With the date of the referendum on whether the UK should leave the European Union firmly in place, let the circus begin.
Between now and June 23, the British people will have plenty of chances to hear the arguments on both sides. However, one thing should be very clear: the whole Brexit debate is just a huge PR exercise serving to distract attention from the real problems that the economy is facing.
Leaving the EU or staying in it will not solve inequality, which is the biggest problem in Britain today, and it is growing.
A survey by the Chartered Institute of Personnel and Development late last year showed that 71% of employees believed CEO pay in the UK is either “too high” or “far too high”, with 59% of employees saying that the high level of CEO pay demotivates them at work.
It’s probably not a coincidence that Britain has the lowest productivity in the G7, with the gap versus other countries at the widest level since records began in the early 1990s. ONS data quoted by The Guardian show that output per hour worked in the UK was 18 percentage points below the average for the remaining six members of the G7 group of industrial nations in 2014.
Well known economist Andrew Smithers has argued in his book “The Road to Recovery” that policies governing executive compensation must change because they are one of the biggest factors causing the current stagnation.
That is because management bonuses largely depend on measures of success like earnings per share, return on equity or share prices, which can be manipulated over the short term by buying back shares or other types of financial engineering that harm, rather than help, the real economy.
“This encourages companies to use debt rather than equity to finance their businesses. As our current problems are largely due to the excessive building up of debt, allowing interest to be deducted as an expense before the liability to corporation tax is both dangerous and absurd,” Smithers writes in his book.
If you look at the problems that are plaguing the corporate world now, it’s impossible not to see the consequences of that policy: many companies in the field of energy are struggling with high-yield debt that has turned sour as oil prices have fallen. Most of it because the managers wanted to get good bonuses by sacrificing long-term growth for short-term “success.”
Turn your gaze to the housing sector in the UK, especially in London, and inequality will become painfully obvious. Again, fiscal policy has a lot to do with it, as does turning a blind eye to the proceeds of corruption finding a safe haven in London. Things are so bad that even a privileged member of society — a Conservative MP with a salary of £74,000 a year — has found himself priced out of the crazy London housing market and forced to move back with his parents.
Politicians have blamed the housing crisis mainly on migration, and mainly on immigrants from the EU, conveniently ignoring that London is a safe haven for money launderers, as the identity of ultimate buyers of properties can be easily hidden, and there are thousands of apartments that are being bought and left empty.
Campaigners recently organised a tour of the London mansions of rich oligarchs to show the extent to which London is used as a recipient for dirty money from such countries like Russia, Ukraine or Kazakhstan.
Also, the lowest interest rates on record and tax incentives for buy-to-let landlords (a solid Conservative voter base) have seen the sector mushrooming, with tales of landlords owning tens, hundreds or even thousands of properties only now emerging in the media.
These are often leveraged off each other, taken out with interest-only mortgages – a risky house of cards that could collapse if house prices go south. The government is finally scaling back some of the tax relief that was helping the sector, but at the same time legislation is still heavily tilted in favour of landlords, while tenants maintain their precarious position.
Blaming the EU
It would not have been easy for a Conservative government to tackle these problems. It would have meant ending the preferential fiscal treatment for a big number of their voters (rich corporate managers, shareholders and company owners, as well as landlords) with very little reward in the form of votes from the grateful working class, because structural measures such as these take some time to show their effects.
Instead, the Conservatives, headed by PR specialist David Cameron, took the quick and easy way out: they turned the public’s attention from the real reasons of growing inequality to an imaginary one: Britain’s membership of the EU.
But things quickly went out of control: the issue snowballed and, from a relatively innocuous way to allow the British public to let off some steam, it became the biggest political headache a modern-day UK Prime Minister could have. The irony is there is no proof that Britain would be one iota better off outside the EU than inside.
The leader of the House of Commons, Chris Grayling, said that the £10 billion spent on the EU could be used to plug the country’s budget deficit. However, the current budget deficit is estimated to be £45.7 billion – therefore, leaving the EU would only cover about 22% of the budget gap.
And that’s only in case it doesn’t widen further because of lower tax collection (if companies decided to relocate some of their jobs and operations in the EU) or higher spending (if job losses following company closures force more social spending.)
The same goes for other arguments for leaving the EU: immigration is the widest used, but in truth it isn’t the immigrants who are causing the economic problems in the UK, but the government’s own policies. Many people outside of the UK see this. Will the British realise it, too, before they vote in the most important referendum in decades?