Tories. He may seem to have the tweed and chalk dust qualities of your rather ineffectual geography teacher, but the reality is that he is much less qualified.

So the choice was provincial arrogance or provincial ignorance.

What then for the Liberal Democrats?

Surely in the face of the simultaneous intellectual implosion of the right and left in British politics there should have been a revival of the kind of muscular liberalism that speaks for internationalism, globalism, openness and economic literacy?

Well, not this time. In fact the percentage of the vote fell even from the nadir of 2015. Our sole comfort was that we fought the election better, so that in our key seats we made a few gains. yet the loss of Nick Clegg was bitter indeed. Of the 9 seats we held last Wednesday, we lost five of them. Ok it was close, and for 2 votes here, 45 there, we could have not merely gained but doubled from 9 to 18 or so. More to the point with Ed Davey and Jo Swinson back, the Liberal Democrat benches have some big hitters returning to the House of Commons.

However for the time being the battle is not coming our way. However that gives us some opportunity to plan and build, and I hope we do. I will be trying to make the case of a more modern, innovative ideology to put forward to the party and to the country.

The time is surely coming when a party that can put forward a positive vision of the future will overcome the backwards looking intellectual failure of both left or right.