The false premise of the EAW; the wrongful assumption of parity of justice across Europe

The English and Welsh legal system is one of great history and importance in the development of legal principles across large parts of the globe. Seen from both a criminal and civil law perspective, it is held up by many as the gold standard and in many ways the template for less aged jurisdictions.

The protections and freedoms of the Briton in his court system is ensured by several constitutional safeguards. The upholding of right of Habeas Corpus for example, which large majority parliaments have struggled to infringe in the shadow of even terrorist threat, shows that it is a system which has an enduring central balance. The separation of powers which underpins this, Executive, Legislature and Judiciary, is politically unquestionable for the most part, and politicians in the UK tread lightly here for they know that it a principle which the citizen prizes incredibly highly.

The move towards European integration has demanded that the Union itself has a converging policy for judicial affairs, and central to this policy is an implied parity of justice across the European Union. By inclusion of the  Charter of Fundamental Rights in the Lisbon Treaty, the intent was to set the standard in such areas at a parity that was at least an acceptable minimum under which justice could be relied upon. But has it been altogether successful?

Assessing Judicial Effectiveness.

One potential indicator in assessing the dedication of the nation state to operating an effective judicial processes, is the manner in which it funds the process itself. When looking at the budget allocated to the Justice system across the EU and further, the European Commission for the Efficiency of Justice report 2014, shows a great disparity across the EU nations. Britain, while not being the highest spender (figures exclude the cost of public prosecutions), is one of the higher spending nations, and certainly above the average. It’s spend is proportionately very high, over 40% of its total budget, to financial aid of the litigant or defendant. We know that with the reduction in the spend on civil litigant support in the legal aid system, that this relates to a very high degree of spending on the legal assistance of criminal defence.

By comparison, all apart from Norway spend a lower proportion of their budgets on legal aid, but Denmark, Sweden, the Netherlands, Finland and Ireland all spend fairly high proportions, over 20%, on legal aid. At the other end of the spectrum, Romania, Poland, Malta, Greece, Bulgaria, Spain, Slovenia, Lithuania, Latvia, Italy and even Austria, spend less than 10% – many of these under 5%.

This would tend to indicate a difference in the balance of public policy priorities between the states – where some have a large funding priority to the prosecution by the state or to the court system itself, but less so to the individual defendant or litigant. In the common law systems such as the UK, there are a smaller number of very qualified judges, and therefore a lower courts wages bill for example, but the defendant is well represented at all stages at the cost of the state in many cases. Inquisitorial systems of course have different structural costs. But how does this imbalance affect the access to justice, and to a reliable defence for those without significant means?

Access to Effective Justice.

Fair Trials abroad reports a mixed picture across the EU nations in regards to access to effective justice, and access to a lawyer on detention in particular. Pre Trial detention in some EU states causes particular concern, especially where there is a lack of legal aid or long process due to failure of the courts to pursue matters promptly post detention.

Bulgaria for example, comes in for particular criticism from the US state department in regards to pre trial detention. It complains that prosecutors in Bulgaria bring charges into a heavily backlogged system without sufficient evidence. Where the judicial system acts a check against this error, the Judge must refer the case back for further evidence collection and presentation, but at this point the defendant is still deprived of his liberty. To make this situation worse, the low amount spent on legal aid in Bulgaria means that the defendant will have difficulty in accessing any public defence aid while incarcerated. This would not be the case in the UK, where the defendant should be afforded fairly swift justice, with full legal representation.

Michael Shields’ case highlighted the lack of rigour in the Bulgarian legal system, as was widely reported in the press. His was case of mistaken identity, via an identity parade process which would not have been allowed under UK law. Evidence that he was in his hotel, asleep at the time of the incident he was charged for was ignored by the courts, and there was a total absence of forensic evidence. He was fortunate that he had been allowed to serve his sentence in the UK, thereby allowing the then home secretary Jack Straw to intervene (eventually), and Shields was granted a pardon after four years of incarceration for a crime he knew nothing of.

In the 24 months to March 2016, Romania was held to be in violation of Article 6 of the European Convention on Human Rights 19 times, and Article 5 in a further 9 instances. Again, issues of pre trial detention loom large in Romania’s very ineffective legal system, and access to legal advice is again poor. Fair trials abroad note many cases of alleged brutality to extract evidence or confession, which has then been made admissible in court. The US state department notes that “Major human rights problems included Police and Gendarme mistreatment and harassment of detainees”. Prison conditions are also exceptionally poor in Romania, and that the Council of Europe’s Committee for the Prevention of Torture has registered allegations including acts regarded as torture of imprisoned persons as recently as 2012. These include beatings, use of electric shock and stress positioning. The independence of the Judiciary is now also under threat, and political interference is also noted.

Greece, although it has a better record that Romania under at the ECHR with only 8 cases decided against it in the same period, also suffers significant problems with pre trial detention and access to legal representation. What have been described as ‘Chronic delays’ in the courts, an average of 50 months taken to reach a criminal trial verdict, are described in a study by the World Bank. The dire financial mess in Greece has led to concerns of judicial corruption.

The case of Michael Turner, extradited to Hungary in 2009, is shocking in that it is fairly clear that Westminster magistrates court was ‘mislead’ into granting extradition on the basis that the case was ready to go to trial. EAW requests are designed for trial, not for incarceration for investigative purposes. Eventually, after an extended period of alleged mistreatment he was released without charge, only to be hauled back to Budapest in 2012 – to be found guilty of a trivial fraud of £12,000, which he is appealing. His sentence, non custodial. He suffered months of imprisonment in substandard conditions for a crime punishable only by a fine in Hungarian law.

Even long standing Western EU members are not entirely free from issues though. Austria merits a mention on the Fair Trials International website due to poor police practice in terms of issues that would be covered by the Police and Criminal Evidence Act 1984 – namely that they are not cautioning subjects correctly with regard to right to legal representation. France was also held to be in breach of the ECHR in regards to detention and trial 25 times in the 2007-14 period.

Conversely, the same organisation criticizes the UK in only one respect:

Unjust Extradition from the UK under the European Arrest Warrant.

Protection of the citizen

This paints a worrying picture. The common law system in place in the UK, the separation of powers and the independence of the judiciary, ensure that our system conforms to the highest standards. It is not perfect, but it is built and constituted on the correct foundations. While it seeks to protect the citizenry from the worst elements amongst us through use of a police force and prosecution service, it also seeks to protect us from the will of any government which tries to extend state power beyond the constraints of the law.

Our parliamentary system is also strong, in that we have a committee structure and a revising chamber which has a tendency (with some exceptions of course), to modify or even weed out bad laws at the drafting stage. This again, makes it more difficult for government to extend the power of the state for its own ends. Even with the constraints on spending that have been imposed in recent years, our spending on public defence is the highest by percentage anywhere in Europe, and only outspent by Norway. Many of the countries to which we subject UK citizens simply on request, have none of the evidenciary safeguards afforded by legislation that has been in place here for over 30 years.

Yet despite this, we are asked to accept the EAW on the basis that the ‘aim’ is that all the legal systems across the European Union will someday be in some kind of parity. At the same time, the enforcement process for this parity is creating only the tiniest impact. In some areas, it might be argued that the direction of travel is contrary to that which is desirable as the political scene shifts.

The UK courts must once again be able to differentiate between the standards of justice offered in different jurisdictions, and refuse to extradite to countries under which fundamental rights cannot be guaranteed. At the same time, the presumption to extradite must only be upheld under the 1957 European Convention on Extradition where there is a demonstrable standard of  Judicial transparency and independence, and where there is real doubt the right to call for evidence must be restored.

Justice must be equal for all in the UK, it is the fundamental principle in a free society. We must not outsource responsibility for this to other nations in respect of our own citizens or those who seek refuge here. It is not the role of the nation state to offer up its people for summary injustice.

 

 

 

 

 

“Implementation” – Transition to the post Brexit world

In her speech of this week, Theresa May set out the objectives of the UK in the coming Article 50 negotiations and beyond. In doing so she has ruled out membership of the single market in a move that many people have suggested renders impossible a smooth transition from EU membership to the final desired position – a Free Trade Agreement. But is that an entirely accurate assumption? 

EEA Transition

During the campaign, the Flexciteers led by Dr Richard North, set out a first stage of transition of European Economic Area membership (and therefore single market participation) via renewed membership of EFTA, the European Free Trade Association . It is believed that the PM has ruled this out with her recent speech, but I’m not sure that this is entirely true.

Certainly she has said that we will not be ‘members’ of the single market at the point we leave the European Union – but she leaves the door ajar. Implementation suggests a move from the position that we currently hold to the one that we will agree to finalise. Therefore there must be a halfway house, a method of avoiding what some have described as a ‘cliff edge’, or at least a moment significant and sudden regulatory alteration. .

Implementation will almost certainly be in stages. Changes to customs arrangements, movement of goods, fisheries, agriculture, services. All will have to be picked apart. This is not likely to be attempted in one single move, but in separate phases. The first has been revealed already:

Repatriating the Aquis

Repatriating the aquis has been a key pillar of David Davis’ policy declarations in Parliament. Partly this has been to answer the reservations of opposition politicians that rights currently enjoyed domestically under EU directives will be preserved. But the less obvious reason is that it ensures we begin our life outside the EU in complete parity with EU law.

This is important for any potential transition, because it will be imperative that all our trade rules mirror that of the EU until we are outside and have alternative structures in place. These structures under a new FTA will still tend to follow the Union’s rules for conformity. But as we already know, this is something that is being heavily influenced by global bodies, and should be more so influenced as the WTO’s Technical Barriers to trade regulations begin to have a greater effect. Of course, there is still a competitive nature to regulation, but for the moment let’s set that fact aside.

EEA rules

To all intents and purposes, the UK will still at the point of leaving the EU, be operating in regulatory harmony with the EEA/ Single Market. This provides an opportunity to pursue, up to a point, an EEA based Brexit.

May proposes an implementation in parts for the FTA. One potential solution for this is to remain under EEA rules and participate in the single market through a mirror or shadow EEA solution. Each time a header is agreed under the FTA to be completed, that section of the EEA that can be supplanted by the new FTA moves to the new environment.

This however, presents a problem. The EEA must have an adjudicator – an arbiter for disputes. Presently for us, that is the ECJ.  On 20th October 2016 the President of the EFTA court gave a lecture in the UK in which he observed that in bilateral Swiss – EU dealings, the EU had suggested that the EFTA court and Surveillance authority be used as the arbitration and enforcement authority. He similarly suggested that in any bilateral EU-UK agreement the same arrangement could be used.

This of course suggests that the EFTA court is quite willing and able to undertake this role, both as the arbiter of the current EEA based agreement at the moment of leaving the EU, but also of the bilateral agreement that would be reached and implemented in stages subsequently.

FTA Implementation.

Exploration of the EEA annexes shows a myriad of directives which must be in force for the EEA agreement to be whole. These have been added since the introduction of the agreement to keep the EFTA nations which participate in regulatory harmony with the EU in the areas which they both agree are EEA relevant. Many of these are simply to regulate trade, but many are not. Remember that the task of the EEA was to ready the EFTA nations for EU membership, it was not simply to extend the single market to the EFTA nations. All of this regulation currently in force will have been domesticated.

But as each area of law under the annexes is no longer subject in the UK to EEA direct regulation, and becomes part of the Bilateral agreement area, or simply is no longer applicable because the Bilateral treaty no longer covers this area and is simply domestic law, then the EFTA court would no longer implement the EEA rules. Instead they would implement those clauses now in the FTA. In other words, the EFTA court can be contracted as an independent adjudicator for the duration of the process (and possibly beyond). Domesticated elements would revert to the UK courts.

Alternatively, the EFTA court could rule only on areas covered by the parts of the EEA agreement still in force between the EU and UK, and already active parts of the FTA could be enforced by a new authority – such as a bilateral EU UK committee, formulated specifically to permanently oversee the FTA. (For the UK this would certainly be politically preferable, simply because it would put the partners on a visibly equal footing).

As the areas of competence reach conclusion, all sectors of agreement eventually transfer to the new authority, or at least out of the EEA and into the FTA.

Fulfilling the objectives.

May stated that at the point of leaving the EU we would not be members of the single market, and we would not be subject to the ECJ. If the above route was chosen and agreed between the EU and UK then both those primary considerations would be fulfilled. (While some might disagree with this point, the ECJ influence would be indirect and for the purpose of transition only) . 

At the same time, the EU would have had its way on sequencing, in that the FTA objectives would be set out in accordance with Article 50. However, we would still be following the EEA rules under the enforcement of the EFTA court until we had finalised the FTA under article 218, a political win for the EU in that the rules are still seen to be politically inseparable from the market. The economic issues of cliff edge for both sides would be negated, but the objectives set out by the PM would still be technically met – we would not be ‘members of the single market’ (we would not be in either EFTA or the EU so we could not be members), and therefore we would not be directly under the rule of the ECJ.

Conclusion

The EFTA court is very different from the ECJ in many ways. Its willingness to be part of a potential Brexit transition I think should be welcomed.  I cannot say whether this is a solution that the government is considering as I have no more information than any other observer. However, I think if the detail could be made acceptable to both sides, it offers one potential avenue for both sides to achieve the objective of a smooth Brexit, while not damaging significantly the interests of either party.

 

 

May’s Speech – Predictable Overreactions

170117070033-01-theresa-may-speech-0117-exlarge-169

So, the morning following the speech setting out Britain’s “position” on leaving the EU by Prime Minister Theresa May, the reactions are predictably diverse and some bordering on the hyperbolic.

We are left (in the words of Donald Rumsfeld) with Known knowns, known unknowns and unknown unknowns. Let’s start with the Known Knowns

We will walk away if we have to:

This was the easiest line to predict. Cameron went to Brussels knowing that whatever happened, however little he was given, he would react in exactly the same way. He was always going to put a frock coat on it and show it off like first prize.

Brussels is a place well used to such behaviour, and used him for its bidding, thinking that having the weight of the Prime Minister behind it would turn a dressed up frog into a prince. They didn’t bargain for the British people, who have a tendency to be rather more independent of mind.

May hasn’t made the same mistake – from the outset she is making clear that Britain can and will walk away, and that it is for the EU to weigh up the consequences of that for themselves as well as for us. It’s a standard negotiating position.

We will be outside the Single Market:

Bearing in mind the terms of the campaign, this is no surprise. Remain always pushed the idea that to leave the EU would be to give up single market membership, and Leave always took that as an advantage. Only a few of us in the middle argued a third way (EEA/EFTA). As we had no discernible impact on the outcome, it is entirely predictable that our campaign arguments have little influence in the tactics of negotiation.

But is this the disaster that some are predicting? Not from what I can make out. There will be some issues of course, but this is not a some desire expressed to go ‘Straight to WTO Rules’ by tearing up the 1972 agreement and not holding any negotiation at all. There is still plenty of scope for MRA, Trade agreements and the suchlike, without being members of the single market. For the politics of this, both sides must be seen to gain something, or equally to lose something. That doesn’t make it a zero sum game, politics is not business.

We will leave the Jurisdiction of the ECJ:

This again, is a bit of a no brainer. Even under EFTA/EEA, this would have been at least partly true. The influence of the ECJ would have still been there but its ability to impress its will at least one stage removed to the EFTA court. The amount of EU law would have been drastically reduced. It was never the perfect solution, and was never intended to be a permanent fix.

We will be able to control migration from the EU:

Again, this was an inevitable red line, I cannot for the life of me see why this is causing any consternation. But what it doesn’t suggest is that anyone currently enjoying the right of residence via EU citizenship will face any new hurdles to remain here.

We will seek Customs agreement with the EU:

This is a very sensible move. Along with the idea of Mutual Recognition and services conformity, Customs procedures will be one of the more complicated of the big administrative issues up for discussion. The nature of that agreement is of course, still an unknown at this point.

We will seek a UK/EU FTA:

This is quite ambitious, FTAs can often take a long time to negotiate and get hung up on the smallest of issues. But in a negotiation you start at the boldest point, so this is not anything we should not have expected to hear.

We will seek an Implementation period for that FTA:

So despite the reaction of many to the idea of a ‘Cliff edge’ – the government’s intention is still to avoid one. The open question is now how they will do that.

Known Unknowns:

How will the EU react to our negotiating stance?

Predictions this morning are that the EU partners are saying largely – ‘you’ll get nothing’. But of course, that’s exactly what you would say for public consumption in their position. Behind closed doors, discussion will be much more sensible, this is how negotiations work.

I think we must wait and see what shape the discussions take, and refrain from the panic commentary of “We’re Doomed, doomed I tell ye” that has featured in some places  overnight. Governments like to get re-elected. Clinton was right when he said “It’s the economy, stupid”. May is not going to throw herself under a bus, and there will be compromises along the way.

At the same time we know that the EU has its own internal problems, without now taking a trade hit, or suffering any difficulties in accessing market money for EU based businesses. The objective for both sides will be to first do no harm to themselves.

For one’s self respect and anger management, avoiding the press at this time (on both sides of the English channel) is certainly advisable!

What has been the response to discussions behind closed doors?

The idea that discussions have not been happening is fanciful nonsense. Firstly, these informal discussions go on all the time between officials in corridors, opening up lines of contact that are un-minuted and unofficial. The world doesn’t just exist in the formal sphere. Feelers will be out, on both sides. What we see in public is just the show, not the substance.

We don’t know what the intelligence services are saying either, but we do know that the PM will be receiving intelligence reports that have a bearing on the positions of others in the negotiation, (just as they will have on us). Remember that we are dealing with 27 sets of interests, not just one position. The EU talks like a single entity, but it is much more complex than that.

We also don’t know the response of Norway, Switzerland, Lichtenstein or Iceland. Have we made overtures about rejoining EFTA, and have they been accepted or rebuffed? Again, these are positions we know could be, or might have already been explored, but we don’t know the progress of them.

Implementation period:

What does May intend by this? We know that the entire EU Aquis will be incorporated in to UK law, David Davis has told us this already. Does this mean that the implementation period will comprise of a set time, still under the rules and principles laid down in the EEA agreement? It’s not impossible, and if there was a sunset clause here then it would be more palatable politically in the UK.

Some criticism has been made also that we cannot have an implementation period to a destination that we cannot know, because it will be impossible to agree an FTA in two years. I have some sympathy with that view, but it is not impossible to set out the broad scope of objectives within the two years, leaving the implementation period to thrash out the details. Of course this still creates a deadline, but it doesn’t have to be like article 50 by necessity – in that it relies only on our partners for extension.  We already have some templates, such as CETA, which can be built on. This might not be entirely ideal for some, but it does mean that we are not starting entirely from scratch. It should also be noted that we start from a point of regulatory harmony, something that no other FTA negotiation with the EU has experienced.

As for the implementation period, it would need to be subject to (if it were EEA based) some form of arbitration. And this is where the EFTA nations question arises again – would they agree for the UK to join EFTA, or to adopt the EFTA court as a temporary arbiter of this period? Of course, if May has already had some feedback from EFTA, then she would be in a position beyond that which we know. It should be remembered that EFTA membership is not reliant on EEA membership – Switzerland is outside the EEA. We might retain EFTA membership permanently, even after leaving the single market.

Unknown Unknowns:

Many scoffed at Donald Rumsfeld over this term, but it was an important recognition that there are simply possibilities which we may not have even anticipated arising. As commentators from the outside, we are not in a privileged position for information, so we must accept that with some humility.

While we can of course, read and interpret the statements of ministers, the law as it is written, the treaties to which we bind ourselves and of course the historical precedents, we are still outside the process. Our position is one of being fallible, even if our research is entirely accurate. For most of us, our understanding and interpretation of EU and international law was constantly moving even during the campaign, it would be supremely arrogant to believe that we have somehow reached total understanding now.

DON’T PANIC!

The Hitch Hikers’ Guide to the Galaxy has these important words printed in bold letters on the cover. It’s probably the best advice ever issued in the Galaxy. (Along with the bit about Vogon poetry, that was very important advice).

Panic is futile. It won’t change anything, and you’ll probably give yourself an ulcer.

Article 50 hasn’t even been triggered yet, there is a long way to go. If we start panicking now over every statement that is made it’s going to be a very long two years. Also, it won’t help to heal wounds that have opened up in UK political discourse to rush to hyperbole and exaggeration as if wild articles in the Guardian or Twitter warriors really have an influence on those who will undertake the negotiations. LBC’s James O’Brien will tell you every day, for three hours a day if you can last that long, that its all for the consumption of the Daily Mail – Dacre is the real driver of the government. If you listen to him, you’re likely to have a nervous breakdown by 2019. Spare yourselves, I  implore you! Spare the NHS, it’s stretched enough as it is!

What we really know is actually…not very much. And we won’t know that much until we see the negotiations unfold. May is playing poker with her cards face down, that much is sensible at least. But two years is a long time in politics, and there are many events to come, as any historian will attest.

 

Brexit: Political Considerations

bd

On the now defunct Brexit Door blog, I spent the best part of a year developing the arguments for an EEA/EFTA based Brexit solution – what was basically to all intents the first stage of the Flexcit plan by Dr Richard North. There were several reasons for this. Firstly, it was the only game in town for anyone who wanted to see any real research led argument. Secondly, its motivations were the ones I shared, in that it was not motivated by either xenophobia or any intent to pull up the drawbridge between ourselves and the continent.It was based on mainly classical Liberal trading arguments as opposed to protectionism.

Strongest of all the considerations, was that I thought that this would be the single plan to leave the EU that would be able to gain enough support in the campaign to allow those with fears over the impacts of exit some security, while also gaining us the opportunity to create a fully independent Britain over a period of time. We could win, and take a majority of the ‘middle ‘ with us.

In the final weeks of the campaign, we were all much heartened by polling commissioned by the Adam Smith Institute and published in the Telegraph which backed this theory very strongly. However, there is a fly in the ointment.

Brexit in the Courts.

In the last few months we have seen several court actions, and at the same time we have gained an extended understanding of the manner in which the EU treaty works in practice through engagement with those who are or have been involved in the legal process on the EU side (such as Andrew Duff). This means for me, that the shape of the negotiation is somewhat different to that which we had initially believed before the vote.

Much of this stems from the Jolyon Maugham case, which is currently being brought through the Irish courts. He is seeking to show that the article 50 notification is revocable unilaterally by the leaving state, so long as that revocation is in good faith ( and not just a delaying tactic). Of course, this changes the dynamic. Were that case to succeed then there is likely to be a point at which the choice to remain in the EU will appear again, before we have left it.This is a significant factor, because before the referendum we took the opinion from many sources that the choice at the end of the negotiation process would be between any deal we had reached against leaving without one. This was a key component of Flexcit, to avoid that pressure based on the two year guillotine on article 50.

Maugham’s case is, from what I have read and from answers I have received from various sources, correct. Article 50 is revocable, unilaterally, as the Lisbon treaty was written to be read not just alone, but in conjunction with the Vienna Convention on the Law of Treaties (the accepted international authority on treaty law). It is Vienna which provides the framework for notification, and the rules surrounding this notification.

Of course, if this is correct, then Gina Miller’s case should by the same token, fall at the supreme court, because there is no implied repeal of the 1972 act in the simple placing of the notification to leave. Parliament will still have to be consulted on the treaty that will replace our EU membership (and there would have to be some agreements, even if not the depth and scale of an FTA, that would have to go through the process of Parliamentary approval under the 2010 Constitutional Reform and Governance act). At that point, the choice to Remain would still on the table, legally speaking.

Political Impacts of Continuity Remain

It is impossible to argue that the coverage of the court cases and the resignation of Sir Ivan Rogers has not had a political impact. The results of the cases are not yet in, but when they are, and if they return the results I am led to believe that they will, this will almost certainly create a political shift again. Opinions at this point, especially amongst Leavers, seem to be hardening.

Partly this is a change in perception – simply the fact that they won a vote that most expected to lose (including myself if I’m completely honest). This has emboldened views that we must go for the swift and sharp option. But also it is a function of the continuity remain campaign.

Rather than press for a solution that the middle could coalesce around, many Remainers have looked for strategies to derail Brexit. In this, Tim Farron is a prominent voice – their hope is that they can force a second referendum on the deal, while emboldened by Maugham’s case that to reject the negotiated deal now means that we remain, rather than leave to some ‘Hard Brexit’ WTO status. Project fear can be replayed again, and the incentive for the EU to ‘play nice’ would appear reduced.

At the same time, those who are now coming around to the idea of an EEA/EFTA route out, are seeking it as a much more long term arrangement than most leavers would be willing to be subject to. Ian Dunt for example, has proposed to hold out an olive branch to Leavers in the form of co-operation around the EEA/EFTA route. But in his article he tries to convince Remainers that this is the best way to shadow the progress of the EU in legal harmonisation, the aim being that we should have the shortest gap to bridge to rejoin it at a later date.

This makes it very difficult for Leavers who proposed the Flexcit route – because in that plan was the intention to lift power through enhancement of Global governance (via WTO TBT agreement), to the next higher level – UNECE. Clearly, those newly in favour of EEA/EFTA are not looking to that aim at all.

The Civil Service, Parliament and Norway

One consideration that is coming to the fore is that none of the personalities involved in the campaign have really changed. Parliament is still there, as is the Lords. The MPs elected in 2015 were presumed by their own statements to be about 500/150 for remain.

The Civil Service, always supposed to be a neutral tool of the state and therefore the people, is arguably nothing of the sort. Peter Oborne has written extensively and authoritatively on this subject. It has never been a secret that the distinction between the EU and the British Civil Service was a very blurred line, and that the Civil Service (at its highest levels) were not in favour of a referendum. Oborne also writes about the politicisation of the Civil Service, something that has led to suspicion about how the system works, and makes it very difficult for the man on the street to feel confident in it.

And what of our major Parties? The Conservative Party, which should always have naturally been against Supranational government, has always been its biggest cheerleader. Labour after 1987 joined in. If both parties are showing a desire to support the will of the people in effecting Brexit, it is almost certainly regarded by many as no more than a position of convenience. These parties have not been somehow forever changed by the result of the referendum. Arguably with some justification, people fear that eventually they might both return to their old positions, and simply never really get beyond the initial first stage of Brexit – a kind of half out position where we play along tacitly with the ECJ and other institutions.

Norway, our proposed EFTA partner, also suffers from a similar malaise. Its politicians are largely out of step with its electorate when it comes to matters regarding the EU. They would join tomorrow, if they thought they could get it past the people. The referendum has not changed this, and the comments of the Norwegian PM this week about Britain’s lack of negotiating ability have simply not helped matters (even if they had a ring of truth to them). It has made our EFTA partner appear hostile to many leavers, even if that was not the intention.

All of the above, makes it more difficult for Leavers to coalesce around a deal which leaves us close to the EU, such as the EEA. Simply, the trust in our own political system is not there.

Conclusions

The hardening lines I see in the public discourse over Brexit, the conversations with friends and the reports in the media draw me to the belief that the EEA solution is less and less likely to be our route our of the EU, whatever its merits.

Those who have rallied to its cause since the referendum have been largely those who wrote it off as ‘Pay with no say’ or ‘Fax Democracy’. Their volte face inspires little confidence in confirmed Leavers, and their fellow travellers are often holders of some quite extreme positions on Brexit which further salts their ground. While they openly support the idea of ‘rejoining’ at a later date, they surely stand little hope of wider support. Of course, that doesn’t mean that Rejoining is a realistic prospect, even via a prolonged EEA transition. As Dr Richard North points out, it’s a big political leap to reverse the decision after we are actually out. EFTA membership makes it no more easy to rejoin the EU, for it is a political decision, regardless of the logistics. But the floating of this idea hardly promotes a common cause.

The government, while still being that of a Tory party, must already be looking to their next election. The argument for immigration control is playing large in areas where the Tories need to gain ground, but not so much in the areas where they are fairly safe. Labour’s pledge to keep current Freedom of Movement rules hands them an historic opportunity to break Labour in the North. Article 112 emergency brake mechanisms are simply not being discussed in the public arena, because the same people are in charge who effectively rubbished this option in the Referendum campaign, on both sides of the house. Only Cameron and Osborne have been removed. But Fox, Johnson and Davis have been moved in – and we know their position on EEA from the campaign. Only Davis has appeared to soften slightly, in terms of payments to the EU – though any reader of Flexcit will be able to tell you was always going to be part of the settlement and ongoing co-operation. There’s no such thing as a free lunch.

All this leads me to believe that other options will have to be explored first. An FTA will certainly not be part of the Article 50 process in the way that transition to EEA could be – that is a separate issue under the EU Treaty. The EU has made noises to the effect that these issues will not be taken in parallel. So I think it is becoming clearer what the government’s position will be – and it will not be that which I campaigned for.

However, there is still a wide scope for agreement with the EU and continuing constructive co-operation. Brexit, on any terms we negotiate, will still be better than Remaining in an EU which is contrary to our nature, culture and long term interests. There is no ‘WTO’ option as was painted by some in the campaign – the dichotomy between ‘Hard’ and ‘Soft’ Brexit is a false one. There are in fact many shades of grey. Both sides must be seen to get something they want in the upcoming negotiations for the consumption of the public. But that doesn’t mean either side has to lose for the other to gain, and I am still confident that the outcome will be Liberal, good for Britain, and potentially good for the EU.

 

The Remainers Strike Back

john-and-tony

About a week ago, Tony Blair and John Major re entered the fray, with Blair and his associates still claiming that the result of the referendum might be reversed if the situation was seen to have been altered by events.

Of course, while this is not out of the question, it is more an attempt at steering the outcome towards a form of Brexit that can be manipulated to be as close to EU membership as possible by forming a coalition across the centre.

A similar kind of triangulation has this week been attempted by a minister, in that his assistant walked down Downing Street with her notes keenly pointed towards the waiting long lenses of the Paparazzi. Only the very naive will read this as an accidental mishap.

Both are engaged in classic tactical steering. The Government towards the so called ‘Hard Brexit’ in which the we steer away from the  EU in one moment rather than as a process, and the Remainers towards any kind of reversal that looks even possible of the referendum result.

In the end, both sides know that they won’t get everything they want. The EU is in a similar position, in that it wants to dissuade other states from holding referendums it therefore would like the outcome to be unpopular in the UK. At the same time though, its powerhouse economies of the north that are currently propping up the ailing Eurozone are significant exporters to the UK, and disruption in that flow would be pretty disastrous for them as well as us – but with the added extra of the fact that we would probably recover lost ground sooner due to our resulting freedom of agency. This would undo any of the benefit the EU received from administering us a ‘punishment beating’ quite quickly.

Noise

What we are hearing from all sides is Noise – and little more. Some are suggesting that the government doesn’t have a plan, but to be honest that’s just foolish. Of course they do. Just because the Guardian and the Independent think that the there’s a box file marked Brexit in David Davis’ office with the square root of bugger all in it, it doesn’t make it so. At the same time, pretending that the politicians are the ones coming up with the answers is also ridiculous, that will be the civil servants.

It all adds up to the same thing – the outcome is going to be the one where both sides will have been seen to take losses – but both sides will be seen to have made significant gains.

For the EU it will be the message that it kept trade with the UK on its terms and conditions, and that freedom of movement was contingent to it.

For the UK it will be that we have returned to the conditions of free movement that we agreed to in 1992, without sacrificing trade, and shook off the ECJ, CAP, CFP and the customs union. We are free again to make our own trade deals.

So the outcome will almost certainly, and barring accident be: EEA via EFTA (or a shadow EEA that is redrawn to look like an FTA but with all the contingent conditions).

The nuances of these arguments won’t be heard on either side of the channel – our media will see to that, quite possibly through a lack of understanding but more likely because they like to paint in the kind of opinion reinforcing primary colours that their readers find comforting. The mainstream media is largely (though not entirely) an extension of the bubbles it serves, and for the intelligent or independent, a bit of waste of effort.

The Real danger for Brexit

The battle however, won’t be over at that stage. EEA via EFTA is only meant to be a staging post to a better kind of independence for the UK. It will be reliant on events like any other settlement. And this is really what remain hope to exploit over a period of years.

The Spinelli group of MEPs in 2013 published their draft new treaty of the European Union – the Fundamental Law. The point of this was to be the final treaty – a kind of ‘Windows 10’ moment that would relieve the EU states of the necessity to hold referendums and other unnecessary acts of ratification in the future, while completing the basis for the federal structure of the EU.

Simply put, it was always designed to be the final piece of the European Jigsaw. This saw two levels of EU membership. One would be the full version that we know now, with full Eurozone participation. The second would be a form of Associate membership. The conditions for this were left particularly vague in the text, but the intent was clear. Rather than being a freedom from central control, associate membership was a ‘lock in’ which simply removed the opportunity for the remaining members to hold up the progress of the core towards full integration. The problem is that the core would always outweigh the associates, they would set the direction of travel. At the same time, there would be no freedom from the ECJ or the CAP/CFP – all common resources would remain.

The danger of the EEA/EFTA solution is clear. The EEA can be rolled up at any time under one years notice. The EU states can simply leave together if they so desire. They will not do this unless they can offer the Norwegians (and especially the Norwegians) a different option. The political class in Norway have long wanted to become full EU members, it is the population that has reservations. But were the EEA to be rolled up into associate membership in a decade or so, there is a good chance that the Norwegians would choose that rather than face the cliff edge.

So the EU would probably grant some exemptions to get this passed – CAP and CFP no doubt would be up for discussion. Britain might be offered similar exemption  But the reach of the ECJ would not be optional. We would be back where we started.

Removing the EEA before we were ready to move to full independence would leave the UK with a significant issue. We would face a choice that would be portrayed as ‘what we currently have’ against something that makes project fear look like a children’s bedtime story. It would almost certainly be put to a referendum, and quickly, as the timescale would be much shorter than article 50, and we would not be in the driving seat on starting the process of rolling up the EEA. We would have two choices – neither of them palatable.

This is what I think the Remainers tactic will be, to make sure progress halts at the EEA Stage. We know that the people in charge of the government and civil service are Remainers, so while they are in power there will have to be continuing significant pressure on them to ensure further progress.

How realistic this ‘remain’ scenario is, clearly is a question for the reader. I’m not certain it will happen by any means, but I think it is what Remain and the EU would try to engineer if it felt it was feasible. Even after Brexit, Remainers won’t go away. They will wait until an opportunity arises and they will try again to create their vision of a single European State. They are as ideologically wedded to the Single European State as Brexiteers are to national independence, it’s not a passing fancy. The only question in my mind is whether there will be enough of them to make it a reality, or whether they will have the means and the support, and of course whether the EU will be able to stabilise itself enough to reach the next treaty procedure in its current form.

How do we avoid this?

The best route to avoiding this is to make sure that the EEA option is used only as an interim position. That will probably mean mobilising the other EFTA states to move on with a new FTA with the EU that is not seen as a route to membership by either side, but as a permanent Free Trade Deal with no loss of self governance and a very independent dispute resolution system.

I still think that short of being able to agree a full FTA in two years from the Article 50 notification (a near impossibility), the best Brexit for both sides will be the EEA via EFTA solution. It has much of what we want for the short term and the opportunity to have much more in the long term.

But we must not allow remain to hijack it as a permanent solution – because given enough time it could be utilised in a way that returns us to the EU, but in a much less powerful position even than we currently suffer. The EEA solution should therefore come with a pre determined end point, or there may never be sufficient pressure to ever move beyond it, therefore making the remainers the eventual winners in the long game.

The Guardian, Nissan and the WTO

guardian-nissan

 

Aditya Chakrabortty writes this morning on the deal between the May government and Nissan in quite astonishing terms. May has apparently promised to ‘subsidise Nissan’ against the cost of any potential Tariff barriers that will operate after Brexit between the UK and EU.

This amounts to welfare for the corporations, he says. At the same time he writes that the government refuses to say what kind of taxpayers money has been offered to Nissan, proving that in essence he has absolutely no evidence for the assumptions he is making.

But in Guardian land, it is not evidence that is pursued, it is the emotion of the reader channelled against this ‘evil Tory’ government and Brexit. It’s simply bias reinforcement, read the comments section to get a feel for the readership. Why the Guardian is even regarded as a Newspaper I’m not quite sure. Like the Daily Mail, it’s largely a n outlet for partisan outrage.

Chackrabortty hasn’t done his research properly. So here I will attempt to complete that task for him.

If he had bothered to read the WTO Agreement on Subsidies and Countervailing Measures, Chakrabortty would know that his entire article is built on a false premise: That Government can compensate companies or provide state aid in the way he describes to subvert the tariff system. It cannot.

Quite simply, what he infers in his article is absolutely impossible – and as a journalist, he could have done the research (all 5 minutes of it for an educated Google user) that would turn up the Agreement itself, and then read the first page of it, to realise that there was likely to be an issue with his proposition. But when you’re trying to provoke outrage, the facts are not important. Which is exactly what the Guardian and its readership usually accuses the red tops of, twisting facts to suit the story.

The Nissan Deal:

Nobody knows exactly what was discussed between the government and Nissan, but I can at least outline the possibilities here, and the extent of what would be permissible.

Firstly, cash grants and subsidies will not be on offer, and certainly not as compensation for any raised tariffs. At the same time, no tax exemption will be offered either, because that is also classed as illegal state aid (just as it would be inside the EU). There might be some investment in education and training, but of course this can be held to be benefiting an area rather than a company, and might apply to all companies in the nation or area.

The most likely initial offer to Nissan would have been on e of reassurance: An intent to stay within the Single Market if it is possible, but at the very least to retain the regulatory framework for the motor industry that currently exists.

Secondly, there would have been a reassurance over the customs procedures that would be aimed for in the post Brexit environment, in that the current developments on Rules of Origin would be continued and there would be no regulatory divergence. For work done to finished products brought into the UK for the intent of re-export (a starter motor once fitted to a car is still a starter motor), the existing system will apply (Ad Valorem).

What May can also assure Nissan is that her negotiating stance is not going to be a danger to the ‘Just in time’ business model that prevails in motor manufacturing. There isn’t going to be gridlock at the ports, and each shipment isn’t going to be subject to import checks or heavily increased processes. Nothing substantive will change.

Lastly, she could assure Nissan that there would be no difficulty in bringing in skilled workers from the EU. Where there is a necessity for highly trained staff, there will be no additional test for entry and work permits. Free movement of the skilled will simply not be curtailed in any way after Brexit. This was always going to be the case anyway and nobody who campaigned for Leave or Remain could have reasonably thought otherwise.

The UK is good for business

Nissan is in the UK because it offers the right environment for its production base – we have the skilled workforce, the infrastructure, the legal structure and the employment and trade laws that make it a good proposition to remain. That’s not some kind of immoral Thatcherite ‘sweetener’ – it’s just common sense. What Nissan was assuring itself was almost certainly that this would not change that policy is likely to be favourable to retaining the current business environment.

The Guardian should try to return to its roots as a quality newspaper, or it will face the same fate as the Independent.

 

Art 50 Judgement -Why it proves the case for Brexit

Much argument has been made already over the recent delivery of a judgement in the Article 50 case, on whether the judgement is right or wrong, or whether it turns its back on popular democracy.

But for me the most important argument has been missed – that this judgement proves yet again exactly why the case for Brexit was unassailable on purely constitutional and democratic grounds

The judgement shows us that the EU treaty is not like other treaties, even those which convey rights on the UK citizen. Recent legislation sets out the process by which Treaties must be ratified by Parliament, but is silent on the manner by which governments may withdraw from them. This judgement might have been used  to attack the premise of Royal Prerogative in principle as it could have argued that all treaties are enacted by Parliament through a vote. But the legislation on ratification (2010 Constitutional Reform and Governance Act) does not force government to enable treaties through legislation, thereby creating UK Law – the ratification process creates no new legislation for which there must be repeal.

This clearly signals the intent of Parliament NOT to erode the nature of Prerogative by making all all treaties part of the UK legislative body, thereby requiring a Legislative process for repeal.

So why is this so different in the case of the EU? I’m a little at odds with the argument of the court, in that they concentrate so heavily on the issue of ‘Rights’ conveyed by by the 1972 Act rather than the issue of the Act itself. This is I think, because of the nature of the submissions from both sides, which of course raise rights as the issue.

The main thrust has weight though. It looks at the chain of events that must surely follow if the words of Article 50 itself are enacted correctly: That once there is a letter of notice then the process of leaving is started, and that there is no ability for the nation to halt this process entirely of their own volition. This means that there is effective repeal of the parts of the 1972 Act which enable other UK legislation (and the rights conferred therein) without express repeal of those clauses by the UK Parliament. This is why in essence, a Repeal Act for a great many issues will be necessary at the end of the negotiation process.

The point though is clear – Only Parliament may repeal legislation once it has enacted it. It cannot be done by Royal Prerogative. Article 50 Notification puts in chain an irreversible process that ‘In effect’ repeals parts of the 1972 Act, simply because the wording of Article 50 gives no power of the state to withdraw notice.

Why this proves the constitutional case for Brexit

When the Lisbon Treaty was ratified in Parliament, in no way was this issue publicly discussed. While there was note of the new ‘Process for leaving the EU’, there was certainly no discussion of the matter of ‘irrevocable notice’.

Even the government’s lawyers thought that this was a case that they could win. I was quite confident until I read the judgement that even if the government lost at this stage it would win on appeal. It won’t, the judgement might be an imperfect one, but it will stand, and it should. Executive power should be limited.

But this judgement exposes the uncertainty in Law that has rarely existed in British history until our entry into the European Community via the 1972 Act. The implications of changes in EU law is that each change may give rise to domestic effect without the direct participation of Parliament, but with its tacit legislative approval via an act written in a time in which the depth and scale of the European Project was not understood.

Where does this leave the citizen at Law? Largely he must be confused, because he may no longer be certain of the law even as it is written in statute and in previous case law. The Rule of Law is one of the most fundamental principles of the UK Constitution, and forms the part of the bedrock of the rights of the Citizen to parity and fairness before the state. The degree of complexity and conmpeting sources of law now subvert the Rule of Law into being the Rule of Lawyers, in that it is made more difficult for even the legally educated to absolutely certain where one right ends and another begins.

Constitutionally then, the words of Lord Denning at the time have clearly come to pass, in that EU law would flow into domestic law like the tide and differentiation would then become impossible.

In effect, for the Citizen at Law, the EU has already become ‘One Country’ – for he can no longer exercise many of his rights without encountering its legal tentacles.

Complexity

Complexity is the friend of the Lawyer, and the Judge. It gives both power (and makes Lawyers rich). Even in Shakespeare’s time lawyers were looked upon in unfriendly terms as the confounders of the people – as Dick utter the immortal line in Henry the VI when planning his utopian society: “The first thing we do, Let’s kill all the lawyers!”.

Law is necessarily complex, as legislation attempts to cover a multitude of eventualities. But in general terms it is at least certain, in that once it has been interpreted by either conventional use or the courts, then the citizen can rely on this.

But of course, the layer of complexity added by of the system of directives in the EU helps to tip the Rule of Law into being the Rule of Lawyers. If Complexity is the friend for the lawyer, uncertainty is his mistress.

Nowhere is this better illustrated than in our own ‘Human Rights Act’ which is in effect a piece of ‘EU style’ legislation conferring rights on the Citizen. It simply moved ability of the UK courts to do what the ECJ would have done previously.

The confusion that this causes to the law can be seen in the range of cases brought on Human Rights Grounds in the domestic courts. No longer is law certain – where does my right end and yours begin? The courts often then become the arbiter of this. This is a largely alien concept in UK law , and removes certainty.

Political Implications

Even Parliament in writing law has fallen foul of the the EU’s legal powers. The Merchant Shipping Act is perhaps the most famous legal case (leading the the Factortame cases), but is far from a unique one.

Because UK law must be compliant with EU, then arguments arise even after the drafting and passing of UK Legislation as to whether this is in fact the case. This leads to further uncertainty in the law, because even the legislation as enacted might fail to be carried in its intent or letter by the UK courts, if it could be interpreted as non compliant or Parliament’s intent becomes non compliant to future EU Law. Politically then, it shows the power that has been eroded from the legislature of the UK and handed to the EU, in that its will is no longer paramount. If Parliament, as a representative democratic instrument, no longer has this primacy, then we the people no longer have that implied democratic primacy either. It has arguably been one further step removed from us.

Westphalian Principles

This is the principle reason for which I fought the EU Referendum campaign on the Leave side. While I had always been sceptical of the benefits of membership, it was my study of law in the late 1990’s that convinced me that the UK was wholly incompatible with the EU. The principles of UK Law and historical evolution of democracy was at odds with the corpus of the rather more ‘Napoleonic’ EU law. Conflict and uncertainty were inevitable. The further the project moved to completion the more fundamental the clash would become.

The principle that all is permissible except that expressly forbidden by law, ensures to a degree the freedom of the individual from oppressive government. Many EU countries take an opposite view, that only that which is conferred on the citizen is a right.

The Westphalian principle of non interference in the domestic affairs of other states is of paramount importance also. Nation states comprise themselves of people largely of common cause and culture, even if that common cause is adopted by the course of immigration. Democracy is difficult enough to protect even in that purest circumstance, but in a state of 500 million people with no common cause, it is impossible. While there will always be co-operation between states and there will always be international regulation on issues such as trade, the individual should always have certainty in his own domestic law, passed by those who should fear him directly – the elected legislative.

If there was ever any doubt, this judgement proves the validity of the case for Brexit.

Trump v Clinton – How did it come to this?

The US presidential race has been seen as one of the dirtiest in living memory. Neither candidate is liked much by the American public, and Trump is hated almost universally by the UK media and political class.

Let’s be honest, they are both grotesque caricatures of the worst kind. Trump is the worst kind of tycoon, arrogant, cocky, misogynist, and not as successful as he makes out. He’s a braggart. Clinton is corrupt to her core, a machine politician who believes she’s above the law, and under investigation (not for the first time) by the FBI.

But neither should have made it this far, and most especially Hillary Clinton – who failed in 2008 to get the nomination from the Democratic Party when she was the favourite. As other candidates dropped out, not one of them endorsed Clinton in 2008 – every one of them endorsed Obama. And it’s not as if Obama had achieved much up until that point, a product of the Chicago system with plenty of doubts about his credibility.

So why Hillary?

Look at the candidates who stood against Hillary Clinton this time around.Not one of them apart from Bernie Sanders had actually won an election to Congress or Senate. Not one other elected politician of any experience stood against her. There could be multiple reasons for this.

The possibilities are not mutually exclusive either. The first is that I cannot imagine  any Democrat thought that they would be facing Trump. In fact, I suspect that they thought they would be facing either Ted Cruz, or more likely Marco Rubio. That would have been a tougher race to win, even for a good Democratic Candidate with a clean record.

Secondly, they would have to follow Obama, and be responsible for his mess. Specifically that would mean somehow making the Affordable Care Act work in practice, which has proven almost impossible thus far. Syria has also been a disaster partly of America’s making with its foolishly indefensible ‘Red Line’, which has made it look weak. Putin has taken advantage of a weak President, and there’s no easy solution to that.

But I really think the main reason is much more important. For the last eight years, the UK media has been trumpeting the USA’s economic miracle, that the American recovery from 2008 has been much better than that made by the UK (and by Europe, but that doesn’t get mentioned much). The truth about the US economic miracle is that it’s an illusion. It’s just as much an illusion as the UK recovery.

The illusion of Recovery

The Troubled Assets Relief Program bailed out the Financial Sector in 2008, but it didn’t really do anything else but keep the plates spinning. Main Street America was still on the hook for its own borrowings, built up over a generation of encouragement by Fed policy. GDP has been pushed along by the continuance of loose monetary policy, making it appear as if main street has become less indebted in comparison (and it has a little)- but in plain figures personal debt is still very large. Policy has been to try anything to stimulate demand.

The link between share prices and company earnings has been stretched beyond normal bounds, something that is true of the UK market also. This suggests that eventually there will have to be a massive correction. The markets seem disconnected from the real economy. At the same time the USA is still running a nasty trade deficit which is only possible without serious short term risk because the Dollar is the world’s reserve currency and other countries still want to hold dollars.

Every time Janet Yellen previews the idea of raising the cost of borrowing, the market convulses, and from 2008 only a measly 25 points rise has been managed – hardly a return to normality. But it cannot go on forever with ZIRP, there has to be a moment when realistic pricing returns to the market, even if in eight years it hasn’t yet happened.

The Poisoned Chalice

So for all the best of intentions, Obama leaves an economic poisoned chalice. To be fair to Obama, Bush left him the worst possible legacy, but he has done absolutely nothing to address it except kick the can down the road with the help of the Fed. This could point out the reluctance of potential Democrat candidates to run in 2016, and to wait for a better time. But the Republican race was much more competitive, and yet Trump still won.

In the illusion of recovery, the same issues that gave us Clinton from a weak field gave us Trump from a much more competitive one. Middle America knows that the system doesn’t work for it any more, the illusion is not apparent for them. Mired in debt, with little real industrial growth, asset prices still growing, bankers still rich, they are just mad as hell and they weren’t in the mood for any more of the same. Trump was middle America’s revenge on the political class that has failed them with economic policy, social policy, and especially foreign policy, all designed in a detached enclave in Washington which no longer looks or sounds like them (if it ever really did).

The Next Time Around

I see this election as the indicator that the economic wheels are soon going to fall off. The next four years will probably be an absolute nightmare for whoever is in charge. If that’s a Republican they will get a little more slack because they can blame Obama, and Trump can especially claim that as an outsider he was not part of the problem or it’s originating class. (Of course, that’s not entirely true either, but politics often works that way).

Hillary has been part of the establishment for most of her life, if the shit hits the fan there will be no patience for her at all. She cannot pretend somehow to not be part of the problem, there is no distance. The Democrats can still purge themselves in 2020 if they win this time (which still seems likely) and then remove the last of their ‘Dynasties’ as the Republicans have done with the refutation of the Jeb Bush candidature.

A Clinton win will almost certainly put a Republican in the White House in 2020 – a Trump win will almost certainly do the reverse. Clinton won’t be impeached, if she wins her problems will dog her but they won’t be terminal, just as they weren’t for Bill. The office is protected by its nature in American politics. It’s going to be a rotten four years in the hot seat. Resolute better not just apply to the desk! Either candidate will most likely have a terrible time and probably won’t be returned to power.

Unless of course, they can manage the impossible, and keep the economic plates spinning for another four years. I wouldn’t bet on that.

Parliament – the institution that never learns

In voting back disgraced MP Keith Vaz to the Home Affairs Select Committee, Parliament has once again thumbed its collective nose at the British people.

Vaz withdrew from the Chair of the Home Affairs Select Committee after this expose in the staunchly Labour supporting Sunday Mirror. Prostitutes and Drugs were the allegations. Hardly a fitting reputation for a supposed guardian of the legal process.

But in less than two months, his fellow MPs have returned him to the committee, despite an attempt by Andrew Bridgen MP to force a vote – and by 203 -7 his appointment was confirmed.

If this had been Keith Vaz’ sole indiscretion it might have been just within the realms of understanding. But Vaz is an MP who has proven to be both immune to normal standards of shame, and slippery as teflon in avoiding any real loss for his misdemeanors.

A long history of poor judgement.

His first brush with Parliamentary Authority was in the days of Elizabeth Filkin. Filkin was the Parliamentary Standards Commission who proved to be far too good at her job for MPs liking and they briefed against her maliciously before having her ousted as an inconvenience.

The tenacious investigator found that Vaz has received donations from a lawyer which he had not declared. This was only one of 18 complaints against the then Europe minister. Soon he was deep in trouble again, over the Passports for Hinduja affair. Vaz was found to have made representations to the Home Office and soon stepped down for ‘Health Reasons’.

In 2002, Vaz was suspended from the house after three complaints were upheld against him, in addition to an investigation which outside the house involved allegations of perverting the course of justice.

But his poor judgement is allied by a lack of self awareness and a hunger for publicity. A serial bandwaggon jumper described by Patrick Mercer as ‘A Crook of the first Order’ who despite this had Mercer’s respect as a stunning operator.

There are many other issues with Vaz, but I won’t waste too many words continuing, the picture is already clear and a pattern of behaviour established.

Parliament fails yet again

Despite there being an opportunity to stop this appointment by vote, and despite the Labour Party having the ability to put up and support another candidate, Vaz was returned with an overwhelming majority.

Of course this reflects badly on the Labour Party itself, but is wasn’t the Labour party that voted for him – it was the Tories – 159 of them, apparently to preserve the ‘Process’. They have returned Vaz to position which I would suggest he is not fit to hold (and might still be forced to leave as he is still under investigation). Past this, it can be almost guaranteed that the party will return him to his seat until he retires voluntarily in one of the safest constituencies in the nation. Clearly the ‘Process’ is broken.

The reason for this is simple – Parliament has its own code of conduct which no longer bears any resemblance to that of the majority of the voters. We knew this when it ousted Elizabeth Filkin, and when it tried to brush the expenses affair under the table. But it has now completed its own defenestration. It holds no respect in British public life, MPs now reduced to the status level of used car salesmen and estate agents.

Don’t bet on any improvement soon.

 

The Irrelevance of Mark Carney

As the papers are filled with ‘will he, won’t he’ stories over Bank of England chief Mark Carney’s potential future in the job, a moment should be spared to consider the total irrelevance of who occupies his post.

Largely, whoever has occupied the post has done the same thing, because they were educated in the same way. (This is where the Left start raging about Goldman Sachs and the conspiracy of the 1%). They have a point about GS – in that there seems to be a revolving door between the large financial houses and in particular the Federal Reserve in the USA, and to a degree Government on both sides of the Atlantic. That is not helpful, because these institutions are not the real economy – that’s High Street and Factory Britain. But unfortunately the policy of the MPC (Monetary Policy Committee) certainly favours the former over the latter.

But why is that, and why do they have it so wrong?

When the Bank of England was made ‘Independent’, it had an inflation target set at 2%. That meant that every year, it’s aim was to make your savings 2% smaller. Seems an odd thing for the MPC and government to want to achieve? Well not if you’re heavily in debt, and aim to always live beyond your means. But we were already past the point of no return at that stage, because we were living in the era of the Greenspan ‘Put’ – the massive monetisation of US deficit spending of the late 1980’s and 90’s. Deficit spending was the narcotic of the western world. It could bring governments the option to promise anything they liked and hope to deliver it – while the bill came later.

greenspan

Of course, they had a ready client – you the voter. Who votes to have less of anything, or have to pay a higher bill for it? Retail politics is only possible in an age of deficit spending, otherwise someone has to pay, and in that same economic cycle. That was the designed constraint of the Bretton Woods System, where money was ‘solid’ – pegged to a dollar that was redeemable at $35 to the Ounce of Gold. But after August 15th 1971, that was all gone. Nixon closed the Gold Window, money became ‘Fiat’ – in that it was simply a medium of exchange rather than a store of value. This removal of an effective brake on government spending then helped to cause a decade of stagflation in the USA with its effects being felt here in the UK too, where industrial relations set a desperate backdrop for a decade of turmoil. We had already been forced to devalue the Pound due to deficit spending and the balance of payments in the 1960’s – the lie that the ‘Pound in your pocket’ was unchanged was just that – a total lie. It was made smaller, but it kept the plates spinning.

Fast Forward

The Keynsians have been in charge all over the western world almost unbroken since FDR and the ‘new deal’. But this hasn’t led to prosperity, at least not for the majority, though it did take a while for it to reach its ultimate conclusion, which is where we are now.

Economies expand and contract. It’s a very normal process, and a vital one. In a contraction, the market is normally responding to an over supply of one commodity or another (or many). When someone invents a product and a demand for it appears, then new entrants try to ride the new trend until eventually the market is saturated. Then it falls back and finds a sustainable level. The productive capital that is surplus is then channelled into something else, and the process repeats. This is simply the market sending out the correct signals. Keynsians look at the other side of the balance, Demand. They want to keep demand level by adjusting monetary supply, and therefore smooth the economic cycle.

In a recession, prices for goods no longer in demand should fall until they find a market (or the product simply disappears and the capital is reallocated). This kind of deflation is difficult for governments because it raises the value of the currency in your hand – its spending power increases. But of course, the tax take falls too, when denominated in that same currency. (A TV costs £50 less, then the sales tax falls accordingly for example).  This is a nightmare for overspending government, because if the value of the currency rises, then so does the difficulty of carrying and expanding the debt. Taxes would have to rise.

So to remove Deflation, a good thing in a truly free market, they simply raise the money supply to pump demand. This way, the constant devaluation of the currency provides government with two opportunities. Firstly it spends that money first, so it spends it at its full value. By the time the money gets out into the hands of the people, it’s already devalued. Secondly, they can pay back their debts with this devalued paper, which is easier than having to pay it with real ‘money’ (i.e. something that has real intrinsic value). The proof is there – A dollar in 2012 was worth just FOUR CENTS spending power of the dollar in 1913.

shrinkingdollar

So time and time again, government pulls the lever of cheap money (low interest rates) to boost the economy. The first time it works, because debt in the economy is low and therefore the average man can borrow. The second time, the result is less because main street is already a bit leveraged. But the effect of extra money chasing real assets has already boosted asset prices, so the home owner can leverage more currency against his rising asset value and he feels wealthy again. He’s still spending.

The third time, he goes for the credit card maybe, and starts to live a month or two in arrears. But now borrowing from the future is getting harder, and the future is getting closer. He can’t go much further down this route before he defaults. Payday lenders step in for the moments when he gets a bit close to the edge.

And then there’s a shock to the system, and Mr and Mrs indebted of the high street can no longer spend – they can only just afford the repayments they already have. Monetary policy is already just about tapped out now, but government cannot afford for the voter to lose his asset (the home which has risen in paper value only due to the paper being largely worthless). They’ve been tapping that well for a generation now, while real wages have fallen so that they can continue to live beyond their means. But the political imperative is keep the plates spinning.

So off we go to ZIRP – Zero Interest Rate Policy – where the currency price mechanism is eradicated from the market entirely. Now the debtor might be able to pay to maintain his asset (home), but he cannot improve his situation as the currency in his pocket is worth less and less every year. But it’s even worse for the next generation, assetless they have no store of wealth and no way to save as their earnings will never be enough to get any assets to use as hard collateral in the price removed market. They are the lost generation, held hostage by their forebears stupidity and largess.

The 99%

And that’s where we are today folks. The One Percent are doing great, because you keep supplying them with ‘Free’ gambling chips to ramp the financial markets. The Squeezed middle survive while they can pay their existing debts under ZIRP. All this so that ‘government’ can spend more than it taxes and appear to be generous while in fact it is stealing from you (as Kings of old did when they cropped coins).

There is no real cost to money at the front of the economy because it’s all very short term loaning – day trading, 24 hour style cash flow economics. One day an investment bank borrows, the next it cashes in and lends. It’s a cushy little number. It plays the markets with the printed money, and takes the profit. Of course, real investment in plant and machinery is long term and more risky – and the rates for that aren’t linked to the 24 hour carry trade. You my friend, cannot sip at the well for free, for there is real risk, and risk has a price. Capital is continually miss-allocated into assets whose value bear no resemblance to the wider economy, and that capital is locked away from productive use. The real economy, starved of investment, stagnates.

Real investment requires saving. If I make an instrument today, and don’t consume the profit from it immediately, I can store capital and invest it later into new machinery. Therefore I can raise productivity, and the economy is larger. There are more goods available for the same capital input, I just didn’t consume it immediately. Saving is the driver of productivity, and productivity is the driver of real wealth. But when the price mechanism is skewed, and saving is simply done at a loss (inflation runs ahead of savings rates), there is no encouragement to save. And of course, if you’re running to stand still you have no excess to save in the first place. And government wants you to consume NOW – so that it can tax NOW, and keep the plates spinning.

And there you have it, Britain’s GDP has constantly risen because it has printed money, (and imported the labour and goods to utilise it). But productivity is flat and has been for more than a decade, so therefore more of the same will not work. Productivity is the key factor. But with the monetary system as it is, the price mechanism that drives investment and therefore productivity gains is hopelessly distorted, and all monetary policy can do is attempt to drive consumption by the already asset wealthy by increasing their access to more currency.

It’s going to end. And when it does, all hell is going to break loose for a while. And then, it will finally get better for High Street Britain. Removing Mark Carney won’t change a thing. The market will eventually correct itself whomever is in charge, because the Bank of England’s MPC (and the Fed) will simply have no capacity left to keep the plates spinning. Any shock might bring that about, and that’s why Brexit scared the B of E so much.

The facts of life are often said to be ‘Conservative’. It is not true. The Facts of life are Austrian.