Friday 22 July 2016

The Vision Thing

Do I detect the Beeb's post-referendum Continuity Project Fear beginning to run out of traction?  Maybe that's just my own optimism shading the landscape.  But relentlessly optimistic I remain, because there is just so much to play for, and the 'other side' is in such utter disarray.  Actually that should be 'sides' in the plural, but hey, Come the three corners of the world in arms / And we shall shock them. Nought shall make us rue / If England to itself do rest but true.

Not that the situation isn't fraught with peril.  In a situation like this one could wish for a Heseltine - an onside Heseltine, obviously - someone with tenacity, tactical nous and creativity: the chap who solved the Poll Tax in half an afternoon.  Is David Davis that man?  We shall find out.

I actually agree with whomever it was (can't find the link) who wrote recently that the government now needs to conduct itself as if we were at war.   Yes, it's big and serious!   Full attention and maximum effort required on all fronts.  Melt down some of the family silver.  Tighten the belt.  Grown-ups to the front.  Now is the hour.

Funnily enough, the early signs of exactly such an attitude that may be detected - everyone lauding the big cross-border investment deals that have been announced as proof we are open for business - make the wretched Hinkley all the more likely to "go ahead", however crass.  The French are obviously rushing to grab, quick, while stocks last.   So be it; a 'yes' in July 2016 means very little in practice, but has big symbolic importance and, given we really don't need the project & the French really, really do, confers some rather handy leverage.

(But isn't ND an implacable opponent of Hinkley?  Yup - which goes to show the priority I'm advocating for all things that tend towards advancing the main cause.)

I quite like the parallel Paul Goodman draws with the Stuart Restoration: a time for focus, creative politics and reconciliation.  Might draw this out a bit more on another occasion.  But an even more compelling analogy (and I hope I'm steering clear of the Godwin trap) is with Churchill taking the reins in 1940.  Phoney War coming to an end; focussed leadership drawing on eclectic resources; clear vision.  You ask what is our policy? .. what is our aim?..   

Just now the Vision thing is, maybe, a bit less black-and-white: a bit harder to articulate in detail what would constitute success.  But here's my attempt.

The settlement we reach - with Europe, and amongst the various parts of the UK - must be so good that the Irish (that is, the Southern Irish) should seriously start thinking about whether they want to join us.

I don't see why not.



Blue Eyes said...

Agree. I don't care about Hinckley because in the grand scheme it is small beer. The bigger picture is much, much bigger.

It would be really nice to line up a trade-deal-in-principle by the time we put the Article 50 legislation through. That ought to concentrate minds.

As for the Irish, isn't some sort of federal UK plausible, a sort of UK single market customs union single travel areawith a mutual defence scheme and very little else decided at Union level? That may be how to get the ScotsNats onside (Nicola is only bargaining, after all, she knows that if Scotland leaves the UK it will not be in the EU).

For me "success" means a fairly comprehensive trade agreement with the rEU, with relaxed mutial work "visa" arrangements but no automatic future right to be treated as a local citizen. I.e no automatic right to claim welfare etc. and no automatic right to stay forever unless working.

If the UK can place itself as a hub for a wide network of bi-lateral and multi-lateral trade agreements, and keeps its law and taxes sensible, then the future could be very bright indeed. Today's Flash PMI notwithstanding.

Blue Eyes said...

I meant a trade deal with a strong partner, whether the US or Canada or China or elsehwere important.

Electro-Kevin said...

Opportunities - yes. As always in upheavels.

That we have come to this pass. Dare I mention the Trump and Brexit phenomena have similar origin ?

Both are a gag reflex to years of oppressive political correctness - oppression whenever anyone dared to say our country was becoming too crowded and our nationhood was being diluted before our eyes.

Xenophobia is not the same as love of - and concern for - a nation being wilfully deconstructed. (I'm certainly not a xenophobe as I see that the deconstruction is actually coming from within.)

So I fear that when Paul Goodman is so resigned about mass immigration that the Blairite Mrs May will be too.

This was the key issue which caused people to vote Leave and it should not be forgotten.

The point was reached after decades of peaceful debate and due democratic process.

The people have been the model of tolerance and patience - despite the lies that have been told about them and if they do happen to 'forget' why the people voted to Leave then the next step will be less democratic, patient and tolerant.

The people have actually been adults in all of this. But what on earth are they supposed to do if they are still ignored in spite of it all ?

Blue Eyes said...

Well EK if you don't like what happens, then use your vote at the next election accordingly.

What I would suggest to people is that they resist the temptation to get upset before anything has actually been agreed. After all, what is the point?

dearieme said...

I do hope that you are referring to the Southern Irish joining us only in the sense of leaving the EU. We surely don't want those buggers back in the UK again.

Laban Tall said...

@dearieme - they already have the vote here. Actually reuniting with Eire would be great - the two countries are socially much more alike than they used to be. Those days of Catholic supremacy are alas gone, but a beneficial side effect is that they no longer have a pipeline of young men brought up on Kathleen Mavourneen and Our Lady Queen of Semtex.

Cobh, Berehaven and Lough Swilly could house the Trident submarines and the Scots could close Faslane and Rosyth. It's a winner!


Y Ddraig Goch said...


"Do I detect the Beeb's post-referendum Continuity Project Fear beginning to run out of traction?"

I wish you were right.

Listening to the radio earlier I heard some newsreader excitedly announce that the UK economy had started shrinking (something about a PMI index?). As I look at the BBC News website right now the headline is "Brexit causes dramatic drop in UK economy, data suggests". They seem positively giddy - here at last, you can hear them think, is a catastrophe that won't evaporate even as we report it.

James Higham said...

You're enamoured of Heseltine, Nick? Hmmmmm.

Nick Drew said...

YDG - what I said was traction - I know they are still running the line, but I'm not sure it's riveting the population

James - not the offside Lord Hezza of Remain-in-the-Past: it's the entrepreneurial power-politician of old, his creativity / problem-solving / general policy-delivery we need

dearieme - Irish joining us only in the sense of leaving the EU?; well, that, but I also have half a thought for a federal-type settlement with Scotland they might fancy a bit, too

Y Ddraig Goch said...

Nick Drew @ 7:09

Ah, fair point. And very decent of you to respond after I muddled you up with Blue Eyes. Surely, that's a sacking offence?

Nick Drew said...

all 4 of us get muddled all the time - no probs! (we do use different fonts/colours, you know ..?)

Blue Eyes said...


rwendland said...

I don't understand how we could easily become "a hub for a wide network of bi-lateral and multi-lateral trade agreements", because of the tariff avoidance through re-export problem.

Say the US-EU has a 10% each-way tariff on Widgets. We cut a UK-US free trade deal to have 0% tariff on Widgets. Subsequently UK-EU cut a deal letting us into the Europe free trade area. Won't US Widget exporters to the EU then export Widgets to the UK, then re-export (possibly with some trivial value-add) them from UK to EU - niftily bypassing the 10% US-EU tariff?

From what I've heard on the radio, most countries will delay agreeing trade agreements with the UK until after they know for sure what the UK-EU deal will be. Largely to manage this re-export incentive problem. If at all possible, it will certainly take a lot longer to negotiate than some people imagine. Seems to me for perfect optimisation trade deals need to be negotiated in sequence to make sure a regime without significant tariff leakage is arrived at.

rwendland said...

On Hinkley, I would have thought the 15% fall in the Pound/Euro exchange rate would be weighting heavily on EDF and the Chinese investors minds. Lots of the costs (major components) are in Euros, but the electricity to be produced is in lower value Pounds. I'd have thought quite a lot more spreadsheet columns bottom box will have turned red.

Put simplistically, the future electricity £92.50/MWh CfD price has turned from EUR 65.51/MWh a year ago into EUR 47.31/MWh. Given it is clear the economics was at best marginal a year ago, that is a tough nut to swallow.

rwendland said...

... Whoops, calculator error! Second para should be:

Put simplistically, the future electricity £92.50/MWh CfD price has turned from EUR 130.61/MWh a year ago into EUR 110.54/MWh today. Given it is clear the economics was at best marginal a year ago, that is a tough nut to swallow.

K said...

@rewendland You can't (legally) evade tariffs like that. Goods have a "country of origin" which is where they are manufactured and the COO stays constant no matter where the goods are moved to. Yes you can fudge the COO on small shipments but if you're doing freight quantities with a bad COO you're gonna get in trouble.

So in your scenario if you moved widgets from the US to UK the recipient would pay no tariffs. But then when the goods are moved from the UK to the EU the recipient would pay the EU's tariffs for the US.

What the UK would need to do is get FTAs with countries like India and China for raw materials. Then manufacture the materials into goods with a UK COO which can then be exported with FTAs to the US and EU. The UK would become a hub of materials coming in and goods going out.

K said...

Also "raw materials" doesn't have to literally be raw materials. It can be parts which are assembled into a car or a computer etc.

K said...

Also also ... Germany isn't so much a car manufacturer as a "hub" of car manufacturing. Parts come in from all over the EU and the world and they put them together. The UK sends parts to Germany and they send whole cars back to us. This is why some are saying that Germany will compromise because if not they will be hit once on tariffs for the parts coming in and a second time on cars going out.

And I think many might be surprised by how many "quality German products" are really from East Asia. Even within the EU when you move around large quantities you have to fill out an Intrastat and so much from Germany is labelled as CN, TW, etc for the country of origin.

Over in the US all products must have their country of origin on their packaging (the "Made in America" obsession). You will often see with English versions of products that have a crappy sticker on them saying "Made in China" and this is usually merely European manufacturers obliging with US regulations but when they sell on the continent they don't put this sticker on and mislead customers into believing e.g. that Adidas trainers are really made in Germany. Meanwhile, if we're not too late, "Made in England/Scotland/etc" labels will probably actually increase sales of certain products in the US.

Nick Drew said...

Mr R - so, if we believe they will actually decide anything next week, either
(a) they'll give a conditional 'yes', demanding compo for FX
(b) they'll use FX as their excuse to walk out
(c) we'll find out there was a great deal of fat on the bones after all!

Electro-Kevin said...

BE - Well EK if you don't like what happens, then use your vote at the next election accordingly.

E-K - Tried that. Doesn't work. So we forced them to give us a referendum, on which they lost and now they are already back-pedalling on the key issue (as mentioned in the Goodman article.)

BE - What I would suggest to people is that they resist the temptation to get upset before anything has actually been agreed. After all, what is the point?

E-K - I suggest people remain vigilant as to what the Government intends (doesn't intend) to do and be prepared to get very upset indeed. After all, we can now say that they have exhausted all democratic means and have conducted themselves far better than sore losing Remainers.

(I did not put up a Leave poster for fear of being ostracised in my left leaning social circle or having my window broken.)

Blue Eyes said...

EK by all means be vigilant. I am not suggesting you "trust" the govt and parliament to come to the result you hope for without your taking part in the democratic process.

However, in a democracy where everyone has a (roughly) equal say, and in which there are highly divergent opinions, don't expect the end result to be perfect for you. Personally I much prefer a messy consensus situation where there is broad support, to some Utopia in which people at one end of the spectrum are happy and the rest thing they have been done over.

If you are that exercised, why not run for something? Magnify your influence?

dearieme said...

"they already have the vote here"

Indeed. Our leaving the EU would be a suitable occasion to end that nonsense.

rwendland said...

K, you obviously understand tariff regimes very well indeed! I'm a novice wondering every time this was mentioned in MSM over the last months how this problem would be overcome, and no-one explaining it. Thanks for a good concise explanation.

So, as I understand your explanation, even if a single component costs well over half the total production cost, the COO of that component is lost and the product gains the COO of country of the assembly plant.

So in my scenario above, if a Widget was a component, someone wishing to build an assembly plant for products sold into the EU utilising a lot of US made Widget components would be financially incentivised to build the plant in the UK to benefit from the lower tariff rate the UK applied on US Wedgets?

You can see why the EU trade negotiators would then not want us in the Europe free trade area in that case. It still seems to me there are a huge number of tariff-rate interactions and considerations for trade agreement negotiators. It does not seem likely all this will be agreed quickly, and as the expert I heard on the radio said, why most countries would want to know the exact details of the UK-EU deal before they enter detailed negotiations.

rwendland said...

ND, a few more possibilities strike me:

(d) they'll postpone the build until EDF have finished the simplified "New Model EPR" redesign in 2020, then use Hinkley as the first demonstration build to show other potential customers. But that will need a new GDA by the UK regulator, so we are talking a build start date around 2023 (which will also allow FX rates to have settled).

(e) they sell the already prepared Hinkley site to the Chinese, who will use it instead of Bradwell for their George Osborne agreed first power station. Either with the trusty CPR-1000/Hualong One (many already built), or a lead site for the CAP-1400 (enlarged Westinghouse AP-1000).

or, if it weren't for the Chinese financiers, and the French government is terrified by an order-gap and redundancies in the nuclear component supply chain:

(f) suck up those extra losses!

EDF cannot be best pleased that the future profits of what was British Energy (old UK nuclear) have been devalued by 15% odd. Though as gas will go up ~15%, and working-week daytime electricity by perhaps 10%, this will be softened a bit.

Electro-Kevin said...

Blue - I'm pretty convinced any organisation I got involved in in real life would be ruined.

K said...

@rwendland I think the official definition for changing the country of origin is something like "materially different". Value doesn't matter.

I think the real reason nobody wants to engage in trade discussions yet is because it's not clear what the starting position is. For example Canada wants a FTA with the UK but they've had a FTA with EFTA since 2009 and the UK might join EFTA.

K said...

@rwendland Also worth pointing out that the average tariffs on most goods is about 2.something% - so compared to VAT etc it's absolutely marginal. And unlike VAT, due to thresholds etc, tariffs seem to benefit small businesses over large businesses.

Some outliers are cars where it's more like 20%. I'm no expert but since we're one of a few left hand drive countries how many cars sold in the UK are really manufactured abroad? We could get low tariffs for India and Japan and screw the rest.

Another outlier is electronic goods where it's usually 0%. Not sure why but it's probably ripe for exploitation.

rwendland said...

K, thanks for extra info. You're a star.

Yes, you can see how the ebay-generation small trader can take advantage of this. On top of the micro-trader advantage of flying just under the VAT threshold, especially if you are in services. And next year they get 100% business relief up to a rateable value of £12,000.[*] Seems sunny side up for micro and small traders!

[*] Why shouldn't single people rent a small business premise to live in, saving £1k-ish of council tax? And run a micro-business or hobby on the side.

mike fowle said...

I watched Look East this evening, the local BBC news roundup. I foolishly hoped that they might cover our local carnival - a really great two day event, with scope for positive news and great pictures. No such luck. The BBC had calculated that the East would lose £74 million from Brexit, plus agriculture would lose £600 million. Where do you think that money comes from I shouted at the screen. Waste of time of course.

Nick Drew said...

mike f - welcome: and accepting the beeb carries on with this stuff relentlessly, do you think it has any real traction with Joe Public?

I feel not, but must accept that water eventually acts even on stone

Anonymous said...

On Sunday, I heard a BBC reporter sniggering that "perhaps the traffic hold-up at Dover is the French punishing us for Brexit"

They really can't help themselves. Whittingdale chickened out in the BBC Charter review, no doubt pressured to do so by Cameron, who wanted the Corporation onside for the Remain campaign. Still didn't work, though.

Now is the time to abolish the TV Licence fee, and let the BBC sink or swim.

Charlie said...

Anon, it's quite simple, just stop paying your TV licence. Write to them and tell them you don't need it as you do not watch or record live-to-air TV. Even if you do, in reality there is zero chance of being found out, unless (I'm thinking of the Frankie Frazer Brass Eye interview here) you accidentally grass yourself.