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April 29, 2019

Labour's national executive to vote on second referendum

The main focus in the Brexit saga this week is tomorrow's scheduled vote in Labour's national executive committee on whether to back a second referendum in the campaign for the European elections. We noted a couple of news reports suggesting that the NEC might support Jeremy Corbyn's line against an automatic second referendum. The Guardian even reported that Labour was on the brink of backing a compromise agreement with Theresa May - without the need for a second referendum.

It is impossible to ascertain any probabilities from these reports. In our experience every push in one direction creates an almost equal offsetting counter-pressure in the other. After Robert Peston reported that Labour's NEC was likely to back Corbyn's position, one of the trade unions apparently switched support in favour of a second referendum. Corbyn has a solid majority on the committee, but Brexit is splitting Labour just as it is splitting the Tories.

Why does this vote matter, considering that the MEPs have no powers here? The answer is that the vote will set Labour's position on this issue going forward. Second referendum campaigners hope to turn the European election into a proxy referendum on Brexit itself. We are not sure that this will succeed. The latest YouGov opinion poll has the Brexit Party at 28% in the lead, followed by Labour's 22%, the Tories at 13%, and the Greens at 10%. The LibDems, Change UK, and UKIP are now all under 10%.

At tomorrow's NEC meeting, Jeremy Corbyn is said to favour a compromise that will keep the second referendum on the table, but one that will not bind the leadership if it agrees a deal. One of the union leaders reportedly told Corbyn to cut a deal with the Tories. Given the Tories's virtual extinction in the opinion polls, we think that Theresa May too, has a strong incentive to cut a deal. 

The Guardian quoted Rebecca Long-Bailey, the shadow business secretary who is close to Corbyn, as saying that the first goal of the Labour Party is to get its own Brexit proposal adopted. Long-Bailey is more optimistic on the talks than others - noting that the talks have gone into a lot of detail, especially on the issue of workers' rights.

In his Guardian column, Will Hutton makes the point that tomorrow's vote in the NEC will settle the future of the Labour Party - whether it will continue to temporise over Europe, as he put it, or whether it takes a strong stance against English nationalism. He writes that Labour has reached the moment where this issue can no longer be fudged. Corbyn himself was not on the extreme end of the scale - he recognises that he cannot lose touch with a majority of his supporters. But it is the people who are closest to him, his inner circle, who are fighting for Labour to keep its current position of ambiguity.

The FT, meanwhile, has a story confirming something we have long suspected. May wants EU students to pay the full non-EU university fees from 2021/2022 onwards. This is about three to four times as high as the fees charged to UK and EU students currently. This would effectively put the UK university system outside the financial ability of all - except the richest - EU students. We think this was one of the more predictable consequences of Brexit, like separate passport queues for UK and non-UK citizens. Despite the agreement on citizens' rights, there is no way to prevent such discrimination in the long run.

We are also certain that any negotiation on a customs union will ultimately touch on these issues. We are aware that the EU is not insisting on freedom of movement as a prerequisite for agreeing a customs union, but we believe it will politically difficult for the EU to agree while the UK discriminates against EU citizens.

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April 29, 2019

What the debate about electric cars says about Germany

The electric car is to Germany what Brexit is to England - an issue that goes right to the core of people's belief systems. When we travel to Germany, as we do frequently, we keep on hearing an argument against the electric vehicle from virtually everybody we know: the carbon footprint of EVs is higher than for the new generation of fuel-driven cars. That view was most recently reaffirmed by a study from the Ifo institute authored by a group of physicists and economists - Hans-Werner Sinn among them. 

The debate is about the CO2 emissions over a car's life cycle. There are many technical issues involved with any such estimates that go beyond the confines of our briefing. The one point we would like to make concerns dynamics. EVs are current small-production units. With constantly improved battery technology, shifts in the composition of energy sources, and increases in production volumes, one should expect big falls in life-cycle CO2 emissions in the future. We would agree that the carbon footprint of Tesla's luxury EVs is clearly above that of an equivalent fuel-driven car, but this is a misleading comparison.

FAZ reports that VW has commissioned its own study showing that the EV version of a Golf has a lower carbon footprint than the fuel-driven version. It is interesting that VW has jumped on the EV bandwagon, as it is now offering e-versions of its cars. 

Another technical complication is the national energy mix. In France, where energy costs are cheaper and carbon emissions lower because of nuclear power, the results are different from Germany. VW argues that an increase in the proportion of renewable energy generation would drive down the EVs' carbon footprint.

The global trend is clearly moving against the fuel-driven car. But the debate is nevertheless interesting. It tells us that part of German society will desperately cling on to the technologies of the past, which it correctly regards as Germany's unique selling point. So the debate is really about whether Germany should quickly adjust to a world in which it is no longer the dominant industrial producer, or whether it should try to hang on to the old world for as long as possible.

In EVs the two biggest technical shifts of our time are coming together: from analog to digital, and from fossil-fuel based energy production to renewable sources. Given its financial and human resources Germany would have been well-placed to play a leading role in that transition. But German society has chosen to resist it.

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