ID cards compromise for a liberal immigration system?

Immigration and migration are signs of success economy. A small number of people migrate, moving for work or looking for a new home. The vast majority of people don’t move that far from where they are born. Big cities draw people in for work before they settle in urban areas nearby. Education opens up opportunities, others stay closer to home.

The movement of people even at an internal level is small. External populations don’t move on mass unless they are forced to. Nobody questions people moving from cities to towns, but they do question foreign-born citizens coming here. The reason is simple people don’t like the unknown. In reality, you have more in common with them than billionaires or millionaires who own various media platforms.

The political establishment has made legal routes, costly plus time-consuming. Basically, creating a system that incentivizes the rich or middle class to use it. Crafting an impression that they want to reduce migration, but in reality, no desire at all to do it. A shrinking labour force is never a good thing. Restricting the supply of labour even further would be terrible news.

Using every single lever possible to undermine the immigration system. Reducing resources for the asylum seekers, dehumanizing the legal route. Creating unsafe routes only real way in. At the same time created a toxic system that treats people badly. Gangs exist due to a lack of legal safe easy routes for many people to take. Most people crossing channels in small boats are asylum seekers. Taking the risky deadly trip, doing nothing wrong. Highly driven people who you want in the UK.

Speaking of the asylum system has slowly been degraded. The number of people applying is static, compared to others smaller than average. Therefore, current problems are a due backlog of cases not being decided within 6 months. On-purpose delays are designed to push people away. We could let people work as cases are decided but we don’t.

Sometimes problems are complicated, often lacking any solutions. As it turns out-migration is one of the problems. You can create a system that is safer, and easier to use with lower barriers. Or could create a system that treats people like animals and a problem. I rather treat people how I would like to be treated because one day, the UK could find itself at the other end of the stick.

The unique thing about the UK is the lack of a universal identity card system. Have a patchwork system with certain services restricted already. The state is already powerful enough can oppress citizens or none citizens if it wanted. Therefore, the tools already exist, for an authoritarian regime to abuse the tools. Already a push at the moment for voter ID checks to come into force.

Could create a card system that allows for an amnesty to happen. Easier enforcement at the cost of civil liberties, not a fan but would help. Given the scale of identity, checks don’t think civil liberties are the problem here. Created a society that outsources most of the functions of government to private businesses.

I have slowly changed my mind about ID cards. Why I think it could lead to a more liberal and sensible immigration system. The issue is less important and most voters feel the UK has restored control. Vibe-based policymaking has been powerful in recent times. Recent newspaper highlights have not helped with the idea the govt is incompetent, painting the picture of an uncontrolled mess. ID cards can help reassure voters, govt has a grip. Opening up the way for a more flexible and liberal system. Possibly you could see freedom of movement return in a future labour govt policy mix.

Voter ID does come to pass ID cards could help stop discriminating against some groups. I do recognise that most voters are more authoritarian than me. Simply dismissing the idea can lead to some horrible outcomes. The price worth paying for a kinder approach. Without losing the ability to implement a more liberal policy.

Labour is trusted, ID cards could seal voters’ trust in the party on immigration. Could end up being a compromise worth considering. Labour caution so far is worrying me but I can understand why.

Age of disruption

Legacy of GFC and Thatcher reforms

After the great financial crisis, the UK has underperformed and never fully recovered. Many parts of the UK have never recovered from repeated shocks. Failure to address the imbalance has created deep scars. Nations around the world share similar problems but tried to fix them. Economic inequality has major negative outcomes. The UK is looking at two lost decades of wage growth, and dozens of structural problems that are hard to fix. Deregulation with light touch regulation has created low competition. State intervention has become a sticking plaster for fundamental problems.

Margaret Thatcher’s early years saw unpopular reforms first before sharing the benefits later. Of course, the reforms she did, caused huge amounts of pain. She accelerated trends against unproductive industry and sold off public owned assets. Took years before the fruits of the reforms took hold. Therefore Thatcher benefited from the business cycle returning back. She did however cause a massive set of problems for future prime ministers. She created a class of income poor but asset rich workers. Thatcher did create regulators that went with the light-touch approach.

A dream turned nightmare with unproductive vested interests returning. Markets have become dominated by small groups of companies with little or no competition. Public-owned companies have become private unproductive companies with no competition. Weak labour market regulation did create cheap labour by the backdoor. UK workers on average are poorer than European workers. Globalisation saw many benefits, cheap goods created a wave of low inflation. Central banks believed they had control over the levers of inflation.

New Labour riding the Thatcher wave

New Labour decided to ride the wave Thatcher helped create. Economic boom allowed for lower taxes, Blair did some unpopular reforms. Labour did however invest into public services, day to day spending funded by tax increases. Brown like many others had fiscal rules to help guide policy. Party did loads to help the poorest. Leaving in place the fundamental changes that allowed more homeowners to exist and inflate the asset prices further. Some of the more difficult reforms ended up being to scrapped. Blair and Brown funded infrastructures projects to boost growth. Much of new Labour legacy destroyed outside handful of reforms. Brown supply side reforms like minium wage have stood the test of time.

Open secret the conservatives wanted to cut spending, blamed New labour for the great financial crisis. Brown allowed Cameron to craft a narrative Labour spending was to blame. Financial crash was caused by bankers, inflated assets with high risk borrowing. Bubble burst with assets falling in price, banks cut lending due lacking the cash to cover the losses. Financial sector was bailed out before it would seize up. Reform came to reduce the risk in the system, patch work but better than nothing.

Cameron / Osborne ideology debt rules

Cameron / Osborne solution was cutting public spending. Poorest in society ended up taking the bulk of the burden. The pair reduced the size of the state to kick start the economy. Not exactly kicked started the economy, helped to stall the recovery until they slowed down the pace of cuts. Various economic numbers have stalled or failed to meet the historic trends.

Conservative’s self-made rules have been changed before,  no reason why debt-to-GDP could not be stable. The choice was made ratio of debt-to-GDP has to come down. Rules are designed to create some stability and credibility behind a political choice Tories have chased from 2001 onwards. George Osborne’s office of budget responsibility has highlighted the choice before. Osborne decided to promote tax cuts for the middle class and wealthy when he could get away with it.

UK like many other nations enjoyed record low rates on borrowing for over a decade during a period of low growth. Failed to invest during this perfect time, much needed reforms got ignored or kicked into the long grass. The UK is set to have lost two decades of economic performance and face huge drags in growth. Result is public services without capacity or resilience needed against shocks. 12 years of pain for no real benefit. Client journalists have repeated the lie that things must be this way. Alternatives do exist but nobody must be informed about them.

Boris Brexit size hole and Truss gone

Cameron failure over party management, ruined his career and caused brexit to happen. Three prime ministers in a row grasped the brexit mandate. Briefly Cameron held an EU referendum, lost it and quit. Unable to control eurosceptic flank, too a gamble and lost.

May flirted with eurosceptic flank, tried create internal coalition within the party that could support brexit. She took a gamble for an election and lost her majority.  Once again failing at party management after crafting hard red lines making any deal impossible.

Johnson came along with Irish sea border deal nobody could support before and passed it. Clown was crippled by crisis, poor at party management. Party animal that was Johmson, lied and cheated his way to the top. Defeated by his own hubis, whole government resigned and forced Boris to quit.

Truss quickly came to power and quickly resigned. One budget promising growth without hard work, tax cuts for the rich. Helped to cause market turmoil pushed up borrowing costs and caused mortgage rates to skyrocket.

Rich Rishi has come yet another Oxford graduate who has his fingers over this mess. At the time of writing he still prime minster.

Age of disruption came from with the conservative

Various choices therefore, the result is a shortfall of about £35 to 50 billion, extra money is wiggle room.  Just in case the magic growth fairy fails to visit. Structual weakness UK has underperformed and never fully recovered. Moron risk premium has now been applied to the UK. Goverment job is lender of last resort against shocks that happen, things like covid or recessions. More growth means less tax revenue is required. Brexit created trade barriers helping to fuel already poor growth of the UK economy has resulted in a bigger shortfall. Increasing growth means more tax revenue but supply-side reforms like a more liberal planning system are badly needed.

British politics has created a toxic trap, incentives against doing painful but much-needed reforms. An endless cycle of cutting just means worse public services that cost more in the long run. Big failure over last couple of decades have been not building enough. Anti growth coalition Liz Truss talked about includes Tory voters, mainly older homeowners who block things getting done. Older voters dislike doing what is required to help younger workers who fund their retirement. Poorer workers now is storing up poorer retired pensioners in the future. Older voters who are insulated took a gamble on brexit. Breaking that cycle is important and necessary.

Question and answer

Current drags on UK growth are dysfunctional housing market, poor infrastructures and planning system.  Liz Truss was right to focus on the UK poor performance and lack of growth, Tories have helped fuel that.

Housing market has become an asset that sucks money from more productive things. Bursting that bubble requires slowly decreasing prices, needs bold tax reform and changing incentives.

Infrastructure like roads, homes and other services needs to be built. In order to sustain the current growing population or even aging population. At the same time

Planning reform that allows stuff to built takes forever to build anything in the UK due locals blocking. Cities unable to expand due green belt or locals blocking developments. Sometimes good reason for delays, like environment issues or flooding concerns.

Politicans are reflecting what voters tell them they want. Often that is dangerous and contradictory. Leaving many good set of policies in the bad sell pile. Channelling Cameron here with some hard truths that are unpopular could allow us to break that cycle. Does mean breaking the long term hold certain groups of voters have over politics. The planets sake rebuilding the system is needed. Otherwise the planet may give us giant shock and even bigger disruption.

Dysfunctional British parliament is a symptom of the British voters contradictory desires. Liz Truss asked the right question but gave the wrong answers. World is growing older and UK won’t remain attractive problems remain.

Rishi Sunak has become prime minister, a boring fiscal conservative. Similar instincts to the rest of his party but is inexperienced. At times he can be robotic and geeky, viewed as highly competent. Boring with a hint of dull is back in fashion. Boris promoted Rishi, hoping the treasury would be under n10 thumb. As it turns out treasury had other ideas and power remained untouched. Boris declined and Rishi climbed in terms of influence. Rishi was one of the first senior ministers to leave helping to oust Boris from power. In many ways, Rishi is a traditional conservative. Boris’s 2019 election coalition is different to traditional blue voters. Similar in being homeowners but they want more state intervention.

Pressure on political services means more demand for higher spending. Liz Truss asked the right questions but got the answers wrong. More growth would reduce the tax burden, policies needed for that require a mandate. UK badly needs planning reform and other supply side reforms. Not every reform is anti-worker. Bold radical tax reform is also needed to fund public services. Changes require need a mandate that Rishi lacks. Therefore, a general election is required but first Tories need to understand what they want to do. So far looks like more of the same. 

Both main parties have an opportunity. Only question is do they want to take it and change the direction the UK is heading in.

Liz Truss has resigned as PM.

Therefore, became the shortest reigning British Prime minister in history. Elected by the party membership, a mandate that was different to the 2019 conservative manifesto. Certainly, you would carefully plan what changes to do. Deeply inspired by free-market think tanks based on Tufton street. Toxic influence has poisoned British politics for years, markets firmly rejected it. Theories from Tufton street failed, U-turn was forced but the damage was already done. Instead, Truss decided to run headfirst into the brick wall. Normally you build consensus to govern, Lizz Truss tried to force things past parliament.

The whole platform went up in smoke, followed by a series of train wrecks. As it turns out she was deeply inexperienced and out of her depth for the top job. Unforced errors reduced her time further in downing street. The pain was accelerated by her own arrogance. The real tragedy she never took responsibility, and failed to learn from Boris Johnson’s own arrogance. A golden girl of the party grassroots failed basic lessons about politics. She never really had a big support base and ignored how important party management would be. Series of unforced errors, bad theory and total failure to understand how to get things done.

She is in office but without any real power. History won’t view her kindly and her political career is now over. The Halloween budget is most likely going to be pushed back. A new prime minister only having 3 days to sign off a budget is unlikely.

*Events moved quickly and I was thinking this morning she would stay a bit longer. Turns out lettuce does have a longer shelf life compared to her.

Mini budget, making of a financial crisis

UK government announced a mini-budget, part of it would be measures to deal with rising energy costs.  Details finally become public, universal blanket support with average cost capped. Business energy costs again average price is limited, 6 months compared to 2 years for the public. Idea behind it is incentive to reduce energy usage.

Energy generators have been making record profits, estimated to be about £170 billion. Reason is gas prices being linked to general energy unit costs. Some producers have seen no raising costs but huge profits as prices rise. Windfall tax on excess profits and delinking gas prices from energy generation would make sense but that was ruled out. Govt intervention was needed as the market became dysfunctional. Global problem as energy supplies and high demand pushed up prices.

Mini-budget proposed went far further than just the energy support package. At least we got some more details but for many businesses already too late. Normally markets barely move, markets do listen and react. Chancellor Kwasi Kwarteng plan for growth was unfunded tax cuts for the rich, higher borrowing and limited details on supply style reforms. Kwasi economic credibility was destroyed by his own budget and actions. That not normal at all and unlikely to calm markets if he stays in post. UK is now facing weaker pound which means higher inflation and higher borrowing costs. Higher inflation means higher interest rates, lowering house prices and increasing borrowing costs overall. Markets are going bake in higher prices as insurance against the risky budget ideas. Punishing and warning the government to avoid doing stupid ideas.

Supply style reforms with no real details mixed with tax cuts to boost demand. Plan for growth is going to end up reducing growth, any growth gained is wiped out. Estimates of how much growth from the reforms about 0.1%. UK is now facing further spending cuts, inflation is eating into budgets. Real easy obvious supply side reforms like reducing NHS backlogs and waiting times not on the table. Nothing to boost skills or training. Nothing on childcare nothing on well anything but tax cuts for the few. UK could borrow to fund these things, apart from tax cuts. Borrowing costs would go up but not by that much.

UK is facing a toxic mix of poor policy choices, under funding of public services and trade barriers with the EU. Everything that is happening right now is by choice. Planning reform was promised again but no real details. Against this backdrop UK wants to scrap EU laws it voted to keep. Reaction against the UK budget was not due one policy idea but all of it. Being forced to pick what bits you want to keep but can’t have it all. Liz Truss now faces a painful U turn against her policy platform, she could ignore it but pay a heavy price. UK is now likely to go into a deep recession without further support unlikely to recover in time for a general election. Creating the conditions for defeat and just from one short budget. Bank of England had to step in to protect pension funds. 

Lizz Truss should own this mess and quickly learn from it. Speaking this morning and doubling down has not helped. Long list of people who think UK needs to change course but only two voices matter on the subject. Three weeks into the job and not making a good start.