Brexit – Some Thoughts

I am conscious that this is a highly sensitive subject. I have to acknowledge that 52% of voters that voted, elected to leave the EU – at least that is what is being claimed. I am rather less inclined to believe this to be a thorough explanation.

I will declare that I voted to remain, not because I think the EU is perfect, but to use a metaphor, if I’m not entirely happy about what happens in my street, leaving it solves my experience but not the problem and should I want to discuss access to the road again, I don’t really expect much of a welcome, in fact they are likely to make it a toll road and my choice will forever be yes or no, but never “what if we did it this way…”

As we all know, there was and continues to be a lot of heated exchange. It is certainly possible that the UK can exist outside of the EU and trade as “normal”. However many seem to have forgotten that the UK, (if indeed it can still be called that within a few months) has a population problem, but not the one being discussed. The problem is longevity.

Thankfully due to our rather excellent health service, most of us are living longer. This is a good thing, reflecting our progress as a society. Of course this also means that more people are alive to draw a State pension and are alive longer to draw on support from family and State. The demographics of the nation by all calculations mean that there is more pressure on the State to find the money for this ongoing “support”. Unfortunately, the ratio of people in retirement to those not yet retired is shifting, considerably. The bulk of pensioners do not have high incomes and the State pension is effectively tax free due to the personal allowance.

Its not enough…

In practice those pensions are paid for by current taxation, not historic taxation, which was merely the “membership fee”. The bulk of tax is paid from income tax raised each year. We need more people to earn money to pay tax to provide for the “system”. Indeed HMRC collected £533bn in taxes of all types for 2015/16. The highest amount ever, yet still not enough. For the record about 54% is from income tax, 19% from VAT (that nasty European idea) and 11% from corporation. In short 84% from direct taxes. If you wish to see the latest HMRC report spanning back to 1980 click here.

Not enough being born

The UK birth rate is in decline. It has fallen from 2.93 per woman in 1963 to about 1.90. This is historically how we have sustained the nation. Tracking this forwards, combined with people living longer merely confirms what I have stated. There are fewer people of working age to provide for those that are not. (click here for evidence).

Not enough jobs, yet low unemployment…

Those wanting jobs now have to compete in an increasingly global economy, unless of course it is something very bespoke or crafted locally. The technological revolution has barely started, more service and manufacturing jobs are being “automated”… whether it’s the booking of flights, paying for your groceries, renewing your tax disc, banking or calling to complain. Certainly there are new jobs and roles, but in a world where tax rates and regimes vary, we clearly value convenience and low prices over jobs and “fair” (please let’s just call it “appropriate”) taxes – I’m thinking Amazon. Ironically, the UK has just recorded its lowest level of unemployment for some time at 5.1%, the lowest since the credit crunch, which in turn was the lowest since about 1977. Click here for evidence.

All creatures great and small…

On Thursday the UK voted to end its relationship with its main and nearest trading partner. The equivalent of all those market towns that used to have an exchange, now amalgamated in London. The world is a big place, but just as we like the convenience of Amazon, so do nations like the certainty of trade agreements and low prices. The advantage of the EU is that trade prices are thought of collectively, negotiating as a block for a better deal, not the cheapest deal.

You may disagree with me, you may find many faults with the EU (who doesn’t) but what is clear is that few people really voted from a position of knowledge, but rather prejudice (anti- big brother) or simply feeling disconnected with the establishment, on the wrong end of every “good deal” and clearly do not believe that we are all in it together. I understand this to be more of a protest vote against cuts and austerity, which I fear politicians will continue to ignore the cries of people that have become so desperate that they voted for the equivalent of selling your home, buying another without first reading the contract or having a survey done – let alone agreeing the mortgage. Buyer’s remorse is inevitable.

A problem aired is a problem shared?

Yes we could simply “get on with it” but as yet nobody wishes to be remembered as the person that took the action that is likely to result in not simply the severance from the EU but also the end of the United Kingdom. There is another alternative – that of acknowledging that both sides are actually “right” or at least make some fair points. So perhaps, there is an opportunity to get all these frustrations (not just British ones) out on the table, to properly reform, thoughtfully and respectfully. I admit this is a more unlikely scenario as I attempt to find a silver-lining and a ray of hopefulness.

Of course the EU isn’t perfect – neither is Westminster

I’m sure there are lots of examples of bad EU laws, but I am not informed enough to know them all – are you?  I, like many others did sign up for and support Hugh’s Fish Fight. I do know there are plenty of sensible ones. I do know that simply counting laws is no fair or sensible way to assess them. The House of Commons Library attempted to do so and found that between 1993 and 2014 about 13% of laws relate to EU obligations or implementation of them. Again, unclear about whether they are good or “bad”.

I can’t see you….. really?

Yet here we are. A nation now blaming each other and looking terribly unfriendly to anyone that isn’t white “or from these parts”. Yes I know not all Brexit voters are racist, I doubt many are, (not all are white either) but whether you like it or not, we need “new blood” to help our economy by running services, building businesses, creating jobs and paying taxes.  Sadly, no, alarmingly the result of this vote has emboldened those with racist views, which we must now all face down in person, not merely in words. The degree of tension is palpable and this is not the Britain that any of us wanted. I hope.

Lasting security is not a high wire fence

However, all these problems are not exclusive to the UK. Indeed most of the EU has precisely the same problems of longevity and poor levels of saving with high dependence on the State. Arguably they have worse problems and likely to merely exaggerate problems. However the way to reduce envy and create greater security is to help your neighbour prosper, not collapse.

Of course, Mr Shakespeare would have seen this as very good material….. oh he did.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email