Tag Archives: Immigration

UK 2017-2025? Post anaemic recovery, post Brexit, lousy post

So, at last, George Osborne has just cancelled his appointment with eliminating our deficit, ie having a budget surplus, by 2020. I’m not sure if that means he has come to believe in textbook macroeconomics, is appreciating the limitations of neoconservatism, or is just dealing with the reality of the impossibility of the task given what is likely to happen to the UK economy post-Brexit.

Some people are saying that if the UK economy really tanks as a result of Brexit there will be a need for more austerity. God help us. It’s more the case that there will be a need for really massive stimulus. But here is what George Magnus thinks will happen, somewhat mangled by me: a UK ‘demand shock’ recession will be fully evident by end 2016 and through 2017, with rising unemployment and more spending cuts but rising fiscal deficit from the ‘fiscal stabilisers’ of social services support and as the government also tries to stimulate somehow with infrastructure projects, along with the possible removal of OAPs ‘triple lock’ on their pensions, maybe even removal of the alleged ‘ring fence’ for NHS. All this will probably erupt into the open in the (new?) Chancellor’s Autumn Statement later this year.

But, more significantly, there will be a substantial ‘supply-side shock’ through 2020-25 as business investment, particularly from foreign companies (the likes of Toyota, Nissan, Siemens, etc) is diverted elsewhere, while investment spending from UK companies is reduced, along with housing starts etc. If there is lower immigration (or, indeed, movement of immigrants to their home countries or elsewhere) this would further weaken the supply-side of the UK economy. Any ‘total factor’ productivity benefits from supply chain integration with other EU countries will evaporate, making even some UK-made goods more expensive at home and reducing any benefits of a shrunken pound to our exports. The average Brit will be noticeably poorer than now.

And, by the way, any ‘money printing’ where there is a supply-side recession could well cause significant inflation, unlike with the demand-side recession we have recently encountered.  Whether any government is equipped to recognise when one type of recession melds into another type of recession is a moot point.

George Magnus is more dispassionate than I am, because he does not mention social unrest, which will likely become significant. Among other things there will likely be a further rise in active racism.

Another equally  dispassionate blog on the Triple Crisis site, while pointing out very real negative economic effects of Brexit, indicated that they will not necessarily be quite as bad as some have suggested. However, it is less sanguine about the inevitable accompanying rightward shift of Conservatives in power in the UK (more pro-austerity, more pro privatisation of NHS) and of the negative knock-on effects on the EU itself and on the euro.


My instinctive take on Brexit (now that it’s happening) …. Rolling updates…

NOTE: Blue 14 June 2017 edit-inserts are the latest…

The Brexit result has been achieved through the anger of many of the British people.

  1. It will be bad for the UK economy in the short-medium term. I have no idea about the long term (but in the long term we are all dead, especially the elderly)
    • JUNE 2017 – JURY NOW IN – UK Economy is tanking while CPI is at 2.9% and RPI at 3.7%. Latest official figures show GDP growth worst of all advanced economies. Incomes now plummeting in real terms
  2. Unfortunately, before the long term it is also likely to facilitate the break-up of the EU and boost the already growing fascist movements across Europe
    • NOW LOOKING LESS LIKELY with success of Macron in France and collapse of UKIP in UK (Phew…)
  3. In the UK this will be because the ‘promise’ of Brexit (control over our laws, regulations and, above all, immigration) will not produce the effects the mass of Brexiters will be expecting: immigrants will still come in as long as and in the numbers our economy needs them, which is what has been happening up to now
    • DOH! (SIGH…) Now we have nearly full employment with labour shortages – skilled and unskilled. NHS in particular trouble filling posts as foreigners less likely to take the risk of coming. Proof we need the immigrants (who are voluntarity not coming now, because of Brexit risk!)
  4. And if the UK economy no longer needs them, or it does need them, but is deliberately starved of immigrants by border controls, that means our economy will be shrinking
    • DOH! (SIGH…) WELL, IT IS CERTAINLY STOPPING GROWING, even if not actually shrinking (but watch this space)
  5. Which means the majority of British people will be poorer and more angry
    • YUP – that’s beginning to happen
  6. Scotland may begin the process of leaving the UK… And Northern Ireland may see a renewed outbreak of civil war as many there will want to join the Republic of Ireland. Those events will add to the messiness of things, to say the least
    • LATEST GENERAL ELECTION SCOTTISH RESULTS MAKE SCOTTISH EXIT FROM UK LESS LIKELY. But Northern Ireland situation is becoming more precarious
  7. Back in England and Wales, the regulations which protected UK workers rights as employees will be dismantled in the name of setting business free of its shackles (which will do bugger-all to help free enterprise boost the economy, but may put extra money into the salaries and bonuses of the most senior managers and owners of SMEs and some large corporations), thus making the poor even more angry
    • JURY STILL OUT But looking less likely as ‘Soft Brexit becomes more likely
  8. UKIP will then morph into a fully-fledged fascist party and more people will vote for it
    • INCOMPETENCE AND LATEST ELECTION WIPE-OUT LOOKS LIKE PUTTING PAID TO THIS PREDITCTION; BUT IT MAY SPLIT, LIKE MOST EXTREMIST PARTIES WITHOUT A VERY STRONG CHARISMATIC LEADER
  9. While similar stuff will be happening happen all over Europe (it is already beginning in France, Holland, Poland, Hungary, Austria)
    • LESS LIKELY NOW (see #2 above…phew)
  10. In the meantime, elsewhere, Trump may well be elected US president
    • YUP THAT DID HAPPEN EVEN THOUGH POTUS AND TEAM ARE PROVING SO INCOMPETENT THEY MAY NOT LAST A FULL TERM
  11. It’ll be the 1930s all over again
    • JURY STILL OUT, BUT LOOKING LESS LIKELY FOR THE MOMENT
  12. Russia may take advantage of the chaos to physically join up with Kaliningrad via either an invasion of Poland or an invasion of Lithuania (probably Lithuania), which might spark a major European war
    • BIT LIKE AN EARTHQUAKE OR VOLCANIC ERUPTION IN THE MAKING, RUSSIA IS DOING EARTH-TREMORS, BUT JURY STILL OUT. HOWEVER, PUTIN’S TROUBLES AT HOME MAKE HIM MORE UNPREDICTABLE
  13. But a Trump-led America could well stay out of that, saying ‘not our problem’
    • STILL MOST LIKELY SCENARIO WITH A BULLY-COWARD IN OFFICE, BUT EVEN WORSE, COULD GO ATOMIC TO ‘BOMB THE SHIT OUT OF THEM’ – (NOW THERE’S A DISTRACTION FROM HEALTHCARE, TAX REFORM AND OTHER INCOMPETENCIES)
  14. Lithuania falls, because an enfeebled NATO has no chance of stopping Russia. But I don’t think this will seem very important in western Europe
    • JURY STILL OUT. SHOULD IT HAPPEN WESTERN HAND-WRINGING IS MOST LIKELY SCENARIO

I think the expression ‘clusterfuck’ was invented for just such a rolling scenario.

Here was The Economist’s Kal’s take

In the meantime…

  1. What I’d now be very interested to see is the UK’s balance of trade figures broken down by sector and the likely effect on this of a newly persistent GBP£/US$ ratio of 1.4 and GBP£/euro ratio of 1.3. with tariffs imposed as if we were not in the EEA (free trade area).
  2. Also a back of envelope calculation of the likely effect of just these two items on UK domestic inflation and on UK GDP (ignoring ‘confidence’ effects ie all other things being equal, which I’m sure they won’t be… But let’s keep it simple)
    • THIS WAS ME WONDERING WHETHER A DEVALUATION MIGHT NOT BRING SIGNIFICANT SHORT-TERM GAINS TO THE UK ECONOMY WHILE MOST PUNDITS WERE PREDICTING IMMEDIATE DISASTER. IT LOOKS LIKE I WAS RIGHT TO WONDER… BUT. TO JUNE 2017, UK TRADE IS DEFINITELY SUFFERING MORE THAN IT IS BENEFITING FROM CURRENT BREXIT CHAOS

As for 1930s … Trump’s America looks LESS LIKELY NOW TO BE going Authoritarian (Fascist? Racist?). The relationship of Trump’s USA with Putin’s Russia look like becoming very ‘interesting’ indeed. I’m obviously not the only one who thinks so. This from Frances Coppola’ s blog on the likely repercussions of the Trump administration.

She sees a major realignment of powers taking place, with chunks of eastern Europe returning to Russia’s fold and a likelihood of the return of American military action in the Middle East (and elsewhere – China, North Korea), less tentative than recently. With North African and Midddle East oil taken out of ISIS and other radical Islamist control – no accident that an ex-oil boss is now Trump’s Secretary of State – and possible Russian takeover of Iran’s Caspian oilfields.

If it gets any more ‘interesting’ we won’t have to worry so much about jobs and pensions…


On Immigration into UK. It’s (not so) complicated…

I don’t think there is much doubt that the primary emotional driver behind the Leave campaign is that of immigration. Namely, a strong feeling among many British citizens that there are just too many immigrants in Britain now and that the flow should at least be reduced substantially.

Of course there are other drivers too: about the alleged ‘undemocratic’ nature of the EU, its alleged inefficiency and financial profligacy, its alleged ‘red tape’ regulatory regime over which we Britons are alleged to have little or no control, its alleged control over our justice system. All of these could be argued. For instance, there are some sectors of the business community (particularly some SMEs and swashbuckling entrepreneurs) which just hate regulation of any sort. But I don’t wish to talk about any of this now because these issues, none of them, or in combination, provide the sheer emotional charge behind the Leave agenda.

So let’s look at immigration.

We’re in the here-and-now, so best not to rabbit on about Britain being a ‘nation of immigrants’. Rather better to start with the fact that we have an order of net immigration from outside the EU which is similar to that of the net numbers from within the EU.   Net migration from within the EU and from outside the EU were both running at around 185,000 per year in 2015. Thus, despite the EU ordained requirement that the UK accept ‘free movement of labour’ to and from the EU, we have been perfectly free to cut non-EU immigration very substantially if the UK government had wished to do so. And despite David Cameron’s stupid promise to cut immigration to the tens of thousands, his government has done absolutely nothing to start any process of restricting non-EU immigration.

The reason the promise was stupid and the reason nothing has been done about non-EU net migration into the UK is that our economy has needed the immigrants, irrespective of source. The evidence for this is that, despite the total volume of immigration, the rate of unemployment in this country continues to decline. Within this, the level of employment among UK-born citizens continues to rise. See here. Both are now at near-record levels. This fuels our economic growth, such as it is.  Why this has not led to near record growth is another matter, to do with piss-poor UK business and state investment levels.

But the evidence of the need for immigration is also clear from the sheer numbers of immigrants gainfully employed in our social services, health services, construction and commercial sectors, without whom all these sectors would be in an even more woeful state than they are currently. Their state would be woeful because the UK-born population is ageing itself into retirement and ill health and our youngsters are simply not breeding enough to make up for this.

Were it not for the immigrants there is no doubt that some sectors would have invested more significantly in IT/Robotics/Automation to replace the greying UK population – but it has proved cheaper and more convenient to avoid doing this by simply employing more human bodies, irrespective of origin. I have argued in previous posts why business investment is so low in the UK (most especially the UK), but the problem is not only business – the state sector could also have been investing more, likewise argued in previous posts.

But since we are where we are, we need the immigrants who have come and are coming to fill the job vacancies we have in the UK. Without them our economy would decline and our social and health services would be in an even worse state.

But what about the over-demand (‘pressure’) on our social-service, education and health sectors?

This is simply the increased demand we should expect from an increasing population. Provision should have been made for it.

Indeed, up to 2010, until the coalition government abolished it, there had been a poor, underfunded, Migration Impact Fund (MIF) which had been half-heartedly designed to deal with precisely this issue. But of course that would have required government investment in the housing, health, social services and educational sectors expected to be negatively impacted in demand terms by a growing population. Not that a young, healthy immigrant inflow would be making significantly greater demand on social services and health (except probably GPs). But surely they would on eduction and housing needs. We can see the dilemma the UK government is in: its policy of austerity forbids it from borrowing more or taxing more so it can spend more, even on investments that would provide significant medium- and long-term economic returns for the state.

So, when it comes to immigration and the increased pressure it puts on housing, the GP health service (less so hospitals), and education in particular, the government is fighting the Leave campaign with one hand tied behind its back.

Which is most unfortunate, as otherwise it could easily have taken the steam out of the part of the anti-immigration movement which is not wholly motivated by a dislike of foreigners.

Meanwhile, Labour has been quite hopeless in its misguided and half-hearted emphasis primarily on the protection of workers rights, etc, in its fight against Leave.

Even if the Remain campaign wins, the referendum (delightfully referred to in the FT as the ‘neverendum’) has been a wholly unnecessary, wholly disruptive and damaging event. And a cockup from beginning to end.

 

 

 


Against Brexit

David Smith writes the ‘Economic Outlook’ column in The Sunday Times Business section. I don’t much like a lot of what he writes because he’s one of those columnists who has believed (and possibly still does) that the UK’s deficit must be eliminated and our debt must be cut now-now-now. Which is what George Osborne has been trying to do since 2010 – and singularly failed. But, in the meantime, Osborne has managed to cut capital expenditure significantly, while off-loading a load of costs that used to be borne by central government onto local authorities. Not to mention the damage he and his ilk of ‘small-staters’ have done to the NHS and social services. All for want of taxing a bit more and borrowing a bit more, when ‘the markets’ are actually paying governments to borrow. Nearly all mainstream academic economists believe this has been counterproductive, as do even some working for banks and newspapers, not to mention the IMF.

But I digress.

In today’s column (29-05-2016) David Smith tackles some of the Brexiters’ economic and ‘resources’ arguments. And he does it very well indeed.

Firstly, he quotes data from HMRC showing that ‘recently arrived’ immigrants paid £2.5b more in taxes in 2013-1014 than they received in tax credits and benefits. Presumably this surplus in tax revenue over expenditure from immigrants has been going on for some time – and is likely to continue. David Smith says ‘Part of this money has been used to cut the budget deficit. But it is also as available as anybody else’s taxes to pay for public services‘.

Well, wash your mouth out. He’s not seriously suggesting that, if we have a load of new immigrants increasing pressure on our housing and public services (NHS and education especially), we should be spending tax-payers’ money to boost spending on housing and public services, is he? I do believe he might be… Though it is almost as a throwaway, as if he doesn’t want people to notice he was kind-of suggesting it.

Which brings me to his second excellent point.  He looks at the alleged ‘job transfer machine’ – the allegation that all these immigrants are taking the jobs of stout British workers. David Smith points out that the number of UK-born workers in employment (I think he’s quoting ONS, but I can’t be sure) has increased by 1.1m to 26.25m since the low of Jan-March 2010. A record apparently. And, not only that, but in the 6 years to the end of first-quarter 2016 there was an increase from 70.7% to 74.6% in the UK-born employment rate. Just wow, eh? Still believe they are taking our jobs? Unemployment has been going down (fact) since all these immigrants have been ‘swamping’ in from the EU.

So, clearly, these new immigrants are taking jobs and starting businesses which truly needed to be filled and needed to be started. They are contributing in spades to the growth of the UK economy (our growth, while lacklustre, due to – ahem – austerity, has been better than that of most developed economies) and recent immigrants, as well as boosting growth, are, as we saw, substantial net contributors to our tax revenue.

So – that all being the case, we really should stop moaning about the immigrant pressure on resources and bloody, bloody (bloody) well spend the money, even if he have to borrow some, on training more doctors, other education-resources, housing, health-resources and social services that our increased population now requires. Surely that’s not difficult to see – unless of course one is determined to cut public expenditure, no matter what, as a matter of religious belief…

I’m not sure if David Smith would agree, but he does seem to sort-of agree. Doesn’t he?

And, while we are on the subject of Brexit – here is some really great stuff from ‘Rick’ at flipchartfairytales. He has done his homework…