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Newsletter 09 August 2021

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The Tokyo Olympics finished yesterday, and as final numbers of medals were totted up, we were treated to the ridiculous comment from Guy Verhofstadt that the ‘EU combined has more gold medals than the US or China’.

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Dear Subscribers,

The Tokyo Olympics finished yesterday, and as final numbers of medals were totted up, we were treated to the ridiculous comment from Guy Verhofstadt that the ‘EU combined has more gold medals than the US or China’. If that is the way Guy likes to count, he must be rather disappointed by the Team GB-shaped hole that Brexit has left in the ‘EU’ total since 2016. The UK achieved fourth place in the medal table without any need to co-opt its neighbours’ victories. Better luck at Paris 2024, Guy, when presumably the entire EU will benefit from home advantage…

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Worth our weight in gold

The UK’s disproportionately high position in the Olympic medal table is nice, but ultimately not very important. Britain can, however, punch above its weight in a variety of sectors which do make a material difference to its economic prospects. The UK’s strength in university research world rankings, for instance, was always one of the reasons to expect the country to do well outside the EU. This strength is reflected in a huge increase in applications from Chinese students – up 44% since 2019 and more than to all EU countries put together.

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Our universities are excellent (especially Cambridge, in our not-at-all biased opinion)

Alas, there are still all too many people who fail to recognise that the UK is a country which has strengths and should play to them. Another sector in which Britain has long excelled is defence, in stark contrast to much of the rest of the EU. That is why the idea of an EU defence union always looked like such a bad idea from a British perspective. Such a venture would inevitably involve diluting our defence expertise and handing over important questions of our security to less experienced European partners (who have, to date, often relied on Britain for their own defence needs).

Yet as we discuss on the websites this week, advocates of an EU defence union continue to wield far too much influence on the British defence establishment. Notable amongst such figures is Angus Lapsley, former UK Ambassador to the EU’s Political and Security Committee, who has recently been touted as a candidate for UK ambassador to NATO. Now, however, Lapsley has also been revealed as the senior civil servant who left sensitive UK defence documents at a Kent bus stop. You can read the full story from Gwythian Prins below.

Media

BfB co-editor Robert Tombs wrote an article for The Telegraph, ‘The Boer war dead deserve to be remembered’, discussing poorly thought-through plans to ‘recontextualise’ a monument to men who died in the Boer War.

On the website this week

Blogs

What the night manager of Hotel California did next, by Gwythian Prins

Gwythian Prins discusses a shocking security breach by fervent Remainer Angus Lapsley, the former UK Ambassador to the EU’s Political & Security Committee, who turns out to be the very person who left Top Secret British security files at a bus stop in Kent. Lapsley’s actions since Britain left the EU have threatened to do serious damage to the UK’s defence interests, but his influence remains strong.

The Lapsley Case has a potential to be as significant an intelligence leak scandal as any since the Profumo Affair.”

Only Joking. Boris and the Pits, by Graham Gudgin

Boris Johnson’s quip about Thatcherite pit closures being a help to climate change may have been intended as a joke but it reveals a poor understanding of the history of decline in the UK coal industry and also of Mrs Thatcher’s role in that decline. Some clarity is required on whether the current government approves of free market solutions to major industrial change.

If the red-wall seats are to be retained, more clarity is needed on the extent to which the current Government intends to be interventionist when it needs to be.”

Key points this week

Truckulent Problems in Long-Haul Freight II

Shortages of drivers reflect employers’ poor treatment of workers, not a lack of skill in the British workforce.

Further to our recent rebuttal piece which debunked misconceptions about shortages of long-haul drivers in the UK, and in connection with claims about Brexit-related labour-cost inflation, it’s worth noting that the industry’s problems stem from the way it treats its drivers, rather than a shortage of qualified people as is sometimes made out.

An October/November 2020 report bears this out.  To drive a large goods vehicle commercially you need both to pass a number of initial tests and then to maintain your certificate of professional competence/driver qualification card, which is granted on the basis of recent LGV driving experience.

In 2020 there were 287,000 people working as large goods vehicle drivers in the UK, a further 330,000 who held driver qualification cards but didn’t describe themselves as LGV drivers, and 327,000 who had passed the tests but had no card (ie. no recent experience).

Even allowing that many of these people may be in the military, retired or otherwise using their licenses to drive large vehicles without considering themselves to be LGV drivers for survey purposes, the point remains that there is a substantial pool of potential drivers.  From this reservoir of potential drivers it should be possible to fill the shortage of 100,000 drivers which is claimed.*

The key barrier, however, is the poor way that many logistics companies treat their hauliers – a problem which, as we explored, has been intensified by EU integration levelling the labour market, which has affected road haulage along with many other sectors.  For many haulage companies, there are advantages to being domiciled in Eastern Europe to further take advantage of these benefits.

To add insult to injury, the same companies now complain via the Road Hauliers’ Association that the logistics system is close to breaking point, when they have had five years since the Brexit vote to plan and reassess their recruitment and retention policies.

There signs, however, that companies are beginning to change their policies.  John Lewis and other supermarkets are now offering drivers more competitive salaries – a natural consequence of the restriction of supply.  In turn, this should encourage a measure of innovation on the supply side, whether in the flashier form of self-driving vehicles or more mundane improvements to the efficiency of routes and vehicle fuel consumption.

* A word on the statistics – the 2020 numbers may have fluctuated if European drivers have returned to the EU.  It’s also worth noting that UK migration statistics rely on the government’s Labour Force Survey, which is itself flawed.

A Brexit Price Bubble?

Brexit has relatively little input into recent price rises compared to the impact of Covid, as seen by inflation experienced in the rest of the world

Several recent news stories addressed the UK’s inflation, as the Consumer Price Index rose from a 2.1% year-on-year increase rate in May to a 2.4% rate in June.  Many headlines pick out Brexit as a principal cause of these increases, as a shortage of cheap skilled workers formerly recruited from Eastern Europe impacts prices.

In the main, however, inflation is more easily accounted for by the pandemic.  When workers are forced to self-isolate for days after receiving a notification from the NHS app, even when they and the majority of the population have been vaccinated, then supply chains will naturally come under extreme pressure.

Furthermore, as the furlough scheme will remain in some form until the end of September, it creates friction in the labour market, as employers have few incentives to cut unnecessary labour and employees have fewer incentives to switch jobs.  There’s also the demand side to consider.  As consumers flock back to high streets, and both fiscal and monetary policy remain loose, some measure of demand-side pressure is probably also a factor.

Moreover, inflation is a global and not a solely UK problem.  US inflation has risen to the highest level in a decade, as consumer prices year-on-year soared to a 5.4% increase in June.  The FT reports expectations that Eurozone consumer price inflation may reach 2.5% later in the year, and is expected to have reached 2.2% in July.  Pandemic-related labour shortages have hit logistics sectors across the world (such as shipping), while semi-conductor shortages and price rises from Chinese factories threaten to drive up the cost of physical inputs.

Inflation is also still pretty low.  It’s relatively close to the Bank of England’s official target of 2.0%, compared to the 9% it reached in the 1990s.  All of this suggests that stories picking out a shortage of Eastern European labour as the central driver of inflation show substantial ignorance – or a journalistically-dubious selectivity with the relevant facts.

As a final note, it’s worth stating that the asset price inflation of the last decade, along with other factors, left real wages stagnant for British workers.  Some level of labour price inflation, therefore, represents a net gain for working households.

Conversely, scare stories about shortages of workers and suffering consumers are at least partly the result of employers’ self-interest.  Many employers would like to see the old status quo of cheap European labour restored, and are lobbying vigorously for relaxed immigration controls.  And although it is perhaps normal now to see left-leaning Labour Remainers in alliance with big business to undermine workers’ bargaining power, it’s no less jarring for that.

Key Points is compiled by a Cambridge PhD student.

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We are also on Twitter, posting articles and retweeting the daily events that bring Brexit to the fore in the national news.

Facebook 

Discussion also continues over on Facebook.

How you can help

There is much about Brexit still to be decided. Our MPs listen to their constituents. Do continue to send them links to our articles, especially on matters relevant to your constituency – for example, in rural areas, articles on the threat to British agriculture. Alternatively, make an appointment to speak to them at their next surgery. Let them know what you want post-Brexit Britain to look like.

As Boris Johnson said in in his post-election address, it is also time for unity and reconciliation. Keep reading our posts and share links to our quality content to help others understand how leaving the EU will be good for the UK economy and for our own democratic governance. We aim to educate our critics to think differently and more positively about the long-term impact of Brexit.

You can follow us on Facebook and Twitter.

Yours Sincerely, 

Newsletter Editor

An Oxbridge PhD Student

Dr Graham Gudgin 
Economist, Centre for Business Research, Judge Business School University of Cambridge

Professor Robert Tombs
Emeritus Professor of French History, University of Cambridge

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Briefings For Britain