Thought you might be interested in the email I have sent Henry Bolton following his appearance on Question time last night, as follows:
First of all, congratulations on a very solid performance on Question Time last night. You have my full support. I am sorry I missed you on 25th November but we were in France. I have set up a monthly standing order in favour of Make Brexit Happen.
In the light of this I hope you will take the following contribution in the constructive and positive manner in which it is intended. I felt you missed a couple of crucial points.
With regard to the Brexit negotiations, the core reason why Theresa May is making such a pig’s ear of them is that she wants a trade deal. It is this that has completely undermined her negotiating position and allowed Michel Barnier to take her to the cleaners. But a trade deal with the EU would be an economic catastrophe for this country in any event.
This is because any balanced deal would increase both imports and exports by roughly the same percentage. So if you start with a deficit, as we have, it will only increase that deficit because everything will go up in proportion. It’s just primary school mathematics, yet nobody seems capable of understanding it least of all our inept Prime Minister.
Our trade deficit is the root cause both of our increasing debt bubble and of the low investment and productivity growth paradigm we have been stuck in for the past thirty years, and which accelerated with the banking crisis ten years ago. We are blindly careering headlong towards another financial crisis, except that this time it will be ordinary people who go bankrupt and not just the banks. And now we also have an industrial strategy white paper which aims to touch the taxpayer for enormous sums for investment which should instead be coming from the City.
A trade deficit is like having a hole in the bottom of our economic barrel. Wealth, jobs and consumer demand are pouring out of it all the time. If nothing were done unemployment would go through the roof. However the Bank of England came up with a cunning wheeze called Quantitative Easing – basically printing more money. This has the effect of reducing interest rates thereby encouraging people to borrow their future income to spend today to plug the hole in the barrel. But as Mervyn King himself pointed out very succinctly in his recent book, The End of Alchemy, this can only be a temporary fix. Sooner or later tomorrow becomes today and everyone has run out of income and cannot borrow any more. Even if they can manage in the short term on existing levels of debt, as soon as interest rates start to rise they will be caught out, just as the rise in oil prices caught out Americans with sub-prime mortgages last time.
Low interest rates also reduce the level of savings. This starves the banks of money to lend for investment, and low investment leads to low productivity growth. Today our average real standard of living is around 25% lower than it was in the late 1980s, which is when unbalanced globalisation kicked in. You can find a graph of this on my website at jepoynton.com/2016/05/08/the-economic-consequensces-of-immigration. Remainians as well as some Brexiteers talk blandly about free trade as though it were some sort of general panacea for all our ills. It is not. Yes there are many studies which show a strong correlation between free trade and economic growth, but what everyone misses is that there is also a strong correlation between that growth and those countries which run trade surpluses. Think of all the countries which have done well since WW2 – Germany, Japan and China for example; all have run massive trade surpluses. In other words the surplus countries get all the benefits, leaving the deficit countries with nothing. Indeed worse than that, there is also a transfer of existing wealth between them. That is why we and the Americans, both of whom run huge trade deficits, have suffered such a catastrophic fall in our standards of living. And to make matters even worse, there has been a big increase in both the pay and regional gaps on both sides of the pond so that wealthy Remainians can afford to close their ears and claim “I’m all right Jack so let’s just carry on indulging our middle-class guilt complexes”.
For all these reasons eliminating our trade deficit must be our primary national economic objective (together with setting up a Sovereign Wealth Fund to hedge our National Debt and which ironically the low interest rates make eminently feasible), yet here we have a Prime Minister busily engaged in doing precisely the opposite. It’s time she was called out. We must balance our trade first before we can afford to increase its volume. Not only that, we cannot afford to forego the £25 billion or so that trading under WTO rules would bring in import tariffs. We would presumably simply put in place a mirror image of the EU tariffs, which would then both reduce our fiscal deficit and reduce our imports by creating import substitution. In other words people would find British products and services better value and that in turn would create thousands of extra jobs; more in fact than those created by extra exports under a trade deal. Exporters obviously want a trade deal and subscribe to Conservative Party coffers accordingly, but they are only looking at one side of the coin. The other side is bigger!
There are only two ways you can manage a trade deficit; devaluation and import tariffs, both of which are only available through Brexit. The markets determine the level of our currency, so that just leaves import tariffs as a direct policy instrument. I know some will accuse me of protectionism for this, but surely balancing our trade is more important. I don’t advocate big unilateral increases in import tariffs as obviously these run the risk of starting trade wars, but a negotiated approach is still an option and failing that a gradual increase aimed at those imports where we can substitute must make sense. Our policy should be to establish a surplus of between zero and 1% of GDP.
As regards the Irish border, I am sure a system of self-declaration by importers backed up by spot checks would be sufficient. We would need ANPR and CCTV cameras at the crossing points so that spot checks could be carried out elsewhere within Northern Ireland and at crossings into mainland Britain, but nothing solid at the border itself. As far as people are concerned we do need full information on who is arriving into the Republic, including bio identification data, so we can look out for them if they don’t leave the Republic when they should or if they show in up Northern Ireland or at a crossings into mainland Britain or beyond. This simply requires a bilateral deal with the Irish government and should not involve the EU at all. I see no reason why the Republic should refuse such a joint project, especially if we contribute to our share of it, but if they do then a hard border is unavoidable. We must make clear that the ball is firmly in their court over this.
Nor do I see why EU citizens should be given preferential treatment within the UK compared to citizens of, say, Outer Mongolia. That surely is exactly the type of discrimination we argue so strongly against. Of course we must expect the EU to treat our citizens (including myself with our house in France!) on the same basis as we do theirs, but an immigration system on a two-tier basis as I set out on my website at jepoynton.com/2017/01/14/balanced-migration would surely be acceptable all round whilst also achieving our objective of balanced migration.
On a completely separate issue I was uncomfortable with the way most of your co-panellists immediately jumped onto the populist race-hatred bandwagon over Donald Trump’s re-tweets of Britain First’s videos, when in fact those videos simply reported factually and without comment Muslim aggression towards whites and disrespect for the catholic faith. Through your co-panellists’ preoccupation with platforming and value signalling they overlooked the facts and ended up contradicting themselves, blaming the messenger rather than the message and in effect condoning the violence! It was an opportunity to call them out for it.
As you rightly said there is a serious debate to be had regarding Islamic imperialism and cultural displacement within the UK. The point must be made that this is not race hatred but a genuine concern arising from high levels of immigration. It’s about numbers not cultural diversity. Multiculturalism is a natural extension of libertarianism which UKIP strongly supports. Live and let live.
If they think Britain First is guilty of hate crime in this instance then prosecute them for it, as they have been in the past. A guilty verdict could then give some basis for rescinding Trump’s invitation, though I personally would still not support it. An acquittal would call them out! That is how we should do justice in this country. As it is Theresa May’s tetchy reaction leaves her looking foolish and diplomatically inept.
Americans do not see or understand the asymmetric imperialist guilt-complex that afflicts so much of the British establishment these days. They take things straight and will see these videos for what they are; no different to the reports we see nightly on the BBC News about atrocities committed by ISIL and the Taliban. So should we. Whilst Donald Trump may be more a perpetrator of fake news than the recipient of it, in this instance at least he appears to have hit the nail on the head. Let us unambiguously applaud him for doing so and welcome him to this country.
I hope you will find the ideas on my website useful – they are almost all on economic policy – and that we can meet up sometime soon to discuss them.
With best wishes,
John Poynton FCA