Scarfo And Company Cpa’s – The year in business: A review of 2016

2016 was the year that a decade of bubbling public discontent over the economy boiled over in two dramatic votes.

Donald Trump defied almost all predictions to become President of the United States. A few months earlier, the UK had turned its back on the club of European nations it joined 43 years ago.
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The UK referendum result was a shattering blow to European Union leaders, who were only just beginning to breathe more easily after years of battles to keep the euro currency together.

The decision came as a shock to many, but it didn’t surprise one economic commentator, Roger Bootle, chairman of Capital Economics and best-known for his accurate predictions in his book, The Death of Inflation, published 20 years ago.

Mr Bootle says his reaction to the referendum result has been one of “sheer delight”.
He says research shows the main motivation for voters ticking the Leave box was encapsulated in the simple phrase “take back control” and believes the decision will help the UK economy.

Voters’ disillusionment

By contrast, a former adviser to the European Commission, Graham Bishop, says he was “appalled and horrified” by the result, but says he wasn’t surprised.

“When you spoke to people you realised the depth of their disillusion with many things, of which the EU is just one.”

The voters’ disillusion was clearly connected with the fact that living standards for the bulk of the British population have continued to decline in recent years, and Leave supporters linked that with the recent wave of immigration from the EU into the UK.
High unemployment in the south of Europe, as well as the lack of opportunities in poorer EU countries like Romania and Bulgaria, has led to a constant flow of workers into the UK.

EU leaders had refused to allow the UK to limit that migration, arguing that free movement of workers across the bloc was sacrosanct.

The tide of new workers may well have boosted the total size of the UK economy, but in the past 15 years its population had risen by 10% to 65 million.

Many felt that the new arrivals from poorer countries had forced down wages and property was becoming unaffordable. And given that UK health and education are paid for by taxpayers, those services were left stretched and demanding more from taxpayers.

National debate

Roger Bootle argues that immigration has indeed depressed wages in the UK, and says freedom from European regulations that span everything from loft insulation to working hours will boost the economy.

“The EU is a regulation junkie… and I think it’s extremely damaging. Once we’re out, we’re going to have a national debate and discussion about precisely what rules and regulations we want.

“We’ve got to comply with single market rules in order to sell our goods into the single European market, that’s fair enough.

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“That’s not the same thing as having the whole load of everything to do with health and safety, working hours, whatever, for a dry cleaning business in Oswestry set in Brussels. That is madness. And across the whole of Europe, not just Britain, people are fed up with it.”

Graham Mather is a British former Conservative MEP and now president of the European Policy Forum. In view of his contacts in Brussels, I asked him if he thought leaders of the EU now regret taking such a tough line saying the UK could never put quotas on immigration from other EU countries.

“I think they made an offer which was going as far as they could because they are all democracies, the Romanians, the Poles – they answer to their people in elections,” Mr Mather says.

“And if they gave us a deal which allows their people to be discriminated against and pushed out and sent home and so forth, their electors would take revenge on their leaders. So, this is the problem that we are not just a single entity. It’s a game of 28 separate democracies.”

Dramatic pledges

Donald Trump’s election as President of the United States was even more unexpected than the UK referendum result.

Before the vote, Mr Trump had made a series of dramatic pledges. They included building a wall along the southern border with Mexico, a repeal of President Obama’s healthcare reforms and tariffs of 45% on Chinese imports. Read More

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