Monday, 24 November 2014

How UKIP could destroy the UK

The UK is staring emerging from a recession and in many ways the future for the UK hasn't looked brighter for many years. Not only have we returned to growth, we are now growing faster than most of our European neighbours.

However post recession UK could almost be thought of as two separate countries; urban UK and rural UK.  Urban UK is the urban high growth areas with world class technology and cultural industries. This part of the UK can almost be through of as a European Singapore or Hong Kong. This UK is primarily made up on London and surrounding areas but increasing other parts of the country are learning from the success of London. There is increasing a feeling of increased opportunity in places like Leeds and Manchester serious talk about building HS3 to create a power house of the north. Meanwhile the great cities of the midlands such as Birmingham and Coventry are returning to growth. Coventry in the 80's was seen as the architypical "ghost town" (indeed the Specials wrote the song about their home town) however a city centre being redeveloped and Jaguar building cars to rival Mercedes and BMW it has the feel of a town on the up.

However the story is very different in rural UK. In rural UK does not have any great industries or any great universities. The small market towns are often that fill rural UK are often disconnected from the cities that have such infrastructure. As a result these rural areas are not able to build the necessary clusters of advanced companies to enable them to compete in a globalised world. There are few jobs in these areas and even fewer well paid jobs (although this is to some extent offset by the lower cost of living). In this sense rural UK can therefore reasonably be compared with an Eastern European nation.  

The interest of Urban UK and rural UK also also somewhat divergent. Urban UK benefit from a close relationship with the EU enabling its products to be sold to the worlds largest market. Relaxed immigration rules enable the movement of labour and mean few barriers for new skill migrants. This makes in turn makes urban UK a great place for large companies which further driving up wages and draws in more talent in a virtuous circle. The amazing wealth generating capabilities of urban UK means a large number of lower skilled jobs providing employement for others in industries such as hospitality and retail. 

Meanwhile rural UK has a slightly more awkward relationship with the EU. The low tech industries of rural UK don't have much of a global market and hence international trade is not a priority. Meanwhile the weak local economies mean that migration is typically seen in a very negative light. Perhaps the slightly ironic thing is that the EU would probably look a lot less negative for rural UK were in a separate nation. As a separate nation it would be significantly poorer and wages lower and would attract few migrants (and it would be in economic equilibrium with many of the poor parts of the EU). However, the success of urban UK means pushes up wages and increases government spending (on rural infrastructure) making it more of an attractive destination for immigrants than it would otherwise be. 

Given these two nations the logical thing for any government to do would be to focus its energies ensuring that the urban areas continue to proposer through good trade links and investment in the vital infrastructure these areas need and ensuring that they can continue to attract talented people. They would in parallel invest in the rural areas with an awareness that these areas are not going to be the areas of growth for the future. This is more or less the strategy that successive governments have (correctly) adopted. However, increasingly there is a political challenge. A side effect of the higher wages in rural UK is that it encourages low skilled immigrant. Such immigrants have the discipline of poverty and as a result are prepared to work harder. The results is the predictable backlash and in the poorer disconnected market towns this comes in the form of UKIP.

Reactionary parties are nothing new but UKIP however causing a particular headache in the UK due to the way the political system works and the recent history of the UK. Both the main parties (the conservatives and labour) cross the rural/urban divide and both parties have seats that are likely to be targets for UKIP as a result. This means neither party is able to entirely make the rational choice and focus policy on growth in Urban UK and managed decline in rural UK. 

Whilst Labour can claim some success are reviving the inner city areas. Many of these neighbours (particularly in places like London) have gone from being no go areas to desireable neighbourhoods offering city centre living for affluent young professionals. This has in turn created jobs and opportunities for the original residents.

However the many of the smaller mining/mill towns have not experienced the same success. These towns don't really have the scale to or skills in their local populations to be hubs. Although new Labour tried policies to help these areas (e.g. opening art galeries in Burnley) they were always in retrospect destined to fail. The fact that the policies were unable to help the Labour significant parts of their heartlands has increasingly lead to a sense that the party has forgotten its working class roots "sold out to metropolitan elite". Increasingly Labour are finding themselves in a bidding war with UKIP to make populist sounding noises to win the votes in these "left behind" constituencies.

Meanwhile the Tories have a similar and arguably worse problem. Back in the 80's many rural conservative areas seemed to exemplify Thatchers values - places fully of small business and entrepreneurs (indeed Thatcher's own father ran a small grocers in such a market town). 30 years on the fortunes of these constituencies are looking decidedly mixed. Many suburban Tory areas in commuting distance of big urban centres as they have remained desireable neighbours for couples to bring up children (whilst living in easy commuting distance of centres with good job opportunities).

However many other market towns haven't been as successful. Unlike the urban areas which form natural "hubs" which attract skilled people, rural areas are often beset by low skills meaning world class industries are unlikely to be based there. Traditional industries in such areas like as agriculture and tourism are either growing slowly or (in the case of tourism) in decline from international competition. This in turn means there are few entrepreneurial opportunities and the types of beautique retail outlets (which can thrive in rich urban areas) are unlikely to have such traction in towns. Meanwhile more traditional retail outlets (like grocers stores) are unlike to fare well against the competition of large scale discount stores.

The situation for the conservative areas is very ironic on many different levels. Opposition to the EU is often positioned in Thatcherite terms by tabloids (more free trade and removing the "heavy hand of Brussels"). However, increasingly the opposition to the EU is based on dislike of immigrants "undercutting local labour" and a desire to turn back to the clock (to the 80s - which 70% of UKIP votes think of as a better period according to a recent poll). Its difficult to see these drivers as anything other than protectionist desires from residents of dying town. Indeed probably the best argument for leaving the EU would be our ability to remove agricultural tariffs, however, its hard to imagine such a policy having much appeal in rural communities.

The Future
The UK future remains should be as a trading nation with great cities and great centres of learning that are the admiration of the world. These is the future that all major parties should be striving for. However the threat of UKIP prevents either party from fully grasping this. It would be a huge tragedy is politically expedient calculations to counter a reactionary "insurgency" from a dying parts of the UK prevented our countries from achieving its full potential. 

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