Category: Politics and economics

The House of Commons has agreed that European Citizenship should be maintained

Something remarkable happened yesterday.  The House of Commons passed this motion:

this House supports the maintenance of European Union citizenship rights for Welsh, Scottish, Northern Irish and English citizens, notes that the range of rights and protections afforded to individuals as European Union citizens are integral to a person’s European identity; further notes that many of those rights are closely linked to the UK’s membership of the Single Market; and calls on the UK Government to ensure that the UK’s membership of the Single Market and UK citizens’ right to European Union citizenship are retained in the event that the UK leaves the EU.

That argument (and indeed many of the arguments made in Parliament) has been the subject of several entries on this blog, the petition I have raised to the European Parliament (0922/2016, here), and a legal case currently being considered by the Dutch courts.   The position to date has been that the British Government has signally failed to protect the rights of British citizens, probably because they fear that if they make the attempt, they will have to make reciprocal concessions to the EU.  That would be worth doing, but the central argument is not one about protecting the interests of the UK; it is to require the EU to live up to the commitments that it has made to its citizens.

Unemployment benefits are being reformed in France

The government of President Macron has proposed a series of changes to unemployment benefits.  The context is very different to the UK.   Unemployment benefits are not run by the government, but by Unédic, a formal consortium of employers and trades unions.  The benefits are contributory and related to previous income (which makes them generous by comparison with UK benefits); they get reduced for longer periods of unemployment.

The proposed reform makes three substantial changes.  First, it will extend unemployment benefits for the first time to the self-employed.  Second, employees will not longer be excluded from  claiming if they have given up their previous work voluntarily.  The government is justifying this by suggesting that it offers people the opportunity to start a business.  At this stage, it’s not clear whether that will be a formal condition; if it’s not, there are others who may find different uses for it.   (The Thatcher government in the UK used to have a separate system of support for small business start ups, and one person I knew at the time was funded to become a successful writer of comedy.)

Third, there will be new sanctions; a person who refuses two reasonable offers of employment will have benefits halved.  That’s a little more leeway than claimants in the UK get, where claimants are driven to destitution for missing an appointment.    A report yesterday gives two examples of people having benefits stopped for the serious offence of being in hospital at the wrong time.

A few things I may not be able to do again

I’ve done a few things this week that I probably won’t be able to do in the same way in a little more than a year from now.  They include:

  • driving through three European countries without an international driving licence or extra  insurance
  • taking up employment without a work permit
  • using my mobile phone on UK rates (if you imagine that UK phone companies will stick to European rules when they don’t have to, think again; there are still penal rates applying to phones used on the sea crossing).

Theresa May has called for the UK to ‘come back together’ and promises to take account of “the views of everyone who cares about this issue”.  All the government’s attention has been focused on trade and migration.  Those of us who care about having existing rights taken away have been offered no thought or consideration at all.

Any trade agreement with the USA will be one-sided

I have always read reports from the Institute of Economic Affairs with some interest, even if I rarely agree with them.  I was disappointed by the  report released last Monday about the wonders of a trade agreement with the USA.  It covers little more than the sort of objection one might find discussed in the Daily Mail: US firms will invade the NHS, they’ll want private justice and they’ll lower our health standards.

Those objections are all real, but there are other concerns, too.  The USA is a federation of states each of which has its own laws.  The States of the USA strictly license occupations, and 30% of  all of its employment is restricted by this kind of licence.  A licence to operate in the USA is not a licence to operate in each state – as universities,  bankers, and even the likes of florists and barbers can attest.  This is critically important for services; and services, not manufacturing or agriculture, now represent the core of the UK economy.

TThe UK is not without its own restrictions of course; nearly 20% of all UK occupations are now restricted.  My source for that statement is the Institute of Economic Affairs, in a comment they released on Thursday.  But the UK is a unitary state with its own unified market, so one licence generally serves for all the UK.  To get parity, UK services would have to negotiate not just with the US federal government, but separately with each of the 50 states.  Any trade agreement with the USA will be one-sided.

Protecting the fundamental right of EU citizenship

I’m supporting the attempt to mount a legal case in the Dutch courts to protect the fundamental status of EU citizens who happen to be British.  The detailed legal argument is given in this article, which cites the ECJ’s view that “citizenship of the Union is intended to be the fundamental status of nationals of the Member States. ”

The substance of the crowdfunded case is based on a similar argument to the one I’ve made in my petition to the EU Parliament, which is still active. If EU citizenship is a fundamental right, it can’t be taken away.  Do please support the petition, even if you can’t pledge to support the legal case.

Rent control doesn’t do what basic economic theory predicts. Little does.

An article in Bloomberg claims:  “Yup, rent control does more harm than good:  Economists put the profession’s conventional wisdom to the test, only to discover that it’s correct.”   The reference to the conventional wisdom – “Economics 101” – refers to two basic precepts of economic theory.  If prices are restricted, it reduces supply and increases demand.   If prices are not set at a market level, it reduces the efficiency of the allocation, leaving people worse off than they might otherwise be.  On the face of the matter, that is what the paper seems to confirm.  I’m not currently able to access the paper, but what the abstract says is this:

“we find rent control increased renters’ probabilities of staying at their addresses by nearly 20%. Landlords treated by rent control reduced rental housing supply by 15%, causing a 5.1% city-wide rent increase.”

I’ve no reason to dispute that finding.  What I do dispute is the idea that this constitutes a general proof of the application of basic economic theory in this field.  San Francisco is one city, with one type of policy.  In most of Europe, the private rented sector is larger where there are rent controls: see R. Arnott, 1995, “Time for revisionism on rent control?”, Journal of Economic Perspectives 9(1) 99-120.  In the UK, the removal of controls in 1957 led to a radical reduction in supply, as landlords took the opportunity to shift to alternative investments.  The removal of controls in 1988 had very little immediate effect: leaving aside stock transfers from the public sector, much of the increase in private renting has taken place since 2007, reflecting low rates of return on alternative investments.  Putting it bluntly, we already know – or should know – that Economics 101 doesn’t reflect what is actually happening out there in the real world.

The central objection to applying basic economic theory in this context is simple enough: it’s much too basic.  It works on the idea that “other things are equal”, and they never are.  Rental markets are invariably complex.  Rent controls are not the only determinant of rents; they’re one factor of many, including the ability to pay and the existence of alternatives (such as low cost owner-occupation).  No less important, a landlord’s decision to rent is never, repeat never, determined by rental levels alone.  It has to balance that factor along with capital values (“rates of return” are a relationship between the two), alternative uses of capital, the implications of holding an illiquid asset, and the prospect of capital gain or loss. So the report that some landlords are converting rented flats into new condominiums is not a reflection on rents; it’s a reflection of a complex calculation, which may work out differently in different places at different times.

Academics ought to be able to discuss colonialism and empire without flinching

In September, I commented on the controversy about a paper on The Case for Colonialism.  This week, a similar argument has exploded in the University of Oxford.  A proposal for a series of seminars on  the ‘Ethics of Empire‘ has been established in the University’s McDonald Centre.  It states that ’empire’ can mean many different things, that both “apologias and critiques” of  empire need to be tested against the historical evidence, and that there are lessons to be drawn for contemporary engagement by the Western Powers. (Note that it refers to “apologias” rather than “defences”; this is not an agenda that puts arguments for and against empire on an equal footing.)  The seminars that have taken place to date have considered the Assyrian, Roman and Chinese empires.

In reply, a letter to the Guardian has been sent by a large and assorted collection of 58 academics, mainly historians, who object to the premises of the proposal.  They claim that that the project is based in ignorance of current scholarship and proposes a “crude cost/benefit analysis” of empire.  (I cannot comment on the first, but if it is true, then a dedicated series of seminars featuring presentations of historical empires by international experts  should help to diminish the scope of the organisers’ ignorance.   I do know something about cost-benefit analysis, and I think I can say more confidently say that there is nothing in the proposal, either explicitly or implicitly, which does argue for such an approach.)  The objectors are on stronger ground when they write:  “Developing a ‘Christian ethics of empire’ is not an intellectually sound, let alone an academically robust, endeavour ”.  The suggestion that the project will offer “a nuanced and historically intelligent Christian ethic of empire” seems to imply that there can be such an ethic, analogous to the idea of a just war; that is controversial, and it may indeed be “political” in the terms criticised in the letter.

It hasn’t helped that the Daily Mail has now stuck its oar in.     The objectors are advocates of an “ugly totalitarianism’, and to prove the point the Mail digs out any mud that it can throw: some of them are opposed to Brexit, five are anti-Israel, and several are (gasp!) supporters of the Labour Party.  The Mail‘s article, by Guy Adams,  is rambling and ill-focused, but at the core it does have a point.  The objectors are basically trying to suppress a dispassionate discussion of  issues in an academic context, because it is framed in terms that they disagree with.  If we can’t discuss the Assyrian empire without prior political genuflections, we’re in trouble.

The joint agreement of the UK and the EU

The text of the agreement between the  European Union and the UK is now online.  There are sixteen pages, contaning a considerable amount of detail in some respects (particularly citizens’ rights). The press has caught up with its existence but the details have not been published more widely yet.

Pages 1-6 are taken up with citizens’ rights.  The rights are centred on a “specified” date, which is the date of the UK withdrawal.  It allows for family reunion and marriage for those who are resident on the specified date. There is no other protection for the EU citizenship of UK citizens who are in the UK on the specified date. People  who move between EU countries while retaining UK residence are not protected.

On Northern Ireland (pages 7-9), there will be no hard border but there will be “mechanisms” to protect the integrity of the Customs Union and the single market.  The Common Travel Area can continue, by neogitation between the UK and Ireland.

On financial arrangements, the UK will continue to contribute to the EU as if it was a member until 31st December 2020.    In other words, the UK government chose the wrong date for its notice.

Police and judicial cooperation will continue under EU law.   Other continuing arrangements will “closely mirror” EU arrangements.


Is the Irish dilemma beyond a solution?

The problem for the UK government seems to rest in a choice between two unacceptable options.  On one hand, they can treat Northern Ireland wholly as part of the mainland, implying the return of a hard border.  On the other, they can treat  Northern Ireland is treated differently from Great Britain, allowing for regualtory alignment with the Republic of Ireland.  The UK government seemed posed to accept the latter, but it has been resolutely rejected by the DUP:

“We have been very clear. Northern Ireland must leave the EU on the same terms as the rest of the United Kingdom. We will not accept any form of regulatory divergence which separates Northern Ireland economically or politically from the rest of the United Kingdom.”

There is a third option.  The United Kingdom has three devolved governments, each of which already has partial derogations from laws and rules which apply in England.  If the British government accepted that there could be a derogation of rules for all three devolved governments, it would no longer be the case that Northern Ireland was being treated differently from the other parts of the United Kingdom.    The precise scope of that derogation has to be considered, but the terms and management of the derogation could be delegated to Scotland, Wales and Northern Ireland to resolve.  It’s called ‘devolution’.

Spot the difference

According to the Treasury, “in 2015-16 income inequality fell to its lowest level since the mid-1980s.”  This is from the Treasury’s paper on the distributive impact of the budget:

This, on the other hand, has just been circulated on Twitter by Alison Garnham of CPAG:

This is what the Treasury thinks is happening after the budget, reviewing income in percentage terms:

And this is what the IFS thinks:

As they ask in Private Eye: I wonder if they are related?