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Ryan Bourne: Beware the push by Hammond and others to make Britain an EU rule-taker

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Perhaps torture works. The collective waterboarding that is the impending Brexit deadline is forcing confessions, anyway.

Philip Hammond was in a government whose stated policy was a desire for new post-Brexit trade deals once it could exit the Northern Irish “backstop” of a single UK-EU customs territory. Now, with Boris Johnson tunneling for just that, the former Chancellor’s official position has shifted. Economic sense, he says, actually means Britain should stay in the Single Market for goods anyway, abide by “level playing field” commitments with the EU, and junk dreams of an independent free trade agenda. Buccaneering Britain, Hammond thinks, is an illusion.

Brexiteers who foresaw May’s backstop as an excuse by her to bounce us into Brussels’ permanent trade and regulatory orbit have seemingly been vindicated. But the danger has not passed. Alongside The UK in a Changing Europe’s new report, Hammond’s intervention pressures wavering Labour MPs and former Conservatives to reject Boris’s proposed “Canada Plus” destination as “too hard a Brexit” for Great Britain. At stake here is whether Britain ultimately repatriates meaningful economy policy, or becomes a rule-taker that’s only ever one small step away from EU re-entry.

Hammond couches his argument in economic terms. Everyone acknowledges trade-offs exist between policy freedom and EU trade frictions, with the latter more easily quantifiable, and the former dependent on active choices. But Hammond’s preferred modelling by the Treasury and others is based on assumptions. Results that suggest a free trade agreement Brexit must reduce GDP by 4 to 7 percent by 2030 relative to Remain, while new free trade agreements and regulatory freedoms could only possibly compensate by 0.2 to 0.5 percent of GDP, do not pass the smell test.

Pre-referendum, such results came from “gravity models,” built around observed relationships showing trade volumes rise in proportion to the size of economies and fall with distance between them. Treasury analysis back then had estimated EU membership raised trade volumes for members, on average, by 115 per cent beyond these factors, suggesting leaving full membership for an FTA would produce a large, long-term 6.2 pe rcent loss of GDP. Importantly, liberalising trade elsewhere could only weakly compensate, because of longer distances to new export markets.

Those results were challenged extensively. The model risked chalking up gains from general deregulations over recent decades (which wouldn’t be lost after exit) as EU membership benefits. Cambridge economists pointed out that the model itself overpredicted UK exports to the EU compared to real trade flows, suggesting a UK-specific trade uplift of a much smaller 20-25 per cent. Global evidence suggests services trade is much less influenced by distance anyway. Treasury results then looked biased towards big negative effects.

Since then, Hammond’s Treasury has changed model but not conclusions. Their November 2018 publication estimated a permanent net loss of 4.9 percent of GDP from a simple FTA Brexit, rising to 6.7 percent if net EU migration ceases. This is much higher than the more static estimates of trade expert and Nobel Laureate Paul Krugman, who estimates first-order net costs of about two per cent of GDP (before any compensatory trade liberalisation). When you hear much larger results, the findings are usually based on “black box” assumptions about large effects of trade on productivity (analysis where economists agree on the direction but disagree on magnitudes).

Four large assumptions that we can assess drove the Treasury’s results:

  1. That significant “non-tariff barriers” to UK-EU trade will arise if we leave the customs union and single market for an FTA
  2. That repatriated regulatory powers bring practically zero upside
  3. That customs procedures at the border will prove significantly costly
  4. That an independent UK free trade agenda would produce little upside.

Do these stack up? At the point of exit, UK exporters will be fully compliant with EU product standards after decades of integration. Assuming then that we’d face the same non-tariff barriers (NTBs) as existing FTA partners looks like a significant overestimate of initial new frictions. Yes, there would be economic costs associated with rules of origin requirements (though the WTO thinks these are small), and a loss of some mutual standards recognition outside the EU legal system. But bigger NTBs arise if regulations deviate. One would hope that sensible governments, Jeremy Corbyn notwithstanding, would only pursue regulatory change if it perceived net economic benefits anyway.

Indeed, it’s baffling to presume both that there will be no upside to repatriating regulation (the Treasury assumes a GDP gain of just 0.1 per cent) but that standards will significantly deviate. Current political moods might be non-conducive to widespread deregulation, but Open Europe once estimated politically feasible changes worth 0.7 per cent of GDP; let alone the potential benefits long-term of avoiding further EU labour market harmonisation, financial sector regulation, and shirking the EU’s precautionary principle in agriculture, health innovation, AI, and robotics.

Customs costs at the border look exaggerated too. Swiss estimates suggest these could be as small as 0.1 per cent. The UK’s would be higher outside the single market, of course, but Paul Krugman thinks the UK would adopt new systems relatively quickly, unilaterally lowering standards if necessary. Previous meta-analysis has found that extensive FTAs have a bigger trade boosting impact than customs unions, suggesting customs costs aren’t really prohibitive to trade flows. NAFTA, for example, is not a customs union.

But it’s really on external trade where the analysis was most slanted. Not only did Hammond’s government say the UK would not unilaterally liberalise tariffs or meaningfully reduce EU non-tariff barriers on the rest of the world; it suggested signing free trade agreements with the US, Australia, New Zealand and TPP countries would only raise GDP by 0.1 to 0.2 per cent. Closer inspection shows why: it assumes only half of the non-tariff barriers on goods and a third on services are “actionable” through these deals, and then only a quarter of these get eliminated in new FTAs. Overall then, given the countries examined for FTAs, the model assumes that the upper-limit for NTB liberalisation is eliminating 6.25 per cent of the very high level of NTBs we are assumed to want to keep.

If anything has become clear recently, it’s that Conservatives have an appetite for a far more expansive free trade agenda. Economists agree free trade boosts growth. Australia’s government estimated it has increased GDP by over five per cent over 20 years through manufactured goods trade liberalisation alone; the government’s own analysis suggests a UK FTA with the EU would life GDP by three per cent relative to WTO terms. So the conclusion that free trade policies don’t matter, especially in regards an FTA with the US, is baffling, even accounting for trade distance. Of course, the gains from a UK-US deal are bigger still when it and the EU look set for a trade war. And the UK is arguably much more likely than the EU to pursue service sector-heavy FTAs as the world becomes richer, to our own benefit.

Now I’m not arguing here that there’s no risk and uncertainty to “breaking free.” It’s difficult to ascertain precise GDP effects from trade negotiations that haven’t happened, regulations that haven’t yet been avoided, and new customs procedures that haven’t been tested. But it’s important to remember Hammond’s favoured analysis largely assumes no upsides to Brexit by construction and calculates downsides based on evidence for policies that the UK shouldn’t want to pursue, or relationships elsewhere that we wouldn’t replicate.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

David Gauke: Whatever briefings from Downing Street may claim, an election fought on a No Deal platform would be disastrous

David Gauke is a former Lord Chancellor and Justice Secretary, and is MP for South West Hertfordshire.

How much has the Conservative Party changed? To what extent has it moved from being a mainstream, centre-right party containing a broad range of views to being a party overwhelmingly focused on delivering an uncompromising Brexit?

It is a question I have asked myself a lot in recent months. Having fought off a deselection attempt because I opposed a No Deal Brexit, and having lost the Conservative whip because I continued to oppose a No Deal Brexit, it is hard to escape the conclusion that quite a lot of Conservatives disapprove of people who oppose a No Deal Brexit. Has the debate become so rancorous and intolerant that there is no longer a place for the likes of me in the Conservative Party?

The answer to that question is uncertain, but I took some encouragement from the Manchester Party conference.
I admit to attending with some trepidation. My position on Brexit is evidently a minority one within the Party. I have not sought to hide my criticisms of the substance and tone of the Government’s approach to Brexit. And I have not ruled out standing in my constituency as an independent if the whip is not returned. If ever I was going to get a hard time from Party activists, now would be the time.

And yet, at fringe event after fringe event, Party members were courteous and polite. Andrew Gimson generously wrote up my appearance at the ConservativeHome event, but a similar report could have been written for those I did with the Daily Telegraph and the Spectator. Don’t get me wrong: I am not claiming that I won the audiences over to my position – the occasional eye-roll, sigh and shake of the head was detectable – but nor was there anything like the hostility one might expect if, for example, you ever read the comments below one of my ConHome articles.

In truth, the Conservative Party felt – in those fringe meetings, at least – very similar to the party of which I have been a member for 29 years. Sensible, practical, well-meaning and decent.

I also take some encouragement from the apparent, new-found enthusiasm within the Government to reach a deal on Brexit. In previous columns, I have argued that seeking a deal and being willing to compromise is the right approach. That view would appear to be in the ascendant at the time of writing.

Until recently, an alternative approach appeared to be prevailing which seemed determined to crash us out on  October 31 at any cost. I have previously acknowledged the electoral case for this strategy, but in terms of the outcome for the country, it is thoroughly irresponsible. As such, it is also a huge departure from the modern traditions of the Conservative Party.

Let me give seven examples of principles that most Conservatives would support. I would happily sign up to each and every one of them but I struggle to reconcile them with those pursuing a No Deal Brexit at any cost.

  • We believe that living standards can only be raised and public services properly funded if you have a strong economy.

It is the argument that we have to fight at every election when our opponents make great promises but we respond by pointing out that we have to create the wealth in the first place if we properly want to fund the NHS, for example. Yet the overwhelming economic consensus is that No Deal Brexit would result in a sharp contraction in GDP. And before anyone rushes to claim that this is all a re-run of 2016’s ‘Project Fear’, remember our economy is 2.5-3 per cent smaller than it would have been had Remain won.

  • We believe in free trade.

Open markets benefit both our exporters but also our consumers. This has not always been the Conservative position but, thankfully, it has been for some time. And I know that there are plenty of Brexiteers who are sincere free traders and think that Brexit provides great new opportunities for bringing down trade barriers.

Unfortunately, it is simply not true. The Government’s analysis shows the benefit of getting trade deals with all the English-speaking nations and the major emerging economies will be just 0.2 to 0.6 per cent of GDP whereas the loss of access to European markets of a Canada-style free trade agreement (let alone a no deal Brexit) will be 4 to 7 per cent of GDP. The net effect of a No Deal Brexit or even a Canada style FTA will be to make our economy less open and more protectionist.

  • We believe in fiscal responsibility.

This was the battleground of British politics from 2009 to 2015 when we made the case for getting the deficit down. The contraction of the British economy will inevitably result in deteriorating public finances. Add to that a political strategy which focuses on winning the support of traditional Labour voters which has meant that we are almost certainly already breaking our fiscal rules.  Remember when we criticised Labour for more borrowing and more debt?

  • We don’t believe that the Government should bail-out unviable industries or businesses.

As a statement, this sounds like a bit of a throw-back to the 1980s when Margaret Thatcher weaned the country off supporting lame-duck businesses. But what do we think would happen when businesses no longer became viable because of the impact of No Deal? The pressure to provide support ‘in order to deal with the temporary disruption’ will be immense. The Government has already prepared for this with Operation Kingfisher but removing that support will be very difficult politically. There is a risk that our economy will become much more corporatist than any time since the 1970s.

  • We believe in our national institutions – Parliament, the monarchy and the independent judiciary.

This should go without saying but when Number Ten briefs that the next election will be people versus Parliament, that the Prime Minister will ‘dare the Queen to sack him’, that the judiciary is biased and that the Government will not comply with the law, we don’t sound very conservative (to put it mildly).

  • We believe in national security and ensuring that we do all we can to protect our citizens from terrorism.

And yet a ‘source in No 10’ says we will withhold security co-operation from those countries that fail to block an extension. Meanwhile, the former head of MI6 says that our security depends upon co-operation with the EU and that leaving without a deal means we will have to ‘start again with a blank sheet of paper’. In addition, it is hard to see how any ‘no deal’ outcome doesn’t destabilise the Good Friday Agreement one way or another. The Prime Minister, it is reported, is increasingly concerned about the risk of an upsurge in terrorist activities by dissident republican groups.

  • We believe in the United Kingdom.

It is obvious that Brexit is placing a strain on the union. A No Deal Brexit would be likely to result in a border poll in Northern Ireland, especially with Stormont not sitting and some form of direct rule being necessary. As for Scotland, the chaos of a No Deal Brexit provides plenty of ammunition for the separatists.

Not every Conservative voter will agree with every single one of those principles, or my criticisms of a No Deal Brexit. But a Conservative Party that fights a general election with No Deal at its heart must know that it will be pursuing an approach that is such a radical departure from the traditions of the Conservative Party and that it is vulnerable to losing the support of millions of our longstanding supporters.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: Greta Thunberg and Prince Harry are wrong. Our ingenuity is the earth’s ultimate resource.

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Spare a thought for Prince Harry. By all accounts he is finding it difficult to get out of bed in the mornings, due to “eco-anxiety.” The Sun reports from Botswana that he believes “everything is good in the world except for us humans.” He’s not the only one struggling. At the UN recently, Greta Thunberg was visibly shaken as she denounced the people who had stolen her dreams of a cooler world with “fairytales of eternal economic growth.”

In case it wasn’t clear before, more radical parts of the “green movement” hold a consistent preconception: that human beings and our innate desire for betterment are the problem where environmental issues are concerned. We are destroying the planet, devouring its finite resources through selfish fertility and consumption decisions, while pumping greenhouse gases into its atmosphere. “A plague on the earth,” is how David Attenborough once kindly described us.

The high priest of this worldview was Paul Ehrlich, who coined the oft-repeated assertion that “you can’t go on growing forever on a finite planet.” Prince Charles agrees. Earth simply can’t sustain us if more and more people aspire to Western consumption levels, he says. To save the planet therefore requires curbing population growth, rowing back substantially on consumption (so-called degrowth), or both. Little surprise then that contemporary climate change “solutions” from radical environmentalists include economically destructive, rapid carbon mitigation (“Bring on the recession!” as George Monbiot once said) or curbing global population growth.

Yet there’s a big problem here: Ehrlich and Prince Charles’ analysis was and is wrong. Population growth doesn’t “use up” the earth’s finite resources and economic growth possibilities are not finite. That’s because technologies and human ideas are not fixed. Resource constraint worriers ignore that humans adapt, dream up efficiencies, and change behaviours. As countries become much richer, they become better placed, and more willing to, care for the environment. Even on climate change, a classic “externality” problem, it is the same innovative spirit that drives economic progress that will deliver any transition or adaptation to a lower carbon economy and warmer world.

Consider the evidence. If growth in population or consumption were simply about running down scarce resources, we’d expect commodity prices to continuously rise with population or economic growth. Yet from 1980 to 2017, when the world’s population shot up by nearly 70 per cent, prices of a basket of 50 important commodities actually fell by an average of 36 per cent (or 65 per cent, if instead you consider the reduction in time an average human had to work to purchase them).

Population and consumption growth might put pressure on resource availability for any given level of technology or set of demands. But human innovation means, over time, we devise better ideas and forms of technology to access or convert those resources, or shift to other alternatives when prices rise. In the race between the human brain and resource scarcity, we are winning. As my colleague Marian Tupy has said: “the Earth’s atoms may be fixed, but the possible combinations of those atoms are infinite.”

As counterintuitive as it sounds, that same innovation means economic growth doesn’t necessitate more and more resource use either. Greens think of growth as about consuming “stuff.” And for good reason: during and after the industrial revolution, GDP growth really did go hand in hand with energy use growth. But in a service and high productivity world, production and value clearly arises from doing more with less too. The iPhone in your pocket has replaced a clock, diaries, calendars, letters, calculators, photo albums, large telephones, trips to the bank, compasses, a contact book, and much else. Think of all the resources saved! No wonder Ronald Reagan once said “there are no such things as limits to growth, because there are no limits to the human capacity for intelligence, imagination and wonder.”

Again, the distinction between a static and dynamic world is crucial when considering the environmental impact of this. As Tim Harford explains, if we were all suddenly a fair bit poorer, we’d probably substitute a hat and coat for heating in our homes. But this doesn’t mean that if our incomes trebled over the next five decades, we’d crank up the heating and boil ourselves in our homes. In fact, as we’ve got richer over the last quarter of a century, total energy use per person has actually been falling in countries such as the US and UK, even beyond that accounted for by offshoring of manufacturing.

This is one good example of how economic growth helps shift us up the hierarchy of needs. As advanced countries have solved problems of food, warmth, and shelter, people can afford to worry more about the natural world around them more broadly too. Recent global growth has gone hand-in-hand with the forested area of the planet increasing since 1982 and a continuous fall in fertility, in part because wealthier people want to invest more in the “quality” of their children.

In this light, Prince Harry and Greta’s eco-anxiety is a clear sign of privilege. Neither is having to scramble to illegally chop trees for money to survive, overhunt wild animals as a source of a nutritious diet, or spend half their adult lives pregnant to ensure at least a couple of their kids survive. Many around the world aren’t so lucky, or comfortable enough to put the environment first. A UN poll of 10 million people around the globe showed far more worry about their educational opportunities or whether their kids are starving or dying from disease.

Once you understand this: what growth is, how it is driven by human innovation, and what consequences it has, you see how futile and damaging an “anti-human” approach to global climate change would be. Drastic mitigation would condemn much of humanity to poorer lives, making us worse environmental stewards in other regards and facing much worse consequences of any warming that occurs. Authoritarian population controls would backfire too, reducing the potential market and payoffs for innovators developing climate change remedies in everything from electric cars to solar panels.

No, the only sustainable, credible route to reducing carbon emissions and adapting to warming will come precisely from the sorts of innovation driving the “fairytales” Thunberg bemoans. Acknowledging this does not preclude modest, economically reasonable policies, such as R&D investments, or even a degree of carbon pricing, to speed up and incentivise innovation and entrepreneurship on low carbon climate solutions. What it does rule out is drastically rowing back on our activities, freedoms, or desires for children.

If Prince Harry is to regain his morning sprightliness, he’ll have to find more faith in economic growth and innovation to the challenges that face us. Human ingenuity, far from being a burden, is the world’s most important resource.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: To help grow prosperity, let’s focus on people and not places – such as towns

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Stian Westlake describes it as the “Strange Death of Tory Economic Thinking”. Conservatives have ceased telling an economic story about why they should govern, and how. Sure, there’s still the odd infrastructure announcement, or tax change. But, since Theresa May became leader, the governing party has shirked articulating a grand economic narrative for its actions.

This is striking and problematic. From Macmillan to Thatcherism to deficit reduction, the party’s success has coincided with having clear economic agendas, gaining credibility for taking tough decisions in delivering a shared goal. But, arguably, deficit reduction masked a secular decline in interest in economics. David Cameron and George Osborne, remember, wanted to move on to social and environmental issues until the financial crisis and its aftermath slapped them in the face.

Now, with the deficit down, economics is in the back seat. Fiscal events are low key and economic advisors back room. To the extent the dismal science is discussed, it’s as a means to other ends, or a genuflect to “Karaoke Thatcherism.”

In short, I think Westlake is right: the Tories do not have an economic story and, post-Brexit, it would be desirable if they did. So we should thank both him and Sam Bowman (formerly of the Adam Smith Institute), who have attempted to fill the vacuum. In a rich and interesting new paper, the pair set out to diagnose our key economic ailments and develop a Conservative-friendly narrative and policy platform to ameliorate them, even suggesting reform of the Right’s institutions and think-tanks in pursuit of the goals.

Such an effort deserves to be taken seriously, though not everyone will agree with their starting premises. It is assumed, for example, that Conservatives believe in markets and want to maintain fiscal discipline, which bridles against recent musings from Onward or thinkers such as David Skelton.

But, again, the key economic problem they identify is incontrovertible: poor economic growth. Weak productivity improvements since the crash have been both politically and economically toxic, lowering wages, investment returns, and necessitating more austerity to get the public finances in structural order. And the nature of modern innovation, arising from clusters and intangible assets, means that growth that is experienced isn’t always broadly shared.

Their agenda’s aim then is to achieve both concurrently: maximize the potential of the economy by taking policy steps on planning, tax policy, infrastructure, and devolution, to increase investment levels, allow successful cities and towns to grow, and to connect “left behind” places to local growth spots through good infrastructure. None of their ideas are crazy. Indeed, I would support the vast majority of them.

And yet, something bothered me about their narrative. In line with the current zeitgeist, they too discuss “places” and their potential, as if towns and cities are autonomous beings. My fear is this focus – shared by those who want to regenerate “left behind” areas – creates unrealistic expectations about what policies can achieve in a way that undermines a pro-market agenda. Importantly, it warps what we should really care about: “left behind” people, not left behind places.

A people-centred narrative recognises that just as firms fail in the face of changing consumer demands and global trends, so high streets, towns, cities, and even regions will shrink too. As Tim Leunig once said, coastal
and river cities that developed and thrived in a heavy manufacturing, maritime nineteenth century world might not be best placed to flourish in a service sector era of air and rail.

A true pro-market policy agenda would admit -and that’s ok. Or at least, it should be, provided we understand that raising growth and sharing prosperity requires adaptation, not regeneration. That means removing barriers for people either to move to new opportunities or have control to adapt their situations to ever-changing circumstances. This might sound Tebbit-like (“get on your bike”), but really it’s just saying policy must work with market signals, not against them.

Today though, interventions actively work in a sort of one-two-three punch against inclusive growth and adjustment. First, we constrain the growth of flourishing cities. Tight land use planning laws around London, Oxford, and Cambridge contribute to very high rents and house prices, and prevent these places benefiting from growing to obtain thicker agglomeration effects.

This contributes to the “left behind” scandal, but not in the way people imagine. When rents and house prices are higher in London and the South East and we subsidse home ownership or council housing elsewhere, it’s low productivity workers from poor regions that find it most difficult to move given housing cost differentials. As a result, they get locked into poorer cities and towns that would otherwise shrink further. That’s why Burnley, Hull and Stoke are the most egalitarian cities in the country, whereas prosperous London, Cambridge and Oxford are the most unequal, even as inequality between regions has intensified.

Having restricted people’s mobility through bad housing policy, we then impose one-size-fits-all solutions and subsidies which dampen market signals further. National minimum wages, fiscal transfers, national pay bargaining, and more, might be designed to alleviate hardship, but they deter poorer regions from attracting new businesses and industries by trading on their market cost advantages. Then, to top that off, we compound the problem further by centralising tax and spending powers, preventing localities from prioritising their spending and revenue streams to their own economic needs.

Now, as it happens, Bowman and Westlake’s policy agenda is perfectly compatible with assisting  “people” rather than “places,” precisely because it’s market-based. They advocate planning liberalisation, a flexible right to buy, and stamp duty, all of which would improve labour mobility. They prioritise infrastructure spending based on benefit-cost ratios, making investments more profitable with sensible tax changes, and devolving more transport power to regions and localities. All, again, will help facilitate areas adapting to changed economic conditions, rather than reviving Labour’s failed top-down regeneration attempts.

But pitching this as a city and town agenda still risks creating the false impression that the net gains from “creative destruction” nevertheless can be achieved without the destruction, and that all places can thrive in the right policy environment.

One can understand why they framed it in this way. Their aim is to persuade the party and its MPs of their platform. Anti-market commentators would call them fatalistic and “abandoning” places if they acknowledged the downside, as if facilitating more free choice amounts to design.

Successful past Tory economic narratives, though, willingly acknowledged hard truths. Deficit reduction entailed tough choices to curb spending. Thatcherism entailed making the case for letting inefficient industries fail. If a new Tory vision is serious about raising productivity growth and spreading opportunity for people, it will have to confront the inevitable market-based adaptation for some places.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: In America, public spending conservatism is being lost. It could happen in Britain.

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Austerity is over. Theresa May told us so after the 2017 election, and again at the Conservative Party Conference last year. Philip Hammond tried restraining her from a blitz of high-profile spending announcements. Yet Team Johnson has now picked up the baton anyway. Today’s spending review from Sajid Javid will reportedly confirm significant money injections for schools, hospitals and the police. The Prime Minister said Monday it will be “the most ambitious spending round for more than a decade.”

Restraining government spending was always said to be a temporary deficit repair tool, of course. Those “tough choices,” added to net tax hikes, have helped bring down the budget deficit to just 1.3 per cent of GDP, from a gargantuan 9.9 per cent in 2010. Once near-balance, a spending squeeze was never envisaged to continue year after year. Despite Nick Timothy’s fear of libertarians under the bed, no recent Conservative leader has been ideologically committed to shrink the size and scope of government. Absent “thinking the unthinkable,” one eventually must release the spending grip given voter demands for high-quality services.

And yet…the zeal with which the Tories have turned heel on their spending narrative is surprising. Whatever one’s view on the efficacy or composition of “cuts”, they were central to the party’s offer through 2016, including the 2015 election win. Balancing the books was said to be about unburdening the next generation from dumping more debt on top of the iceberg associated with an ageing population. Any intergenerational justice message has now gone the way of the Titanic.

For the Government is not promising gradual targeted spending increases in these areas – a natural uplift from a reset baseline after years of restraint. No, proposed hikes in education funding would virtually reverse any real schools’ spending cuts over the past decade. May’s extra money for the NHS is a big step-change too. The spending review is celebrated as the “biggest, most generous spending review since the height of Tony Blair’s New Labour,” no less – a far cry from denouncing that era’s profligacy. In one swoop, the Treasury has undercut its long-held opposition to raising borrowing and junked the idea that public service reform trumps showering public services with money.

Javid attempts to thread the needle by arguing that more spending is still consistent with keeping the debt-to-GDP ratio on a shallow downward path. That maybe true. But a stated goal of policy was always to balance the books overall, even if George Osborne and David Cameron continually pushed back the deadline. A former Treasury fiscal policy director now says that borrowing will in fact start rising again, and soon be above two per cent of GDP. Manageable, yes – but a clear change in direction.

The public discourse effects of this reversal should worry fiscal conservatives. Cameron and Osborne’s consistent messaging helped entrench two crucial contours in discussions about government spending. First, that there was no free lunch (every Labour proposal for years was met with the question “how will you pay for it?”) Second, that what you did with the money (the organisation of public services) was as important as spending levels. After years of Tony Blair’s money throwing, the public were receptive to such apparently grown-up thinking. Now, both those claims-cum-restraints that ensnared Labour have been removed.

If large, real increases in education funding are synonymous with better schools, as Tories imply, Labour can coherently ask “why did you cut real funding beforehand?” Such corrective spending hikes look an admission of a past mistake. Doubly so if funded through borrowing that was previously considered intolerable.

Couching this as “an end to austerity” brings similar peril. These particular decisions don’t imply “we are going to return to affordable spending increases consistent with a low deficit.” If large spending hikes for education are seen as reversing austerity, then obvious questions arise: what about local authority funding? Prisons? Criminal justice? Have these not suffered more from the pain you admit was damaging?

Of course, Brexit is the important context here. It is sucking oxygen from normal economic debates – one reason why the logjam needs to be broken. A slowing economy, induced in part by uncertainty, means an obsessive near-term public finance focus is probably unwise. The very process of extrication requires budget flexibility, not least because the underlying public finances could look very different when future trade relations crystallise.

But all this would be a case for relaxing or suspending fiscal targets through the choppy Brexit seas, not bold new announcements.

No, it’s difficult not to conclude there’s not something bigger happening here. Much of the party has embraced a simplistic “left behind” narrative of the Brexit vote – that it was a cry for investment in public services. They are egged on by former government advisors, armed with polling, who see an opportunity to steer the party towards a “bigger government” vision for the party they’ve always spoiled for.

Academic evidence in fact shows new Brexit voters affiliating with the Tories quickly adopt traditional Tory views on other issues. There’s no need to pander. Yet when you see John Redwood railing against austerity, you realise how strong this view about the changing party voter base has set.

Whether Johnson shares that interpretation is less clear. Perhaps he sees funding boosts now in three major non-Brexit policy areas as short-term deck clearing before an election. Polling strength from these “good news stories” might even firm up pressure on the EU and rebel MPs on his central task. If it helps finally deliver Brexit, many of us will accept fiscal jam tomorrow.

I want to believe this, but the noises aren’t encouraging. And living in the US, where Republicans have gone from a Tea Party anti-spending force to delivering unprecedented deficits for peacetime, in just a decade, I’ve observed just how easily spending conservatism is lost.

Here, it started with big spending increases on priorities too. Republicans cut taxes, yes, but huge cash increases for defence were delivered, greased by money for some Democrat priorities. Once that dam opened though, the money poured. July’s budget deal threw off the last vestiges of spending caps delivered by the Tea Party Congress. Promises of Republican spending restraint in Donald Trump’s potential second term ring as hollow as claims he’s using tariffs as a path to freer trade.

Here’s the worrying consequence. As US conservatives have learned to love deficits, or at least use them, the left’s spending demands have only gotten more extreme. With constraints stripped away, Democratic Presidential candidates feel liberated to propose mammoth programmes and spending hikes – the Green New Deal, a jobs guarantee, universal childcare and more. When asked how the country can afford this, they point out to the red ink spilled for Republican priorities. There is no answer.

UK Conservatives are far from the Republican point of no return on spending, as yet. But the mood music has changed dramatically. America shows that when conservatives abandon spending constraint, they legitimise the left’s spending wild demands, to taxpayers’ detriment.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: In America, public spending conservatism is being lost. It could happen in Britain.

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Austerity is over. Theresa May told us so after the 2017 election, and again at the Conservative Party Conference last year. Philip Hammond tried restraining her from a blitz of high-profile spending announcements. Yet Team Johnson has now picked up the baton anyway. Today’s spending review from Sajid Javid will reportedly confirm significant money injections for schools, hospitals and the police. The Prime Minister said Monday it will be “the most ambitious spending round for more than a decade.”

Restraining government spending was always said to be a temporary deficit repair tool, of course. Those “tough choices,” added to net tax hikes, have helped bring down the budget deficit to just 1.3 per cent of GDP, from a gargantuan 9.9 per cent in 2010. Once near-balance, a spending squeeze was never envisaged to continue year after year. Despite Nick Timothy’s fear of libertarians under the bed, no recent Conservative leader has been ideologically committed to shrink the size and scope of government. Absent “thinking the unthinkable,” one eventually must release the spending grip given voter demands for high-quality services.

And yet…the zeal with which the Tories have turned heel on their spending narrative is surprising. Whatever one’s view on the efficacy or composition of “cuts”, they were central to the party’s offer through 2016, including the 2015 election win. Balancing the books was said to be about unburdening the next generation from dumping more debt on top of the iceberg associated with an ageing population. Any intergenerational justice message has now gone the way of the Titanic.

For the Government is not promising gradual targeted spending increases in these areas – a natural uplift from a reset baseline after years of restraint. No, proposed hikes in education funding would virtually reverse any real schools’ spending cuts over the past decade. May’s extra money for the NHS is a big step-change too. The spending review is celebrated as the “biggest, most generous spending review since the height of Tony Blair’s New Labour,” no less – a far cry from denouncing that era’s profligacy. In one swoop, the Treasury has undercut its long-held opposition to raising borrowing and junked the idea that public service reform trumps showering public services with money.

Javid attempts to thread the needle by arguing that more spending is still consistent with keeping the debt-to-GDP ratio on a shallow downward path. That maybe true. But a stated goal of policy was always to balance the books overall, even if George Osborne and David Cameron continually pushed back the deadline. A former Treasury fiscal policy director now says that borrowing will in fact start rising again, and soon be above two per cent of GDP. Manageable, yes – but a clear change in direction.

The public discourse effects of this reversal should worry fiscal conservatives. Cameron and Osborne’s consistent messaging helped entrench two crucial contours in discussions about government spending. First, that there was no free lunch (every Labour proposal for years was met with the question “how will you pay for it?”) Second, that what you did with the money (the organisation of public services) was as important as spending levels. After years of Tony Blair’s money throwing, the public were receptive to such apparently grown-up thinking. Now, both those claims-cum-restraints that ensnared Labour have been removed.

If large, real increases in education funding are synonymous with better schools, as Tories imply, Labour can coherently ask “why did you cut real funding beforehand?” Such corrective spending hikes look an admission of a past mistake. Doubly so if funded through borrowing that was previously considered intolerable.

Couching this as “an end to austerity” brings similar peril. These particular decisions don’t imply “we are going to return to affordable spending increases consistent with a low deficit.” If large spending hikes for education are seen as reversing austerity, then obvious questions arise: what about local authority funding? Prisons? Criminal justice? Have these not suffered more from the pain you admit was damaging?

Of course, Brexit is the important context here. It is sucking oxygen from normal economic debates – one reason why the logjam needs to be broken. A slowing economy, induced in part by uncertainty, means an obsessive near-term public finance focus is probably unwise. The very process of extrication requires budget flexibility, not least because the underlying public finances could look very different when future trade relations crystallise.

But all this would be a case for relaxing or suspending fiscal targets through the choppy Brexit seas, not bold new announcements.

No, it’s difficult not to conclude there’s not something bigger happening here. Much of the party has embraced a simplistic “left behind” narrative of the Brexit vote – that it was a cry for investment in public services. They are egged on by former government advisors, armed with polling, who see an opportunity to steer the party towards a “bigger government” vision for the party they’ve always spoiled for.

Academic evidence in fact shows new Brexit voters affiliating with the Tories quickly adopt traditional Tory views on other issues. There’s no need to pander. Yet when you see John Redwood railing against austerity, you realise how strong this view about the changing party voter base has set.

Whether Johnson shares that interpretation is less clear. Perhaps he sees funding boosts now in three major non-Brexit policy areas as short-term deck clearing before an election. Polling strength from these “good news stories” might even firm up pressure on the EU and rebel MPs on his central task. If it helps finally deliver Brexit, many of us will accept fiscal jam tomorrow.

I want to believe this, but the noises aren’t encouraging. And living in the US, where Republicans have gone from a Tea Party anti-spending force to delivering unprecedented deficits for peacetime, in just a decade, I’ve observed just how easily spending conservatism is lost.

Here, it started with big spending increases on priorities too. Republicans cut taxes, yes, but huge cash increases for defence were delivered, greased by money for some Democrat priorities. Once that dam opened though, the money poured. July’s budget deal threw off the last vestiges of spending caps delivered by the Tea Party Congress. Promises of Republican spending restraint in Donald Trump’s potential second term ring as hollow as claims he’s using tariffs as a path to freer trade.

Here’s the worrying consequence. As US conservatives have learned to love deficits, or at least use them, the left’s spending demands have only gotten more extreme. With constraints stripped away, Democratic Presidential candidates feel liberated to propose mammoth programmes and spending hikes – the Green New Deal, a jobs guarantee, universal childcare and more. When asked how the country can afford this, they point out to the red ink spilled for Republican priorities. There is no answer.

UK Conservatives are far from the Republican point of no return on spending, as yet. But the mood music has changed dramatically. America shows that when conservatives abandon spending constraint, they legitimise the left’s spending wild demands, to taxpayers’ detriment.

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Brexit, Johnson, Merkel, Macron – and 30 days in the wilderness

“We were also over-reliant on Angela Merkel, even after she showed us that she wasn’t as dependable a supporter as we might have wished,” wrote Daniel Korski, in his account of how David Cameron lost the EU referendum.  “She certainly seemed to take much more of a back seat during the final, crucial weeks of negotiations, giving advice, offering support and laying out red lines, but not getting too involved.”

An entire library could be assembled of stories claiming that Merkel would, at one time or another, come to the aid of a British Government during its to-and-fros with the European Union.  The claim is that Germany – as another pro-free trade, pro-American, pro-market economy country – is a natural UK ally.  But when push comes to shove, Merkel has stuck with France and the EU Commission.

Korski reminds his readers that she deserted Cameron over the appointment of Jean-Claude Juncker as the Commission’s President, to which she was originally opposed.   As with Cameron, so with Theresa May: as recently as February, the German Chancellor called for “creative” thinking on…yes, the Northern Ireland backstop.  “We can still use the time to perhaps reach an agreement if everyone shows good will,” she said.

And as with May so, now, with Boris Johnson.  Once again, Merkel has said that there is time to agree a deal – 30 days, to be precise.  “The backstop has always been a fall-back option until this issue is solved,” she said on Wednesday, during a join press conference with the Prime Minister.  “It was said we will probably find a solution in two years. But we could also find one in the next 30 days, why not?”

Some have put that remark alongside Emmanuel Macron’s declaration that “the framework that has been negotiated by Michel Barnier that can be adapted,” and concluded that the EU is preparing to blink at the last moment, climb down on the backstop, and present Johnson with an amended Withdrawal Agreement – which will then at last pass through Parliament, thus bringing this chapter of the Brexit story to a close.

According to one version of events, the Prime Minister himself believes that such an outcome is still possible, while others in his top team don’t.  If so, the balance of the argument strongly suggests that they are right, for four main reasons.  First, the EU collectively takes its ideology seriously, and this demands sticking with the Withdrawal Agreement, or an agreement so like it as to make no difference.

Second, it must show Donald Trump, and the rest of the world, that if it takes a position on a major strategic issue, such as Brexit, it will hold to it.  Third, Germany and France must ultimately be sensitive to the concerns of smaller EU countries, of which one is in the Brexit front line: Ireland.  Fourth, they have reason to wait, along with the rest of the EU, to see if the Commons, when it returns in September, blocks Brexit yet again.

Finally, it is worth remembering that Merkel’s position is not as dominant as it was during the Cameron years; and even then, to quote Korski once again, she was prone to “not getting too involved”.  Seen in this light, Merkel and Macron’s words – which in any event must be considered in the context of everything else they said – look more like more gambits in a blame game than a genuine change of heart.

Johnson wants to signal that he’s up for a deal: that was the point of his visits before this weekend’s G7 summit in Biarritz.  Macron and Merkel do, too: hence their hints of flexibility.  But the sum of the evidence is that “nothing has changed”.  In any event, it is far from certain that even a revised Withdrawal Agreement would get through Parliament.  That would require a Bill, which would of course be amendable, and time is very short.

If the EU had prized mutual gain over protecting its project, it wouldn’t have insisted that the Withdrawal Agreement precede trade talks.  Perhaps there will be a last minute shift after all, if Johnson can demonstrate that Parliament cannot stop the No Deal Brexit that his Government is actively preparing for: the European Council will meet on October 17.  But it appears that all concerned are now bracing for No Deal.

Some in Number Ten are hopeful that, if it happens, the EU will go for mass mini-deals – and so oil the wheels of economic co-operation.  That would be a rational response to the threat of recession in Germany and elsewhere, and the hard border in Ireland that a No Deal Brexit would bring.  But the EU’s clinging to the backstop, despite its commitment to seek alternative arrangements by December next year, suggests that rationality is in short supply.

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Patrick Spencer: What the new Government should do to ensure migrants are better skilled – and supported

Patrick Spencer is Head of Work and Welfare at the Centre for Social Justice.

The debate around immigration has become fraught to the point of complete intransigence in recent years. Events as close to home as the Grenfell Tower tragedy and as far afield as the Syrian civil war have brought the subject to the fore again. Inflammatory rhetoric here as well as in other countries hasn’t helped. As we leave the European Union, cooler heads must prevail.

The Centre for Social Justice (CSJ) is today releasing a report that brings a level-headedness to the debate that is sorely needed. Importantly, it places the interests of immigrants squarely at the centre of its proposals. Immigration policy should not just be about who is allowed to come and work in Britain, but also how we support those people who do, so that they can avoid the trappings of low pay, unsafe working conditions, crime, social marginalisation and poverty.

The reality is that uncontrolled immigration growth over the last 15 to 20 years has worked – to a point. Our services, manufacturing and agricultural industries have benefited from skilled and inexpensive labour from EU new member States.

However, the economic costs of low-skilled immigration have been both wage stagnation at the bottom end of the income spectrum – analysis at the Centre for Research and Analysis of Migration found that “an inflow of immigrants of the size of 1 per cent of the native population would lead to a 0∙6 per cent decrease at the 5th wage percentile and a 0∙5 per cent decrease at the 10th wage percentile” – and low levels of productivity boosting capital investment. High-skilled immigration has had the opposite effect though, increasing wages, productivity, innovation and capital investment.

In the long term, it is also likely that the British economy will demand less low-skilled labour. Automation, technology and changing firm dynamics are likely to mean a greater focus on hiring higher-skilled workers, and more fluid jobs in which individuals are expected to take on multiple roles and work across multiple teams. The CSJ argues therefore that is irresponsible to continue to operate an immigration system that is deaf to the demands of our changing economy, and risks leaving migrant labourers unemployed and at risk of falling in to poverty.

It is for this reason that the CSJ’s first policy recommendation for this Conservative Government post-Brexit is folding all EU immigration in to the existing Tier 2 skilled immigration system, and tightening up the eligibility for Tier 2 applicants so that they are genuinely skilled and can command a wage well above the UK median. Key to this recommendation is carving out occupations that are deemed of strategic interest to the UK economy, for instance nurses and doctors who come to work in our NHS, but do not earn above average salaries.

The Government’s responsibility to immigrants should not stop there. For those that do come to Britain legally, whether under refugee status or another route, we must make sure support is there to reduce the risk that they and their children become socially marginalised, end up in low-paid work or unemployed, and get stuck in the criminal justice system. It is naïve to think the immigration policy debate ends on day two.

In that vein, the CSJ also recommend more integrated support for refugees when they come to Britain, including better financial support, longer term housing options and help with English speaking skills. The report also calls for a beefing up of the Director of Labour Market Enforcement financial powers and reach. There are potentially thousands of foreign individuals kept in forced servitude in Britain today, and many more working in unsafe conditions for illegally low pay.

Finally, it is high time the Government addresses the huge disparities in economic outcomes among minority and indigenous ethnic groups. Generations of immigrants from some groups still perform poorly in the education system, labour market and criminal justice system.  The Joseph Rowntree Foundation found that poverty rates among Black and Minority Ethnic (BME) Groups are twice as high as for White British groups. Dame Louise Casey discovered that individuals of South East Asian and Caribbean descent were three times and twice as likely to live in deprived parts of the UK, when compared to White British groups. Just one third of Bangladeshi women living in Britain are in employment compared to three quarters of White British women. One in five Black African and Black Caribbean men and almost one in four Mixed Race men are economically inactive. Unless the Government addresses the problem with real gusto, it will persist.

This report calls for calmer and more long-term thinking on immigration policy that prioritises high-skilled immigration and increases support for parts of the country that have struggled due to uncontrolled low-skilled immigration. Public opinion reflects this – polling by Hanbury Strategy earlier this year found that 51 per cent of the UK public recognise that not all parts of the UK have benefited from immigration, while YouGov polling in 2018 found that ‘treating EU citizens who want to come and live in the UK the same as people from elsewhere in the world’ was supported by 65 per cent of respondents and scrapping the limit of high skilled immigrants was supported by 46 per cent of respondents.

This is a great opportunity for the new Government to fix this long-standing issue of contention in British politics for the long term.

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5 tips for keeping your indoor plants alive year-round

Westlake Legal Group Untitled-32 5 tips for keeping your indoor plants alive year-round indoor plants houseplants horticulture Home Resources home and design Home & Design Home growth flowers floral design floral care design decor
Photo courtesy of Nikki Norton

While gardening has been around for centuries, it is now becoming increasingly more common to surround not just the outside of your house with flowers, but the inside of your home with natural life, as well.

The truth is, those indoor plants are as good for you as they are trendy. Houseplants release oxygen and absorb carbon dioxide, removing up to 87% of air toxins in 24 hours, according to recent research from NASA. Plus, a study from the Journal of Physiological Anthropology states active interaction with indoor plants, such as smelling and touching, can reduce physiological and psychological stress. 

In order to reap the benefits, though, it is essential to understand how to care for the living things growing in your space. 

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Happy pre-turkey day! Im resolving myself to find the best spot on the couch tomorrow, right next to wine! . . I visit my family up north generally once a year, and this year my grandma is 98! She’s sure kicking it for her age! I wish I look half as good as her when I’m her age! . . I’m not posting for the rest of the week, or answering emails for that fact.. BUT! I will have a trip to NYC, so I can’t promise I won’t be insta-storying! —I get to go pick out my wedding dress Friday!! . . Photo: @jacquelynepiersonweddings Plants: @modernfoliage Rentals: @smthingvintage Flowers: @sweetrootvillage Catering: @welldunncatering Planning: @tarteventco . . #modernfoliage #thanksgiving #realweddings #weddinginspo #tropicalwedding #dcbride #vabride #mdbride #dock5 #cozyvibes #interiordesign #dcdesign #plantdesign #weddingrentals #nycbound #sunnyvibes #midcenturymodern #rattanfurniture #hopephilodendron #palmtrees

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The first thing to know, according to Nikki Norton, horticulturist and owner of Modern Foliage Designs, LLC, based in Haymarket, is that most houseplants are tropical, preventing them from surviving outside in Virginia’s climate and creating more challenges for indoor care. 

Here, we share best practices from both Norton and Morgan Walker, horticulturist and owner of Petals and Hedges in Leesburg, for ensuring your indoor plants thrive throughout all four seasons, continuing to bring your safe space to life. 

Don’t overprotect them
Much like caring for a pet, it is essential to give plants their space. 

According to Norton, a common misconception people have about indoor plants is that they need a lot of attention. Houseplants are a lot like weeds growing in a garden, Norton explains, in that they shouldn’t be overburdened with treatment until there is a problem or need. Keeping a consistent eye on your plants is key.

Go easy on the water
While humans are supposed to drink a certain amount of water daily, plants are completely different. According to both Norton and Walker, people often water their plants far too much. 

“The one thing that always amazes me is how many clients ask, ‘How many times a day should I water it?’ and I’m like, no, that’s the wrong way to think about it,” says Norton.

For her own houseplants, Norton waters about every three weeks, but it isn’t necessary to keep a watering schedule, rather check on your plants every so often.

“Most people over-water and they turn to mush or they under-water and dehydrate,” Wallace says of one of the most common houseplants, succulents. “There is a happy balance, and you need to make sure your container has good drainage, so they are not sitting in water or drying out too quickly.”

Cut back on fertilizer
As the weather cools down, your plants require different care, especially when it comes to fertilization.

“If you are fertilizing frequently, you should cut back because they won’t be growing as naturally or quickly, which means they won’t be taking in that much water, too,” says Norton. 

Be wary of the light
When the season changes, so does the sun’s rotation outside, which means it’s time to move your houseplants to a new spot in order for them to get the proper exposure to light.

“The sun will set faster, meaning your plant will get less light throughout the day if you keep it in the same spot,” explains Norton. “The sun sets lower in the south, so there’s more light in your southern window closer to winter, but in the summer that would be your western window.”

According to Walker, most plants go through a dormancy stage when the seasons change, meaning they shed old leaves to make room for growth. When this happens, she recommends re-potting them into larger containers so the root’s have more space to grow, feed them with fresh, sterile soil and make sure they aren’t too close to a heat source that could dry them out.

“Finding the right spot for your plant with proper light exposure can be hard indoors for those who lack windows with perfect exposure,” says Walker. “You can find grow lights on Amazon that provide some extra rays to keep them happy.”

Learn the plant’s life cycle
While it takes time, plant owners eventually grow an intuition for properly caring for each one. According to Walker, knowing your plant and understanding what amount of water, soil and sun exposure makes it happy is the most important part of keeping houseplants alive.

“Garden plants can rely on mother nature—they get nitrogen from rain, from mulch, there are earthworms—whereas houseplants are 100% reliant on you,” says Norton.

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