Five questions for the “stay” campaign

The “stay” campaign is making much of the purported risks of leaving the EU. They seem reluctant to defend the EU on its merits, apparently taking the view that it’s a disagreeable necessity. Let’s explore this with five questions about risk. 1. Political risk

As a defender of the EU, do you deny that

• the EU is an inherently political project?
• its political capital and administrative energies have been focussed on continental unification?
• despite this, everyone acknowledges the EU’s longstanding “democratic deficit”, with multiple and confusing executive and judicial bodies which are not held to account?
• one, the ECB, has been at liberty to inflict a classic “bankers ramp”, penalising Greece as a creditor, without regard to the political reasons for its default, in which the EU itself is as much an offender as Greece itself?
• another, the ECJ, conceives of itself as an instrument of unification, leading to judgements which are arbitrary, intrusive and unpredictable.

In consequence, how happy are you about the risks which the EU poses to basic stability for itself and the UK?

2. Administrative or performance risk

How do you look away from the evidence that

• twenty one years of failed audits attest to the EU’s administrative dysfunction at the most basic level?
• the EU’s trade policy is hampered by its focus on the problems of the past, specifically tariffs on goods, rather than the future, that is services and nontariff barriers?
• the EU’s nontariff barriers give rise to harmonisation which is unnecessary and intrusive, with the World Bank describing its restrictions as second only to Russia?
• trade policy is also hampered by the EU’s emphasis on deepening its own internal market - in particular its headline currency policy - rather than opening it up to global commerce?
• this has diverted political capital and administrative resource from less dramatic but more effective measures, stalling its FTA programme, slowing growth in output and external trade, and adding nothing to the UK’s exports?
• the EU’s treatment of the free market in labour gives rise to uncontrolled migration and prevents national control over entitlement to welfare?
• the EU’s internal decision-making is so opaque as to give rise to the newly invented word of “comitology”?

How comfortable does this leave you when you think about the risks which the EU’s way of doing business poses to meeting its own objectives?

3. Economic risk

How can you shrug off concerns that

• the EU’s inherent corporatism has led to its “regulatory capture” by continental producer interests, especially manufacturing and agricultural interests, giving rise to intrusive harmonisation to the detriment of the UK?
• the EU has de facto given up on free markets in the matters most important to UK, capital and services?
• the EU’s passporting arrangements for banks risk contagion?
• the EU’s treatment of the free market in labour has given rise to intrusive regulation on employment conditions?
• the CAP has led to higher food prices and has restricted supply?
• the EU’s Internal decision-making (comitology) is barrier to the conduct of business?
• the UK has suffered from its loss of independent representation in international trade bodies?

How does this leave you as to the risks which the EU’s policies pose to economic welfare for itself and the UK?

4. Reputational risk

How easy do you find it to look away from the spectacle of

• a prolonged currency crisis threatening disruption among our neighbours?
• the EU’s treatment of migrants adding to chaos on its borders and doing nothing to ease turbulence in the Middle East?
• the EU’s tariff walls restricting supply of entry-level manufactures (eg, clothing) from emerging market suppliers?
• the CAP raising restricting agricultural supply from emerging market suppliers?
• the EU presiding over the highest level of nontariff measures among major traders but for Russia?
• the EU admitting to the world’s most complicated tariff regime?

What do your answers suggest as to the risks which the EU’s policies pose to its reputation in the global community, as well as the collateral damage to the UK’s reputation as a member?

5. Finally

Tell the truth, now: are you proud of the EU? do you admire what it’s made of itself? what it has achieved for this country? does its pattern of conduct and outcome sit well with your own standards and values? Or to revert to the formula to which stayers seem to be committed, what necessity justifies the nation’s continued commitment to a body showing such dysfunction?

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We should apologise for the “and another thing” character of these relentless questions. But the rhetoric does enable us to go beyond the commonplace that the “stayers” have given up defending the EU on the basis of its good intentions. We can now see that they are challenged to do so on the pragmatic basis that remaining makes for risk-avoidance.

What Should Be the Absolute Minimum Pass Standard in the Bank of England’s Headline Stress Test?

[For the previous blog posting in this series, see here.] Consider the following question: according to the Bank of England’s own guidance documentation, what should be the absolute minimum pass standard in its headline stress test, the test based on the ratio of Common Equity Tier 1 (CET1) to Risk-Weighted Assets (RWAs)?

The Bank of England used a 4.5% pass standard in the test, but I assert that it should have used a pass standard of at least 7% instead.

Why does this matter? Well, if you use 4.5% as the pass standard, the UK banking system performs fairly well under the stress test, but if you use 7% as the pass standard, it doesn’t. [See End Note 1]

This is a big deal because it undermines the Bank of England’s narrative that all is well with the UK banking system.

So what do the Bank’s own guidelines indicate that it should use as the absolute minimum pass standard?

We can break this question down as follows.

First, what is the relevant Bank of England guidance document?

Answer: the guidance document is the Bank’s October 2013 Discussion Paper “A framework for stress testing the UK banking system”.

Then there are two further questions. According to this guidance document:

1. What is the connection between the pass standard in the stress test and the minimum capital requirement(s) imposed on banks?
2. What exactly is/are these minimum capital requirement(s)?

On 1:

Page 28 of the Bank’s October 2013 Discussion Paper contains the following statement:

Interpreting these [stress test] results, and reaching a judgement about bank capital adequacy, requires a view on the level of capital that regulators want banks to maintain in the stress scenario. This is often referred to as the ‘hurdle rate’.

This ‘hurdle rate’ is the same as my ‘pass standard’. To continue:

Ultimately, this is a policy decision by the FPC [Financial Policy Committee] and the PRA [Prudential Regulation Authority] Board. But there are a number of considerations the FPC and the PRA Board might take into account in considering the level of capital banks should maintain in a stress.

A key consideration will the minimum level of capital required by internationally agreed standards. Banks need to maintain sufficient capital resources to be able to absorb losses in the stress scenario and remain above these minimum requirements.

My interpretation: leaving aside the judgmental override caveat in the second paragraph, the pass standard should be at least as high as the minimum capital requirements.

This takes us to the second question: what is/are the minimum capital requirement(s)?

The Discussion Paper continues further:

Minimum capital standards have been set internationally by the Basel Committee on Banking Supervision and transposed into European legislation under the Capital Requirements Regulation and Directive (CRD IV).

For example, under the PRA’s proposed implementation of CRD IV, the minimum Pillar I common equity Tier 1 capital requirement will be set at 4.5% from 1 January 2015 onwards.

If you didn’t read any further, you might conclude that the pass standard should be 4.5% because the Bank’s Discussion Paper claims that the minimum Pillar 1 CET1 requirement [note the singular] is 4.5%.

But this is to presuppose that there are no other CET1 minimum capital requirements and this is not so.

In fact, the 4.5% minimum is only one component of a set of CET1 minimum capital requirements [See End Note 2] [note the plural] and the overall minimum capital requirement is the sum of each of the components in this set.

The second component of this overall minimum capital requirement is explained in footnote 2 on the same page:

Consistent with the Basel III Capital Accord, CRD IV [also] requires banks to have at least a 2.5 percentage point buffer of capital [the Capital Conservation Buffer or CCB] above the 4.5% minimum.

Thus, the CCB is an additional minimum requirement on top of the 4.5% minimum capital requirement.  

Therefore, the overall minimum capital requirement is the sum of these two minimum capital requirements and 4.5% + 2.5% = 7%.

And since the pass standard in the stress test must be at least as high as the sum of these minimum capital requirements, i.e., the overall minimum capital requirement, the pass standard should also be at least as high as 7%.

QED.

The Bank’s position seems to be that they can ignore the CCB in setting the pass standard because the CCB is a different type of minimum requirement and because the failure-to-comply sanctions associated with the two minimum requirements are different: failure to meet the bare minimum 4.5% requirement could lead to the bank being put into resolution, whereas failure to comply with the CCB minimum requirement would merely lead to the bank being required to file a capital plan with its supervisor who may limit payments of dividends and bonuses.

Such thinking would fail any logic test.

The Bank’s point about the CCB being a different type of requirement is correct but irrelevant; what matters is that the CCB is a requirement nonetheless.

Nice try, but the blind-them-with-an-irrelevant-difference-defence doesn’t work.

Conclusion: according to the Bank’s own guidance document, the absolute minimum pass standard for the CET1/RWA stress test should be 7%.

I also consulted a number of experts for independent opinions. Not a single one was willing to defend the Bank’s interpretation of its own rules.

Consider for example this response from my friend, the Canadian economist Basil Zafiriou:

I read the standard the same as you, Kevin. The CCB is a mandatory buffer, so it has to be added to the CET1 minimum for an overall capital requirement threshold. Suppose a fire safety code requires commercial establishments to have a front and back exit plus a sprinkler system: having a front and back exit meets the exits requirement, but an establishment would not meet the fire code standard unless it also had a sprinkler system.

Still, I doubt you can win this argument with the BoE. You’re relying on logic and they rely on argument by assertion. And since they make the rules, like Humpty Dumpty they can make any rule to mean “just what [they] choose it to mean.” [See End Note 3]

Basil’s analogy with a fire safety code is spot on, ditto the Humpty Dumpty – and we all know what happened to him. The Bank’s interpretation of its own document is like Humpty himself, scrambled.

To give another view on the matter, on p. 24 of his authoritative book on the Basel III system, Safe to Fail: How Resolution will Revolutionise Banking (Palgrave Macmillan, 2014) Thomas F. Huertas states that

Strictly speaking, the capital conservation buffer does not constitute a minimum capital requirement.

At first sight, this statement might seem to support the Bank’s position, if read alone and out of context. But now consider the sentence that follows:

Instead, it represents the level at which the bank has to conserve capital by limiting dividends and distributions and by liming bonus payments in cash to management and employees – ample reason in the eyes of many to regard 7 percent as the effective minimum requirement.

Put another way, his view seems to be that “strictly speaking”, the minimum is 4.5%, but “effectively” it is 7%.

Furthermore, after the end of his first sentence there is a flag to a footnote in which it becomes clear that he is not citing the Bank’s ‘framework’ document at all. Instead, he is citing the Basel Committee on Banking Supervision (BCBS) in its original Basel III framework document, “Basel III: A global regulatory framework for more resilient banks and banking systems.” This footnote refers to pp. 54-57 of the Basel III framework document and an example of what it says is the following, which appears on p. 55 of that document:

129. A capital conservation buffer of 2.5%, comprised of Common Equity Tier 1, is established above the regulatory minimum capital requirement.

This language and the use of the term “minimum capital requirement” in the singular suggest that the BCBS might have seen the CCB as something apart from the minimum capital requirement [sic]. This is a one reasonable interpretation of the BCBS document but the underlying ambiguity in that document (e.g., over whether there is one or more minimum capital requirement(s) etc.) is regrettable.

Be this as it may, Huertas’s statements cannot be cited in defence of the Bank of England’s ‘framework’ document as he was referring explicitly to the BCBS ‘framework’ document and he made no reference at all to the Bank of England’s ‘framework’ document. Nor can there be any ambiguity here: Dr. Huertas was crystal clear what he referred to.

So when is a minimum capital requirement not a minimum capital requirement?

The Bank’s answer: a minimum capital requirement is not a minimum capital requirement when the Bank doesn’t use it as the pass standard in its stress tests, even though it promised it would.

I am tempted to say that this is truly Clintonesque hair splitting, but it is not: it is simply wrong.

The credibility of the Bank’s stress tests should be out there unchallengeable and shining bright for all to see, not dependent on a misreading of its own guidance documentation – and a misreading that just happens to underpin the Bank’s preferred narrative that everything is fine with the UK banking system.

If the UK banking system is as strong as the Bank of England maintains, surely the Bank can build a stronger case that this?

Kevin Dowd

February 29 2016

End Notes

End Note 1:

To be precise, with a 7% pass standard, the average surplus over the pass standard is less than 100 basis points, 2 banks fail the test, 2 scrape through by very narrow margins over the pass standard, 2 banks get small margins over the pass standard, and only 1 performs well.

End Note 2:

To clarify, the other components are the Capital Conservation Buffer (CCB), the Counter-Cyclical Capital Buffer (CCyB) and the Globally Systemically Important Banks (G-SIB) Buffer. I believe that to be convincing, these should be set at the maximum plausible levels they might take under fully phased-in (‘fully loaded’) Basel III. (And I am ignoring the new Systemic Risk Buffer announced in December 2015.) However, for present purposes I focus on the CCB as I am only concerned here to make the point that the Bank should never have used 4.5% as the pass standard in its stress tests.  

End Note 3:

For those of you who forgot your Lewis Carroll, "When I use a word," Humpty Dumpty said, in rather a scornful tone, "it means just what I choose it to mean—neither more nor less."

Ten questions for the “leave” campaign

Let’s ignore the fake alternatives of HMG’s recent papers - the scare stories about the UK’s position with third countries . Let’s also ignore the threadbare character of the government’s “renegotiation” with the “reformed” EU. No-one with a ha’porth of sense pays any attention to either. We can’t however, ignore the fact that the “leavers” need to come up with a crisp account of what they expect the electorate to vote for. Let’s orient ourselves by looking at the table of alternatives below.

Chart 1: Alternative trading arrangements for the UK

table 1

Sources: ASI, Global Counsel, David Campbell Bannerman MEP, HMG

This table is largely based on material from Global Counsel, a “stay” outfit, but it succeeds in illustrating the political character of the alternatives. The top row shows the present position, ie, that of the “stayers”; the bottom row attempts to capture the objectives of those advocating leave. The colours for the “stayers” at the top more-or-less reverse those for the “leavers” at the bottom. No surprise: the “stayers” are willing to tolerate the current sacrifice of sovereignty to maximise trade access; the “leavers” want to maximise “sovereignty” and will tolerate a bit less trade access. The five rows in the middle set out alternatives, with a rainbow of colours showing their various combinations of trade and sovereignty.

In the event, the “leave” campaign is currently engaging with four alternatives, of which only two show up in the table. All have strident proponents, strengths and weaknesses and unanswered questions.

1.The “Norway option” is advocated by Christopher Booker, Richard North and Robert Oulds. They say that this is the only realistic option, as the tangled web of UK/EU/third-party relations will take years to unravel and that it violates international law and common sense to accept the view (heard from, eg, Bernard Jenkins) that UK could legislate unilaterally so that “with one bound, Jack was free”. They argue that this option takes advantage of the precedent of Norway itself and the existing institution of the European Economic Area, which gives its members greater influence over EU policy than the UK has at present. It gives rise to the following questions:

• As this option involves accepting almost all of the EU’s existing acquis, ie, its existing complement of policies (in particular, including free movement of labour and a financial contribution to EU funds), how is the leave campaign to communicate it to the electorate as more attractive than the prevailing position?
• Do these arrangements really hold out the prospect of more influence than that enjoyed by the UK at present?
• Is it realistic to accept the contention that this option alone conforms to the Article 50 timetable of 24 months?

2. The “Australia option” has been mentioned by Richard North largely as a fall-back from the “Norway option”, but possibly as a more attractive alternative. Australia and the EU have negotiated a “Mutual Recognition Arrangement” (MRA), which eases the supply of goods and services between the two without obliging either to engage in intrusive harmonisation. At first sight, this scheme looks attractive but it has been little examined and gives rise to the following questions:

• Isn’t it the case that the Ozzie MRA is limited to a small number of technical rules in restricted areas?
• Does the bargain struck between the EU and Australia (or something realistically within the compass of negotiators) address the UK's reasonable objectives?
• Is such an arrangement realistically on offer or can negotiators realistically put it on the table within an acceptable timescale?

3. “WTO-plus” is pushed by David Campbell Bannerman in several books including a new one out later this month. The scheme’s attractions are that a minimum (ie, no more than compliance with the “Most Favoured Nation “ [MFN] rules of the World Trade Organisation [WTO]), it requires no assent from the EU. The idea is that after notice has been served under Article 50, negotiations between the EU and the UK will improve trading conditions above the WTO minimum. It gives rise to the following questions:

• Would such arrangements actually give sufficient access for UK exports (including re-exports) to the EU, in particular those involved in “just-in-time” supply-chains operating on a continental scale?
• How would such arrangements address services, the largest and fastest growing part of the UK’s economy and the sector in which we have greatest comparative advantage?

4. “Vote ‘out’ to renegotiate ‘in’ ” is no longer favoured by Boris Johnson but remains the objective of Michael Howard. The idea is that this would minimise disruption by giving the UK the best of both worlds. Two questions arise:

• How is such a scheme to attract those for whom “leave” means “leave”?
• How would such a scheme avoid accusations of preparing to break trust with the electorate, as political leaders are said to have done in 1975 and since?

We can’t answer every question but here are some preliminary conclusions.

a) Every alternative is imperfect. The question before the “leave” campaign is how they compare to each other. The question before the electorate is how the “leave” campaign’s selected option compares what the “stay” campaign is defending. We address the latter in a companion note, “Five questions for ‘stayers’.“

b) The alternatives on offer are better seen as journeys rather than destinations - in the grim jargon of government, a “direction of travel”.

c) HMG should be working up its own "plan B". It may make for fine campaigning polemic not to do so, but it also feels irresponsible and disrespectful to the electorate.

d) Unilateral legislation may not be able to resolve relations with the EU or others for all time but it can certainly freeze them with third parties for renegotiation at leisure. This is also perfectly consistent with international law. In general we warm to a programme of “freeze, then reform”.

e) Finally, negotiations may proceed better for the UK from an assumption of nothing (ie, WTO/MFN arrangements) rather than an assumption of the current state. After all, psychologists tell us that our species is constitutionally risk-averse: we prefer avoiding loss to making gains. If Brexit comes, better to apply that pressure to our negotiating counterparts!

The “leavers” need to nail their colours to the mast before campaigning officially kicks in, with the Electoral Commission’s decision on “designation” in mid-April. To get there, they need to work up good answers to these ten questions.

The Housing Market: from Whitehall Clichés to Local Initiatives

At present we have housing policies which revolve around clichés. If something is repeated often enough, it soon begins to be taken for truth. We are told time after time that there is a housing crisis. We are also told that the level of new build is too low and lower than in the past. Finally, there is the policy stereotype that we need national targets to solve the crisis. The crisis is usually defined in terms of affordability, and measured in terms of the ratio between income and house prices. Income is taken as the income of an individual. Yet most mortgages are taken by couples both with earnings so a more realistic figure would be the joint household income. There are no published figures for such joint income: but partners who are both on the minimum wage would be earning £30K between and across the labour market, £40K would be a more reasonable estimate.

Outside London, the South East, and East: prices paid by first time buyers in 2014 were:

• West Midlands - £146,000
• East Midlands - £137,000
• Yorkshire and the Humber - £133,000
• North West - £136,000
• North East - £118,000

(Source ONS)

The average price across these five regions is £134,000. The (Help to Buy) scheme with a 5% deposit has been popular in these areas, but even a 10% deposit should be feasible in a population where most young people under 30 have ISAs. For a 10% deposit, in the extreme case in which they had no savings at all, our young or not so young couple would have to save between them £600 a month over two years - from a gross income of £3300 a month. In Scotland, the average first time buyers price was £137K and in Wales £133K.

In other regions there are more serious problems of affordability. In the East the starting price was £204K, in the South East £231K and in the South West £181K. But even in these regions there are lower priced properties in some areas. There is a real affordability problem in London where the starting price was £364K. So in terms of affordability, there is a range with no problems in five regions, some in three, and an acute problem in London.

Excess Demand -The second test of crisis is the existence of strong excess demand. There are 124 post code areas in the UK. Our estimate is that of the 124 there are 30 with intense demand pressure, 70 where turnover is steady, and 24 where there is a housing surplus measured by the existence of housing stock that hardly ever sells. Again the problems are much more limited than the usual description in terms of crisis.

The Holy Grail of Owner Occupation

There is another idee fixe which has a great influence on policy— there is a crisis in terms of reduced access to owner occupation. Between 1961 and 2008 owner occupation rose from 43% to 68% of households and private renting rose from 9% to 14%. This rise in owner occupation was due to some factors, such as, the coming of the right to buy not likely to be repeated on this scale. The private rented sector has made several contributions:

1. Local initiative through buy to let has led to increased choice and the availability of tenancies in every town and city including London. This was a totally different situation from that at the end of the era of rent control in the 1960s.
2. Renting gives people with middle to low incomes much more choice of the area in which they live. Every year many thousands of new graduates and new migrants find accommodation in London. The rental market even in London has adjusted to the purchasing power of the customers which is much lower than that for house buyers.
3. Renting allows people to find accommodation quickly in new areas—the transaction costs are much lower. Owner occupation fitted well to a labour market in which people had jobs for life, but makes little sense for people who may move jobs, become self-employed or even move abroad for a period.
4. There is a tendency to exaggerate the shorter term capital gains to owner occupation. If house prices rise 5% a year in real terms, they would double in 20 years. The £134K house would be worth £270K—but the owner occupier –allowing for mortgage payment and depreciation of £2k a year for repairs, would have paid £180K even before discounting which would reduce the long term gains. The capital gains to owner occupation accrue mainly to those with very long term occupation who have paid off their mortgages—in fact the generation who were in jobs for life.
5. Even the problem that young people continuing to live with their parents is not as simple or heart rending as it sounds. This is not just a question of housing shortage. It may be the better option if the parents are under occupying larger houses. There are also gender differences with many more males in their 20s continuing to live at home. Perhaps the next Whitehall programme should be to promote evening classes for young males on how to turn on washing machines and cook simple wholesome fare.

The Myth of Under Production

Housing policy is deeply affected by the view that we are building far too few houses. Often mentions are made of the 400,000 plus built in the 1960s. However these numbers were a once for all event in conditions which were very different. There were residual problems with slum clearance and bomb damage: but the main feature of the 1960s was the ruthless demolition of large areas of housing, especially in Manchester and other Northern cities, and replacement with large estates often of poor quality. There was much demolition of houses which should have been improved. Many of the properties built in the 1950s and 1960s have had to be demolished because of their poor quality having caused misery to their residents. Many of the famous Macmillan 300,000 houses have had to be demolished. The photos show striking examples in Hackbridge, South London. workers cottages at least 200 years old could be on the market for £500K while a 40 year old development by the River Wandle is being demolished.

In social housing the Peabody properties built 150 year ago are of better standard than many of the modern properties close to them. Whole estates have had to be demolished such as the Quarry Hill flats in Leeds and the Ferrier estate in South London—but not before they had caused misery to successive generations of tenants.

In fact the output of private sector housing has been quite stable up to 2008, at around 150,000 houses a year — one of the few features of the housing market that has shown some stability. (See graph) The lessons of the past are that national targets promote poor quality in housing and that government interventions have been the main cause of a repeated boom and bust cycle in the housing market.

The New Realities of the Housing Market

There used to be a housing life cycle which involved early periods of renting or living in the family home, followed by movement to a small house or flat, and then for some after a few years moving to a larger house with family space. The stay in that house could be decades. This life cycle pattern led to a stable core of long term owner occupiers—or council tenants.

Now the market is more divided into sub-markets depending on a much greater variation in housing preferences by ‘consumers’. The market is adjusting to changes in household types which are leading to greater variations between local areas. There is not one national housing market but a series of sub-markets between housing of different types and sizes, and with differing economic incentives. We need much more information about the housing demands of specific groups including:

• Single people—now 44% of households.
• Regional and sub-regional differences demand for properties of different types and sizes.
• Housing mobility by younger people and housing aspirations.
• Likely downsizing by older people—and how equity release has reduced the incentive to downsize. Mobility and post retirement options.
• How do people see options for changing housing space without moving? There is a much more extensive business in terms of additions to properties than there was in the past. How far will these options affect local demand for housing?

The most obvious regional difference in housing is between London and the rest of the UK. The London market is distinctive in its housing stock with more than half the flats in the UK in London. It is distinctive in the average price and in the top end property values. It is also distinctive in turnover and mobility.

The London market is affected by Hirsch effects named after the economist Fred Hirsch[1]. (Hirsch 1976) There can be intense competition for scarce positional goods. The word “cool” is worth £200K on the London housing market as formerly low income areas such as Balham and Tooting acquire social cachet. The Sloane rangers have now moved to Battersea. Transport and tube availability reinforce the Hirsch effects. Such effects are found much more strongly in London than in any other parts of the UK. These special conditions certainly require feasible measures to increase the availability of housing—but they are a bad guide to policy for the rest of the UK.

Policy Directions: Quality and Choice

Housing needs to use DevoMax. We need not national housing targets but a series of more local and sub-regional policies to build momentum for further improvement. There has been some very significant progress over the last two decades in raising quality and choice. 90% of British properties now have central heating and reach standards which would have seemed out of reach 40 years ago. Social housing agencies have greatly improved management of rented public housing. Buy-to-let investment has increased choice and mobility.

Local Enterprise Partnerships can be leaders in improving the local environment. Some LEP plans and County Councils are already setting targets for housing. They now have the chance to lead in better local environments. For example SEMLEP the LEP for the South Midlands covering Buckingham, Northampton and Milton Keynes with a current population of 1.7 m has set out aspirations for building 100,000 houses in the next ten years.

West Sussex is expecting 56,000 houses over the same period.

Overall LEPs are planning 1.5m houses over the next ten years. These developments create opportunities for some distinctive high quality additions to the local stock. But first LEPs should commission studies of the potential customers in the area. What seem to be the gaps in the existing housing stock? There are opportunities for many different types of scheme, from starter flats for young people through to extra care housing. Targets for ‘housing’ are too simplistic. What kind of housing in a time when there is much less standard life cycle than used to be the case?

Targets lead to a focus on numbers and easy options to reach numbers. This will tend to push action towards building large numbers of houses on the outskirts of exiting towns, often without adequate infrastructure and social amenities. Instead of ribbon development we will get rectangle development. There is a danger that opportunities will be overlooked for infill developments within towns. Change on the High Street and on supermarket sites is creating new opportunities for much more building in towns. LEPs can provide information both in terms of the types of housing required and for local opportunities. There are particular opportunities for social housing agencies to develop these local schemes. Instead of national targets we need different market driven opportunities which will vary between LEPs. Devolution means promoting housing choice and housing quality—for people with lower income as well as the better off.

A local approach is highly relevant to the special problems of London. Here there are pressures but also an active market for any middle income housing either for rent or buy. There are many new opportunities to develop sites. For example one supermarket chain (Tesco) in London has just released ten large sites for development.

The reduction in planning restrictions on adaptation of offices into residential has had highly positive effects but there is far more that could be done, especially in the suburbs, for more intensive use of smaller, often semi derelict industrial and garage sites, as well as for change in High Streets to redevelop unused shops. There is of course scope for developing new kinds of industrial site as is being done in Shoreditch, but many of the smaller sites in the outer suburbs such as Richmond and Hounslow are not suitable.

There are already positive developments in rented housing in London. Under the Build to Rent scheme there are already close to 14,200 units in planning, completed or under construction in London compared to 7,112 in the rest of the country. These schemes are attracting pension fund and institutional investors and can do for the wider range of mainly young people what investment has done for student housing.

The housing problems of London should be addressed by local initiative not by national targets.

[1]Hirsch F. Social Limits to Growth . Routledge 1978

Another ten bad arguments for staying in the EU

Here are another 10 of the arguments for remaining in the EU that do not stand up. 11. A leave vote would be a leap into a perilous and unpredictable unknown

It is certainly true that an exit from the EU would take the UK into an unpredictable unknown, though there is no reason to suppose that it need be particularly perilous. It would be unpredictable because the future always is. If we stayed in the EU we would also face an unpredictable future.

It is important to understand that status quo is not an option. If we vote to remain, we are not voting to stay inside an unchanging EU, but to stay in one that will continue to develop and change. Many in the EU wish it to move to "ever closer union," and they mean political union, with ever more decisions being taken collectively by EU institutions rather than by the governments of member nations.

The choice between "remain" and "leave" thus comes down to a choice between staying within an organization that will develop towards closer political union, or choosing not to be a part of that closer unity. The UK could survive and prosper outside the EU; many other countries do. For much of our country's history it has stood alone, outside of political union, but intertwined with other nations by treaties, alliances and agreements.

A post EU Britain would continue to enjoy those relationships and the advantages and security they bring. It would retain friendly relations with the EU, as many countries already do. A UK that voted to stay in the EU might be able to retain a considerable area of independence from centralized decision-making. It might be an outrider, inside the EU, but outside of the central core of nations driving toward ever closer union. It depends on the terms that can be agreed. But there is no reason to suppose that our absence from that process need be perilous.

The least unknown course is to remain an economic partner of the EU, while choosing no longer to be a part of the political union. This would be achieved by a vote to leave.

____

12. Britain's voice is stronger in Europe

Some think that the UK doesn't count for much by itself these days, but by joining our voice into an EU chorus we can make ourselves heard more. The EU presently represents 28 nations with a combined population of over 500m. If the EU were a country it would be the world's third most populous and have the second biggest economy. With such a size, goes the argument, the EU has to be listened to. It can make its voice count for far more than any of its individual members, including the UK, could.

The problem with this argument is that it assumes that our interests coincide with those of the EU, and that it does in fact speak for us when it makes its voice heard. The reality is that the UK is one small voice within the EU, and one often not heeded. The UK is regularly outvoted within the EU, so EU positions are often ones that were opposed by the UK when they were first put forward. Securing agreement between 28 nations is difficult, so many collective decisions will act against the interests of some of the individual members.

The EU is also cumbersome. It takes time to negotiate a position that takes account of the preferences and views of its individual members. A single nation can declare its position on issues that arise, but the EU might take weeks or months before a joint position can be hammered out. And even then the position will probably be a compromise rather than a clear expression of its position.

A UK that was independent of the EU would, it is true, speak with a smaller voice than that of the EU, but it would be a voice that actually represented its interest every time, rather than having that interest swallowed up in the interests of others. An independent UK would also have its own seat in many of the world's assemblies, instead of having that seat occupied on its behalf by the EU. Its voice would speak for itself. ____

13. It will cost us money to leave the EU. We'd lose EU grants

While it is true that some UK institutions such as research laboratories receive grants from the EU, these are a tiny fraction of the amount that Britain pays in as its annual contribution. In 2014 that was £19.1bn. It would not, therefore, cost us money to leave the EU. On the contrary, the UK would end up well ahead financially if it did vote to leave.

The EU's record of money management has often come under attack. It has a huge budget and spends money on a lavish scale. Its expenses for parliamentarians and officials are notoriously profligate, and it gives grants to organizations within member states, choosing to reward pro-EU groups and to withhold funds from those that do not actively support it.

The UK would come out well ahead if it left, and would no longer have the EU interfering in its domestic politics through it use of grants to influence political thinking in the UK to support the EU and its policies. An independent UK would be more careful in spending its funds than the EU is with those funds it allegedly spends on our behalf.

The EU takes huge sums from the UK and spends large parts of them on projects in other countries, as well as in this one, that an independent UK would probably not choose to back. An independent UK would also gain economically by not having to follow the many EU regulations that raise the costs of business without achieving anything worthwhile. A UK that spent the funds for itself would certainly choose to spend them on things it decided were more in its interest.

There would be a positive effect on our national debt, too, in that if we were no longer in the EU we would no longer bear any liability (through our central contribution to its budget) to support states within the Euozone that have suffered economic collapse and need to be bailed out. ____

14. UK businesses would lose out if we left

This is almost certainly untrue. Once the trade deal is put in place, which will be well before we actually leave the EU, UK businesses will have continued access to the Single Market. Since less than half Britain's trade is with the EU, and since 95 percent of UK firms do not export there, the expectation is that UK businesses will continue after exit much as they did beforehand. Some firms will take advantage of the more favourable regulatory climate after exit to lower their costs and increase their worldwide sales outside the EU.

Some firms, especially in the financial industry of the City, will have to overcome difficulties by making changes to the way they do business. But with the difficulties come opportunities. Unconstrained by the EU on the global stage, UK financial firms are well placed to expand into new areas. London's role as the key global player in the finance industry will not be harmed if the referendum vote takes the UK out of the EU. Nor it will find that role threatened any more by EU encroachments designed to support its other members to our detriment. On the contrary, its new independence will enhance its status as a neutral ground on which the world finds it advantageous to do business.

It is noticeable that countries such as the US, Australia and Switzerland are not lining up for admission to the EU. They know the losses if they did join would far outweigh the gains.

It is generally true that UK governments have been more sympathetic to the needs and problems of businesses than have their EU counterparts. EU legislators and bureaucrats often seek to impose a political agenda on business, whereas the UK usually oversees business with a looser rein, preferring to see it seize opportunities to generate wealth rather than to constrain it within a political plan. A UK independent of the EU would almost certainly create a climate more favourable to business than any the EU itself might bring about. UK businesses would benefit, not suffer, if this were to happen. ____

15. International peace and stability are safer with Britain's EU membership

Peace and stability featured among the motives when the European Economic Community was first established. France and Germany had fought in two disastrous and costly world wars, and the thinking was that further wars could be prevented if they were bound together to each other by strong economic ties. These later developed into political ties. The strategy worked to some extent, in that France and Germany learned to negotiate and settle disputes by compromise and arbitration instead of by military posturing.

This was over 60 years ago, and represents yesterday's solution to yesterday's problem. It is no longer part of the EU remit to keep France and Germany from making war on each other because that is not a modern world problem. Some have pointed out in any case that it was the need to unite against the threat of Soviet aggression that threw France and Germany together more securely than did the EEC.

Indeed, military commentators and historians have made the case that it was not the EEC and its successor EU which preserved international peace and security, but the network of military alliances led by NATO which acted as a sufficiently strong deterrent to resist threats to that peace from the Soviet Union and its Warsaw Pact allies.

It is noticeable that the EU failed in its attempts to bring peace to the Balkans in the wars of the 1990s following the break-up of Yugoslavia. The killing and ethnic cleansing continued despite attempted EU mediation. It was only when NATO intervened with its armed forces, thereby causing the US to bring military force into the conflict, that peace was eventually restored.

A departure from the EU by the UK would not involve its departure from NATO or its other co-operative alliances, and would not bring any weakening of international peace and stability. ____

16. The UK farming industry would be destroyed if we came out

There is no doubt that farmers across the EU benefit from the subsidies and supports that the EU provides out of its budget. Determined to protect their farmers, together with the traditional look of their countryside, the French bargained hard to get the EC (as it then was) to support farming with subsidies and tariffs, and the Common Agricultural Policy was born.

The CAP subsidized over-production, leading to such excesses as "milk lakes" and "butter mountains" as surplus goods were stored. It had a malign impact on developing countries, since the EC closed its borders to their primary produce, while dumping its own surpluses onto world markets to undermine world prices for them. Its subsidized beet sugar, in particular, undercut poorer countries dependent on cane sugar exports.

The CAP was also charged, and still is, with promoting excess application of fertilizers and pesticides. More recently it subsidized bio-fuels from food crops, leading to food price rises in poorer countries so EU members could move to renewable fuels. The CAP record has been malign on the environment and world living standards.

Undoubtedly UK farming would change if we left the EU and its CAP. It would be more exposed to world markets and world prices, outside of the EU's protective bubble, and would have to adjust accordingly. It would have to move to farming crops and animals for markets, rather than for subsidies. Fortunately the more than £19bn that the UK would save in its membership payment would provide a buffer from which support for UK farmers could be phased out gradually as they adjusted to real-world conditions. The UK might choose to continue support to some areas of farming but, once out of the EU, these would be chosen to aid UK farmers rather than those of other EU members. UK farming would not be destroyed, but it would change for the better. ____

17. Civil rights would be weaker in Britain if we left the EU's jurisdiction

If the UK left the EU, it would cease to come under the rulings of the European Court of Justice (ECJ), but would continue its accession to the European Convention on Human Rights, which is overseen by the European Court of Human Rights. The ECJ fundamentally rules on EU law, but there is some overlap because it is obliged to weave into its findings a due respect for the ECHR. This Convention covers not just EU members, but the 47 nations of the Council of Europe.

This distinction reminds us that Europe and the EU are not the same; the latter is a subset of the former. There would be no loss to the UK in leaving the jurisdiction of the ECJ. The latter interprets EU law, and has usually ruled against the UK's when it has opposed interpretations of EU law that it believes are opposed to its interests.

It was a European Court ruling that declared it to be illegal to have a blanket ban on giving prisoners the vote, a move opposed by the UK which has traditionally denied them this right. There have been other cases, notably the ban on "whole life" sentences. Those adversely affected by decisions of the UK courts have resorted to appeal to the ECJ if the issue concerned interpretation of EU law, or to the ECHR if they felt they their human rights had been infringed. These include those charged with terrorist offences and those who have openly urged violence against Western nations including the UK.

If the UK quit the EU, it would still be bound by the ECHR, whose decisions UK judges have agreed to respect. There have been calls for a UK law to enshrine civil rights in a UK law that would replace the 1998 Act that took us into the ECHR. But this issue is not bound up with our membership of the EU, and would not be affected by our withdrawal from it. ____

18. The UK would be more likely to break up if we left the EU

SNP members have suggested that Scotland would also have to vote to leave in order for a UK-wide 'leave' vote in a referendum to be valid. There seems little if any evidence that Wales of Northern Ireland would want to seek independence and remain in the EU if the UK as a whole voted to leave, but the question is valid as to whether an exit vote might precipitate Scottish independence.

In law the position is fairly clear. If the UK votes to leave, this will apply to all parts of the UK when it is implemented. There is no question of Scotland being allowed to remain in the EU if Scots were outvoted in a UK-wide referendum, any more than Yorkshire would be allowed to remain if a majority of its residents bucked the national trend of a 'no' vote. Scotland would leave as part of a UK exit.

Whether this would inflame the nationalism of a Scotland determined to unite with Brussels rather than London is something that cannot be predicted. It seems strange that Scotland would want to leave one union in order to join another. A future independent Scotland would have to start the application process from scratch if it wished to join the EU.

As far as opinion polls can give any indication, they show that the Scottish population is divided on the issue, just as is the population of the rest of the UK. It is true that Scotland voted to elect many SNP Members of Parliament once they could safely do so without fear of separation from the UK after the independence vote was defeated. It seems that the Scots quite like the SNP without liking the idea of independence.

In the coming referendum it is likely that millions of Scots will vote to remain in the EU, though it is unlikely that a majority of the population will do so. It is also likely that millions of them will vote to leave the EU, though this, too, is unlikely to constitute a majority of the population. Scotland may or may not choose the path of independence in future, having recently rejected it. But whether the UK votes to leave in the EU or to remain within it does not seem likely to affect that outcome. ____

19. If we left we'd lose the regulatory controls through which the EU makes our banks and businesses behave properly

The supposition here is that the EU is in a better position than is the UK to ensure that banks and businesses conduct their affairs in ways that are satisfactory to people in the UK. There is no evidence for this. There is, however, considerable evidence that EU bureaucrats and politicians have far less knowledge or understanding of how business actually works than do their UK counterparts, which themselves are not always adequately competent.

It is also patently clear that EU regulations on business are subject to political horse-trading as EU member states vie to gain advantage for their own areas of business. In financial regulation, for example, there are many allegations that other EU members, envious of the UK's leading position in finance, deliberately seek to impose regulations that will restrict the UK's position in order to advance their own.

The notion that the UK is too weak-willed to adequately monitor and circumscribe the behaviour of its banks and businesses is a strange one. The implication is that we in the UK are prepared to condone irregularity and even immorality in our business affairs to a lesser degree than our EU counterparts. Given the business ethics that prevail in some EU countries, this is a truly remarkable notion.

The UK seems both ready and capable of introducing and implementing the regulations needed to ensure acceptable ethical and sound business practices within its shores. We have done so in the past and currently do so; but we can only do this at present within EU rules. We would enjoy greater flexibility outside the EU.

There is nothing to suggest that we need the distant decisions of EU bureaucrats and politicians to ensure that this happens, and much to suggest that we could do it better and more appropriately ourselves. ____

20. Leaving the EU would see the UK retreating from the world to become insular and narrow in its outlook and influence

This claim is the opposite of the truth. In fact the EU is characterized by a narrow regionalism that is anti-global in its outlook. It looks inward from behind its protective walls, and tries to keep out the world influences it thinks might upset its delicate balance. Too often it seeks to insulate itself from the rest of the world rather than to embrace and interact with it.

Furthermore the EU is growing less significant internationally as time passes, constituting a smaller share of the world economy. A UK which voted to separate from the EU would not be retreating from the world but advancing into it. The UK could make global trading partnerships and negotiate free trade deals that opened its markets to other countries and gave it access to theirs in return. The UK could think and act globally instead of tying its future only to the other members of the EU.

If the UK votes to leave there is no question of putting up shutters and fences to keep the world out. It is the exact reverse. The UK would play a full part on the global stage, recognizing that the future of the world lies not in seeking regional advantage, but in recognizing that the world is becoming one that interacts more widely for mutual advantage. We are moving into a world of interconnectivity, where people in distant parts of it impact daily on the lives of those in the far reaches of it.

The UK is held back from this by the need to conform to EU rules and to let the EU negotiate on its behalf agreements that are more restrictive and confining than those we could have negotiated for ourselves. A UK that voted to leave would not be retreating behind the walls of a 'Fortress Britain,' but declaring itself ready to deal and trade with the wider world beyond the EU's borders, and confident that it can do so effectively and in ways that make it a better place.

Ten bad arguments for staying in the EU

There are good arguments on both sides of the EU debate, both for staying and for leaving. Unfortunately, many bad arguments are being made. Here are 10 of the arguments for remaining in the EU that do not stand up.

1. A leave vote would cost jobs

It is commonly claimed that if the UK were to leave the EU, some 3m-4m jobs would be "at risk." Nick Clegg is among those who have claimed that some 3m jobs are "dependent on our EU membership." This is incorrect. As Ryan Bourne has shown, these jobs are dependent on our export trade with other EU countries, not on our membership.

If the UK left the EU, it would negotiate a trade deal with the EU, and exports would continue. It is not in the interests of other EU countries to cease trading with the UK, since trade benefits both partners. Countries as different as the US, Peru and Mexico all have trade deals that grant their goods access to EU markets and allow EU goods to sell in their own markets.

There is a case that UK jobs might increase if it left the EU. The EU share of UK exports has been declining, and is now less than half of what we sell elsewhere. It would be in our interest to expand trade with global partners such as China, and untrammelled by EU trade rules, it would probably be easier for us to do so.

Some of those predicting job losses previously predicted that the UK would lose 2m jobs if we failed to join the euro. They were wrong. There is no evidence of any job losses attributable to our keeping the pound. In fact that decision made it easier for the UK to deal with the Financial Crisis. We were able to implement policies denied to the euro countries, and were able to create more jobs in several years than the euro countries combined. The UK has seen job gains, not losses, because it kept its currency.

The numbers of alleged "job losses" if the UK left the EU are plucked from the air, making the completely false assumption that our trade with the EU would cease if we did. It could even be argued that the £20bn we pay annually to the EU would generate more UK jobs if it were spent here instead. ____

2. The UK would lose influence in the world

The thinking behind this is that in a world of continental powers, the UK is a small island without much impact. By being part of the EU, it acquires that body's collective strength and bargaining power, and can thus exercise more influence than it ever could unaided.

This notion derives from an age now past. It was true in the 1960s and 1970s that the UK's influence had much diminished and was still diminishing. The country had the lowest growth rate in Europe and the highest strike record. Beset by costly and unresponsive nationalized industries, and plagued by aggressive and powerful trade unions, Britain cut a pathetic figure and was sometimes called "the sick man of Europe." One of the motives for joining the EU (then called the EC) was the widespread feeling that we couldn't cut it on our own.

This changed in the 1980s and early 1990s as the UK reformed itself. It went from the lowest growth to the highest, from the highest strike rate to the lowest. It acquired a confidence it had lacked before, and became more influential as other countries noted and admired its progress.

The UK is not currently very influential within the EU. When it votes against measures proposed in the Council of Ministers it is defeated. Its interests compete with those of 27 other nations, many of whom often combine to promote their own interests. Increasingly the Eurozone countries combine to pass measures inimical to the interest of those not in the currency union.

Outside the EU the UK would negotiate its own position instead of having that position buried among the interests of others. It would take its own seat on international bodies such as the World Trade Organization and be able to lobby and bargain for its own advantage. It is highly likely that the UK would use that position to promote lower tariffs, more free trade, less protectionism and more opportunities for enterprise on a global scale. It cannot do that as 1 in 28 members of a body that currently monopolizes its representation. Outside the EU the UK would almost certainly be more influential in the world, not less. ____

3. Firms would leave the UK

Although some argue that firms would leave the UK and relocate within the EU if Britain voted to leave, there is scant evidence that this would happen. Only 5 percent of UK firms trade with the EU, but all firms currently have to obey EU rules and accept EU regulations. Many small and medium enterprises complain that they are adversely affected by those rules, and that extra costs are imposed upon them when they have to comply. They would stand to gain if the UK took control of its own business climate, and they would have no reason whatever to leave.

Among the 5 percent who do trade with the EU, there are many who would like to see control over trade deals taken back into UK hands. There are, it is true, a few large companies who favour remaining in the EU because its rules raise barriers that potential new competitors find it difficult to surmount. They are a minority that has strong influence over the Confederation of British Industry, whose "surveys" of opinion have been exposed for using flawed methodology to make them seem more representative. Even among these, there are hardly any that threaten to leave, and almost certainly none that would actually do so.

It was said that is we failed to join the euro, many businesses would leave the UK. In the event it did not happen.

Most business leaders, when asked, deny there is any question of them leaving the UK for elsewhere in the EU in the event of a UK withdrawal. These include big employers such as Vauxhall, Nissan, JCB, Airbus and GE. Any who did so would be at a huge disadvantage with respect to those who did not. They would have to follow EU regulations for their trade with the rest of the world, whereas their still UK-based competitors would only have to follow them for their trade with the EU.

There are considerable costs involved for most companies in relocating to another country. The perceived advantages of leaving the UK to move to a country still in the EU would have to be massive to justify such costs, whereas the reality is that they are not. Indeed, in most cases they are negative, and the advantage would lie in remaining in a UK that could now control its own regulations and negotiate its own trade deals. ____

4. The UK would lose inward investment

The theory is that if the UK were no longer located within the EU, foreign firms would transfer their investment to countries still inside it. Even if firms retained their factories and facilities already here, it is argued, the UK would lose new investment because those firms would choose to expand within the single market rather than outside it.

If the UK did decide to leave, it would negotiate a trade deal with the EU that allowed reciprocal access to each other's markets, just as the US, China, and many other countries have already done. International firms would therefore have no reason to consider the UK as a less attractive investment opportunity than it is presently.

Although the claim is made that they would pull out investment, there is a paucity of international investors announcing plans to withdraw investment, or even talking of doing so, if the UK votes to leave. On the contrary, car makers and others have said they have no plans to withdraw present or future investment if it does so.

Ernst and Young's Attractiveness survey found that 72 percent of US investors and two-thirds of Asian investors would like the UK to have "looser" relations with the EU. This means that instead of wanting to keep the UK bound tightly within the EU and its rules, investors would be relaxed, even favourable, to a looser relationship such that the UK might enjoy outside the EU, but with a trade treaty negotiated with the EU.

The UK is the favoured destination for foreign inward investment in Europe because it enjoys certain advantages, linguistic, cultural and historical, as well as business and financial. Those advantages would not be eroded if the UK decided to leave the EU. On the contrary, the odds are high that they would be enhanced if the UK were free to offer deals and terms that it is currently prevented from doing by the need to comply with EU rules and directives.

A UK outside the EU would need to think globally, taking links with the wider world as no less important than its deals with the EU. Its advantage would lie in seeking out and attracting more inward investment, not less, and there is no evidence to suggest that it would fail to do so. ____

5. If we came out, the UK would have to obey EU rules without any say in drafting them

Lord Heseltine recently flew this particular canard on the Radio 4 Today programme. He actually said that if the UK voted to leave, "our trade policy would be made in Germany without us having any say in it." It is certainly not true that America's trade policy is made in Germany, or Switzerland's, or Mexico's, Peru's, Australia's or the other countries that trade with the EU without being members of it.

A UK outside of the EU would similarly negotiate a trade deal with the EU. It would, like the other countries, comply with EU rules for the goods it traded with the EU, but not for goods traded outside it. The EU in turn has to meet the standards of the countries it exports to for the goods it trades with them. Some 95 percent of UK firms do not trade with the EU, so would not have to comply with EU rules, or have their trade policy decided in Germany without having any say in it.

The UK's trade policy would be made in the UK, not in Germany or Brussels, and would be such as to aid and encourage UK firms instead of tying them down with many pointless restrictions. Some people seem to assume that the UK would have a "Norway-type" relationship with the EU, or a "Switzerland-type" relationship, but if the UK did leave the EU it would develop and negotiate its own relationship with the EU, like many other countries have done.

The claim that the UK would lose its ability to influence the rules presupposes that it has any significant influence as things stand. The UK has 8 percent of the votes in the EU Council of Ministers. It has tried to block 72 measures over the past two decades and has been outvoted every single time. Each of them has passed into EU law. The notion that the UK has valuable input into the drafting of new EU laws is not really supported by the facts. Our presence within the EU basically means we are forced to comply with laws made by others against our opposition. Outside it we would not. ____

6. We'd have to negotiate with each of 27 separate EU countries

This has been said by some of those who support the UK remaining within the EU, including Lord Heseltine, even though it is obvious and palpable nonsense. Assuming that the other member states remain within the EU if the UK decides to leave, the EU will continue to exist, although containing 27 members for the time being instead of 28.

The UK would not have to negotiate with them one by one because the EU negotiates on their behalf. We would negotiate a trade deal with the EU, a deal that would then apply to all of the remaining members. UK firms would gain access to the single market via that trade deal, and their goods would then be able to enter each of the individual countries that make up the EU on the same terms. Similarly the goods from each of them would be able to enter the UK, all on the same terms as will then apply to the others.

UK citizens have their preferences, of course, as to which EU countries they favour more than others. Character, culture and history play a part in their choice of countries to visit, as does climate, and obviously the cost of living plays its part. These preferences would continue to be exercised, and doubtless to change over time, if the UK were no longer a fellow member of the EU. But the rules governing visits to them by UK nationals would be decided centrally by the EU, not by the 27 countries individually.

The Schengen Agreement for borderless travel between countries within the area does not currently apply to the UK because it, along with Ireland, chose not to join. This would be unchanged if the UK left the EU. UK citizens would have to show passports on entering other EU countries, as they do now. The difference would be that UK travellers would walk through the lines marked "non EU members." This also would not require negotiation with individual EU states.

It would be up to the UK if it left the EU to decide for itself whether to retain separate entry lanes for EU members as opposed to those entering from elsewhere in the world. It might be convenient to do so. ____

7. We'd lose access to EU markets, hitting our exports

Some commentators seem to think that if the UK voted to leave, then the EU would act vindictively to punish it for doing so by cutting trade links. Such an outcome is far-fetched to the point of fantasy. Countries to not behave like that, especially with friends and allies. They work together for mutual benefit and self-interest.

The EU has signed free trade deals with many countries, giving them access to its single market in return for its members having access to theirs. There is no doubt whatsoever that it would do the same with the UK if it chose a future for itself outside the EU.

Some pro-EU activists deny this. Stephen Kinnock MP recently said in Parliament that the UK would get a "punishment beating" if it left. This is unfounded. Punitive tariffs are banned under WTO rules. The EU's Lisbon Treaty states:

" 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."

Britain is too important a trading partner for much of the EU for them ever to consider ending that economic interdependence. Similarly the UK's trade with the rest of the EU, although now less than our trade with the rest of the world, still represents almost half of our total trade. It is in the interests of both parties to allow mutual access to each other's markets, and there is no question that this would continue if the UK voted to leave. A free trade deal would be negotiated with the UK, just as the EU has already negotiated similar deals with other countries.

The reality is that if we left the EU, the economic relationship would continue, but the political relationship would be changed to one in which the UK made its own decisions instead of being obliged to accept collective ones. ____

8. Our ability to control immigration would be worse if we came out, not better

If we left the EU, there would still be constraints upon our ability to control immigration because of our commitment to international human rights and asylum conventions. We would, however, be able to restrict the numbers of EU citizens allowed to move and settle here. Whether we would want to do that is another matter, but we would no longer be forced to allow free movement of EU members if we were ourselves no longer part of the EU.

In some areas we would negotiate with other countries, but our ability you do so would be enhanced rather than diminished if we were able to do so independently, instead of having to do so collectively through the EU. There is no doubt that an independent UK policy on immigration would give it greater control than it could achieve through an EU wide immigration policy imposed upon it.

Some strange claims have been made, including one that the French would stop policing the migrant camps near Calais if the UK quit the EU. They would apparently do this to punish us for leaving, leaving Britain at the mercy of mass attempts to infiltrate into the UK. There is no evidence at all that anything like this would happen, or that it would have the effect predicted. No officials or spokespeople have indicated an intention to do this; the idea is empty and utterly implausible speculation.

There is a very good case for saying that immigration into Britain, especially skilled immigration, is a good and helpful thing. For centuries we have admitted those fleeing persecution or seeking to better their life. If this were under UK control, it is likely that we would continue with such a policy. But it would be easier, not harder, for the UK to be able to control the numbers, the rate of flow, and the type of immigrants we wanted to give priority to. We would be able to do so in ways that made it easier to absorb and integrate such people into our society and our culture. ____

9. UK citizens living in Europe would have to leave

It is difficult to see where this idea comes from because there is nothing to support it. If the UK opted out of the EU, there is no way that our ex-partners in that union are suddenly going to deport all UK citizens living within their borders. They would have no reason to do so. Nothing in our relationship with the EU, either now or following a withdrawal, would cause this to happen. British citizens living elsewhere in the EU are a positive asset, with most making a significant and positive economic contribution to the countries they reside in.

Similarly there would be no expulsion of EU citizens currently residing in the UK. Again, there would be no reason to, and nothing arising from the negotiations would imply it. The overwhelming majority of them make a similar positive contribution to our economy, and it would be very much in the interests of both parties not to change the status quo of those currently residing in each other's territories.

Anyone who lives in another EU country for 5 years or more gains the right of residence, and this right would not be rescinded, either for UK citizens who have chosen to live abroad, or for EU citizens who have settled here.

The UK remains part of Europe, whether or not it retains its membership of the EU. Undoubtedly UK citizens will continue to wish to take jobs in Europe, even if the UK leaves the EU. It is equally certain that EU citizens will be attracted by employment in the UK. In many businesses these days staff are often rotated through different foreign branches of an international company, gaining both experience and promotion opportunities. This will continue whether the UK remains in the EU or chooses to leave it. People from non-EU countries such as the US, Australia and Japan, come to live and work for a time in EU countries. The same would be true of UK citizens if we ourselves became a non-EU country.

UK citizens in the EU will not be forced to leave. On the contrary, they will be joined by fresh arrivals from the UK, and the same will be true of EU nationals living and working in the UK. ____

10. We'd all find it more difficult to visit EU countries

It would probably be no more and no less difficult for UK citizens to visit EU countries if the UK were to withdraw from it. We are not part of the Schengen area with its passport-free travel. UK citizens have to take passports and show them at frontiers. They are subject to possible customs and immigration checks. The same is true of EU visitors to the UK. This will continue. The EU has visa-free reciprocity with several countries, and would be virtually certain to achieve similar reciprocity with the UK if it ceased to be an EU member.

UK citizens would need passports, not visas, as they do at present to visit EU countries, and their citizens would similarly enjoy visa-free travel to the UK, with admission on showing passports.

Again, some make the specious claim that the EU would 'punish' the UK for leaving their club, and would retaliate spitefully against UK tourists. The reality is that many EU countries count UK tourists as important for their economy, and would not allow their governments to make travel more difficult for such visitors. It seems extraordinary that the people who make this false claim are happy to remain in association with countries as spiteful and vindictive as they believe them to be.

There might just be the minor difference of UK visitors having to walk through the line for "non EU members" when they arrived in EU countries. But just as UK visitors are usually allowed currently into Schengen countries with a nod and a cursory glance at the passport, so they would almost certainly be treated in future as they entered EU countries.

Given the numbers of EU citizens who wish to visit as tourists, it might even be advantageous for both sides to agree to continue the present arrangement both ways.

Top tools for understanding economics

There are vital thinking tools that people well-informed in economics have that most other people do not. These tools are roughly translatable as being the following 8 things. These things are ones that need to be understood, but frequently are not. 1) Almost every action has tangible and intangible benefits, and tangible and intangible costs, and if you haven't considered all of those factors thoroughly you do not understand enough about what you’re doing.

2) Just because there are good intentions and a perceived ethical stance behind a view or an action, this does not mean what you have is a good idea. In fact, quite often good intentions and a perceived ethical stance actually mask the reasons why many ideas are bad ones.

3) Just about everything in life is a trade-off, where something happens at the expense of something else (primarily time, money, and material resources) - and there is rarely anything you can do, or ought to do, that lies outside of this consideration.

4) If there is one thing that should almost never be interfered with it is the mechanism of prices that are dictated by the supply and demand market. Prices are not just sums that tell us the value of something, they are vital information-carrying signals that inform us of the outcome of billions of transactions throughout the world. No politician can know the market clearing price of anything better than the market knows itself.

5) The economic pie is not fixed, nor is it zero sum. If I have a slice of it, this does not mean it leaves less for you, because the economy can keep growing, creating wealth and value for both of us.

6) The principal drivers of human prosperity, increased well-being and economic growth are trade and competition.

7) Just as in the market of goods and services, tax is also something that also ought to be opened up to competitive forces.

(Note on 7: Just as shops and restaurants compete with one another for your custom, so too do governments of nation states in their rates of taxation (they would be able to do this more successfully were it not for the fact that so many people are under the misapprehension that society would be better if the rich were taxed more). Governments are competing with governments of other countries for foreign investment, where attracting more external workers and more capital investment from foreign entrepreneurs benefits the nation. People want to work and invest in nations where they are not taxed too heavily on their income and their investments.

8) To properly understand economics you have to understand incentives. When one person goes out to complete a transaction based on self interest, he (or she) adds a little bit of value not just to his own circumstances, but to every agent involved in the transaction (the seller, the transporter, the manufacturer, those mining for raw materials, and so on). Multiply that one transaction by the billions that have been going on every day in the past century and a half (in particular) and the result is the Smithian invisible hand mechanism that aggregated to all the increased prosperity and well-being the world has seen.

Understanding these 8 points provides the bedrock on which you can build pretty much your entire arsenal of economic understanding, political analysis and societal commentary. Virtually everything you need to speak rationally on any of those three things is bootstrapped by the wisdom of 8 points above.

Ten initiatives to help young people: 3. Redressing the age imbalance

Several analysts have made the point that there is redistribution from relatively poor young people to comparatively affluent older people, and have suggested that this is unfair.  Politically, the elderly have more clout because there are twice as many of the over 65s as there are of the under 25s, and they are twice as likely to vote.  This means they are four times as effective in voting terms, a fact that politicians have taken account of. Popular perception of the circumstances in which pensioners live is somewhat out of accord with modern reality.  The image of a woman with a blanket over her shoulders, huddled over a fire and wondering if she can afford to toss another stick onto the flames does not accord with present day reality for most pensioners.  Some 86% of pensioners live in households with assets in excess of £50,000.  The average income of over 65s is £15,400.  A young person working on current minimum wage for a normal working week earns just under £13,000.  Yet the young person is taxed while the older person is guaranteed a triple locked pension that will rise with inflation, or average earnings, or 2%, whichever is the highest.  On top of this comes a winter fuel allowance, a Christmas bonus and a free bus pass.

It is doubtful if this can be sustained in the long term.  Government will not end the triple lock in this Parliament because they made a manifesto pledge not to, but for the next Parliament they should consider reverting to indexing pensions in line with the consumer price index, as used to be the case.  This would enable them to reduce taxes on low-paid young people.

A proportion of pensioners do live in straitened circumstances, and even though their pension would rise to keep abreast of inflation if it were indexed to the CPI, some would need additional help.  If the government did abandon the triple lock in favour of rises with price inflation, they might need to establish an Emergency Relief Fund to deal with older people in poverty.  Government might choose to contract out to charities the task of locating such people.

The measure would, without doubt, give government the slack it needed to ease the taxation of low-paid young people, giving help where it was most needed.

Ten initiatives to help young people: 2. US/UK visa swap

Employment is a major concern for many young people, both for those who choose not to undertake university education and for those who have done so.  Because of concerns about immigration, especially illegal immigration, the governments of both countries have tightened the rules and made it very difficult for citizens of the one country to seek work in the other. The UK government should negotiate a 'visa swap' with the United States to produce a new kind of visa available to young people below the age of 25.  Under the new arrangements, young people in Britain would be able to travel to the US for up to two years, and obtain work there without the need for a work permit.  Similarly young US citizens would be able to live and work in Britain for up to two years without the need for a work permit.  Neither represent a type of immigration that would concern the other country.

If the two governments agreed to such a visa swap it would greatly extend opportunities to the young people of both countries.  There are large numbers of young people in Britain who would jump at the opportunity to live in America for two years and work to support themselves there.  In the process they would acquire new skills.  In particular they would be exposed to the US approach to consumer satisfaction, and learn the standards of service expected there.  They would almost certainly return to the UK with attitudes and skills sought by employers, with their career prospects enhanced.

Similarly, large numbers of young people in the US would welcome the chance to broaden their horizons by visiting Britain for a couple of years and working there.  They would have the chance to visit the nearby continent of Europe during holidays or time off, and gain experience of foreign countries other than the UK.  Most American youngsters are noted for a can-do attitude and a commitment to the work ethic.  Working alongside young people in Britain, they could well provide an example that could spread those attitudes.

In terms of international understanding, the Anglo-American relationship would be enhanced if significant numbers of each country's young people had lived and worked amongst their counterparts in the other country.  The cultural exchanges and friendships formed would facilitate each country's understanding and appreciation of the other.  An arrangement such as this would be immensely beneficial to the young people of each country, enriching their lives with new experiences and opportunities.

Rescuing the NHS

The media would have us believe that, due to cost cutting, the NHS is in terminal decline when, in reality, it is thriving and has never had more resources.  Political spin aside, the real problems are that it is too big, too diverse, and over-managed. Suggesting that the NHS most needs the removal of political interference is hardly new.  The Bank of England has improved since Gordon Brown gave it independence.  It has not been privatised.  It remains a non-profit making public corporation acting, so far as it can, in the best interests of the country.  It would be inconceivable to make the BBC, also a public corporation, part of the Department for Culture Media and Sport.

Of course politicians should set the goals and priorities for the NHS and allocate the resources but continual interference in the way it is managed has demoralised staff and created patient dissatisfaction.  What qualifications do MPs have which can usefully applied to the NHS before other equally unqualified politicians reverse any changes as soon as they can?  The UK’s biggest organisation, by numbers employed, blows in the wind.

The NHS should have a long-term, not less than five years, charter setting out what it is aiming to achieve and the funds government will allocate.  Parliament should agree the mission but not how it should be achieved.  And NHS top management should certainly be held to account at the end of each charter.

The debates about “privatisation” exemplify why politicians should leave the NHS stage.  Left-leaning MPs claim that allowing anyone to make a profit, however small, in the supply chain raises the cost for the taxpayer.  This school of economics was once popular in Leningrad.  Now Russia, like everywhere else, recognises that even a public corporation cannot itself make everything it uses.  The Norfolk and Norwich Hospital does not take deliveries of iron ore to make their own scalpels.  The NHS should do for itself what it does cheaper and better.  When buying in services is cheaper and better, the taxpayer gains by so doing.  Whether someone has made a profit along the way is irrelevant.

Only local managers can do these calculations: they should be free (transparently) to buy in what makes better use of their resources and to do the rest themselves.

Secondly, prevention (health promotion), cure and care are three very different problems that need three solutions, not one. The NHS should focus on curing people and returning them, as soon as their health permits, to their normal lives or to state care if they and their families cannot cope.  Using curing resources for care is not just wasteful but ineffective, and even inhumane, as recent complaints about nursing and mental health institutions testify.

Moves are now afoot to bring care and the NHS closer together which is good in the sense of combining the two caring functions but bad in the sense that the managerially challenged NHS will not be able to cope with both roles. We should stop trying to cure the uncurable: the senile, and those suffering from dementia and many forms of mental health.

The National Care Service should be an independent organisation developing its own pride and professional standards.  The Hospice movement is a shining example.  It is noteworthy that general practice aside, the great curing institutions tend to shrink in number but grow individually as more specialities have to be accommodated whereas in care, the tendency is to move from large institutions to a multiplicity of small units closer to their communities.  Different problems need different solutions.

Finally, preventive health is in practice national publicity intended to reduce the net national cost by persuading us to adopt healthier life-styles.  Their effectiveness can be measured, and funded, by the reduction in the costs of cure and/or the benefit to the economy from our working productively for longer.  This role could be managed directly from the Department of Health or a separate quango but in either case, the performance measurement of the campaigns should be transparent.

Dear Politicians.  Please stop bickering over the NHS: separate its three functions and then leave it to the professionals.