RexN Euroblog

Oompah oompah .... JunckerEuroblog

Posted by RexN Fri, March 31, 2017 12:21:17

As Theresa May has finally triggered Article 50, Juncker and others have made their thoughts known. Are they worth listening to?

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He is quoted in various media outlets as saying: “Britain's example will make everyone realise that it's not worth leaving … On the contrary, the remaining member states will fall in love with each other again and renew their vows with the European Union…. Half memberships and cherry-picking aren't possible. In Europe you eat what's on the table or you don't sit at the table.”

His remarks are widely interpreted as intending to punish Britain for daring to leave.

On the other hand, one of his fellow EU presidents, Donald Tusk started off by taking a different approach, saying: “Therefore we must to do everything we can to make the process of divorce the least painful for the EU”. He has since apparently retrenched into the Juncker bunker.

To add fuel to the fire, one of the EU’s chief negotiators, Michel Barnier is also reported as suggesting “complete uncertainty about their rights and their future, the reintroduction of binding customs controls on trade from day one of the UK’s withdrawal, which will inevitably slow down trade and lead to queues of trucks at Dover, serious disruption to air traffic”. He has also suggested that negotiations on substance will not start until Britain meets a “divorce bill” of around £50billion.

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Juncker may for a moment wish to remove his blinkers. There has been a lot of falling out in the EU already. Greece has already fallen foul of austerity measures as a result of a system that favours the industrial North as compared to the Mediterranean fringes.

Elections, both in the Netherlands and France have already highlighted a groundswell of unrest among European peoples.

It should not be forgotten what the European Union really is. It is a collection of 27 member states with a nominal parliament. The parliament can not actually put forward legislative programmes. It is the unelected EU Commission that does.

Some states have benefitted, notably Germany whose manufacturing output is effectively underpriced by being part of a euro currency zone comprised of underperforming nations. Estimates suggest that German goods are 15% cheaper in international markets than they would be had Germany not aligned itself in system of stagnant and uncompetitive economies.

Juncker may suffer from disillusionment that the rest of the EU, suffering through austerity, will fall back in love with the supranational body that has caused individual nations’ citizens to suffer considerably.

When it comes to diet, we can sit at our own table. Nowhere else in Europe seems to have a penchant such a hearty start to the day as a full British breakfast. Our table might just be better stocked.

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As for Barnier, what he seems to be suggesting is of questionable legality and certainly not in keeping with the EU international treaty obligations agreed in Lisbon, specifically Article 8 which reads:

“The Union shall develop a special relationship with neighbouring countries, aiming to establish an area of prosperity and good neighbourliness, founded on the values of the Union and characterised by close and peaceful relations based on cooperation”.

Is Barnier really suggesting that the EU can not be trusted to keep its own word? Can the EU be trusted in any other international negotiations such as CETA and TTIP?

It is also worth reflecting on the “worst case scenario”, that of falling back on WTO rules. This is a phrase which can be used with different emphasis. In practice, Theresa May has suggested that no deal is better than a bad deal for Britain. It is the “worst case scenario” in international law, not the worst case in the worst of all possible worlds.

For the EU, firstly, to place artificial border controls might be interpreted as a possible breach of those WTO rules. Secondly, this would reveal the true nature of the EU as a protectionist, inward looking and totalitarian regime.

There is a third element too. In order to cause queues at Dover, then the nations who host cross channel arrivals, specifically France and Belgium, would have to be complicit in those breaches of international law. If speaking figuratively, then the same applies to other countries with sea ports such as Spain and the Netherlands. Each individual country would have to authorise illegal acts in international law.

As for the airport threat, this covers every country in the EU. With competition in international markets for inward investment, any artificial barriers to trade will hardly be encouraging to those companies who seek as a basic minimum the rule of law as a criterion for investment.

Barnier seems to implicitly accept that by putting up such artificial barriers, stating the authority of the EU is akin to accepting that Rotterdam may be a sacrificial lamb. Britain’s exports, 56% are outside the EU, might no longer be routed via the Netherlands.

If the EU wants to start a trade war, then so be it. The EU can demonstrate to the world what an unreliable partner it can be. EU citizens, all of who live in democracies, can express their own discontent when British people decide to drink wine from Australia or the American continent in preference to French, Spanish or Italian varieties.

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This brings us back to other political considerations. Theresa May has already hinted that it has been Frau Merkel who has delayed discussion on reciprocal residential rights. There are further suggestions that it is Frau Merkel who has been holding out for the “divorce settlement”.

On the settlement, there are still several issues to be discussed. We do not know how the £50billion figure was arrived at. As a top three contributor to EU funds over the years, the UK has been a significant investor.

Yes, there may be a claim for pension entitlements but let us not forget that the contracts for the likes of Lords Mandelson, Kinnock and Hill have been contracted to the EU, not to the UK. The EU might just be highlighting their own irresponsibility in not funding pension obligations.

There may also be scope for counter claims, notably returns on our input into the European Investment Bank where the clue is in the word Investment. The initial input should be refunded plus any return. If there is no return, then the EU shows itself up once again as incompetent.

There are also returns to investments in science and intellectual property which is held by the EU. Has the EU wasted funds or are we due a return?

There is also the matter of our investment in the institutions of the EU. Perhaps we should expect a few floors of the EU buildings which we can convert into flats, hotels and retail premises in the heart of Europe? We could make a profit out of EU officials and MEPs’ expenses.

Can we even trust the EU figures? It will not have escaped the attention of anyone that EU accounts have not been signed off for decades. Financial accuracy, prudence and diligence are not EU traits.

Let us also suppose for a moment that the media are correct in assuming that Merkel is behind the threatened impasse. If the rest of the EU were to suffer from reciprocal barriers to trade, the rest of the EU would surely become aware. Merkel would face the prospect of being regarded across Europe as a worthy successor to Kaiser Wilhelm II and his Germany’s pariah in the 1930s-40s.

Thankfully, the Germany of today is a strong democratic nation, aware of its industrial strength and with an electorate that can remove Merkel herself.

The German people will be aware that Germany’s biggest trade surplus in 2016 was with the UK. German output is higher value than French cheese or wine. Around 80% of UK car purchases support hundreds of thousands of jobs in the German car and components industries.

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There is an alternative route. The EU can respect the people rather than the German autocrat and Brussels bureaucrats. Whether or not Merkel is removed in her forthcoming election, people still need jobs, whether Polish shoemakers, Mediterranean farmers, vintners and cheese makers, car workers from VW, BMW, Mercedes, Dacia and Skoda.

There is a constructive way forward as proposed by Theresa May.

Europe’s citizens deserve better than the so called leaders. They have the opportunity to direct their politicians to stick it up their Juncker. Barnier can and should be persuaded by the Council of Ministers to put the interests of EU citizens and economies before self preservation of a EU Commission. The ivory tower is no place for a Tusk!

Come on EU, Tusk was right first time. Make the process painless. You have a vibrant market and a gateway to the world on your doorstep. Listen to Theresa. If you want to prosper with us, you just May.

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Final say – House of BurkesEuroblog

Posted by RexN Thu, March 09, 2017 16:01:50

The Lords met again to debate the Article 50 bill. The day was dominated by two Liberal Democrat amendments. The scene was set for entertainment and drama. The ultimate decision would be if the people or parliament should have the final say.

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One amendment passed, one failed. Elsewhere, it was fun to see different perspectives of democracy from self-proclaimed democrats, particularly the Liberals who have been in the losing side in 2 referenda in around 5 years.

The first of those amendments was introduced was on providing a second referendum, this time on the outcome of the Article 50 negotiations. The second was on giving Parliament a meaningful say in approving any deal.

Lord Newby hesitantly introduced what was technically Amendment 3. Much of the debate wandered into whether the decision made by the people on 23rd June last year. Apparently, all referenda are advisory if they produce the result that any given Lord may prefer. David Cameron’s assertions, backed by his government’s propaganda, told the public something else.

Support for a second referendum came from all around the house. There were different perspectives, however. Those against the amendment were keen to highlight that the first referendum was in 1975. The second had already taken place last year.

Supporting the amendment, a number of speakers were keen to point out that such matters are “too complicated for the people”. It is always an education listening to the Lords to be reminded of the words and philosophies of Edmund Burke.

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Those Lords who had been in the ‘other place’ during their careers were keen to regale us with their experience as well as why they are “representatives” rather than “delegates”.

It may surprise those sitting on the red benches that democracy has moved on somewhat since 1774. During the 19th century, more men were given the vote, even if they did not own property. By the time we got to the 20th century, even women got in on the act. Education is now open to all. We even have referenda nowadays.

In the event, Amendment 3 was defeated before Lord Pannick took to the stage over Amendment 1, allegedly ensuring that Parliament has the final say. Pannick will be remembered as the smart lawyer who took part in the legal challenge over the Article 50 process.

It was revealing that both sides of the debate agreed that the wording of Amendment 1 is slightly less than perfect. Lord Lawson highlighted this admirably, pointing out Pannick’s legal skills. Loose wording, so it would seem, presents a two year ticking time bomb.

A fellow Conservative, Lord Hogg, was among those prepared to dismiss slack wording in order to establish a principle. This is the same Hogg whose expenses claims, apparently including moat cleaning and piano tuning, gained such notoriety. Hogg did not declare his interest in CAP subsidies. On the same day, his daughter Charlotte faced calls to resign her position as Deputy Governor of the Bank of England, over her failure to disclose a potential conflict of interests.

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In the meantime, the veteran swashbuckler, Lord Heseltine, declared his intent to rebel with the phrase “the fight back starts here”. He is another who benefits from CAP. Later in the evening, he was lose his five jobs advising the government. Perhaps he will need to up his Lords’ attendance record from 2.7%.

It is always fun to listen to those former Honourable and Right Honourable members of the Commons whilst researching their expenses history in the other house. Among those was Baroness McIntosh who famously claimed for Jayes Fluid twice in a week from a shop which is a four hour round drive from her former constituency home, yet close to her own private properties.

Had she really not made up her mind? Baroness McIntosh is still due an EU pension from her time spent as an MEP. Her previous significant rebellion as an MP was against expenses reform in 2008.

Another trend to delight the audience is Lord Ashdown’s increasing tendency to vehemently defend what start of as “misquotes”. When read to him verbatim, he embarks on debate ranging beyond the amendment. During his time as a Royal Marine, Ashdown will have learned of the benefits of a smoke screen.

At times, the drama turned to pantomime, notably with the contribution from Lord Pearson, one of three UKIP Lords. Outnumbered 34:1 by Liberal peers, it might have been unsurprising to hear the calls of “oh no we don’t”. Perhaps he should have advocated proportional representation in the Lords, given that his party secured over 50% more votes than the Liberals?

Given the nobility presented on the day, there was one notably chivalrous moment. Baroness Deech expressed a mistrust of the remaining 27 EU nations. When challenged, she gave supporting evidence of what she had read in the papers.

In the face of being metaphorically slapped down, up stepped Lord Lamont to provide concrete quotes from key EU negotiators and politicians from the 27. his gallantry calmed the house.

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Other highlights, surprisingly to some, came from the clergy. The Archbishop of Canterbury sought to reduce division. Once again, The Archbishop of York is developing a habit of appealing to common sense and explaining the existing constitutional safeguards that made the amendment unnecessary.

The summaries made perfect sense. Some Lords do not trust the government or the people to make the right decisions. Some Lords do not trust the 27 EU states. Some seek to create a legal quagmire which will keep their practices in gainful employment whilst others will seek to use procedure to get their own way, whether the people like it or not.

The Lords decided that no further referendum was required but BOTH Houses should have the final say on approving a deal – if there is one.

Ultimately, the elected representatives in the Commons will decide. Those who go against the will of the people will have to seek re-election. If they fail, they can always be elevated to the House of Lords.
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Rights of EU citizens after Brexit (HoL debate)Euroblog

Posted by RexN Thu, March 02, 2017 16:06:54

The House of Lords has entered the second day of the second reading of the Article 50 debate. There have been some fascinating contributions, some expected, some unexpected. One in particular stood out.

It has been an interesting week for the House of Lords, starting with Monday’s BBC documentary Meet the Lords. There have been suggestions in the media, allegedly emanating from sources close to the Prime Minister, that should the Lords seek to delay invocation of Article 50, reform of the upper chamber will inevitably follow.

Debate on Wednesday afternoon centred on what is technically called Amendment 9b. The decision of the Lords is whether the Commons should be demanded to provide a guarantee for the rights of EU nationals currently resident in the UK.

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The “noble lords” who support the amendment certainly have a noble case. Central to that is that people should not be used as bargaining chips as the UK seeks to reach a deal with the EU. We should end the uncertainty for existing EU residents.

There are some very practical considerations too. Many British businesses employ nationals from elsewhere the EU. In particular, the NHS is dependent on doctors from the EU and indeed elsewhere in the world. Wholesale change within a short time period would contribute to uncertainty in the provision of services.

It is certainly right that those who have contributed to Britain’s economy and welfare are respected and reassured.

A range of debate from the other side was presented. Among those, the headline grabber was Lord Tebbit who controversially referred to why the debate was about protecting the rights of “foreigners” when perhaps A British government should support the rights of British citizens resident in the EU.

One of those is Lord Lawson, currently living in France but returning to contribute to this debate. He guided listeners to the words of the Archbishop of York, John Sentamu. The latter was arguably the star of the day.

In summary, the Archbishop started by telling us that he voted Remain. He moved to Britain in 1974 when Idi Amin kicked out Ugandan Asians. Sentamu himself opposed Amin’s behaviour, hence his arrival here.

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He presented the historical context of section 9 of the Magna Carta as a basis for British law; no person would be excluded except by the law of the land.

Sentamu proceeded to give yet more context. Article 50 is the start of the Brexit, therefore the negotiation, process. An intervention challenging the “moral high ground” gave him the opportunity to develop further.

In practice, any decision to remove the rights of EU nationals would require further legislation. In the event of a decision to remove those rights, such legislation would have to be presented to Parliament, both the Commons and the Lords. It is unlikely, perhaps inconceivable, that such a bill would succeed. No British government should ever sink to the levels of Idi Amin.

Sentamu’s contribution was powerful in many ways. Even those of us who are convinced atheists have to recognise the simplicity, the clarity and the democratic process encompassed in his arguments, even if we supported the rationale behind the amendment.

What Sentamu has also done, probably inadvertently, is to provide a case for the inclusion of clergy in any reformed House of Lords. His was a voice of reason.

As for the debate, those who have been resident for more than 5 years have the right to permanent residency. Article 8 under European Court of Human Rights those with family here also have rights.

The accompanying Article 50 white paper confirms that it is the government’s intention to secure the rights of both EU nationals in the UK and UK nationals resident elsewhere in the EU.

In the event, the amendment was approved by 358 to 256, a total of 614 Lords (perhaps more) have claimed their £300 attendance allowance and expenses. There were 2 more unelected Lords than elected MPs who had voted in the Commons process.

The elected house will be justified in overturning the Lords’ vote. British law already provides protections for EU nationals living here. The EU may seek to deny reciprocal rights. If they are to seek to deny British nationals abroad those same rights, then we can be delighted to have voted in a referendum not to be a part of a totalitarian EU that seeks to emulate Idi Amin.

As the process continues, we can thank God, if he or she exists, for the guidance of those such as the Archbishop of York.



Brexit - the balance of negotiating powerEuroblog

Posted by RexN Thu, February 23, 2017 21:49:06

As the Article 50 starts to take shape, the question facing negotiators is who has the stronger position. The question has been addressed by select committees. Let’s take a practical look.

At the same time that debate is in progress, sundry parliamentary select committees are hearing evidence from different sectors. Key among them is Mike Hawes of the Society of Motor Manufacturers and Traders (SMMT). His lobbying has included hearings by two select committees during January alone.

Among Mike Hawes’ assertions are that Britain has a weak negotiating position. The basis for this is a much used argument by the Remain side during the referendum campaign. In short, 43% of Britain’s exports are to the EU. In return, Britain accounts for 7% of EU imports. This argument has been oft repeated, notably this week in the House of Lords debate.

EU position
The EU parliament's Brexit negotiator, Guy Verhofstadt, has insisted that it is an "illusion" to think Britain could enjoy the economic benefits of the single market without accepting EU budget contributions and “free movement”.

He has also asserted that the EU will not accept any Brexit deal that will leave Britain better off than it was as a full member of the bloc because that could encourage others to follow the country out of the exit door.

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EU Commission chief negotiator, Michel Barnier, has also suggested that no progress will be made until a “divorce settlement” is reached, something in the order of £50 billion. Leading EU politicians from the power base of Germany and France have insisted that there will be no deal on access to the SEM without free movement of labour.

Behind them, at least ostensibly, there are 27 nations and a Single European Market of 440 million people. Lined up against a solitary nation of 65 million, one might assume a position of strength for the EU.

That strength might also be a weakness, in that the leading powers that provide the bulk of EU funding have to agree to the same deal as the rest. That includes the South European countries undergoing austerity, the agricultural economies and those East European countries with pools of migrating labour.

British position
Theresa May has outlined a British position. Evolving from her “Brexit means Brexit” slogan, we now know her 12 point plan. We have also heard her assertion that no deal is better than a bad deal for Britain.

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By asserting that Britain does not aim to be a member of the SEM, at a stroke she might have appeared to eliminated the EU’s strongest weapon. In real terms, how potent is this?

There is a beautiful simplicity to the British approach. We seek to cooperate with EU members where that is to mutual benefit. We seek to retain our sovereignty, including freedom to protect our borders, manage our own affairs and break free from the ECJ.

Britain would like a free trade deal with our friends. If they don’t want to share the same benefits, we have other friends who do.

Access to the SEM
It is worth pondering what exactly is meant by Single European Market (SEM). It is in fact an arrangement that puts up barriers to those from outside, effectively a protectionist zone that imposes tariffs on cheaper goods from outside.

The SEM will continue to be a collection of 27 countries using 24 languages. Of those countries, 14 use the Euro as a currency, the rest are working towards meeting the criteria for that currency.

The members diverge in many ways; the proportion of their economies involved in different industries, religious diversity, income, wealth and other demographic factors.

Much has been made of the need for the UK to secure access to EU services markets, not least financial services. This can be done by “passporting”, i.e. mutual recognition of regulatory frameworks.

In evidence given to Select Committees, David Davis has identified that the UK has 5,000 passports into the EU. The EU in return has 8,000 passports in the UK.

There are two key points to make about access to the SEM:

1. To be a member, we have to discriminate against those outside the SEM, i.e. the rest of the world, which accounts for 57% of British exports under WTO rules.

2. Membership of the SEM gives those other 27 countries access to the British market where the majority of countries have a trade surplus with us. They need us more than we need them.

Putting into perspective

Some other perspectives might be helpful. Instead of looking solely at exports, a more holistic picture can be seen from the balance of trade:

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Overall, Britain operates a trade deficit with the EU. The largest part of that is with Germany, a country that has dominated European markets. This has been significantly helped by monetary union, the value of the Euro being held down by countries with different structures to their economies. This is estimated to give Germany a currency undervaluation, therefore competitive advantage of 15-25% according to the IMF.

Other countries have significant trade surpluses with the UK, notably Spain and France but let us for a moment use Germany as an example to focus the mind. It also helps to realise that Germany is the largest net contributor to EU budgets.

Germany’s car exports account for 12% of their total exports. Roughly 20% of those exports come to Britain. A significant proportion of those components are sourced from former East European countries. Germany and its neighbouring suppliers need to maintain access to the British customer.

No deal is better than a bad deal?
The default position, if no trade deal is concluded, is a reversion to WTO rules. Yes, that means that British produced cars may have tariffs applied when sold into Germany, at a rate of around 10%. That also means tariffs can be imposed on German cars coming into the UK, making them less competitive.

Theresa May also highlighted amongst her 12 point plan that free of the SEM, Britain is free to negotiate bilateral free trade deals around the world. Suddenly, cars built in the USA could gain a price advantage of 10% over those constructed in Germany.

Similar arguments can be applied to other EU trading partners and other industries. Consumers will note the range of agricultural products on supermarket shelves, from a heavily subsidised, labour intensive industry within the EU and with punitive tariffs on the rest of the world.

Red wines from Chile, Australia, the USA and others would have price advantages against those from France, Spain and Italy. The importance of the UK market to EU members, notably those who are net budget contributors, should not be understated.

To add to perspective, yes, the EU may account for 43% of British exports. That means the rest of the world accounts for 57%, under WTO rules. By exports, the USA is the biggest market for UK goods, Germany 2nd, Switzerland 3rd and China 4th. By surplus, Switzerland tops the ranking, followed by USA, UAE and Hong Kong.

In short, despite being the absence of a deal with a protectionist EU, Britain is afforded scope to profit from larger markets globally, both in lower costs of imports and freedom to sell into global markets.

Who wins with no deal?
On a political level, Britain gains democratic accountability. On a trade level, Britain regains the ability to deal with a world that has liberalised considerably over the last 45 years.

On what should theoretically be the mid point of the 2 years article 50 negotiations, in April 2018, the Commonwealth games will be held in Australia, a group of friendly nations accounting for 1/3rd of the world’s population, over 5 times more than the rump of the EU. This could be a timely reminder of the opportunities in countries which have a shared history with Britain.

Britain gains freedom to manage her own affairs, gains from reducing the net budget contribution, gains control over migration, gains from free trade with the growing economies of the rest of the world.

The EU would lose the net contribution, potentially face reciprocal tariffs with one of the biggest export markets for almost every one of the 27 remaining nations.

A corporate view
With much having been made of the car market during debate in Brexit, no apologies are made for staying with this example. Some further analysis shows that Germany is the biggest car market in the EU.

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The top non-German brand sold in Germany is the 8th most popular model, the Skoda Octavia which is in fact German owned. The top non-German owned brand is the Ford Focus coming in at 14th. The Focus is also built in Germany.

To once again add perspective, in 2016 the Focus accounted for sales of 47,990 in Germany. There were 70,545 sold in the UK. In order to overcome a loss in demand, it might make sense for companies like Ford to avoid tariffs by investing in relocating assembly back to the UK, at least partially.

The relocation of investment argument might even be accentuated if, as suggested by Chancellor of the Exchequer, Philip Hammond, were to follow through his suggestion of reducing corporation tax. Adding value in a low tax economy as compared to the EU would encourage profit to be taken here.

Another angle is those German car makers with plants in other countries that could supply the UK market should trade deals be struck with, for example, Brazil or South Africa. We can always buy our Mercedes and BMWs from those countries. Better still, Jaguar would have a price advantage, more so if using British steel.

Summary
The EU institutions come from a perspective of self preservation, that of the bureaucracy that thrives on increased control. Member nations of the EU are diverse, with needs that vary. It is in the institutions’ interests to delay as long as possible, ensuring maintained net contribution from the UK.
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Central to that self preservation is Germany whose industrial markets are artificially protected to sustain an economic engine for EU survival. The buffer states surrounding Germany depend on the net contributions from the bigger member nations to provide what growth exists in the EU markets. The Southern member states suffer with austerity.

Britain has much to gain from freeing itself from undemocratic bureaucracy. She has the opportunity to return to her national characteristics, based on a maritime history with global trade. We do not seek to protect ourselves from the world, rather embrace it with our friends who share a common language and/or a common history.

Whatever position the EU currently takes can soon change. Frau Merkel faces an election this year, as do the leaders in net contributing countries, France and the Netherlands. As well as negotiating with Britain, the EU has to negotiate with 27 member states, some of who will be asked for greater contributions, others who will be asked to accept less.

EU members need access to British markets to maintain a semblance of growth rather than recession. For Britain, the rest of the world once more provides opportunity. If the EU institutions seek to make Britain suffer, it is EU member states who will suffer, from decline in industrial and agricultural sales to a significant trading partner.

As Theresa May says, “no deal is better than a bad deal for Britain”. No deal would be a bad deal for EU member states. The British market is vital for the EU as a whole to maintain growth. At least one side will need to compromise. The EU has to recognise that its 27 member states will lose more by seeking to put up its own barriers to the British customer.

No deal for Britain would ensure no further contributions, would provide certainty in markets and start the march to trading with a growing world. It is up to the EU to decide whether they wish to adopt the philosophy of lemmings or to cooperate with an innovative country that has a global reach.



House of Lords, an opportunity for reform?Euroblog

Posted by RexN Fri, February 10, 2017 09:35:07

In the wake of the EU referendum, public attention has been aroused by suggestions that the House of Lords could be the forum to block Brexit. Were they to do so, would this make it the right time to reform or even abolish the upper chamber?

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The House of Lords is currently the second most populous legislative chamber in the world, only behind China. It has the largest head count of any chamber in the democratic world.

To summarise the statistics, the House of Lords is currently made up of almost 700 life peers, those being nominated by the Prime Minister. Additionally, there are up to 92 hereditary peers, those who have inherited ancestral titles. A further 26 are bishops.

Among the group of life peers are sports people who have achieved great things. There are also representatives of the legal profession, trade unionists, business people and other who have contributed to society. There is also a raft of failed and/or retired politicians, among them several expenses cheats.

There have been several half hearted attempts over the years at reforming the House of Lords. The most recent Act was in 2014 which merely created the opportunity to retire from the Lords and for members to be disqualified or removed.

The last major reform was under Tony Blair in 1999, which limited the number of hereditary peers. Following the House of Lords Act that year, the number of active peers was reduced from 1,330 to 669. Since then the number has grown again to 805, up by 15%. Each of the 3 Prime Ministers since and before Theresa May have flooded the ermine clad benches, there being over 850 who are either active or inactive. Cameron alone appointed 263 including his resignation honours.

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Given those numbers, a perspective might be given of attendances. In the year after Blair’s reforms, the average number of peers attending was 352 per day. At the time of the formation of a coalition government, this was up to 388 per day, a rise of just over 10%. By the time of Cameron’s resignation, the increase was to 497, a further rise of over 28%.

Those statistics generate a number of arguments.

At a time when they civil service and indeed the country have been subject to austerity, the Prime Minister has been able to appoint chums to a life of indulgence. Cameron did nothing to reduce the cost of government, at the same time as reforming state sector pensions, with the exception of parliament. They average cost of an active peer is over £130,000 each year in allowances and expenses.

At 805 members, it is hard to justify why the 21st biggest country by population should have the 2nd largest chamber, over 8 times the size of USA who have 5 times the population. The fact that is has grown so much since 1999 makes it hard to disagree that patronage is the wrong means for allocating seats. Incidentally, there is a maximum seating of 400.

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Anyone who even casually watches proceedings in the upper chamber will find it hard to believe the average attendance. It would be easier to believe the anecdotal stories of peers turning up to sign in whilst the taxi is left running. £300 per day might corroborate allegations aimed at the former Commons’ expenses cheats. There is rarely, if ever, standing room only.

Clearly, any future reform has to be directed at the number of Lords.

There are some alternate perspectives. No single party has a majority in the Lords. . Currently, it might be argued that the balance of power is held by the 26 bishops, 178 crossbenchers and 30 otherwise non-affiliated members. In the case of the former, the nation is afforded a moral compass, as for the others, they can vote with their conscience and on the quality of potential legislation. Independence of members has some attraction.

It may be a surprise to note how frequently the Lords have sent bills back to the Commons for amendment. In the last session alone, there have been 60 defeats involving 17 bills and other regulations.

Perhaps the most high profile of those was on in work tax credits. On that single issue, it seems reasonable to expect that the majority of the population would support the vote by the Lords. In fact, it is hard to argue that any recent defeats were anything less than appropriate measures to curb the excesses of a rash government with a working majority that could potentially last for 5 years under the fixed term Parliament Act.

On tax credits, the Cameron axis of government attempted to push through something which, if put to a public vote, would undoubtedly be defeated. This was also specifically against the electoral promises made by Cameron and his team.

Further analysis of those defeats suggests that collectively, the Lords have acted to uphold democracy and protect rights. Sundry Lords select committees also exhibit detailed and independent analysis of current events and policies. Not all that the lords do is bad and in fact much is for the greater good.

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So how can we summarise the House of Lords? Certainly it is overpopulated. It is a retirement home for failed politicians and expenses cheats. It has also become a vehicle for unprincipled leaders to reward back scratching. Most importantly, as a revising chamber, it is a vital component in restricting the power of governments which go too far.

This makes the question of how to reform the House of Lords fraught with potential debate.

Some simple principles might apply. At this point, it should also be acknowledged that the House of Lords is unrepresentative in many ways; the predominance of men over women by a ratio of 3:1, the wealth profile and the age profile to name but three.

Firstly, there needs to be a multi tier peerage profile. Honours can be given to those who have excelled and served the public in many spheres. That does not have to be accompanied by entitlement to legislate. Indeed, not all hereditary peers have the right to sit. Extension of that principle would be no novel act.

There also has to be a time limit on how long those entitlements to legislate can apply. Under the current framework, a government has to submit itself to the electorate for 5 years. A peer is in the Lords potentially for life, regardless of competence.

Allowances should only be paid for all day attendance, clocking in before the start of proceedings and confirmed by attendance at a percentage of all votes, 80% does not seem unreasonable.

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Numbers should be reduced to a manageable level. It is hard to justify a figure of more than 400 active members, a comfortable seat each if they are to actually attend debates. On that basis, those attending the least can therefore be moved to the non-voting tier of Lords, to be reduced further as a democratic component is introduced.

That democratic component should number between 50% and 75% (to be agreed) which can be elected in between general elections and on a proportional representation basis, reflecting the democratic profile of the electorate. Such elections would hopefully provide a more reflective demographic profile.

The balance, quite rightly, should reflect the moral compass of the country. Bishops should be retained. £300 is a reasonable fee for legal professionals to scrutinise potential legislation. The balance of power should be held by those without other vested interests.

The need for reform is obvious, the solution can be simple, reducing the cost and abuses whilst retaining the brake on a government which exceeds its powers.



Brexit - some EU perspectivesEuroblog

Posted by RexN Wed, February 01, 2017 11:07:46

The march towards Brexit continues. Finally, the Article 50 Bill has been presented to Parliament. What better time to consider perspectives from the EU on what Brexit might mean?

With the Article 50 Bill timescale, in theory at least, Theresa May should be in a position to invoke Article 50 itself during the EU Council meeting on 9th March in Malta. There will certainly be cause for reflection amongst EU ministers.
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It is worth taking a moment to consider what exactly the EU is. The highest priority from the Remain side is that the EU is a Single European Market (SEM), a free trade area for its member states.

A reverse perspective from outside the EU is that it is a customs union. Barriers to trade may or may not exist among EU members but for the rest of the world, the SEM is a market to which access faces barriers. The customs union also includes countries such as Turkey who have yet to become full EU members.

To many Leave voters and campaigners, the EU is a political union between 28, soon to be 27 countries. Among those, 14 are also involved in currency union with fiscal restraint in order to harmonise their economies and provide currency stability. In practical terms, this benefits some more than others, more of which later.

On 31st January 2017 the President of the European Council, Donald Tusk, has written to ministers. His letter can be seen here. Tusk is one of five EU presidents who collectively produce reports on the direction of travel, the 2016 report can be found here.

In short, these views can be seen a representative of the EU establishment. They are committed to ever deeper union and integration. This amounts to further convergence, fiscally, economically and in strengthening institutions.

To that end, Brexit represents a political threat. Tusk has identified what he calls “xenophobic sentiment” and “national egoism” as challenges within Europe. In short, democracy and the will of the people is secondary to maintaining and deepening the power of the institutions.

On top of the political threat, the EU administration faces a cut in its budget to the extent of a net £8billion (and growing) per year. This figure represents around 14% of net contributions. Brexit means that money will have to be found from elsewhere or that expenditure, with the power that brings, being diluted.

The EU administration is faced with the dilemma of doing a deal that respects democracy at the risk of other members being incentivised to leave or punishes Britain. The question remains, who would be punished more?

The EU is however still a collection of 27 nations, for the time being at least. It is remembered that even though its supporters see the EU as a valuable single market, those 27 states will have different views of what Brexit means. To explore those, let us start with relative trade positions.

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The above table represents the balance of trade, whether EU members are in surplus or deficit with the UK.

Top of the list is Germany with a surplus in excess of £25 billion annually. Their current strength is in full view of those who use Britain’s roads. Germany is the leading car exporter globally at almost twice the value of second in line, Japan and three times the value of USA in third.

To give more background, the UK accounts for 20% of Germany’s car exports. The car industry accounts for 12% of Germany’s total output.

A new German government would certainly be opposed to any sort of deal that damages her own interests. Failure to strike a deal potentially leads to the fall back position of WTO rules. That means of course that British car exports to Germany may face tariffs, in the order of 10%.

Reciprocally, tariffs might be imposed on one of the German car industry’s key export markets. Whilst the SMMT assert this will increase the price of cars by £1,500, there is also the distinct possibility that British consumers shift their buying patterns to those vehicles produced here. Will company car fleets shift from Mercedes or BMW to Jaguar?

There are further threats to Germany. If bilateral free trade deals are struck between Britain and other partners, Japan and the USA, German competitiveness is further diluted by those exporters into British markets as well as British vehicles into American markets.

There is a solution for the car manufacturing companies. German producers, as well as those owned by external investors such as Ford and General Motors can relocate production elsewhere, even back to the UK.

A summary of Brexit for the German economy is that loss in demand from the UK can mean the difference between modest economic growth and recession. Extra competition in markets where bilateral deals are made and disinvestment can lead to depression.

The same principle can be applied to those other countries with significant trade surpluses with Britain, imported cars coming from 7 of the top 8 EU countries which have a surplus with the UK. The exception is Poland which provides components across Europe. Poland’s main export to the UK is consumer goods, including shoes, a relatively labour intensive industry.

Incidentally, the UK happens to be Poland’s 2nd largest export market accounting for Poland’s largest surplus.

Poland is a prime example of another phenomenon, an estimated 800,000 nationals working in the UK and sending a proportion of that income home. Free movement has a greater proportional impact.

The other major trading partners also rely exporting on labour intensive goods to Britain. Among these are heavily subsidised agriculture products; wine, cheese, fruit and cured or processed meats. Reciprocal tariffs would increase these prices in the UK market by up to 80%. Conversely some of these products will become cheaper from the USA, the Commonwealth and the rest of the world.

Jorge Brotons, President of the Spanish export federation Fepex has already identified a cut of 15% in his members’ revenues from the UK, largely as result of currency movements. This would surely be exaggerated by full Brexit and the imposition of reciprocal tariffs. France and Italy can expect similar.

Although campaigners for prioritising access to the SEM choose to minimise Britain’s importance, it can be seen that a shift in Britain’s trading patterns has the potential to impact significantly at the margins. The SEM is not in fact a single market. Rather it is a collection of 27 markets with one dominant currency and 9 others using 24 different official languages.

Remember all of those countries have to agree to a deal.

Not all of the EU is prosperous as was identified on this site here during the referendum campaign. Intriguingly, those with the highest growth rates are typically those former members of the eastern bloc, still with their own currencies and modernising with western investment.

Those with lower growth rates are typically the more mature EU members, outside the German centred powerhouse and who are struggling to meet austerity conditions. These economies are also susceptible to small changes in investment, either through government policy or a fragile banking system.

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This brings us full circle back to the institutions leading the Brexit negotiations on behalf of the EU. For all of the above reasons, it is in their interest to delay Britain’s exit, maintaining free access to British markets, freedom of movement and the net contribution. However, all nations involved must agree, including the UK. It is in our interests to seek bilateral agreements with the rest of the world which provides 90% of our economic growth. The EU can not rely on Britain’s compliance.

Restrictions on budgets, if they are to be overcome, require extra funding to be found from somewhere when EU growth is negligible. With elections this year in Germany, France and the Netherlands, how can they strike a deal that maintains Germany’s artificial advantage through a Euro that is too strong for most of the rest of Europe? Will the resolve of members reflect the self interest of bureaucrats or will “national egoism”, what we call democracy, mean that they have to accept a scaling down of the vision?

It would not be surprising to see the bigger players in Europe influence the change of direction in of the EU. What Tusk misinterprets as “xenophobic sentiment” might actually be the embryo of devolution, seeking to bring decision making closer to home. Mr Tusk, the concept is called sovereignty.

The EU itself may well find itself in conflict with its members. Further integration can only work if funds flow from the rich in the EU to those suffering with austerity. Is that acceptable to the rich? Can the EU survive without?

So we can see a different context. The EU institutions and 5 presidents may seek to take a hard line with Britain. Voters across Europe may thwart their political will by replacing members of the Council with more nationalistic representatives. The goal may shift from power maximisation to loss minimisation. The only thing certain in the EU negotiating position is uncertainty.





A simple policy for BrexitEuroblog

Posted by RexN Wed, December 28, 2016 16:03:08

Introduction
Following the EU referendum on 23rd June 2016, the British people voted to leave the EU, i.e. NOT to be a member of the SEM.

The government tell us that Brexit means Brexit, but not what Brexit means. This is an attempt to set out a negotiating position.

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Article 50
The current government have committed to invoke Article 50 before the end of March 2017 but what does this involve?

Essentially, this provides a mechanism for withdrawal from the EU and is made up of 3 clauses:
Clause 1 relates to the need to make a statement of intent to leave
Clause 2 the negotiation of an agreement as to future relations between the UK and EU
Clause 3 EU treaties will cease to apply to the UK after 2 years unless an agreement is not reached and both the UK and all EU member states agree to extend negotiations

In short, if an agreement is reached, it has to be agreed and ratified by EU member states. No deal takes us to a default position.

Default position
So what happens if an agreement is not reached?

Britain will regain its independent status under World Trade Organisation (WTO) rules.

Agreements that were reached between the EU and the rest of the world were made on behalf of the EU and its member states. Therefore, Britain is bound, in the absence of fresh trade deals, to those treaties that have already been signed up to by the EU. In short, nothing changed with the outside world, unless or until other arrangements are made.

What is the EU?
To many, the answer is a Single European Market (SEM), a free trade area affording member states to trade with each other without barriers. This includes the free movement of citizens between states, with the right to work and be treated as citizens in each others’ countries. Notionally at least, there is free movement of capital.

Outsiders can also see the EU as a customs union. Member states jointly agree to place barriers, whether tariffs, quotas or technical, to trade from outside. Individual member states are not permitted to relax barriers to other trading partners.

The EU is also increasingly a political union, its `competences’ growing with each new treaty. EU members have common policies (in a variety of areas, such as fish stocks, agriculture, social policy, consumer protection and areas of employment law. For those members whose currency is the Euro, monetary policy is decided by an EU institution. Member states also agree, again notionally, to follow certain fiscal rules. These apply equally to Germany and Greece as well as the rest.

The EU perspectives of Article 50
Several EU leaders are on record as suggesting that Britain should not appear to benefit from leaving the EU, no deal should make Britain better off for leaving.

When Britain leaves, in theory at least, the UK net contribution to the EU will cease. This leaves a hole in EU accounts to the tune of almost £10 billion per year. Put another way, 14% of the EU budget will be lost.

At first sight it would seem that if not agreement is made within 2 years, negotiations could be extended. This would have the effect of Maintaining Britain’s financial contribution.

As a customs union, the EU has been slow to negotiate new trade deals. Both the Canadian deal, CETA and the American deal which is still to be reached, TTIP, have been ongoing for several years. It would be no surprise if the EU sought to draw out discussions indefinitely.

As soon as a deal is implemented, the EU has to identify how to modify budgets. The big questions are is the EU’s overall budget to be reduced or will the other richer nations such as France and Germany have to make up the difference? Is either solution politically acceptable to voters in every single member state?

In any event, should a deal not be negotiated, whilst Britain is still a member, any integration measures that the EU seek to implement requiring unanimity are at risk.

British perspectives
As major parties undergo change, we can still see that a majority of parliamentarians were out of step with public opinion. The Remain camp form a majority of the parliamentary Conservative and Labour parties with the Liberal Democrats and SNP both overtly pro EU.

Various media have reported that MPs may seek to delay independence from the EU. The majority of MPs seem to take the perspective that access to the SEM, however defined, is paramount.

Britain has other historical relationships, such as Commonwealth members which account for 1/6th of world income and 1/3rd of the world population, as compared with the EU having 1/6th of world income (down from a quarter in the mid 1980s) and 1/15th of the world population.

Before being members of the EU, its members accounted for around 20% of British trade. This figure peaked at over 50% although since 2008, the EU had become less important than the rest of the world. Currently, the EU accounts for around 44% of our trade.

In short, the rest of the world is growing in importance whilst the EU is stagnant.

A business perspective

Whilst governments seek to protect their own interests, so do businesses. Currently, EU tariffs for the outside world average around 2-3%. During the referendum campaign, remain politicians were keen to highlight some particular areas, notably cars at around 10%, meats at up to 80% and dairy at 36%.

Our own example comes from the car market.

Should no agreement be reached under Article 50, it is indeed the case that the customs union of the EU may impose a tariff of around 10% on cars made in the UK and exported to the EU. Around 1/3rd of British made cars are exported to the EU, the majority going to the rest of the world.

In the British market, 85% of new registrations are EU made vehicles. Let us take Mercedes as an example of what might occur.

A reciprocal tariff can be levied on EU made cars. Immediately German made Mercedes vehicles are 10% more expensive. Free of the EU Britain can strike a trade deal with, for example, Brazil, another country in which Mercedes makes cars. Brazilian Mercedes can now be 10% cheaper than before. To maintain market share in Britain, production can be increased in South America, decreased in the EU with resultant shifts in jobs.

Similar principles apply to EU cheeses, meats, wines and a myriad of other goods.

Negotiating position
Yes, Britain would love to maintain good relations with our neighbours. We have supported the EU for over 40 years, giving up control of fisheries, accepting EU migration, paying a net contribution and not least, providing a lucrative export market for EU based industries.

The infrastructure exists to maintain free trade, unless the EU chooses not to.

Our greater need is to sell our wares on growing rather than stagnant markets. We are a friendly, cosmopolitan nation with friends around the world. We wish to retain access to EU markets, recognising that we are more important to the EU as a market than the EU is to us. A trade deficit of £8 billion per month is testament to that.

Of course, we are prepared to pay for access to the SEM but having seen little value in return for our decades of sacrifice, we seek to charge for access to British markets as a percentage of the value of trade. It would cost the EU more. Alternatively, we can agree on free trade without costs to either party.

On passports for financial services, evidence given to various parliamentary select committees shows Britain has around 5,000 passports with the EU. EU members have around 8,000 with the UK. Both trade in goods and passporting should be linked, maintaining the status quo.

Britain remains a member of the G7, a genuine global power and one of few countries contributing 2% of GDP to meet NATO obligations. We are a powerful nation that has helped preserve democracy in Europe over centuries. We seek to maintain our status as a neighbour and friend but not at any cost.

We hope that the EU will recognise that on current trading patterns, Britain will be their single biggest export market with 16.9% share of their exports.

Red lines
Of course, Britain has nothing to fear from the default position of WTO rules. In recognition of our history, we wish to reverse the racist immigration policy of discriminating against Commonwealth friends, many of whose families sacrificed lives to keep Europe free in two world wars. Free movement is therefore not an option.

Budget contributions are negotiable but dependent on balance of trade.

No treaty is acceptable that restricts Britain’s ability to negotiate bilateral or multilateral trade treaties with the rest of the world.

There should be no deal on goods without a deal on financial services. Passporting in its current form is a prerequisite for agreeing tariff free access to British markets for manufactured and processed goods. Adjudication and resolution of disputes must be through the offices of the WTO/ICJ rather than the European Court of Justice.

The two years to negotiate and ratify a treaty must be seen as a maximum rather than a minimum.

Another referendum?
Quite simply, the British people decided that the government of the day should decide British policy for British people. If the deal is not what the British people want in 2019, then the next election is scheduled for 2020. It is up to parties to state in their manifestos how they would seek to negotiate an improved deal.

Conclusion
It is in the interests of EU member states to reach a deal within the two year time frame outlined in Article 50.

Certainty is provided with the fallback position of WTO rules. Britain’s history of being a resourceful trading nation with cosmopolitan links around the world places us well to grow and play a worthwhile role in the world. We can seek to help develop parts of the world which have been excluded in more than four decades of EEC/EU membership.

If the EU wishes to share in our prosperity as a global trading partner, we seek to maintain their markets with us. Should they instead choose to implode, we are willing to be a role model for the next new era of free trade growth.



The changing face of democracyEuroblog

Posted by RexN Sat, July 02, 2016 10:33:59

A week after the referendum result, the political landscape has changed. The United Kingdom now has the opportunity to remodel itself as an outward looking nation, free of the constraints of policies decided at an EU level. It would seem that the only constraint now is our own political system.

The people have decided on a positive future, for whatever reason. Certainly, there are negatives to have escaped from. So called ‘freedom of movement’ has restricted movement between the UK and traditional friends. Commemorations of the Somme are a stark reminder as to how many Commonwealth citizens gave their lives for a free Europe.

What is labelled as the Single European Market has been by some as an area for free trade when in fact it has maintained barriers to free trade from nations around the world, including developing countries where poverty has been perpetuated by the EU.

The British electorate has shunned the shackles of a stagnant, restrictive regime that has led to mass youth unemployment across southern Europe. The message to politicians is one of creating opportunity in a big wide world.

So how has the political system responded to this message of hope?

Those who watched he results come in would have seen Tim Farron revert to Liberal type. He branded the majority of the electorate as “insular”. In fact, he was the one who came across as insular, denying the opportunities that the majority have seen. It remains to be seen if the Liberals will change.

So what of Labour? The Parliamentary Labour Party (PLP) is in disarray, apparently out of touch with its own party members, 60% of who support a leader who is barely to summon enough PLP support to fill a shadow cabinet. Who knows what will happen; another split, as with the Social Democratic Party in 1981, defections to the Liberal Democrats?

What of UKIP? At the 2015 election, UKIP was the 3rd most popular party with 12.7% of the vote, despite only winning one seat. Put into perspective, the Liberals won 8 seats with 38% fewer votes. Arguably, UKIP’s biggest success may have been to win the Conservative pledge for the referendum. There seems little doubt that there would not have been a conservative majority without that pledge.

By 2020, the UKIP mission should have been accomplished. The United Kingdom should be independent. The party may need rebranding but what remains is a powerful political lobby, ready to hold a government to account and with an infrastructure to make an impression.

The SNP are also in an interesting position. Having lost in the 2014 referendum on independence, the party leader’s overtures towards maintaining EU membership by going it alone have met with an instant body of opposition in Europe.

There is a reason for leaving the Conservative government until last. The majority of the parliamentary Conservative Party supported the Remain camp. Quite rightly, David Cameron announced his resignation as Prime Minister. His party now has to choose a way ahead, perhaps the most critical junction in party history.

At the time of writing, the leading candidate is Theresa May. It is worth dwelling on some highlights of her record, since she asked to be judged on it.

As Home Secretary, she has failed to live up to promises on immigration. She had called to quit from the European Convention on Human Rights, current position is to stay with it. She campaigned half heartedly for Remain. Now she stands for leading us out of the EU. To paraphrase a famous statement from the last female Prime Minister, U turn if you want to, this lady IS for turning.

The Conservative process for choosing a new leader starts with parliamentary members. Of the candidates nominated, May and Crabb were in the Remain camp, Leadsom, Fox and Gove were for Leave. No reminder should be necessary which way the country voted.

Of those MPs to declare their support, the majority have gone for Remain candidates. It may be worth comparing two maps, one of the 2015 general election, the other of the 2016 referendum.

What can be clearly seen is a correlation between a Leave majority and Conservative seats. It would be naïve for politicians to think that the British people will give up democratic power cheaply. Any failure to deliver or any doubt could easily lead to a swing towards a new Conservative Democratic (or similar) party.

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The Remain camp has already nurtured deep distrust in themselves. Project Fear was clearly misleading on so many levels. At the time of writing, the FTSE is has had its best week since 2011. Yes, there has been a technical correction in the level of Sterling, the sort which was followed by a decade of growth following ERM withdrawal.

Suspicion lingers over some Remain candidates, one example being Kevin Hollinrake who, when challenged over reports of Remainers planning to delaying the passage of Brexit, said in a Tweet (apparently now deleted) “25 new bills, all complex … simples”. It may be that Tweet deletion amounts to retraction!

The current party of government is faced with some clear choices:

  1. whoever is the leader, to embrace democracy and move ahead towards a successful and speedy management of Brexit
  2. to delay and risk alienating the the people

Any hesitancy can not be guaranteed to stop a genuine Remain core from resigning their party whip. Combined with the legacy of UKIP, a Conservative Democrat party could be a force to be reckoned with, at least given the current parliamentary nepotism that gives Remainers a majority that is not reflected by voters.

Taking a different angle, Labour potentially has until 2020 to renew itself into a party that does reflect public will.

There is of course always a positive solution that could harness the will of the nation behind a party that chooses to reflect democracy. If the Remain candidates were to put ambition for the country above personal ambition, both the party and the country can unite behind a leader, especially one who has little, if any, political baggage.

The Conservative party can save itself from the political wilderness that it suffered with no outright general election win from 1992 to 2015.

Step forward Andrea Leadsom. Here is a candidate who was at the forefront of the Leave campaign. She conducted herself with dignity, integrity and a calm reassurance. Her message was a positive one, of Britain able to take her great place in a growing world of opportunity.

Social media confirms her appeal to the general public. Yes, the established press and broadcasters have their darlings, May being an example of the sort of pantomime character who can be a villain and at least temporarily is their heroine.

In the grand scheme of things, the Conservative Party can seal its own bright future, leading a bright Britain into the world. At the moment, it looks like a simple choice between Cruella de Vil and Cinderella. If the party has any sense, Cinderella Leadsom will go to the ball.
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