Has Jeremy Warner seen the light?

I started to think so last weekend as I read his column in the Sunday Telegraph business section. Each week Warner provides a Remainer view while on the same page Liam Halligan gives a Leave perspective. I always read both as I enjoy the challenge of debunking Warner’s arguments, but this week I found him saying some things which are undoubtedly correct.

First he acknowledged that we have a massive and increasing current account (trade) deficit. He also saw that this is being funded, in foreign currency, by massive capital inflows, causing an increase in the value of the pound making it less competitive. He noted the devaluation since the referendum and the consequent small reversal in the deficit, but was inclined to attribute the reduction in the deficit more to the buoyant international economy than to devaluation.  He then observed that many manufacturers had scaled back investment since the referendum, and even acknowledged this may simply due to uncertainty and concluded by admitting to a degree of uncertainty himself. None-the-less, he stuck to his Remainian position!

What he failed to point out of course was that all and more of our current account deficit is entirely and solely due to our trade with the other EU countries, as shown in this graph. Our trade with the Rest of the World is actually in surplus. So why the divergence?

2017 EU,RoW CA

He is probably right to observe that our exchange rate is not hugely over-valued, otherwise why would our trade outside the EU be so successful? Nor can it due to tariffs as there aren’t any within the Single Market. He also failed to point out that under-investment and the consequent ‘productivity gap’ goes back to the banking crisis and the start of QE, rather than just to the referendum.

I covered this point in my recent facebook post in response to an IEA podcast, and concluded that the only possible cause of the EU deficit is that over the past twenty years Brussels has methodically and surreptitiously been piling up a great stack of regulations and other non-tariff barriers against us. Whether this has been by design or by accident I leave you to ponder! Either way it means that we must recover control over our terms of trade if we are to have any chance of reversing the deficit and thereby avoiding a massive recession when people can’t borrow any more. That is only possible through a No-Deal (WTO terms) Brexit. Any sort of deal with the EU will lock us into this disastrous trend. Even so, it will take many years of painstaking work to unravel these non-tariff barriers. In the meantime tariffs on both sides of the Channel will help to reduce the deficit and create jobs as people revert to buying British rather than foreign, and the Treasury will have a further £25bn or so of import tariff revenues to help with the fiscal position. Exports are likely still to thrive as devaluation at around 12% is far greater than the average tariffs we will face. We would also have the money to subsidise any exports facing tariffs in excess of 10% if we wish. See also my facebook page for a description of how the max-fac import system could work – it does not require any software investment by industry at all!

It is the re-starting of QE together with consequent record levels of personal debt which gives the game away. The Treasury don’t want you to know this as they were facing a big problem in financing the trade deficit domestically before the referendum. They were under pressure to increase interest rates and restart savings and growth. It is not just about paying import bills in foreign currency; it is also the fact that if both we and foreigners are buying more foreign stuff instead of British then unemployment will rise.

If it really is the case, which traditionalists will argue, that the capital inflows will convert into job-creating investment by industry then why restart QE? The reality is that most of those inflows are simply going into the property market and inflating other assets.

So the Treasury were delighted when they could blame the referendum for the restart of QE, when in reality it had nothing to do with the referendum and everything to do with financing our EU trade deficit. They could even wave their arms about and point to a reduction in unemployment and record job numbers when in fact all they had done was puff up the economy using QE. But in truth it is a con as such a policy is unsustainable. Who will be around when these chickens come home to roost?

Finally a comment on the position of the other parties. Labour, entirely in keeping with their historic and somewhat tenuous relationship with the science of economics, say, as we do, that they want to protect jobs; and then get the technical argument completely back-to-front! It is the No-Deal Brexit which will create and protect jobs, not any deal with the EU as they favour. Neither should we fall into the arms of Jacob Rees-Mogg, who looks forward to eliminating import tariffs on food, clothing and shoes. This is Jacob’s very own magic money tree! Yes of course we would all like lower import prices, but as everyone then buys more foreign than British unemployment will rise. It is the balance of trade that matters, not the volume or the level of import tariffs.

As with the ERM and the Euro, once again only UKIP gets it right!

The Economic Case for Brexit

Over the past couple of weeks I have been lobbying as many members of the House of Lords as I can with the following email as they debate the EU (Withdrawal) Bill.  This is not an easy task as there are restrictions on bulk emails, but thankfully many members retain their own personal addresses, and there are ways round the central system to some extent anyway. So here is what I have sent.

Dear Lord or Baroness X


I should be grateful if you would spare a few moments of your time checking out the economic case for Brexit which I set out below.  This has scarcely been examined in any detail in public and we face the terrifying prospect of members of both Houses taking momentous decisions about the future of our country without the benefit of a full and proper briefing. There is no need to depend on the type of bland assertions, lazy assumptions, dodgy forecasts and personal opinions with which the establishment has bombarded us. Hard facts and logic are available and compelling.

Do we really want to carry on like this?

I start with a couple of graphs using data I have downloaded from the Office for National Statistics’ website.

180314 EU BoP CA180314 GDP pc growth

The first shows a deterioration in our trade deficit by almost 6% of GDP over the past twenty years, whilst the second shows how average incomes are growing at an ever slower and paltry rate. With widening income and regional gaps it is likely that many people are experiencing a real fall in their standard of living. This coincides with the onset of globalisation and our joining the EU Single Market. The EU been responsible for our trading affairs over this period of time and is thus guilty of monumental failure. That alone should be sufficient to sack them.

The link between trade and economic growth

I am not talking here about the correlation between global growth and free trade, which is well supported by research. A closer look at that research however shows that it is only the surplus countries, like Germany, Japan and China, which benefit, while deficit countries like the UK and US have missed out and declined. There has in fact been a transfer of existing wealth from the deficit countries to the surplus countries as well as growth in the recipient ones.

At national level a deficit is like having a hole in the bottom of our economy. If nothing were done about it unemployment would go through the roof. Fortunately the Bank of England has been able to put its finger in the dyke using Quantitative Easing. This works by reducing interest rates thereby encouraging people to borrow more, save less and use up their existing savings. As Mervyn King put it in his recent book, The End of Alchemy, people are now spending their future earnings today. This, he goes on, cannot continue for long because sooner or later tomorrow becomes today and they cannot borrow any more. They will also have used up existing savings. The low interest rates also have the effect of limiting saving, which starves the banks of money to lend to business for investment in new technology and productivity growth. The productivity gap has been well documented as you know, though curiously the obvious cause ignored. This does lead me to suppose that the establishment is only showing us the side of the coin it wants us to see.

It is therefore imperative that we end QE to increase interest rates by balancing our trade before a new financial crisis hits us and to re-establish savings and growth. There are only two ways this can be achieved; though devaluation and by increasing our import tariffs. We have already had some benefit from devaluation following the referendum, but its size is determined by the markets. That just leaves import tariffs as a direct instrument of government.

Whilst a no-deal Brexit will be a substantial step in the right direction, there is no guarantee it will be enough. We must retain the flexibility after Brexit to set our import tariffs at a level which will balance our trade. This may mean delaying re-joining the WTO. Conversely any attempt to do a trade deal with the EU, or anyone else for that matter, will limit that flexibility, whilst remaining in the Single Market will lock us into the £115bn trade deficit we currently have. We would then be completely stymied and helpless. Please note that the Government’s enthusiasm about the opportunities for doing trade deals around the world is misplaced, at least until we have established a balance. Indeed this is also the principal reason why the Doha round of global trade talks collapsed; the precondition of balance was not met.


We all want to see the creation of more jobs, particularly in the manufacturing sector outside London and the South East, and I am not surprised the Labour Party have recently made this their priority. Their tragedy is that they have got the argument completely back-to-front, by concluding it requires us to remain in the EU customs union and single market when the very reverse is the case.

Even though the above graphs show clearly what a disaster EU membership has been for trade and growth in the UK, the following logic demonstrates it further. We have this massive trade deficit with the EU. That means our imports are greater than our exports. Suppose now we place import tariffs on both sides of the channel, which is what a no-deal Brexit would involve. The result will obviously be a reduction in the volume of trade. Assuming the tariffs are at the same percentage level on both sides, the reduction in percentage trade volumes will be similar. But that means that the absolute reduction in imports will be greater than the absolute reduction in exports since we start with a deficit. This in turn means that the number of new jobs created from import substitution will be greater than the number lost to export substitution, ie a net increase. In short it is the balance of trade that matters, not the volume.

Inward Investment

One of the more amusing spectacles in recent weeks has been that of the Japanese ambassador claiming that Brexit would discourage investment into this country. Now that really is trying to have your cake and eat it! UK manufacturers have already had a competitive boost of about 12% from devaluation, so the 10% cost of EU vehicle import tariffs will still leave them better off. The two go together.

There has also been much talk about supply chains. These will chop and change as a matter of course anyway, but any disruption could be minimised by not charging tariffs on components and spare parts. This would have the added advantage of encouraging all vehicle manufacturers to do their final assembly here in the UK.

The Brexit Fiscal Dividend

Much has already been written about the savings from EU budget payments and I don’t propose to go over old ground here. I trust it is fair to say that a net saving of £10bn a year is not controversial. It is other savings that have been overlooked.

First there is the matter of import tariff revenues on imports from outside the EU. These amount to about 60% of all imports of some £625bn a year, on which the EU customs union currently collects just over 4% as import tariffs, ie about £15bn. We pay 80% of these, £12bn, over to Brussels. Clearly after Brexit we will continue to collect this money. Nor will it cause any inflation to do so as it is already in force. All that will change is that we will keep the £12bn for ourselves! Funny how nobody ever mentions that. So that now gives a total dividend of £22bn.

But that is not all. We will of course also start to collect tariffs on our imports from the EU, another £10bn, total now £32bn. There will be some price increases from this, but spread over the whole economy they will contribute only about half a percent to inflation on a once off basis. Big deal.

There is more. A few months ago the Bruges Group produced a paper calculating savings from welfare and pension payments to immigrants and non-residents in the order of £35bn. You can find it at http://www.brugesgroup.com/blog/brexit-the-end-to-austerity.  I have not been able to verify these figures myself, so to be safe let’s just accrue half, £18bn. That gives a total annual Brexit dividend of £50bn a year, FIVE TIMES the number that was bandied about during the referendum campaign.

How could any government in its right mind even think of throwing this sort of money away for nothing? Yet that is precisely what the Remainian camp are proposing to do. We need that money.

The Economic and Political cycles

Do not be lulled by the latest indications of a fiscal surplus. This is just a cyclical anomaly caused by the combination of loose monetary policy and tight fiscal policy. Neither is sustainable, the former economically as I have explained above, and the latter politically. Before long politically irresistible calls for tax cuts from the Right and/or expenditure increases from the Left will destroy the balance just as the former did in the late 1980s resulting in the boom and bust. Let us not repeat the same mistake.

Brexit offers us a way out by enabling us to tighten monetary policy to increase interest rates as the trade deficit is reduced, at the same time as loosening fiscal policy using the Brexit dividend to assuage political pressures, thereby keeping the two in balance. Carpe diem.

Your support

The European Union (Withdrawal) Bill after completing the House of Commons is now progressing through the House of Lords. Your support for this will be greatly appreciated by millions of voters including myself. Whilst most voters will not understand the economic technicalities I have described above, they most certainly feel the results, and they are angry. The problem is exacerbated by the widening income and regional gaps so that Remainers on their massive metropolitan salaries are insulated from the consequences and do not feel them. This is not some right-wing xenophobic populist aberration; this is genuine democracy in action and a recipe for conflict if ignored and which will only increase without a no-deal Brexit.

I ask you to conclude the European Union (Withdrawal) Bill’s passage through the House of Lords without opposing it or seeking to water down Brexit. And above all else without stipulating that there should be a further and thoroughly unnecessary second referendum. Nor should there be an opportunity for the decision to leave to be overturned. As a democrat I earnestly hope that in accordance with the referendum, the general election, and the EU (Notification of Withdrawal) Act, you will also approve the European Union (Withdrawal) Bill.

Please keep faith with the electorate and help restore our economy.

Yours sincerely,
John Poynton FCA
16th March 2018

An Epistle to the Germans

One of the papers I get a regular email summary from is Handelsblatt Global. Last Friday, 26th January 2018, they did a piece on Germans’ attitude to money. I reproduce it at the bottom. I decided to reply to the editor, Andreas Kluth, as follows.

Dear Sir,

Thank you for this opportunity to provide some feedback. I had not noticed it before. I am a Kipper (member of UKIP) and retired Chartered Accountant, and was fascinated by your article about Germans’ attitude to money. I had some experience of doing business in Germany in the early 90’s (your tax system is far more logical than ours, and I enjoyed the opportunity to write off goodwill against tax!) but recall the difficulties of paying bills by credit card. Now I know why!

I am concerned that there is so little understanding of Brexit on the continent. UKIP (and the AfD) are routinely and lazily dismissed as racist and right-wing, whereas in fact we are nothing of the sort. I was fascinated recently by a television documentary here from Freital. When people feel insecure, threatened, ignored and shat upon from on high they get angry, and when they get angry they get confrontational and even violent and abusive. It’s regrettable but it’s the only way they can get attention, and it’s perfectly normal human behaviour. No amount of sanctimonious lecturing is going to change that. The only solution is to address the underlying problems, and that means listening to the message rather than shooting the messenger. I am assuming of course that democracy prevails. You can suppress the few, but you cannot suppress the many. Even Machiavelli understood that.

People look to their own kind for support (hence all the flag waving and putting their country first – all of which I don’t personally chime with) and I see exactly the same thing in my prospective constituency of Southall in West London where there is a majority black and Asian community. We have the largest Sikh community outside India, yet we also have many other ethnic groups as well. The interesting thing is that they all self-segregate into their own streets and around their own places of worship. They feel safer that way and I don’t blame them or have a problem with it, yet when the indigenous community does exactly the same thing they are called racist! There is surely a difference between diversity (good) and cultural displacement (bad)? Many immigrants are in fact white. The immigration debate is about numbers, not race.

I can tell you that my Asian constituents understand Brexit perfectly. It’s the white metropolitan lefties who are the problem. We had a 40% vote in favour of Leave in the referendum (London generally voted to remain). The housing crisis, deteriorating public services and environmental pollution are all major concerns. On average Britons today are 25% worse off than they were 30 years ago (download the numbers for GDP, population and prices and you can see for yourself), and the effect is magnified by widening pay and regional employment gaps partly caused by wage compression from immigration. The metropolitan elite have managed to insulate themselves financially in this way, which probably explains their arrogance and their ignorance.

As I am sure you know, historically the term right-wing derives from the National Assembly in France during the French Revolution when the bourgeoisie, who were better off and better educated, sat to the right of the speaker. Not only were they richer but they also believed in a restricted franchise. Fascism also has its roots in belief in rule by the elite. If anything therefore it is Remainers who are right-wing in Britain, not Brexiteers.

I don’t know how hot you are on English history, but I see this political divide today as similar to that between Catholics and Protestants in the 16th and 17th centuries. Nigel Farage is Martin Luther (ok, he was German!) with his protestations against the indulgences of the Catholic Church (the EU). David Cameron was Mary, Queen of Scots, whose fateful letter to Anthony Babington (Nick Clegg) led to her execution (the referendum result). The Spanish Armada (Article 50) continues to advance. Let’s hope David Davis (Sir Francis Drake) has enough balls (non-canon variety) to win the Battle of Gravelines, though the weather (Theresa May) is decidedly changeable!  In fact it took another hundred years until the accession of William of Orange and the Glorious Revolution of 1689 for the matter finally to be settled.  Since then of course we have enjoyed great success with our German monarchy (many thanks – a big improvement on the Normans).  UKIP may be suffering an attack of hiccups at the moment, but if Theresa May screws up Brexit, which is now looking very likely, I can but quote Arnold Schwarzenegger in The Terminator – “We’ll be back”!

UKIP is still seen as a single issue party, despite two very comprehensive manifestos for the last two general elections in 2015 and 2017.  We stand as a centre radical libertarian alternative to the failed ideologies of socialism and conservatism (big brothers and dead sheep) who are only interested in keeping each other out. Our national political and economic situation reminds me of that of the victim in Edgar Allan Poe’s novel The Pendulum. In it the victim is strapped onto a table and cannot move. Just above him a huge pendulum is swinging from side to side with a huge knife on its underside. Tick, tock, Left, Right it goes on and, with every tick and every tock it descends another notch. Our fate is predictable if we cannot escape our bonds (the EU) and smash the pendulum (proportional representation). Why, for example, do we have to take our essential services from hopelessly inefficient public sector monopolies? Why should we not have the option to purchase them from the private sector on a means-tested basis, perhaps by using a national credit card managed through the tax system? Why do we have to send our children to single-stream comprehensive schools when it is perfectly obvious that many children, particularly those from poorer groups, are struggling to keep up and it is clear they need preferential support and perhaps a more focused curriculum? And why cannot we have a cash alternative to housing benefit when the public sector cannot supply sufficient social housing? It’s all about freedom of choice. I could go on.

However it is trade and the economy that worry me most. Over the past 30 years, since the onset of globalisation and the transfer of responsibility for our trading affairs to the EU, we have built up a massive trade deficit amounting to around 5% of GDP. The EU deserves the sack for that alone!  A trade deficit is like having a hole in the bottom of our economy, and is the single most obvious reason for the decline in our standard of living. Jobs, wealth and consumer demand are pouring out of it all the time, and if nothing were done about it unemployment would go through the roof.

Fortunately the Bank of England came up with a cunning wheeze called Quantitative Easing. This works by reducing interest rates thereby persuading people to borrow their future income to spend today.  Unfortunately it also has the effect both of building up a personal debt mountain (all bubbles burst eventually) and of reducing savings, thereby starving the banks of money to lend to business for investment and productivity growth. And the media wonder why we have a productivity gap?!

As Mervyn King (Governor of the Bank of England between 2003 and 2013) points out in his recent book, QE can only be a temporary fix. Sooner or later tomorrow becomes today and everyone has already spent all their income and cannot borrow any more. Thus the only permanent solution is to eliminate our trade deficit. If we fail to do that interest rates will remain on the floor and not only will our standard of living continue to decline but people will remain unable to save for their retirement and we will have an even greater financial crisis when the debt bubble bursts.

Any attempt to do a trade deal with the EU as part of the Article 50 negotiations will have the effect of locking us into our £70bn trade deficit, as well as denying us some £25bn or so of import tariff revenues. There are only two ways a country to manage its trade balance – devaluation and import tariffs – both of which are only available through Brexit.  It is surely imperative for us to maintain sufficient flexibility to increase our import tariffs to a level that will balance our trade, but nobody seems to have spotted this. Theresa May is clearly out of her depth and doesn’t understand the economics of it, and gets poor advice from a civil service that is no longer fit for purpose, possibly due to having been subject to years of subservience to Brussels and decades of politically-correct social engineering as well as being institutionally biased in favour of Remain. A future UKIP government would have no hesitation in tearing up anything she has signed.

There was never any need to enter into the Article 50 negotiations at all. I am not surprised that M. Barnier cannot decipher what we want from them. The real answer is nothing!  Non-tariff barriers can be overcome by the use of online predeclarations and ANPR cameras, and trackers fitted to lorries would remove the need for inspections at borders; a simple bilateral treaty with Ireland to run joint external border controls would remove the need for a hard internal border; and a two-tier immigration system (balanced migration for citizenship on a first-come first served basis following fifteen years of self-sufficient residency under a points system set to keep the citizenship queue to a reasonable length) would surely preclude the need for special arrangements for EU citizens, which we see as discriminatory anyway. Even the City is now relaxed about banking passports. What is there to negotiate? If you do not throw stones at us we will not throw them at you. Never cast the first stone. Isn’t that all we need to agree?

I shall never understand the continental fixation with free movement of people; presumably some sort of hangover from the war?  My view is that removing borders between countries is a bit like removing the bulkheads from within an ocean-going oil tanker. It just creates instability.  Balanced trade and balanced migration must surely be a precondition for peace and prosperity.  Just as the human body is composed of cells, the family composed of individuals and the nation state is composed of families, so the global community is composed of nation states. If the cell structure breaks down the result is cancer and death. If democracy is extinguished in one part of the world it can continue to shine like a beacon elsewhere. That is why I am a strong nationalist, as well as a strong believer in the benefits of competition both economically and culturally (ok, we might let you win a football match sometime!)

Also I shall never forgive our Treasury mandarins for failing to advise George Osborne  to start a Sovereign Wealth Fund when interest rates first hit the floor nearly ten years ago (I accept he would never have thought of it for himself). We now have a national debt approaching £2trn plus another £4trn or so of unfunded pension liabilities which will hit us later this century. If taxpayers can’t even fund our fiscal deficit now they will have no chance of producing surpluses of this order later. Yet the solution is staring us in the face. Any decent fund manager will get returns of between 7 and 10% on average long term from global equities, yet government 30 year money costs less than 3% simple interest at present. Even just a 5% return compounded would quadruple our money over 30 years – enough to repay the loans and all the interest on them and leave a substantial unencumbered fund thereafter. They can’t even be proper Anglo-Saxons when we want them to be! Where are the non-conformists? Where are the original thinkers? Where are the problem-solvers? Our establishment today represents the lowest common denominator from our paranoid quest for equality. UKIP stands fore-square against all forms of discrimination, including positive discrimination, but with the single exception of ability-ism. I don’t mind where they come from, and it is great to see so many women and people of colour becoming prominent and successful, but we must always chose the best.

I think Germans are very fortunate to have a distaste for debt. It has kept your trade in surplus and your economy stable. Even so your psychology is not in fact that different to ours.  You may suffer from post-traumatic stress disorder (PTSD) on account of your recent history, but our barmy establishment suffers one from our imperialistic past too, which is hardly taught in schools any more. I enjoy reminding them that the British Empire was the first Single Market!  You cannot judge the past by today’s values. The glorious irony is that history programmes on the telly have never been more popular, even those going back to Roman and Norman times.

Don’t be put off by our programmes on WW2, which I see your retiring Ambassador to London is so exercised about. It’s nothing personal. We are saddened by your apparent desire to lose your national identity in Europe, which we think distorts your assessment of the EU. As a nation you have much to be proud of. Let us all remember the teaching of the Bible which exhorts us to “visit not on the sons the sins of the fathers” (to which I always like to add “and neither credit to the sons the claims of the fathers”!). I am quite sure few Brits today blame Germans today for WW2, and as generational renewal, which has always been the ultimate cure for accumulated traumas, proceeds those with direct family memories will die out. Life goes on. It’s just history, from which we learn about human psychology generally.

Well, I hope you liked my little bit of feedback,

With very best wishes,

John Poynton


Dear Reader,
Germans are different, and it often matters. Take, for example, a subject of more than passing interest: money. At a rudimentary level, Germans have the same attitude toward money as English-speaking people and others do: They like it, and they’d like more of it. But beyond that, Germans think about money in a way that is, to put it charitably, idiosyncratic.

For starters, compare attitudes about borrowing. Anglo-Saxons see no problem with that. They borrow money, then spend it on college tuition, get a better job and eventually make even more money. Or they just have fun. At some point, the bank might call. But, you know, who cares? Germans are aghast at such flippancy. Phonetically, etymologically, and psychologically, they understand that Schulden (debt) = Schuld (guilt). Borrow, and thou shalt die. Thy death will be slow and painful.

The differences are just as stark on the savings side. Anglo-Saxons, if they have money left over, will put it where they have been told it will grow. So they buy shares, either directly or through mutual funds. The stock market sometimes nosedives, as in 2008. But they are sure that in the long run they will win. They also buy houses, because they can live in them, and they don’t like paying rent. To buy the houses, they borrow (see previous paragraph). Some are unlucky and get foreclosed on. But most pay off their mortgages, then retire with their house and their shares and feel wealthy.

Germans look askance at shares, and many never buy their own houses (probably because that would mean borrowing). Don’t those Brits and Americans understand that shares are risky, and that risk is, well, dangerous? Germans instead practice safe saving. They put their money into savings accounts at local Sparkassen, which are municipally-owned thrift institutions. The interest paid is not visible even with a magnifying glass, and the money often shrinks when counted after taxes and inflation.

Germans also buy life-insurance policies of a type that Anglo-Saxons don’t really have. These are so-called “capital-life” policies. Like term-life policies, they pay money to loved ones if the policyholder dies. But these German policies are really savings accounts or pension plans, in that they accumulate capital until retirement and then pay an annuity even when the policyholder doesn’t die.

Some of that return is guaranteed by the insurer. But some is discretionary and thus at risk. These subtleties are in the fine print, which even Germans don’t read. Almost all Germans have placed their trust in such insurance: There are actually more capital-life policies than people living in the country.

Jeremy Gray, one of our finance editors, explains this German life-insurance culture and its consequences, which are dramatic. For many years, the life insurers promised policyholders high returns, and Germans based their retirement expectations on those promises. Then interest rates fell almost to zero, and the insurers could not invest the premiums to honor their promises and still make a profit. So now the insurers are in trouble, because their old policies have become time bombs. Many are unloading them to bargain hunters, rather as troubled lenders set up “bad banks.” Some German life insurers are no longer financially sound. A new financial crisis is conceivable.

And the policyholders? Many are suddenly realizing that their policy won’t pay out anything near the amount they had factored into their retirement planning. Some panic, and surrender their old policies, which is often a bad idea. Many fear poverty in their old age.

Just knowing a bit about these different money cultures helps to understand a lot of European politics today. Many Germans consider it self-evident that low interest rates, and by implication the European Central Bank, are the root of all evil. Anglo-Saxons, meanwhile, are watching their stock portfolios and house prices go up, and are looking for a central banker to hug.

Until the next market crash. Last time, it came from America and, tellingly, had to do with houses and shares, among other things. Next time, could it start in Germany and those staid insurance firms?

Helpful advice for Henry following Question Time on 3oth November

Thought you might be interested in the email I have sent Henry Bolton following his appearance on Question time last night, as follows:

Dear Henry,

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

UKIP PPC for Ealing Southall 2015 an 2017 (in which I retained 29% of my 2015 vote!), and UKIP Ealing Branch Secretary.


General Election 2017

Delighted to have been reselected to fight the Ealing Southall constituency for UKIP, and have already received warm greetings on many a doorstep. You can download here both my election leaflet and postal election address. The former was really designed in anticipation of the 2018 local elections and was just about to go for printing when the election was announced, so I just added a banner at the top. The latter only gives me a few words to add to a central office designed template, but I hope I have got the essence of the situation across.

Here though is a much fuller Election Address. In addition there is a shorter hustings address thereafter.

“I should like to talk about two issues this evening. First there is the absolute Horlicks of a start Theresa May has made to her Brexit negotiations. At this rate she will end up with a bummer of a deal with the EU, claim it is the best thing since sliced bread, and then ram it through Parliament on the back of her temporary blip majority. We could then be stuck with it, which would be an absolute betrayal of all those who voted to LEAVE in the referendum. So what can we do about it, if anything?

Second I want to talk about funding so we can end austerity and at the same time resuscitate our public services to the standard we all want and expect. I will show you how UKIP, using our libertarian principles, could raise £150 billion pounds of new money without frightening the horses.

But first of all, why am I here at all? Why is UKIP still here? After all we won the referendum so surely that is job done for UKIP and we can now all quietly retire?

Unfortunately it is much more complicated than that. As I have already mentioned, Brexit in an acceptable form is still far from certain. For us this election is about votes, not seats. Last time we chalked up over 4 million votes and that made an impact. If we can do better this time, which will be a tall order as we are standing down in a number of seats for strategic reasons, putting country before party, we can make an even bigger impact. UKIP is the only pro-Brexit party that can mount a constructive Opposition. The others will of course mount destructive ones, but that is not what we want. So your vote for UKIP will count. A vote for any other candidate in this safe seat will not make a jot of difference. It will be a wasted vote.

So what about Theresa May? One of the biggest differences between the Tory version of Brexit and UKIP’s relates to trade. The Tory’s want a trade deal with the EU whereas we have always said we do not. There are three good reasons for this. First, if you plonk a trade deal on top of an existing deficit, you are only going to increase that deficit. That’s just simple mathematics. If imports and exports both rise by roughly the same percentage, which is after all the object of the exercise, then the deficit will rise by the same percentage. What on earth is the point of doing that? It will only increase unemployment.

Second, it is critical we eliminate our deficit if we want to avoid a new financial crisis. At present we depend on Quantitative Easing to make good the loss of consumer demand from the deficit. However QE not only undermines our ability to save, it also cannot carry on for much longer. QE works by reducing interest rates, thereby encouraging people to borrow their future earnings to spend today. But inevitably tomorrow will soon become today and, oh dear; we have already spent our income. Not only that, we still have a hole in our economic barrel and we now have to start repaying the money we borrowed yesterday. It just won’t add up. The only way we can avoid Armageddon is to eliminate the deficit, and the only way of doing that is by devaluation and import tariffs, policies which are only available from a no-deal Brexit.

Third, if we leave without a trade deal then of course we will put in place an import tariff regime of our own; probably a mirror image of the one we are leaving, the EU one. I don’t know why nobody ever talks about this – it’s weird! Maybe it is because I am an accountant that I pick up on it, but if we did that it would be worth an extra £25bn a year to the Treasury. That’s huge. Yet by pursuing a trade deal, egged on by all those free trade fanatics baying in the background, she is proposing to throw that money away for nothing. How crazy is that? Surely no one in their right minds would do that? But no, that is the way she is going. At this rate she is set to drop us all in the biggest pile of poo ever produced by Woman.

Disastrously Theresa May started her negotiations by declaring openly that she wanted a trade deal. Michel Barnier must have smacked his lips with glee.  “She wants something, so let’s make her pay!” he will have said to himself. And so he did, slamming on a €100bn ransom demand. That’s a ludicrous sum of money and he knows it, but probably thought of it as a negotiating anchor to be given back in stages for other goodies along the way. Unfortunately he is instead stuck with it because the other 27 countries have smelt the money and they are not now going to give it up. Barnier is a professional negotiator, whereas Theresa May clearly hasn’t a clue what she is doing. It’s no good being ‘tough and difficult’ if you don’t know what you are doing. That just makes her ‘stubborn and stupid’.  We MUST divert her from this course, and that’s why a big vote for UKIP nationally is so important. I am even coming round to the LibDems idea of a second referendum. Not on membership but on the “Deal or No Deal” decision. We have trusted the people once, we can do so again. It may be the only way we can pull the plug on a disastrous deal.

OK. Let’s move on to funding. If we are to end austerity we have to find £70bn just to do that. Then to rebuild our public services we would need at least another £30bn, making a total of £100bn, or more safely let’s say £80bn, ie a total of £150bn. Is that possible? Well, consider this.

As I have just noted, the immediate fiscal benefit of leaving the EU is not just the £10bn saving on budget payments but also the import tariff revenues, giving a total benefit of £35bn. That’s about 2% of GDP. A lot of money and far more than any of the other parties can produce, but unfortunately not as much as the deficit. So what’s next?

Corporation Tax on multinationals. You may remember that at the Enniskillen G8 Summit a few years ago it was agreed that multinationals should declare their global profits. This would enable us to tax them on those profits so they could not squirrel them away in tax havens. The WTO was supposed to be working on a system whereby they would centrally assess the taxable profit of these multinationals and then apportion them to each nation in proportion to turnover so that those countries could then apply their own tax rates to them. It’s all gone a bit quiet, but if the WTO does deliver this system it could be worth about another £15bn of tax to the UK. Even if they don’t we can still do it unilaterally. There may be a few double tax issues, but we can just direct those to the WTO! So let’s add it on, total £50bn so far.

Now let’s get philosophical. UKIP is a libertarian party. Freedom of Conscience, Freedom of Expression, Freedom of Choice and Freedom for Britain are the four founding principles upon which the party is built. In this context that means giving people the opportunity to buy their ‘public’ services from the private sector if they want to on a means-tested basis rather than from the public sector. Roughly £400bn is spent on such services, ie health, education, care for the elderly and so on, so if about a quarter of people chose to do this, and on average contributed about a quarter of the cost as their means-tested payments, that would save a further £25bn. So now we are up to £75bn and ahead of the deficit!

I think it quite likely a significant number of people would do this, depending on the exact means-test gradient which we can alter as need be. After all private sector services are likely to be much more efficient, much more accessible and be provided to a much higher standard. That is because they are in an open competitive market, whereas the public sector is a monopoly and all monopolies profiteer. What is austerity after all but a form of profiteering? People will be prepared to pay for that.

Furthermore we could end the privilege tag that burdens our independent schools by simply means-testing their fees. That way any parent no matter how poor could consider an independent school education for their child. Our independent schools are among the best in the world, so much so that now around 25% of their pupils come from overseas, which is a huge export earner. But isn’t it a tragedy that more British children cannot benefit from them. Labour’s vindictive, pernicious and envious attacks on them have backfired making them even more privileged than before. It’s time we cherished and championed our independent schools and removed these burdens in return for a means-tested fee regime.

UKIP also supports grammar schools and free schools, and rightly so if that’s what parents want. Let us never forget that in a free society parents are ultimately responsible for their children, not the state. The state is there to support parents, not to replace them. However we also have a major problem in educating our least able and least focused children. These children need much more attention, smaller class sizes, better trained teachers, more pastoral care etc. etc. which all costs money. We should therefore be aiming to allocate more money per child to these children than to the brighter ones else we will be generating an underclass to the detriment of us all. Streaming allows you to charge means-tested fees for the faster streams and use that money for the slower ones without undermining social mobility.

What’s next? Privatising infrastructure projects, that’s what. HS2, Crossrail, power stations, bridges, tunnels etc are all costing the taxpayer a fortune. Furthermore many of them are probably uneconomic thereby undermining our economic growth rate rather than adding to it. You will never get an objective viability assessment from politicians or civil servants; there are too many hidden agendas in the background, whereas someone who is putting their own money in a competitive bid will surely do so. The long term or monopoly ones can be protected by cap and collar profit regulation to the benefit of both investor and taxpayer. So let’s put these projects up for auction, after the spec has been approved by Parliament, and award them to the higher bidder to build, run and own them. Let the City pay for them if they are viable, and if they are not: don’t do them! It’s a bit finger in the air, but I think we are reasonably safe putting in £25bn a year for this, giving a total now of £100bn.

Resource Management in our public services is next. There isn’t any. I know we all complain about the number of middle managers in the NHS and so on, but there is nothing at the top. For example if you look at the board of NHS England (yes I know it is a separate quango employing about 4000 staff, but it’s the nearest thing the NHS can manage) it is full of medics and civil servants. There is no Human Resources director, no Finance director, no IT director, no Facilities director and so on. In fact there are none of the resource focused directorships that you would see on the board of a private sector conglomerate. No wonder we are not training sufficient doctors and nurses and have to import so many from overseas. No wonder staff turnover rates are so high. What we need is the technique Arnold Weinstock perfected at GEC during the 60s, 70s and 80s. It’s not top-down management. In fact is localism management. I call it ‘Comparative Management by Results’. If we could just get a 5% improvement in efficiency on the £400bn we spend that would be worth another £20bn.

And finally – a Sovereign Wealth Fund. Now I don’t wish to speak ill of the politically dead, but surely George Osborne must count as one of the deadest of dead sheep ever to have inhabited the Treasury (if that isn’t a contradiction in terms!). I always got the impression he wasn’t even interested in his subject. I know Gordon Brown was a disaster, but at least he tried and came up with initiatives. Whereas as Osborne missed an absolute sitter right under his nose; using the fact that interest rates were on the floor to set up a Sovereign Wealth Fund to hedge our National Debt and un-funded pension liabilities, as well as in the long term to fund our public services out of investment income rather than taxes. Work though the figures and you will see it is money for old rope! Furthermore we can to some extent discount the future revenue stream to fund a current ongoing deficit. I am going to put in £30bn for that, and there’s my £150bn! I rest my case. Thank you very much.”

And now for the hustings address:

“Good evening L&G, and first may I say how pleased I am to be here at last. In 2015 I had to miss this hustings due to a prior engagement, so I hope you didn’t think I was avoiding you! Far from it, because may I also say how much I have enjoyed canvassing around Southall. You have been friendly, open-minded, curious, receptive and engaging, and that surely is all we candidates can ask of you. So thank you also for that.

Now I don’t want to spend the whole evening banging on about Brexit, but if you are interested in the technical arguments, about trade in particular, you can find them in my full Election Address, which is on our branch website at ukipealing.com. It is also on the Democracy Club website and on my own website at jepoynton.com.

I thought however it would be interesting just to reflect for a moment on the sudden fall in the expected Tory majority, and why that has happened. Some say it is because of Theresa May’s U-turns on social care and winter fuel payments, but I doubt it. They only affected the rich, and Labour are all in favour of taxing the rich, so where’s the difference?

No, I think it is because the British public have sensed she has already made a complete car-crash of these Brexit negotiations. By demanding a trade deal with the EU, up front, she has played straight into Michel Barnier’s hands. He has responded by demanding an enormous ransom of €100 billion – an impossible sum. She didn’t have to do that, and is now trying to wriggle out of it by saying that no deal is better than a bad deal. But we could have had a deal on non-trade issues anyway, because the EU wanted to deal with those first, and that would have suited us just fine because we could then simply have left at half-time. Now not even that option is available.

The odd thing though is that people have rushed to the opposite extreme, like lemmings over a cliff, straight into the lap of Labour. Do people really think Jeremy Corbyn could do better? Honestly, this is a man who cannot even add up, let alone negotiate. It would be a case of out the frying pan and into the fire. UKIP invented Brexit, we fought for it, we secured the referendum, we understand it. It’s our baby. So please, I beg of you, for everyone’s sake, let us deliver it.

But enough of Brexit already! What I really want to concentrate on this evening is “Beyond Brexit”. UKIP is a Libertarian party. Indeed so far as I can see it is the only libertarian party on the British political stage. The two main parties, Tories and Labour, are partisan and confrontational; still busily fighting the class wars of the early twentieth century, like a couple of Don Quixote’s tilting at windmills.

So what exactly do I mean by Libertarian? I could talk about Freedom of Conscience. I could talk about Freedom of Expression, or Freedom of Choice, and of course of Freedom for Britain. But as is so often the case the best definition comes from considering the opposite, and for that I can do no better than John Stuart Mill’s famous dictum about the Tyranny of the Majority. That simply means that in a democratic society it is not acceptable for the majority to decide everything, because that leaves no room for minority rights or individual responsibility – for true diversity if you like.

We had a classic example of the Tyranny of the Majority a few years ago when a Labour government closed down Catholic adoption agencies. They were doing a great job and harming no one, but because they were serving only the Catholic community they had to go. They simply did not fit with Labour’s socialist totalitarian straight-jacket ideology. Here in Southall you have a number of Free Schools. They likewise would not survive a Labour Government. Labour hates diversity and freedom of choice. All schools have to be comprehensive schools, so Grammar Schools, Free Schools and Independent schools are all in their firing line. To us, parents are ultimately responsible for their children, not the State. The State is there to support parents, not to replace them.

They talk about abolishing privilege, and I get that. But you know there is a much simpler way of doing it. Simply means-test independent school fees. That way any parent, no matter how poor, could consider an independent or grammar school education for their child and at the same time the cost to the Treasury is reduced so more can be spent on the slower stream schools, which is where it is really needed. Our independent schools are amongst the best in the world. 25% of their pupils now come from overseas. And UKIP’s immigration policies would not affect that at all. We are not concerned about temporary comings and goings. It is permanent settlement and citizenship which is the problem. But what a tragedy that more British children cannot now attend these schools. Labour’s vindictive, pernicious, jealous and small-minded policies have actually increased the privilege rather than reduce it! And now they want to add VAT as well.

But let me broaden the picture. Why shouldn’t all our non-security public services be available from the private sector on a means-tested basis? That would be real freedom of choice. It would not only ensure that the supply of services, such as care for the elderly, kept up with demand in an efficient manner, it would also reduce the pressure on our existing publicly owned services, thereby enabling them to do a better job. It is after all the purchase decision in an open competitive market that drives efficiency and drives quality of service, and that is why I believe a significant proportion of the population would chose the private sector even thought they would have to pay something affordable for it. That could save the state some £25bn a year whilst at the same time improving services. People talk about the private sector profiteering, but it is monopolies that profiteer, whoever owns them. After all, what is austerity if not profiteering? The public sector is by far the worst offender.

In summary I am asking you to vote UKIP at this election not only to rescue Brexit but also to share with me my vision for a truly libertarian future for our country. For us this election about votes, not seats. Last time we polled over 4 million votes. That had an impact. If we can repeat that or improve on it this time it will again have an impact. So a vote for UKIP will count and be significant.”

Reducing the Income and Regional Gaps.

Many people voted to LEAVE the EU in the referendum because they felt impoverished and left behind. A more technical way of expressing this is that the income and regional gaps have widened considerably since globalisation, the single market and the opening of our borders. Whilst most of the electorate may not understand the technicalities, it is important we can answer the question “How” if we say we will tackle this problem. So here are six critical policies designed to achieve a reduction in both the income and regional gaps thereby directly addressing the referendum result. There was little about this in our 2015 manifesto so we do now need to address it more clearly.

1. Measure them!
Speaking as an experienced management consultant, if you want everyone to focus on a problem produce regular statistics on it. In this case we should get the ONS to produce statistical series calculating the Standard Deviation of Incomes around the Mean, and also the Standard Deviation of Unemployment Rates by Post Code around the Mean. People will soon understand that if the numbers go up the gaps are getting wider and vice-versa. That’s all they need to know.

2. Establish Reliable Unemployment statistics.
To the best of my knowledge the current unemployment statistics exclude under-employed self-employed people, part-time employment and zero-hours contracts, and people sanctioned off benefits. Partly this is because these details are difficult to collect. I therefore advocate setting up an Online Self-reporting of Employment Status system in combination with Welfare Self-assessment for the Self-employed, payable weekly or monthly on receipt of the online employment returns. These could be cross-checked on a sample basis. Not only would this ensure that self-employed people are not overlooked by the benefits system, but also we would get much more detailed information on under-employment levels. It would bring the welfare system into line with modern employment patterns, and these statistics could then be fed into regional policy (see below).

3. Controlling our borders.
I put this in here for completeness. We all understand wage compression.

4. Shareholder Supervisory Boards.
Reducing the income gap means we must tackle the issue of executive pay just as much as the issue of low pay. This is not about the politics of envy; it is simply to ensure that an open competitive market is operating for the executive labour market. At present it is not for two reasons, the first being that shareholders are not in control.

Only the other day the shareholders of a company, Crest Nicholson, voted 70% to 30% to reject a proposal from their directors for a pay increase. Yet the directors simple ignored it on the grounds that such votes are only advisory. This is not acceptable.
Further, during the banking crisis, it was the directors who were playing “Masters of the Universe” not the shareholders who indeed lost their money. If the shareholders had been in control the more extreme practices and takeovers could have been averted.

Nowadays shareholders are not little old ladies and retired vicars as in Victorian days, which was when their powers were limited, but highly trained and expert fund managers such as those at your pension fund and mine. These fund managers are more than capable of making these decisions on our behalf.

I therefore advocate that Shareholder Supervisory Boards be required for all publicly quoted companies. These could comprise the six largest shareholders on the register at the time a meeting is called plus the Chairman, Chief Executive and one Non-Exec. They would determine what motions would be put to the AGM regarding executive pay, takeovers and mergers, capital reconstructions and the appointment of the auditors. And of course henceforth AGM decisions must be binding on the directors.

5. Cheapest Competent Candidate.
Both for publicly listed companies and throughout the public sector this procedure should be mandatory for the appointment of senior executives and professional staff.
What is needed for executive pay is not a cap (crude, interventionist and redolent of envy) but an open competitive market.

At present senior executives are recruited by head-hunters behind closed doors and pay increases likewise by remuneration committees. Invariably the head-hunters cover their backsides by finding just one candidate who has done virtually the same job at the same level before. This person then realises he is the only one in the frame and demands the earth. Yet large organisations are no different to the armed forces where we have all heard the adage that you end up with more admirals than ships and more generals than tanks. They recruit well, train well and promote well so you get a great tsunami of talent surging up into the little pinnacle at the top with nowhere to go. Their claim that there are only a few people who can do these jobs is demonstrably false.

There is no shortage of talent at all, so we must force head-hunters and recruiters to dip their toes much deeper into the pool of talent by a legal requirement to put at least five names on each short-list. You then simply ask the short-listed candidates to bid for the job, just as you would with a contractor.

I would allow Shareholder Supervisory Boards to choose any resulting candidate since the process itself will have moderated demands, but the pure public sector should always appoint the lowest bidding candidate.

6. Regional discounts on Income Tax and Business Rates.
Previous governments have tried to address regional policy though a range of expenditure programmes. These invariably have been either ineffective or soon forgotten and discontinued. We need a permanent structural solution, and the most potent approach would be through the tax system.

I therefore advocate discounts for both income tax and business rates proportional to local rates of unemployment post code by post code across the country (see above). These will allow residents to retain more of their earnings, much of which they will spend locally thereby reducing unemployment. The cost will be largely cyclical, but the £25bn of import tariff revenues a clean Brexit will produce will underwrite it. A strong regional policy will also leave the SNP dead in the water as well as replacing the Barnet Formula.

Balanced Migration

As argued previously, both globalisation and the EU Single Market have created huge instability in both trade and migration. The majority of the British people now understand that it is not racist to want to bring uncontrolled immigration back into balance, but what would the necessary immigration controls actually look like, and would they be both fair and firm as well as both effective and civilized?

In fact our existing controls are far from being either effective or civilized. Border officials are often faced with having to make ad hoc decisions which inevitably are prejudiced and subjective. That is no more fair on them than it is on the unfortunate visitor, and it paints an embarrassing picture of this country. For example not so long ago a Jamaican woman turned up at Southampton wanting to donate a kidney to her brother who was waiting for it on dialysis in hospital. The border official did not believe her story and turned her away. Leaving aside the fact that a better trained official could easily have confirmed the story by a phone call to the hospital,  the possibility of such a situation should never have arisen in the first place. Then there is the case of the young man who came to this country with his parents from Germany when he was a toddler. His parents opted for him to keep a German passport as a connection with his roots, but despite the fact that he has spent all the rest of his life here he was recently told to leave. There must be a better way.

So here are a set of proposals which I believe would do the job. I have loaded them as a pdf file which you can download here. They go beyond the banner of “an Australian style points based system” and put some flesh on the bones. They are only a ‘catalytic’ proposal in that I am sure they can be improved further under peer review, but they are I hope a start.

Christmas greetings from Southall

UKIP Ealing Southall logo         AN OCCASIONAL NEWSLETTER

No. 2 : December 2016

Dear Ealing Southall resident (and quite a number of others!),

Festive greetings to you all. As before you are receiving this newsletter because we were in contact during the general election, possibly through the 38 Degrees organisation, or on some other occasion. If you would like to be removed from this circulation list please let me know.

The EU Referendum

2016 has been an historic year with victory in the EU Referendum and a fabulous 40% result in favour of Leave for the London Borough of Ealing, for which I am happy to share credit with our comrades at the Bruges Group and Vote Leave as well as the sound common sense of the voters. All the more frustrating then to discover that surreptitiously the Cameron government deliberately set it up to be only advisory and discretionary. Thankfully his successor, Theresa May, has now secured a vote in Parliament which would appear to commit it to supporting the result, so the verdict of the Supreme Court could turn out to be irrelevant. We wait with baited breath.

Gerard Batten, UKIP’s Mr. Brexit and MEP for London, has put together a full briefing here. And if you haven’t already read his renowned FAQ’s on Brexit you can get them here. I have also put up some ideas on constitutional reform on our branch website here. Happy festive reading.

Project Fear has nothing on reality

One of the more significant publications during the year was a book by Mervyn King, now Lord King and formerly Governor of the Bank of England from 2003 to 2013, entitled “The End of Alchemy” in which he traces the origins of both the banking crisis and the fall in growth to the massive international trade imbalances that have developed as a result of globalisation and free trade since the early 1990s. He makes it crystal clear that we must take trade deficits far more seriously than we have done in the past and ensure we eliminate our own.

A trade deficit is rather like a gaping hole in the bottom of our economic barrel. Jobs and consumer demand are constantly flowing out of it. So far the Bank of England has been able to top up the barrel again with quantitative easing. This works by reducing interest rates and thereby persuading people to borrow their future earnings to spend today. But as Lord King points out, sooner or later tomorrow becomes today and further borrowing becomes impossible as people have to start repaying the money they borrowed yesterday. As he puts it, diminishing returns are setting in.

Rather more vividly, it surely does not require a degree in economics to see that if jobs continue to pour out through the trade deficit, and as QE becomes progressively ineffective, the result will be a massive increase in unemployment. The only solution is to eliminate our trade deficit, but the policies required to do that – devaluation, import tariffs, balanced migration and possibly even selective protectionism – are only available through Brexit. Of course I am only talking about protectionism here if it can be negotiated (after Brexit), like a sort of inverted free trade agreement (FTA), and it may not be necessary anyway, but we are in a strong position to do so.

I include balanced migration in this list not for the usual argument that it is necessary to force employers to train up our youngsters and other vulnerable groups into employment, or to encourage them to invest in modern technology, valid though those points are, but that Keynesian management of demand, which has served us reasonably well since the war, becomes impossible without tight control of our borders. Right now the economy is overheating, but with the result that we are just sucking in yet more immigrants and imports rather than reducing levels of indigenous unemployment. The presumed indicator, inflation, is submerged in wage compression and therefore ineffective. Back in the 70’s we had stagflation, where any attempt to stimulate the economy just produced inflation. Margaret Thatcher’s union reforms put an end to that. Today we have staggration, where any attempt to stimulate the economy just sucks in yet more immigrants.

Yes I know the government are claiming unemployment is at its lowest levels for years, but they deceitfully and conveniently omit under-employment, including the many thousands who have been reclassified as self-employed, those in part-time employment who want full time jobs, and those who have been sanctioned off benefits for the flimsiest of reasons as part of austerity. The number of people on zero hours contracts has increased by 20% over the past year, indicating an expanding economy with a labour market so loose that employers can employ whoever they like however they like. Intervention and legislation will only push unemployment back up again. Employers have become so used to ministers pandering like prostitutes to them that their expectations have become totally unrealistic, and still they complain about shortages of skills. It will require a tough government committed to balanced migration to address these issues effectively.

Softies are caught in a trap. If they stimulate the economy all that happens in that immigration goes up. If they restrain the economy all that happens is that unemployment goes up. Just like stagflation in the seventies, except with inflation replaced by immigration. In my last newsletter I indicated that George Osborne had brought in a budget that would mean a million more unemployed. I had assumed he and Theresa May would act to control immigration and that he would make further progress in reducing the fiscal deficit as he had forecast. I was wrong. So we are seeing a massive increase in immigration and no progress on the deficit instead.

If economic meltdown does occur then it could lead to social and political meltdown as well. Armageddon.  UKIP stands as a bulwark for moderate, practical and balanced policies in the face of a possible rise in right-wing extremism. The British temperament has so far stood firm, but who is to say it will continue to do so if we don’t get a clean Brexit before 2020. Hopefully in that event we will just get a re-run of the referendum, but we must not be complacent that we can continue to hold the tide against a rise of the sort of fascist parties we now see coming to the fore on the continent. Societies under pressure polarise. Frustrated people get angry.

One point on which Remainians are right, albeit accidentally, is that economic conditions will continue to be difficult in the immediate aftermath of Brexit. We will have to absorb inflation caused by devaluation, import tariffs and wage rises in order to achieve balanced trade and balanced migration, reducing living standards a bit more and perhaps also requiring some rise in unemployment, before we can confidently put our foot back on the accelerator. I see Brexit in the same light as El Alamein, of which Churchill famously said “This not the end of the war. It is not even the beginning of the end. But it may just be the end of the beginning”. Not exactly “blood, sweat and tears”, but similarly requiring true British patience and grit to see us through. Never forget that the bulk of the establishment in 1940 wanted Halifax as Prime Minister. Halifax wanted ‘to get the best deal’ with Hitler, a sort of ‘soft’ Third Reich you could say. Thankfully we never found out how that would have played out. And no, I am not equating the EU with the Third Reich!

You can find more in my article “There is no such thing as a soft Brexit” on our branch website.

The Free Trade fanatics are out in force – on both sides!

Valuable as Lord King’s book is as an historical narrative and analysis, he comes off the rails with his prognosis in which he recommends yet more free trade. I have dealt with this issue more fully in my personal blog article entitled “Do I believe in Free Trade?” which I hope you will read.

Essentially the classical arguments in favour of free trade, which revolve around increased competition, economies of scale and specialisation, no longer hold true. The practice of offshoring has undermined them. Not only are multinational corporations now offshoring production (farewell economies of scale) but they are also offshoring know-how in the form of R&D and design (farewell specialisation). And if that weren’t bad enough they are offshoring their profits as well, leaving their host nations with nothing.

What we are seeing now is not so much the creation of new wealth but a massive transfer of existing wealth to third world countries as a result of globalisation and unbalanced free trade. Of course it is wonderful that we can now anticipate the ending of global food poverty by 2030, and that millions have been lifted out of poverty in China and elsewhere, or that global population is now expected to peak at under 11 billion before the end of the century. Anybody who predicted these things 30 years ago would have been carted off by the men in white coats. But let us not kid ourselves that most of this is not at the expense of the western working classes. The real twist of the knife though comes because the Remainian (“I’m all right, Jack”) middle-class establishment has protected itself with a widening pay gap, leaving the burden to be carried just by the lower income groups. No wonder they are now fed up with both the burden and the injustice of it.

There is no harm at all in putting in place a mirror image of the EU’s customs tariffs for ourselves. The rest of the world already pays these tariffs (to Brussels) whilst we desperately need the EU countries to start paying them to reduce our trade deficit with them. They can hardly complain when they are charging the same to us. The £25bn or so of tariff income will be a bonus.

We must also beware the queue of other countries lining up to secure trade deals with us. They will get the benefit of no longer paying these tariffs, but what do we get? The danger is that our deficit will get even bigger. Brexit first, put our own tariffs in place with it, and only then consider deals. It could be done within weeks – no more uncertainty and a much clearer negotiating position. I have nothing against free trade per se, but balance must come first.

It is interesting that Donald Trump appears to have a much better understanding of this than we do over here. But then he is a businessman. Successful businessmen know they have to be honest else their customers do not return and their suppliers become unreliable. Politicians are not subject to such discipline.

I first wrote about this under the heading “Greece, the Eurozone and World Trade” early last year. You might also like “Why the Single Market is a Bad Idea”.

The IFS contradicts itself.

On a lighter note I was delighted to see the experts have managed to get their knickers in a twist over productivity and standards of living. But have a look first at my chart which I drew up before the referendum and which is based directly on ONS figures. It shows that our average real standard of living is now 30% lower than it was at the end of the eighties.

Back in July the Institute for Fiscal Studies (IFS) published a report entitled “Living standards, poverty and inequality in the UK: 2016” which nobody took much notice of. It concluded that “median income had risen to above the previous peak reached in 2009-10, and is 2.2% above the pre-recession level in 2007-08.” But just as the Autumn Statement was being delivered last month, they published another report (not that I have been able to find it on their website – it may just have been a quote from their director Paul Johnson, and other commentators have attributed it to the IMF or the Resolution Foundation – but let’s just take it as it was reported in the press and on Question Time on 24th November) saying “This has, for sure, been the worst decade for living standards certainly since the last war and probably since the 1920s”.

Clearly one of these two reports must be wrong. No prizes for guessing which! The latter report also referred to the period since 2008, thereby implying the cause as being the banking crisis. That is wrong too. As explained above the cause is globalisation and unbalanced free trade.

There is no need for austerity

Talking of the Autumn Statement, Philip Hammond is clearly just as terrified of the fiscal deficit as George Osborne was, and has embarked on a programme of austerity to match that of his predecessor. He did not put it that way of course. He quoted the Office for Budget Responsibility’s forecasts that the deficit would reduce to £17.2bn by 2021/2, from £68.2bn now, which would represent 0.7% GDP, which he trumpeted would be the lowest in two decades. But not only did he fail to spell out exactly how this would be achieved, he also noted that the OBR itself says the forecasts involve a high degree of uncertainty, and goes on to anticipate a falling rate of economic growth. There is only one way those figures can be made consistent with each other, and that is through massive austerity.

But you know, there is no need. Here is how we can avoid it while still balancing the books.

Local Issues

My colleagues keep telling me to write more on local issues. Of course I could give you a long list of Labour’s failings in Ealing, but that would not be in the Christmas spirit. A more serious point though is that there is only a very limited amount any party can do at the local level while austerity is being imposed from Westminster. So the best news for Ealing would be a UKIP government in Westminster.

Well I hope your definition of festive will extend to all of the above!
Wishing you a Happy Christmas and Prosperous Clean Brexit,

John Poynton
UKIP Ealing (a notch or two above Lower Slaughter!?)
UKIP Ealing Southall PPC.
ukipealing.com and jepoynton.com