Britain is surpassingly good at selling songs and talent shows on TV

Britain is surpassingly good at selling songs and talent shows on TV

Nov 9th 2013 |From the print edition

TWO MPS WITH quite different views employ the same metaphor for modern British politics. At times, they say, it is “like the X-Factor”. They mean it can be tawdry and shouty. But there is an obvious difference, too. “X-Factor”, a talent show created by Simon Cowell, is far more popular. Despite a glut of reality shows on television, an episode of “X-Factor” can draw as many as 10m viewers in Britain. It has conquered the world, too. Versions of it exist in about 40 countries, from Colombia to Kazakhstan. It is in the vanguard of British exports of reality-TV formats—a small industry, but one that Britain unquestionably dominates.Britain is better at exporting media than almost anything else. The world’s biggest newspaper website, Mail Online, is British. British musicians have supplied the world’s bestselling album in five out of the past six years, and the country accounts for 13% of the global album market. “We’re about twice as good at this as we are at selling other services, and four times better than we are at selling goods,” says Geoff Taylor, head of the BPI, the record labels’ trade association.

Writing and singing in English gives the British a big advantage. The country’s media market is a good size: big enough to make investment in domestic talent worthwhile, but not so big that companies have no incentive to export. British artists are restless and experimental. Two of those world-beating musicians, Adele and the late Amy Winehouse, scraped black American music for inspiration in a way that a white American artist might not dare to. In newspapers, unusually fierce competition has created distinctive brands like the Guardian and the Mail which export well.

But the big reason why Britain is so good at “shiny floor shows”, as the Cowell oeuvreis known in the trade, is government policy. Without meaning to, Britain has stumbled into a kind of industrial strategy for television production. This happens to be much smarter than the formal strategies that the coalition government has created for aerospace, life sciences and nine other industries in an attempt to revive exports and economic growth.

In Britain, as in almost all other countries, the state meddles extensively in the broadcast market. It renews the BBC’s royal charter and sets the licence fee that is levied on all TV-owning households. It is the sole shareholder in Channel 4. A quango, Ofcom, bosses commercial broadcasters about. Among many other things, the state regulates the trade in television programmes. The BBC and other big broadcasters are obliged to buy 25% of their shows from independent producers; in practice they buy much more. And the broadcasters are forbidden from monopolising the rights to these programmes. Independent producers are free to sell their shows to other countries.

These rules, known as the “terms of trade”, are the main reason why independent television thrives in Britain and why it exports so much (Sweden has similar rules and a similarly vibrant production sector). As Alex Mahon, head of Shine Group, puts it, the terms of trade turn British TV screens into “a shop window to the world”. From an office in Primrose Hill in north London, her company makes “Masterchef”, a global hit. “X-Factor” is made by FremantleMedia, which also makes the “Got Talent” and “Idol” franchises.

This is not industrial strategy in the conventional sense. It involves an indirect subsidy, via the BBC’s licence fee, rather than a direct one. It might not be the ideal arrangement. A completely free TV marketplace, with no BBC, might prove just as good at exporting. But it suggests a principle nonetheless. If the state must meddle in an industry, it should do so in a way that promotes competition and dynamism. It is a bit like discovering the X-factor.

 

Exports and the economy

Paying its way

Britain would be able to sell more if it stopped bashing bankers and immigrants

Nov 9th 2013 |From the print edition

THERE IS A global trade at which Britain excels. In little more than a decade exports have risen tenfold. Its biggest customers are emerging markets, particularly China. The industry is green and uncontroversial—indeed, though most British households play a part in it, they seem unaware of its existence. It is not financial services or education or health care. It is recycled cardboard.

Paul Briggs, the British managing director of Mark Lyndon Paper Enterprises, explains how the trade works. A factory in China makes a television, puts it in a box and ships it to Britain. A customer buys the television and discards the box. A recycler sends the box back to China, where it is pulped and turned into a new cardboard box. A factory buys the box, puts another television inside and sends it back to Britain.

It is a thoroughly useful trade. Container ships must sail from Britain to China anyway, to pick up goods; if they were empty they would have to take on ballast. Mr Briggs’s company, which is owned by a Chinese firm, did not exist ten years ago. This year it has already exported more than 1m tonnes of paper (the going rate is up to $200 a tonne). “I want to stand on the roof and scream it,” says Mr Briggs. But, as he points out, the success of his industry results from the weakness of others. Britain exports a lot of empty cardboard boxes because it does not export many other goods.

When in 2007 the pound began to slide, eventually dropping by a quarter in trade-weighted terms, economists assumed that exports would surge. That had happened in the early 1990s, pulling Britain out of recession. Not this time. Britain’s balance of trade improved (see chart 1), but not nearly enough to offset the hit to household finances from more costly imports. This helps explain why the economy stagnated in 2011 and 2012.

Politicians love to describe Britain as an open trading nation, and in many ways it is. It still attracts more foreign direct investment than any other country in Europe, although Germany is fast catching up, according to Ernst & Young, an accountancy firm. Workers in Jaguar Land Rover’s factory near Birmingham say things have improved greatly under the ownership of Tata, an Indian conglomerate. In the old days, recalls one union rep, the floor was so dirty that you worried about picking up a coin. The new factory gleams—and makes money. As for free trade, that has long been a straightforward matter of survival: the nation stopped growing enough food to feed itself in the mid-19th century. Britain loves trade. It just isn’t particularly good at it.

Part of the reason is the slowdown in continental Europe and America, which take 54% and 17% respectively of British exports. Another is the gradual depletion of North Sea oil and gas. A third is that Britain’s strength is in services rather than in the raw materials, machine tools and handbags that emerging markets crave.

 

Take all that into account, though, and the country’s export performance remains dismal. Since 2000 Britain’s share of global services exports has dropped from 7.9% to 6.4%. Germany’s has risen from 5.3% to 5.9%. And Germany is a vastly stronger exporter of goods. Ministers boast that British exports to emerging markets such as India are rising strongly. They do not mention that India is trading so much more with other countries—including other emerging countries—that Britain’s share of its trade has plunged despite the rise in absolute terms (see chart 2).

Exports are a political disappointment, too. A few years ago both David Cameron and George Osborne, the chancellor of the exchequer, pledged to rebuild the economy around them. No longer would Britain rely on “one industry in one corner of the country”, the prime minister told a gathering at Davos in 2011 (he meant financial services and London). Instead it would be powered by manufacturing and overseas sales.

There is no sense in running down what remains of British manufacturing. Parts of it are in fine fettle. Britain not only has a positive balance of trade in cars, for example; it buys and sells the right ones. It imports cheap, low-margin vehicles and exports expensive, high-margin ones, often to the new rich in the emerging world. (One key to success, says Mike Wright of Jaguar Land Rover, is to make back seats exceedingly comfortable: most Land Rover buyers in China have chauffeurs.)

GlaxoSmithKline, a pharmaceuticals giant, is investing heavily in drug manufacturing in Cumbria. Sir Andrew Witty, its chief executive, says a combination of rising wages in the emerging world and ever tougher global product regulations means it can be cheaper to make chemicals in Scotland than in India. It is also easier to keep secrets at home. One of GSK’s British-made asthma inhalers, Seretide, is out of patent but so hard to copy that the firm still makes money from it. “If we’d outsourced that I dread to think what would have happened,” says Sir Andrew.

Britain’s export performance is so poor that it needs to sell more of everything, everywhere. It is trying. William Hague, the foreign secretary, harries diplomats to promote trade. Export promotion is increasingly in the hands of chambers of commerce, emulating the successful German model. Financial support for exporters, often in the form of insurance for bank loans, has been made more generous: support almost doubled last year.

But there is a long way to go before another industry performs as well as cardboard. And Britain’s efforts to promote exports are feeble compared with what other countries do. Its export credit agency still backs far fewer loans than do its French, German or Spanish equivalents. Its overseas business associations are puny—some are little more than lunch clubs, says Lord Green, the trade minister. The overriding perception of British business in emerging countries, he says, is summed up by something he occasionally hears: “We don’t see enough of you.”

The emerging world also tends to be more interested in British services than in British goods. Although politicians often seem to regard manufacturing as more noble than lending money, crunching numbers or writing contracts, buyers are more impressed by the country’s brainpower. Britain is a strong exporter of services, with champions both large and small. Serco, a huge outsourcing firm, operates the Dubai metro and speed cameras in Australia. I-education sells learning software to pushy Malaysian parents, trading on the notion—which will surprise many Britons—that Britain’s education system is the world’s best.

Indeed, some of Britain’s strongest manufacturers are scrambling to turn themselves into services firms. BAE Systems, which makes fighter jets and submarines, now derives over half its turnover from after-sales service. The firm maintains and upgrades jets for the Royal Air Force and the Australian Air Force, and teaches Saudi pilots how to fly. Increasingly, BAE allows other countries to make its planes.

Biggest of all is financial services, which accounts for a larger share of the country’s net exports than all other services put together. Britain’s advantage in this industry is immense. In HSBC and Standard Chartered it has two of only three truly global banks (the other is America’s Citi). Yet “we are making life difficult for some of our strongest industries,” laments Peter Sands, the head of Standard Chartered.

Financial services have been treated badly since the financial crisis—understandable given the industry’s sins, but disastrous for the British economy. One of several harmful measures is a levy on bank balance-sheets, introduced by Mr Osborne in 2012 and raised several times since. Lloyds and RBS, two largely state-owned banks, have been persuaded to retreat from foreign adventures and concentrate on lending in Britain. America has overtaken Britain as a financial-services exporter (see chart 3).

A giant keep-out sign

One policy makes things much harder: the coalition government’s pledge to drive net immigration below 100,000 a year. Since the government has little control over EU migration, it has targeted students, spouses and low earners from outside Europe while trying to encourage skilled, wealthy migrants. The idea is to have fewer Pakistani brides, fewer people studying at dodgy language centres and more PhD students.

 

The policy is failing. The signal has gone out, to the skilled as well as to the indigent, that Britain does not want them. Students in particular are deterred, says Sir Malcolm Grant, who recently retired from running University College London. Rumours are often reported abroad as fact—for example, a vague proposal that visitors from Bangladesh, Ghana, India, Nigeria, Pakistan and Sri Lanka would be required to pay a £3,000 bond, to be refunded when they leave. Rising visa fees reinforce the impression of hostility. The number of visas granted to Indians has fallen by 56% since 2010. Although Chinese students are numerous, Britain is losing out to America and Australia (see chart 4).

When a foreign student pays for a course in Britain, that is an export. So the country’s expensive, restrictive immigration system directly harms the economy. It also harms it indirectly. Chris Cummings of The City UK, a financial-services lobby group, points out that investors tend to put their money in places they know, often from university days. A history of Indian immigration is one reason that so much investment still flows between the two countries. Britain accounts for about a quarter of India’s outbound stock of FDI.

Big companies with predictable staffing needs and lots of lawyers can navigate the visa maze. Smaller, fast-growing ones tend to give up on it. Wonga, an internet-based lender, is expanding from 450 to about 650 employees this year. It would have liked to gather everyone in London, says its boss, Errol Damelin, but talented natives are too scarce and immigration rules too tough. So Wonga has opened nine offices overseas.

“It’s a nightmare,” says Taavet Hinrikus, the founder of Transferwise, another financial-technology firm in London. “We’re talking about well-paid, high-value-added jobs, not importing a maid from Estonia.” And even more barriers may go up soon—this time between Britain and the rest of Europe.

 

Channel deep and wide

Britain’s leaders do not want it to leave the EU, but it could happen anyway

Nov 9th 2013 |From the print edition

IN 1955 THE foreign ministers of six European countries began hammering out the details of an economic and political union that would eventually become the EU. To these momentous meetings Britain sent a mustachioed, middle-ranking civil servant named Russell Bretherton. Sucking on his pipe, Bretherton calmly explained that the project would not get off the ground. If by some chance it did, Britain would not sign up.

A template was thus set. In the following decades Britain has repeatedly been surprised and affronted by the pace of European integration. Prime ministers have briefly grabbed the tiller—notably Margaret Thatcher, wrongly remembered as a straightforward anti-European, who pushed for a single market in the mid-1980s. But in the main Britain has gone along with the European project reluctantly and tardily, often criticising from the sidelines, and joining in only when staying out was clearly the worse option. So it was, at any rate, until recently.

In the past few years Britain has stopped trying to apply the brakes to Europe and has instead tried to find a reverse gear. In 2011 the coalition government passed the European Union Act, designed to trigger a referendum if powers are transferred to Brussels. Britain is to withdraw from many cross-border justice and policing agreements (though it wants to opt back in to some that it likes, including Europol and the European Arrest Warrant). Senior politicians talk of curtailing free movement across Europe’s borders and stripping the words “ever closer union” from the European treaties.

Default Eurosceptics

Britain is not the only country that strains against the EU. The euro crisis and austerity have made others cynical, too (see chart 5). But Britain is the only country where Euroscepticism is the default position of the largest political party. And it is the only country that says it wants first to adjust its place in the union and then ask its citizens whether they want to stay in at all.

Although he pretends otherwise, Mr Cameron did not want to hold a referendum on Britain’s membership of the EU. But his party was getting so worked up that it was threatening to paralyse his government, so he had to give in. Europe is a deadly issue in British politics. It wrecked the Labour Party in the 1970s and 1980s and the Conservative Party in the 1990s.

Still, Euroscepticism was not invented by Tory politicians, or even by tabloid-newspaper editors. Brussels strikes most Britons as a prolific producer of fiddly rules. Otherwise highly popular policies—such as capping bankers’ bonuses—become less so when people hear they were cooked up by Eurocrats. Most polls show that a majority would vote to leave the EU, even in places like south Wales, where European cash has flowed like Brains bitter.

Big firms are keener on the EU than small ones, largely because they export more and have lawyers to deal with regulations. A few industries—such as whisky-making, which benefits from European “geographical indications” rules—are downright Europhile. Manufacturers, too, fear that an exit from the club would be followed by trade barriers. They think a referendum is bad enough. Nigel Stein, the head of GKN, a large engineering firm, says the uncertainty about Britain’s place in the EU is a gift to France and other countries that are competing to attract factories. “The other guys want to eat our lunch,” he says. Carmakers feel the same way.

But Britain has few big manufacturers. It has lots of services firms, and the single market is not working well for those. Roger Carr, the chairman of Centrica (the owner of British Gas), firmly believes Britain should stay in Europe. Yet his account of Centrica’s attempts to expand into continental energy markets is a dismal one, filled with obstructive state-owned entities and protectionism. Britain is open to European energy firms, he says, but the reverse is not true: “We are more welcome in America than we are in Europe.”

This complaint is widespread. If services firms found it easier to sell to continental Europe, opinion could swing: look at Britain’s financial-services industry, which has unusually good access to European markets and is broadly pro-EU. Sadly, reform is unlikely. Germany, where professional-services industries are highly protected and unproductive, stands in the way.

Fearful of inflating expectations at home, Mr Cameron has been careful not to say precisely how he would try to refashion Britain’s relationship with the EU before calling a referendum. Indeed, it is no longer clear that he would try to do that at all. In the past year Tory leaders have become more conciliatory.

Gone is the talk of taking advantage of the euro crisis, and the move to closer fiscal union that this necessitates, to advance British demands for powers to be repatriated. Instead, Britain presents itself as a helpful counsellor and an ally of other governments in their attempts to improve the EU. Denmark, Germany and the Netherlands seem keen on reforms that would allow them to deny benefits to new immigrants; Britain would lead them. Instead of saying they want to repatriate powers, British leaders now talk of enforcing the principles of subsidiarity and proportionality—Eurospeak for the idea that national parliaments should retain as much sovereignty as possible.

This is wise. The European Union has never been keen on making exceptions, and is particularly loth to do it for a country that is increasingly seen as semi-detached. “Britain has no allies if its strategy is to unilaterally seek opt-outs,” says Mats Persson of Open Europe, a think-tank heeded by Conservative MPs. In any case, he argues, history shows that exceptions made for a single country tend to erode over time. Britain is more likely to get its way if it goes for broader structural reforms.

But there are two big problems. The first is that even well-meaning reformers need pull. Not so long ago other European countries often complained that Britain had too much influence in Brussels—over trade and environmental policies, over enlargement, even over language. Few say that any more. Mr Cameron’s veto of a fiscal treaty in December 2011 pushed Britain to the margins as most other countries went ahead without it. Britain has alienated Poland and other east European countries, in part by insisting on cuts to “structural” development funds which benefit them. It lacks bureaucratic heft in Brussels, largely because its civil servants do not speak enough languages. Though it has 12.5% of the EU’s population, it supplies just 4.6% of the European Commission’s staff—and falling.

Hopes are currently pinned on the Netherlands. Like Britain, it protests against EU regulation of things like olive-oil jugs in restaurants and argues that “ever closer union” in Europe has gone far enough. But there are big differences between the two countries’ positions. The Dutch want to draw a red line against further integration in some areas. The British want to move the line so that powers are repatriated. To get what it wants, Britain needs a change to the EU treaties. The Dutch want no change at all.

The second problem is domestic politics. A hard core of some 30 Tory MPs resolutely opposes British membership of the EU. As one Conservative puts it, if Mr Cameron won the power to rewrite every EU regulation and the other member states agreed to pay the queen’s weight in gold in annual tribute, they would still not wear it. Their ranks will swell if renegotiation seems to be proceeding poorly. Senior Tories hope to appear constructive on the continent and tough back home. But the malcontents will be alert to any sign of double-dealing.

Those who want Britain to stay in Europe are hopeful (though not at all confident) that Mr Cameron’s plan will work. They are more worried about what happens if he loses the 2015 general election and cannot carry it out. Labour, a more Europhile party, has yet to decide whether to match the Tories’ promise of an in-out referendum. If the party wins a majority it might plump for a quick one, rather like the votes on Scottish and Welsh devolution, which were held four months after Labour came to power in 1997. That way the party could take advantage of a post-election honeymoon. Even so, it may not get the result it wants. By then the Conservative Party might be led by an out-and-out Eurosceptic: Mr Cameron will surely be ousted if his party is evicted from government.

Ins and outs

The EU will never win a political beauty pageant in Britain. But if the country left, what exactly would it do? Even the most fervent Eurosceptics tend to shuffle their feet at that question. Britain could leave the union but remain a member of the European Economic Area and the European Free Trade Association, like Iceland, Liechtenstein and Norway. But that would mean being bound by regulations that it cannot shape—the Norwegians call it “fax diplomacy”—which would be hard for a nation used to throwing its weight around. Or it could leave the EEA but remain in EFTA, like Switzerland; but it would still have to swallow almost all regulation. And the EU, which is unhappy even with Switzerland’s arrangement, would make life unpleasant. Or else Britain could leave Europe entirely, in which case the tariff barriers would go up and many retired Britons might have to swap the Costa Brava for Margate.

The EU will never win a political beauty pageant in Britain. But if the country left, what exactly would it do?

A British exit would also affect the country’s relationship with America. This has anyway cooled somewhat of late—the result of America’s pivot to Asia and Britain’s growing reluctance to get involved in foreign military adventures involving bearded men. The public feels lied to about both Afghanistan and Iraq, and budget cuts have made peaceniks even of the armed forces. But the two countries remain close nonetheless. Even when they are not joined in war, America and Britain are bound by military co-operation and, more notoriously, by shared intelligence.

America regards Britain as a useful advocate in Europe for the sort of liberal, free-trading rules of the road that it favours. And so it is: an EU without Britain would probably be more protectionist. Although Britain is not the essential bridge between Europe and America, as Tony Blair once fondly believed, it is nonetheless an important one. If Britain were to leave the EU, the country would come to seem less useful.

Britain has really only two options: a miserable one and a calamitous one. Staying in Europe means a gruelling struggle to retain influence in a club that increasingly revolves around the euro zone. Leaving would mean hardly any influence at all, and great damage to business.

There is a quick, if deeply humiliating, way for a British prime minister to ingratiate himself with the leaders of other countries: speak their language. Churchill gave a speech in French; so did Edward Heath, Margaret Thatcher and Tony Blair. Mr Cameron has not done so yet (though he has attempted to sound Australian). When you hear a speech in home-county-accented French or German, Britain will be a little more serious about securing its place in Europe.

Race and immigration

A new kind of ghetto

Britain no longer has a serious race problem. The trouble is isolation

Nov 9th 2013 |From the print edition

“STOCKBRIDGE VILLAGE HAS always been an island,” says Bill Weightman, a local politician. The large public housing estate, a mixture of towers and two-storey homes, was built in the 1960s to accommodate people cleared out of Toxteth and other inner-city slums. Residents were expected to commute to jobs in Liverpool, five miles to the west.

Things began well, but Stockbridge gradually slid. In the ward that contains much of the estate, 42% of working-age adults depend on benefits. Low aspiration begets low aspiration. The local secondary school, Christ the King, inhabited a spectacular modern building. But its pupils did so poorly in exams that it was closed earlier this year.

Stockbridge is also one of Britain’s most concentrated urban ethnic ghettos. Locals aver that people with the wrong skin colour are no longer beaten up if they wander into the estate, as they were until recently. Then again, few take the risk. Fully 96% of the population of Stockbridge is of the same race: Caucasian.

Ghettos are normally thought of as black or Asian: the Bangladeshi housing estates of Tower Hamlets or the intensely African neighbourhood of Peckham, both in London. But Stockbridge Village qualifies, too. It is whiter than Britain or Merseyside as a whole, as well as far more homogeneously working-class. And it has social problems to match any ethnic-minority ghetto. Many of its inhabitants are ill. It is plagued by loan sharks. And its children are failing spectacularly. White 16-year-olds in Knowsley, the borough of which Stockbridge forms part, attain worse GCSE results than do black 16-year-olds in any London borough.

Stockbridge also features the internal policing sometimes found in stable, homogeneous places. Graffiti are few and far between. Several notorious criminals have lived in the estate, but they do not foul their own neighbourhood. Muggings are rare; victims would recognise their attackers. Car thefts used to be more of a problem, but Tosh Fielding, who runs a boxing club, says that matters have improved. He and others would make a few phone calls: no questions, no accusations, but the cars ought to be returned. They duly reappeared.

In short, Stockbridge Village is isolated. Its isolation is partly geographical—it is two miles from the nearest railway station, and three out of every five households have no car—but mostly cultural. Its residents are trapped in a cycle of low achievement and low earnings. So are many other working-class whites in other public housing estates in Britain. Nationally, poor whites fare worse at school than poor blacks or Asians (see chart 6).

 

Places like Knowsley also reveal something about race in Britain. Not that poor whites are exceptionally hard done by, though men with shaved heads and black bomber jackets will argue that they are. Rather, that the country tends to look at race in the wrong way. These days, overt discrimination is not nearly as big a problem as isolation. This is true of blacks and Asians as much as whites.

Comfortably colour-blind

On just about every reliable measure, Britain is exceedingly tolerant on race, and becoming ever more so. In a large survey in 1986, 28% of respondents reckoned that most white people would mind “a lot” if a qualified black person was made their boss. Two decades later the proportion had fallen to 9%. Government surveys find that 87% of whites, and 91% of ethnic minorities, say people from different backgrounds get on well together in their neighbourhood—up substantially from ten years ago.

Lest this be thought mere political correctness, behaviour has changed just as much. With the odd and not too worrying exception of the Chinese, every ethnic group is becoming less segregated. Between 2001 and 2011 the number of Britons with mixed white and black-Caribbean parentage jumped from 237,000 to 427,000. There was a similar increase in the number of mixed white and Asian people.

Britons are also more tolerant than other Europeans. Polls show they are unusually at ease with the idea of a non-white political leader. Immigrants fare reasonably well in the job market. In 2011, 7% of British-born people and 8% of immigrants were unemployed. In Sweden, where racial attitudes are just as liberal as in Britain, the unemployment gap was much wider: 7% for natives, 15% for immigrants. Britain is the only large European country where immigrants are less likely to drop out of school than are their native-born peers.

Many Britons loathe immigration, and nearly all think there is too much of it. But this may be the reverse side of the same racially tolerant coin. People may be dubious about immigration partly because they set exceedingly high standards for their country. They assume that immigrants must be accorded precisely the same rights and opportunities as everyone else. The country has never had a large guest-worker programme.

Yet this harmonious picture is marred by some ugly blots. Some people in some places have fallen out of mainstream British life. This is bad for them, and also for everyone else. It is quite a different problem from broad racial discrimination: less serious, but also harder to solve.

In the 1960s and 1970s many Pakistani men were brought to England’s northern towns to work the night shifts in textile mills—a last-ditch effort to sustain a dying, uncompetitive industry. This failed, and within a few years thousands were thrown out of work. Men scattered to other unskilled jobs, heading for one in particular. A decade ago it was calculated that one in every eight Pakistani men in Britain was a taxi- or minicab-driver.

It was a bad beginning. But the Pakistanis of northern England, who started out as economically marginalised, have removed themselves in other ways. Old-timers remember how the earliest migrants, generally single men, adapted surprisingly quickly to British society, occasionally dating white women and frequenting pubs (they also adored Bollywood films). Then they started bringing parents and marriage partners from the part of rural Pakistan where they came from, the Mirpur Valley in Kashmir. They have kept on doing so ever since.

Bogged down in Bradford

The consequence, says Nuzhat Ali, a campaigner who lives in Bradford, is that culturally “we are constantly going back to the first generation.” Four in ten Pakistanis in the city were born in Pakistan—roughly the same proportion as a decade ago. And the community is mired in old ways. Ms Ali had expected the custom of first-cousin marriage to die out in her generation, but it persists. As a result, birth defects are too common: consanguineous marriage seems to double the risk.

Clans, or biraderis, are a mighty force in Bradford. They select marriage partners for young men and women. They run the mosques. They corral votes for politicians (almost invariably Labour ones). In Birmingham, another city with many Mirpuris, postal votes are occasionally delivered in suspicious batches.

The Pakistanis who live in England’s northern cities are not just isolated and backward compared with other ethnic groups. They are also far less cosmopolitan than many people in Pakistan. Irna Qureshi, a researcher who lives in a suburb of Bradford, says visitors from Asia are frequently shocked by the town’s traditionalism. They arrive wearing jeans, only to find themselves surrounded by British Asians wearing shalwar kameez.

Why are Bradford Pakistanis so cut off? Not primarily because of racism or Islamophobia, though both exist. Nor because they have decided to isolate themselves—though that is true of some. Pakistanis who make good, as doctors or solicitors, often move to mainly white suburbs. Their houses have fancy painted railings in front: an evocation of a South-East Asian family compound.

It is more their clan-based culture that sets them apart from British life, and perpetuates itself. Britain’s Pakistanis can escape this culture, but not easily, and their departure does not undermine it. Ms Ali says a growing number of people scorn first-cousin marriage, including herself, though she did marry a cousin. But the old ways remain mainstream: the biraderis and the imported spouses persist.

The problem is specific, not general. It is with Pakistanis in Bradford, not Pakistanis as a whole. Elsewhere, many have blended happily into British life—notably in London, where a fifth of Britain’s Pakistanis live. But this group in this place is stuck, just as the working-class whites who live in Stockbridge are stuck.

Much the same is true of Afro-Caribbean boys in rough neighbourhoods like Handsworth, in Birmingham—one of the places that rioted in 2011. Craig Pinkney, who runs Real Action UK, a mentoring and outreach programme for Birmingham’s most troubled youths, says black boys frequently slip into a posture of opposition to authority. They begin by challenging teachers and move on to the police. This culture persists down the generations. Handsworth has scores of gangs—tiny, often rather pathetic outfits that are nonetheless capable of trafficking drugs and the occasional gun. Some of the leaders of these gangs, Mr Pinkney says, are the children and grandchildren of the men who rioted against the police in the 1980s.

Again, the problem is specific—some neighbourhoods, even some families, more than others; black boys, not black girls. It is exacerbated by racial discrimination, including among the police. People in Handsworth say the neighbourhood-beat coppers are fine: it is the officers in citywide patrol units, charging out of vans as if high on drugs, who get young people’s backs up. Still, overt discrimination is not nearly as bad as it once was.

Out-and-out racism and Islamophobia have proved straightforward to tackle, if hard to stamp out completely. In the 1970s Britain made it illegal to discriminate on racial grounds in employment or housing. Since the 1980s the police have been under pressure to behave better. Hate speech has been criminalised. All of these reforms were resisted, but over time they have worked. It is harder to solve the problem of isolation.

Since the problems are distinctive and local, the solutions might be, too. In Knowsley, better transport connections would help, to make it easier for people to get to jobs. In Bradford, a dose of home economics for teenage boys would be a good idea. One reason so many Pakistanis go to college and university locally, and thus stay within the orbit of their parents’ and relatives’ marriage choices, is that they cannot cook. Black boys need alternatives to the streets above all.

The really important thing is to understand where the problems lie. They do not lie with whole ethnic groups, nor with mass immigration. Instead, they are specific and deep. Britain mostly gets on well—better than most other countries. But the exceptions are woven tightly into the national fabric.

 

Devolution

The centrifuge

Even if Scotland votes to stay in the United Kingdom, the union is fraying

Nov 9th 2013 |From the print edition

A FEW MONTHS ago two marquees were erected at a funfair in Irvine, on Scotland’s west coast. Over the thump-thump of a sound truck provided by the local radio station, Scotland Yes was handing out saltires and balloons and trying to convince people to vote for independence in the referendum that will be held next September. “We can run our own country,” they said. Better Together was handing out union flags and telling people that Scotland would be worse off outside the United Kingdom. “Think of the overheads,” they said. The competition seemed so straightforward that it was tempting to count flags and balloons, to get a sense of how a typical small town might vote. But that would have been useless.

Almost everybody approached by either camp proved happy to sign a mailing list and to take a balloon. Children, and not a few adults, treated the event as a flag-collecting exercise, often amassing several from each marquee. Soon prams and backpacks sprouted saltires alongside union flags. Even given people’s liking for free stuff and their natural tendency to say or sign almost anything to get canvassers to leave them alone, it was a remarkable display of ambivalence. The Scots, at least in Irvine, would apparently like to be both independent and part of the United Kingdom.

When a Labour government devolved powers over health, education and other public services to Scotland in 1999, the hope was that nationalism would (in the words of George Robertson, an MP) be killed “stone dead”. A system of proportional representation for the new parliament would make it hard for nationalists or any other party to command a majority. This worked for a few years, but then the nationalist ghost returned. In 2011 the Scottish National Party won a majority; hence the referendum.

The campaigns for and against Scottish independence have so far been less about blood and soil and more about budgets and spreadsheets, as though they were being conducted by two rival firms of accountants. Both sides are deeply conservative. One nationalist leaflet handed out in Irvine promises that “Scotland will look pretty much as it does today on the first day as an independent country.” Nationalists want to keep the pound, the existing British pensions system and even the queen. Unionists argue that the only way to ensure Scotland can keep its currency and remain in the European Union is to stick with Britain.

If Scotland votes for independence, what remains of Britain will be shaken. It will also be humiliated

A battle between two conservative positions is a battle on unionist turf and, not surprisingly, the Better Together camp is winning. Polls consistently show that about 30-40% of Scots will vote to leave next September. But the Scottish National Party recovered from a poor position in the polls to win its parliamentary majority in 2011. And the poll is unpredictable because Scots cannot vote for what a plurality of them wants: further powers short of independence, with defence and foreign affairs handled from London. The perplexing scene in Irvine is in fact an accurate representation of the public mood. “The modal Scottish voter says, ‘I’m Scottish, and we should be able to run our own affairs. But I want Westminster to deal with the foreign muck’,” explains John Curtice, a psephologist at Strathclyde University.

If Scotland votes for independence, what remains of Britain will be shaken. The state will be slimmed mathematically, as 8% of its economy and population disappears, together with 32% of its land and almost all of the North Sea oil- and gasfields. It will be diminished militarily. The Scots supply more than their fair share of uniformed men, and Britain’s nuclear-armed submarines are parked in a deep Scottish loch, with no decent alternative berth. It will also be humiliated. A country that cannot hold itself together is greatly diminished in the eyes of the world. Scottish independence would give succour to Welsh nationalists and would cause an existential crisis in Northern Ireland, where many unionists have Scottish roots.

The more you have, the more you want

If, as seems likely, Scotland votes to stay in the United Kingdom, the consequences will be less drastic but still profound. Led by Scotland, the devolved administrations have quietly become more and more powerful (see chart 7). Even in Wales, where devolution was approved in 1997 by a cigarette-paper margin of 0.3%, most people now want the Assembly to be given new powers over policing and welfare in addition to those they already have over education, health and housing. Devolution appears not just irreversible but unstoppable.

When the devolved governments were set up, it was hoped that they would experiment with new policies that could spread to other administrations, rather as ideas spread among American states. That has happened occasionally—as with Scotland’s smoking ban and Wales’s children’s commissioner. But the opposite trend is more marked.

Beginning under Labour, and accelerating under the Conservative-Liberal Democrat coalition government, England has gone on a public-service-reform binge. It has introduced choice and competition to the National Health Service, cut many schools free of local-government control and shifted the burden of paying for university onto students. It has published league tables and other data for the benefit of parents and patients.

Outside England almost all of this has been resisted. No academies or free schools can be found in Northern Ireland, Scotland or Wales. Hospitals remain bulwarks against the private sector. Scottish students still pay no fees in Scotland: not surprisingly, they have grown insular, with just 3% of Scottish 18-year-old university applicants seeking places in the rest of the United Kingdom. Northern Ireland has blocked the coalition government’s welfare reforms. “The overall trend is to preserve an older version of the social-democratic welfare state,” says Alan Trench, who follows the politics of devolution at the University of Ulster. Northern Ireland, Scotland and Wales have diverged from England not because they have experimented but because they haven’t.

What turns this from an interesting wrinkle into a problem is that all three receive block grants from Westminster. This is not offensive in itself: most English regions, too, are net recipients of taxpayers’ money. But it becomes harder to tolerate if the devolved administrations are seen to be using English cash to avoid painful reforms.

The partial devolution of taxation powers, which will accelerate in the next few years, makes the problem bigger. Northern Ireland and Scotland want to set their own rates of corporation tax. If they cut them drastically, as Northern Ireland has said it would do, companies may be drawn away from England. Subsidising another country to take your jobs is a bit much.

Tricky constitutional questions lurk. As the devolved administrations grow stronger and their policies diverge from England’s, the issue of their MPs in Westminster becomes more pressing. By convention, Westminster does not override legislation passed in the devolved assemblies. But MPs from Northern Ireland, Scotland and Wales can vote on bills that mostly affect England. A separate English parliament would solve this problem but create lots of others, and the idea has little support.

The British, and especially the English, are brilliant at muddling along. They can sustain institutions that have long seemed unsustainable; the unelected House of Lords and the Church of England spring to mind. But they can move quickly when theoretical problems turn into practical ones.

That may happen in 2015. The two likeliest outcomes in that year’s general election are a small Labour majority or a small Conservative majority (coalitions are never likely in Britain, despite what everybody in Westminster seems to believe, and even less so in 2015 because the Liberal Democrats will probably lose seats). A small Conservative majority would mean a government that has almost no MPs outside England, so lacks a remit in the Celtic fringe. A Labour government with a small overall majority would lack a majority in England and would hold on only because of its Scottish and Welsh MPs. At that point even the lackadaisical British might realise that something is up.

Nationalism and history

A unionist pin-up

Turning William Wallace’s story upside down

Nov 9th 2013 |From the print edition

THE STATUE OF Robert the Bruce has been spruced up. A new museum is under way at the site of the Battle of Bannockburn, in a suburb of Stirling. It will open next summer, in time for the 700th anniversary of the battle (which Bruce won and the English lost). Just a few months later, not coincidentally, Scotland will be invited to vote on independence.

Many Scots, including many nationalists, cringe at the evocations of ancient battles against the wicked English, and think “Braveheart” a silly film. But history is important to the life of nations. In Northern Ireland disputes over commemorative parades and a museum on the site of the Maze prison have paralysed the devolved government. In Scotland such disputes are rare, because the nationalist account of history is almost unchallenged.

“As long as only one hundred of us remain alive we will never on any conditions be brought under English rule.” That inscription, from the 1320 Declaration of Arbroath, is the first thing to greet a visitor to the historical galleries of the National Museum of Scotland in Edinburgh. Upstairs, the Act of Union of 1707, which united England and Scotland, is said to have resulted from “a good deal of organised bribery, patronage and political force”. At the Wallace monument near Stirling, a crowd watches a pungent account of another battle at which the English were slaughtered.

It is possible to tell Britain’s history in a way that recognises the deep connections as well as the tensions between its parts. You could point out that the Act of Union was swiftly followed by the Scottish Enlightenment, and that a disproportionate number of Britain’s colonial governors were Scottish. You could add that much of Britain was at war in the Middle Ages: not just Scotland and Wales fought the crown, but Cornwall and Kent, too. You could mention that the “English” force routed at Bannockburn was substantially Welsh.

You could also reclaim William Wallace. Thanks partly to “Braveheart”, which came out in 1995, he is now a nationalist hero. But when a score of Wallace monuments were erected in Scotland in the mid-19th century he stood for something quite different. In 1861 a huge crowd assembled for the laying of the foundation stone at the grandest monument, near Stirling. They heard—and cheered—speech after speech about how Wallace’s victory over the English had paved the way for the subsequent happy union of Scotland and England.

“It has given union, strength, and happiness to the whole British empire; for, by preventing the subjugation by force, it has left room for the union by inclination,” explained one worthy, as the union flag fluttered overhead. Wallace as unionist hero: it is only as distorted as the more familiar tale. Though it might not make such a gripping film.

The vacuum cleaners

Led by London, big cities are sucking up talent, jobs and investment from everywhere else. Good

Nov 9th 2013 |From the print edition

IN THE 17 YEARS that Bob Garton has worked at Gascoigne Primary School in Barking, the number of pupils has roughly doubled. The headmaster has squeezed temporary classrooms into the playground and built a room on stilts to preserve precious space for running around. Still, running such a huge operation is brutal. Only about one-third of the school’s 1,200 pupils can fit into the hall, so assemblies and lunch breaks must be staggered. Most difficult is the constant churn of pupils. Every week during the term, on average, eight pupils leave Gascoigne and eight new ones arrive—often with rudimentary English, and sometimes with awful tales of persecution overseas. In short: a successful school in a successful neighbourhood.

Between 2001 and 2011 the population of Barking and Dagenham, in east London, grew by 13%. In the process the borough changed from overwhelmingly white and British to largely black and Asian. It also became far younger. About a fifth of people aged 65 and over disappeared between those years, whereas the population of under-fives shot up by half. Mr Garton’s school is now completely full, but the pressure keeps growing.

This is a new difficulty for London. Between the second world war and the mid-1980s the capital’s population plunged from 8.6m to below 7m. But between 2001 and 2011 it increased by 12%. Over the same period New York’s grew by 3% and Chicago’s shrank by 7%.

London is not particularly unusual among British cities, though. Birmingham, the country’s second-biggest city, grew only a little more slowly than the capital between the 2001 and 2011 censuses. Manchester’s population jumped by 19%. Britain’s big cities are swelling at almost Victorian speed.

Their success is not just measured in heads. In Leeds, Yorkshire’s business capital, Neil McLean explains how the law firm he works for, DLA Piper, has closed small regional offices and centralised work in the city. Leeds is “a combination of a magnet and a vacuum cleaner”, adds Andrew Lindsay, another lawyer. Since 1997 that city’s share of Yorkshire and the Humber’s financial and business-services output has risen steadily from 27% to 32%. Manchester accounts for a growing share of the North-West’s output in those high-paying industries, too.

Politicians often lament the divide between the rich south and the poor north of England. They are being sloppy. What is really happening is that a few cities are pulling ahead of the rest of the country. They are indeed like vacuum cleaners, sucking in talented people, highly paid jobs, government investment and, lately, power.

London is by far the most powerful: its nozzle reaches around the world. Only 64% of Londoners were born in Britain. Rich foreigners install their wives and children in luxury flats in central London while they flit between Moscow, Dubai and Mumbai. Such is their hunger for property, and so limited is the supply, that prices are driven to mad heights. The tax paid on home sales in Kensington and Chelsea in the fiscal year 2012-13 exceeded the tax paid on all homes in Northern Ireland, Scotland and Wales put together.

Poor immigrants head farther out, to places like Barking. But, though poor in means, they are often rich in aspiration. At Gascoigne Primary School, Mr Garton remarks approvingly on the pushiness of parents from countries like Albania and Ghana, some of whom are highly educated. Demand for music lessons at the school has surged. London’s schools may be hard to manage, but they have outperformed schools in the rest of the country over the past decade. Immigrants are a big reason for that.

The diversity machine

 

London’s vacuum cleaner is rather leaky. Having sucked in people from the north of England and overseas, the capital disgorges others across the South-East and pretty parts of Devon and Wales as Londoners move out in search of affordable houses with gardens (see map). Because many of the people who leave the city are not white, its environs are becoming more diverse. Between 2001 and 2011 the ethnic-minority population of Hertfordshire, to the north of the capital, doubled.

The capital has a similar effect on business. It draws entrepreneurs and employment from far afield but spits out enough of them to sustain the entire south-east corner of England. Cities like Cambridge and Milton Keynes owe much of their success to their proximity to London. Together, they shrugged off the economic slump. Since the middle of 2010 England has added a net 585,000 jobs. London got two-fifths of those; the South-East and East regions got almost all the remainder.

London has achieved all this without being especially well run. This is no slight to Boris Johnson, the city’s ambitious mayor; he simply does not have much power. London’s 33 boroughs collectively have greater heft, but even they do not have much. The most important decisions about London are made by the national government in Westminster. It has helped the city largely by avoiding catastrophically bad decisions, common in the past. In the 1960s, for example, the government froze office-building in central London and encouraged businesses to leave.

Manchester, by contrast, is well run. Since the 1980s it has been steered by a posse of sensible, business-friendly Labour politicians. Seizing the unexpected opportunity provided by an Irish republican bomb, which in 1996 blew up a particularly ugly shopping centre, they have redeveloped much of the city centre. Ian Simpson, the architect who designed Manchester’s tallest building—and a beautiful flat for himself on the top floor—says it is now immeasurably quicker and easier to put up a tower in Manchester than it is in London.

Manchester proper is a smallish city, with just over half a million inhabitants, a fifth of the Greater Manchester metropolis. But it is easily the most powerful brand, thanks in part to Manchester United Football Club (which actually plays in neighbouring Trafford) and its rival, Manchester City. And it has developed an implicit understanding with neighbouring cities. They throw their weight behind its bids for business and state cash. In return, Manchester passes on some of the spoils, such as a fast-expanding tram network. Greater Manchester’s ten local authorities set up a combined authority in 2011, which is becoming a model for other places. Fiscal devolution has come earlier to Manchester than to any other city: it can keep half the extra taxes it gets from transport investment.

Both Leeds and Manchester will benefit from Britain’s proposed high-speed railway, HS2, if that line can overcome growing political worries about its cost. Long before any trains start zooming up the track, a project known as the Northern Hub will make Manchester’s trains run more quickly and smoothly. Still, no city in Britain can touch London when it comes to squeezing money out of taxpayers. Its government may be feeble, but MPs spend half the week in the capital and the media are based there, so the city tends to get what it wants. IPPR, a think-tank, calculates that it is in line for infrastructure investment worth £2,600 per Londoner, much of it on Crossrail, a new railway. Investment per person in the North-East will be just £5.

That is not fair. But fairness is not the right measure by which to judge an urban policy. Scarce resources should go where they will generate the greatest returns. Trying to resist the agglomeration effects of big cities is not just a waste: it is actively harmful to Britain’s economy. “We’re spending lots of money to fight against the tide,” says Henry Overman of the London School of Economics. Better to do the opposite and encourage London and other successful cities to keep growing.

Turning inward

Britain has lost its global swagger. It needs to abandon its separatist dreams and rediscover its open, trading heritage, says Joel Budd

Nov 9th 2013 |From the print edition

BRITAIN IN 2003: the country hugs America tight as both prepare to go to war in Iraq. Though many of its continental neighbours disapprove of that adventure, Britain is nonetheless close to “the heart of Europe”, in the confident phrase of its internationalist prime minister, Tony Blair. Defence spending and foreign aid are rising quickly. Immigration is surging. Together with Ireland and Sweden, Britain prepares to welcome workers from Poland and other eastern European states to whom all other EU countries have shut their doors.

Britain in 2013: following a defeat in the House of Commons, the government pulls back from a mooted American and French bombing of Syria. Support for British membership of the European Union is, in the government’s own words, “wafer thin”. Defence spending is declining, in real terms and as a share of the economy. Immigration is falling fast, though still not as fast as the Conservative-Liberal Democrat government wants. Britain has barred Bulgarian and Romanian workers for as long as legally possible, and is thinking about denying them access to benefits. The Foreign and Commonwealth Office is shedding staff. Only the foreign-aid budget grows, to the chagrin of most Britons.

In a variety of ways, Britain has turned from being an enthusiastic global player to something between a free agent and an opinionated spectator. That does not mean it has become isolationist in principle. It has erected no trade barriers and has become no less welcoming to foreign investment. It has stormed out of no international club—though that may happen soon enough. But, through a combination of policymaking and global shifts that it is powerless to stop, Britain finds itself lonelier in the world. It feels smaller, more inward-looking.

Politicians still talk the global talk. Although David Cameron, the prime minister, explicitly rejects Mr Blair’s internationalism, he adds that Britain must not shrink from the world. He tries to focus his countrymen’s attention on foreign competition and likes to intone that Britain is running a “global race” against hungry opponents. If wishes were shipping containers, exports would be rising quickly. Leading Tories say (sometimes) that they want to stay in Europe, so long as the EU can be made less meddlesome.

But the message is jumbled and contradictory. On a trip to India, Mr Cameron assured his hosts that they were welcome in Britain. Then, at the Conservative Party conference in September, many vertical surfaces were emblazoned with the boast: “Welfare capped, crime down, immigration down”. Politicians talk up exports, yet they talk down financial services, the country’s biggest export industry. Understandably, many Europeans pay less heed to British pledges to reform the EU for the good of all and more to the promise to hold a referendum that could well see the country pull out.

Two grinding, unsatisfactory wars in Afghanistan and Iraq have made Britons leery of foreign adventures. A weak economy leads them to fear for their jobs, and worry about the foreigners who might take them. “The public mood ten years ago was one of optimism and possibility. Now it’s one of anxiety,” says Douglas Alexander, Labour’s shadow foreign secretary. Voters distrust politicians even more than they normally do. Hence the rise of the UK Independence Party, a Little-Englander outfit that condemns both immigration and politics as usual.

The economic slump has indeed been grim. Britain went into the financial crisis highly leveraged, and with a large financial-services industry. Not surprisingly, it was clobbered. Although the economy is at last growing, it has a lot of ground to recover. Britain’s economy is 16% smaller than if it had kept expanding at its trend rate before the crisis. And in contrast to many other rich countries, Britain’s population is going up, flattering its GDP figures. Allow for that, and the country has performed far worse than America over the past decade, and has been caught up by Germany (see chart).

 

Tentative signs of a strong economic recovery are one reason to hope that Britain will be able to return to a more active, less sulky role in the world. A greater cause for optimism is that, as Mr Alexander also points out, Britain is in practice a startlingly international place. Politicians have slowed the tide of foreign students flooding into its universities but they have been unable to stop it. London has become a national and global entrepôt. If you are interviewing businesspeople in the capital, it can be a surprise to encounter someone with a London accent; in the technology industry, even English accents are not all that common. And London is slowly remaking Britain in its image.

The British hate immigration in principle, but they are better than most at assimilating newcomers (the country’s most hopeless neighbourhoods are white and British). They think nothing of importing a Canadian to run their central bank, or a succession of continental Europeans to manage the English football team. Great numbers of them travel and live abroad. Your correspondent once spoke to a candidate for the British National Party—a now-puny organisation that wants foreigners and their descendants to leave the country—who told him, without irony, that some party activists were so fed up with immigration that they were moving to Spain.

Ordinary Britons, their lamentable failure to learn foreign languages aside, are more engaged with the world than people in most countries. Look, for an odd example, at the way they watch birds. British birders travel far more than others, says Mark Cocker, a shrewd observer both of birds and of the people who are obsessed with them. Most of the international bird-watching outfits have British roots. “Perhaps it’s because our own avifauna is so piffling—just 250 species,” he ventures.

Don’t fall apart

This special report will argue that Britain needs to rediscover the open, internationalist, trading culture that made it great. It has much to do. Its exports are too feeble—one reason why its economy is taking so long to recover from the slump. It is in real danger of leaving the European Union, which would leave it powerless to shape its most important market. London and a few other cities are thriving, but they would be healthier still if they were less constrained. Britain’s immigration policy has become actively harmful to its economy.

The country also needs to deal with a domestic problem. Ten years ago Scottish nationalism was in headlong retreat, but in a mere ten months from now Scotland will vote on whether to become an independent country. If it opts to leave, what remains of Britain will cut a greatly diminished figure on the world stage. Together with the referendum on EU membership, which may take place in 2017 or even sooner, the vote could set the country on a path to serious isolation.

“We have learned not to fantasise about being larger than we are,” says Rory Stewart, a Conservative MP. “We must learn also not to fantasise about being smaller.” Britain is an energetic, diverse country that has shaped the culture of much of the world. It needs to turn again to face outward.