Vince Cable becomes latest pro-European to come out against free movement - as it happened
Rolling coverage of the day's political developments as they happen
5.39pm GMT
I have serious doubts that EU free movement is tenable or even desirable. First, the freedom is not a universal right, but selective. It does not apply to Indians, Jamaicans, Americans or Australians. They face complex and often harsh visa restrictions. One uncomfortable feature of the referendum was the large Brexit vote among British Asians, many of whom resented the contrast between the restrictions they face and the welcome mat laid out for Poles and Romanians ...
The economics are ambiguous. Seen globally, more migration is undeniably a positive. People moving from high unemployment, low productivity countries to areas of labour scarcity and higher productivity produce economic gains. But the benefits accrue mainly to migrants themselves (and business owners) ...
The argument for free movement has become tactical: it is part of a package that also contains the wider economic benefits of the single market. Those benefits are real, which is why the government must prioritise single market access and shared regulation. Yet that may not be possible to reconcile with restrictions on movement. The second-best option is customs union status, essential for supply chain industries.
4.58pm GMT
My colleague Polly Toynbee has been writing a good article about the IFS report. Here is an extract.
My generation bought cheap homes, and saw them rocket in value, in boom times earning more in a day than we earned going out to work. This unearned, unmerited, untaxed wealth needs to be captured in one way or another, at some time in people's lives or deaths.
That soaring bricks-and-mortar wealth damages the economy and still fails to encourage more homes to be built. Property wealth needs to be collected and redirected to struggling young families with no chance of owning their own home. Start with a council tax that genuinely reflects the value of homes: currently, with no revaluation of tax bands since 1991, it's capped very low for valuable properties, while squeezing money out of those with nothing. US states levy property taxes and so should we, to chill the market and raise funds for housing. Time too to look at other ways to tax the elderly wealthy to pay for their own social and medical care, so the burden doesn't fall on a poorer younger generation.
Related: Inheritance tax is toxic. We need new ways to tackle inequality | Polly Toynbee
4.44pm GMT
The Institute for Fiscal Studies has called for inheritance tax loopholes to be closed. Paul Johnson, the IFS director, said this in an interview early this morning on the Today programme.
Johnson was on the programme talking about a report the IFS has published on inheritance and inequality. The Guardian's story about it is here and the IFS summary is here. The report does not make policy proposals but on the Today programme Johnson argued that inheritance tax loopholes should be closed.
The problem with inheritance tax is that it is very hard to make it work for the really wealthy. It is the middlingly wealthy who end up paying it because it is pretty easy, if you can give money away during your life, or use trusts and so on, for people who have got serious money not to pay the full 40% ...
I think there is a case for looking at inheritance tax. There are some really absurdly obvious loopholes in it that one might want to sort out.
As ever with these things, it does depend on what you want to achieve. If you want to do more to ensure that people have a more equal start in life, or more equal inheritance, then you need more inheritance tax. But you may well then find that a more effective set of policies are policies that support younger people, particularly in the housing market. Policies for example that you increase council tax and reduce stamp duty, or increase the amount of houses that are built, so that the importance of this inheritance becomes less significant ...
The more constructive thing in the long run is, part of the real big problem here is that the younger generation is doing very badly in terms of pensions, very badly in terms of housing, not very well in terms of earnings. If you can sort those things out, then inheritance becomes less important proportionately.
At present, agricultural land and unquoted business assets are exempt from inheritance tax, at a cost to the exchequer of 440m and 590m per year respectively. While there might conceivably be a case for allowing tax payments to be spread over time where assets received are illiquid and are to be retained by the recipient, it is hard to see any justification for the wholesale exemption of these assets. These reliefs create just the sort of non-neutrality the tax system ought to try to avoid, pushing up the price of agricultural land and of certain offerings on the AIM market, and providing a large incentive to keep businesses going and in the family even if there are good financial reasons for disposing of them sooner - as well as providing an open invitation for people to buy what might otherwise be wholly inappropriate assets purely as a way to avoid inheritance tax (albeit with a minimum holding period of the assets to qualify for relief).
The principal reason that inheritance tax is forecast to raise only 4.2bn in 2015-16 is that it can be circumvented by the simple expedient of passing on wealth during one's lifetime. Transfers in the seven years before death are taxed on a sliding scale (from zero for transfers more than seven years before death to the full 40% rate for transfers less than three years before death), but gifts made before that are not taxed at all. Those who are able - often the wealthiest - are encouraged to pass on their wealth at a time dictated by the tax system.
3.50pm GMT
The Economist has published a leader on Theresa May, and a long briefing about her first six months in power. They both come to a similar conclusion; that, while it is too early for a final assessment, May's record so far has been disappointing and her failings are starting to resemble Gordon Brown's.
Here's an extract from the editorial. It is headlined "Theresa Maybe, Britain's indecisive premier".
Yet caution has started to look like indecision. Her most senior official in Brussels has just resigned, saying that the government does not have a clear Brexit plan. After six months it is hard to name a single signature policy, and easy to cite U-turns. Some are welcome: a silly promise to put workers on company boards, for instance, was abandoned; a dreadful plan to make firms list their foreign employees lasted less than a week; and hints at curbing the Bank of England's independence were quietly forgotten. Selective "grammar" schools will be resurrected-but only on a small scale, and perhaps not at all, given how many Tory MPs oppose the idea. Other reversals smack of dithering. The construction of a new nuclear plant at Hinkley Point was put in doubt, then given the go-ahead; a new runway at Heathrow airport was all but agreed on, then deferred until a parliamentary vote next year. "Just-about-managing" households were the prime minister's lodestar for a week or so, then dropped. So were suggestions that Britain would seek a transitional deal with the EU after Brexit-until they were recirculated a few weeks later when Mrs May apparently changed her mind once again.
The cause of this disarray could be that Mayism itself is muddled. While vowing to make Britain "the strongest global advocate for free markets", the prime minister has also talked of reviving a "proper industrial strategy". This is not about "propping up failing industries or picking winners", she insists. Yet unspecified "support and assurances" to Nissan to persuade the carmaker to stay in Sunderland after Brexit amount to more or less that. Her enthusiasm for trade often sits uncomfortably with her scepticism of migration. Consider the recent trip to India, where her unwillingness to give way on immigration blocked progress on a free-trade agreement.
Like Mrs Merkel, Mrs May has seen off rivals through canny manoeuvring; she bides her time, knowing when to speak up and when (as in the referendum campaign) to stay quiet. Like Mr Brown, she is prone to overblown rhetoric, irritability and indecisiveness. The biggest worry, though, is that she may also share his inability to adapt-the key difference between Mr Brown and Mrs Merkel.
Mrs May shows few signs of the ability to assimilate the new that has made Mrs Merkel so successful. Her vision of leadership, it seems, is focused on giving statements, installing processes, gathering up information and control-and little else. This makes it worryingly easy to imagine the Britain of 2018 or 2019 in disarray: her party in revolt, her ministers and partners alienated, her government sclerotic, Brexit talks breaking down, the economy tanking and Number 10 in bunker mode.
2.51pm GMT
Here's the author and former political columnist Robert Harris on that Economist cover.
Echoes of the Telegraph's attack on Eden 60 yrs ago, for not providing "the smack of firm government". Got under his skin, disastrously https://t.co/rWmYLjIICh
2.41pm GMT
When Charlie Whelan was working as Gordon Brown's spin doctor, he once summed up his approach to media management with something to the effect of: "Who cares about the Economist? We've got the Sun."
I hope that's what they still think in Downing Street. Today the Sun has an editorial lavishing praise on the prime minister. But Britain's pre-eminent news magazine (which perversely calls itself a newspaper) is less impressed.
Theresa May's problems are stacking up, and she doesn't seem to have a plan. Our Britain cover this week: pic.twitter.com/JdXV45zktV
@AndrewSparrow @TheEconomist. Sorry to disappoint you but that's utter bo*****s. Never said that.
@AndrewSparrow I might have said I don't care about @TheEconomist because nobody reads it!
2.25pm GMT
I thought Sir Ivan's resignation email was, I don't know, rambling, a bit emotionally needy, not something you would expect from a civil servant of that calibre.
Related: Why has the UK economy defied predictions of doom?
2.07pm GMT
Earlier in the Q&A Andy Haldane was asked if the Bank of England was now more positive about the prospects for Britain post-Brexit than it was before the referendum.
Haldane admitted that the economy had done better than expected in the second half of last year. But he said, over the longer term, the Bank of England still expected Brexit to harm growth.
I think near-term the data, the evidence we've been accumulating since the referendum, has surprised to the upside. [There's been] greater resilience, in particular among consumers and among the housing market, than we had expected. Has that led us to fundamentally led us to change our view on the fortunes of the economy looking forward over the next several years? Not really.
This is more a question, I think, of timing than of a fundamental reassessment of the fortunes of the economy. So back in November we published a forecast for inflation which was the highest we've ever published. And the forecast for growth in the UK economy that was the lowest we have ever published.
1.51pm GMT
Haldane is taking questions now.
Q: What scope do you see for more assertive policies to alter the distribution of wealth?
1.40pm GMT
Andy Haldane, the chief economist at the Bank of England, is speaking at the Institute for Government now. You can watch a live stream here.
The BBC's Kamal Ahmed has been tweeting from it. Here are some of his tweets.
Andrew Haldane @bankofengland says productivity improvement holds the key to building an economy that "works for all" @ifgevents
Haldane on economists: "It's a fair cop to say that the profession is in crisis." Cd lead to a rebirth in economics.
Haldane: pre financial crisis economic models were "ill-equipped" to deal with behaviour which was "deeply irrational" @ifgevents
Haldane @bankofengland "We'd foreseen a sharper slow down than happened." Says economy is performing as if Brexit vote hadn't taken place
Haldane @bankofengland says in 2017 economy could be "somewhat more difficult". Consumers cd "throttle back" spending @ifgevents
Haldane: "I'm not saying economists should talk like Trump but we need different means of conveying our messages." Language matters
Haldane: "Full implications of Brexit [on the economy] are yet to be known." @ifgevents
12.23pm GMT
You can read all today's Guardian politics stories here.
As for the rest of the papers, here is the PoliticsHome list of top 10 must-reads, and here is the ConservativeHome round-up of today's politics stories.
Liam Fox and David Davis's alleged failure to understand briefings in the weeks after their appointment left Sir Ivan Rogers in despair, friends have said. Britain's top diplomat in Brussels, who resigned on Tuesday, considered quitting on more than one occasion after the referendum.
Sources said that he was frustrated by his attempts to induct the two Brexit cabinet ministers in the details of the single market and customs union ...
Less than three months away from the government's self-imposed deadline for triggering Article 50, we still do not have a delivery plan, negotiating strategy or clear understanding of the resources required to achieve a successful Brexit. To say this is neither to be "pessimistic" or "political", nor in denial of the referendum result, but simply make an honest statement about the reality of our situation.
Too much of the debate about Brexit starts from a naive view of how we would like to world - and Europe in particular - to be rather than how it actually is. Nowhere is this more evident than in our insistence that despite all the evidence to the contrary, we can have free trade in goods and services with Europe but not free movement of labour.
In fact, we know the predominant source of error. It stemmed from underestimating the strength of household consumption after the vote for Brexit. Economists expected a vote to leave would increase household savings in the short term, both as precautionary insurance against uncertainty and to begin an adjustment to a less prosperous future.
These were reasonable guesses, based on recent household behaviour - for example, at the time of huge banking uncertainty early in 2008. But rather than rising, household savings fell throughout 2016. The savings ratio dropped to an exceptionally low level in the third quarter as consumers went on a borrowing and spending binge not seen since before the financial crisis.
12.00pm GMT
Earlier (see 10.48am) I flagged up this Politco Europe article and said it was by Mats Persson. That's my mistake. It's by Daniel Korski, who also worked as an adviser to David Cameron on Europe and on other matters. I'm sorry. But it's still a good read.
11.43am GMT
The Financial Times (subscription) has published a good article by Alex Barker this morning relating to Sir Ivan Rogers' resignation. Barker says Rogers' colleagues say he had his "hair on fire" worrying about the prospects of Britain getting a transitional deal as it leaves the EU.
Sir Ivan Rogers' warning to Downing Street, leaked in December, that the EU expects a full UK trade deal to take until the early to mid-2020s seemed stark. By Brussels standards, however, it was one of the more uncontroversial aspects of his advice.
More significant was his assessment that British political imperatives to control borders and leave the jurisdiction of European courts required the UK to go for a "hard Brexit" deal, leaving the UK outside the customs union and the single market. Given this reality, the most valuable outcome of Article 50 talks would be co-ordinated, orderly transition terms that would allow Britain to adjust.
For the EU-27, any transition must be simpler than a final EU-UK trade deal. That means fashioning a transition from existing EU systems: the European Court of Justice, EU laws, EU budget contributions and core EU rights such as the free movement of people. But any bespoke transition cannot be allowed to look better than actual membership.
By contrast, Theresa May, the UK prime minister, is preparing for an election in 2020. That would probably be after Britain leaves - likely to be in 2019 - so potentially in the middle of any transitional period. Yet she will have to reconcile the terms of any deal with two promises she has made to British voters: to leave the jurisdiction of EU courts and to repatriate controls over immigration.
11.18am GMT
Services sector activity jumped to a 17-month high in December as the British economy continues to exhibit signs of resilience in the face of Brexit uncertainty, the Press Association reports.
The closely watched Markit/CIPS services purchasing managers' index (PMI) reached 56.2 in December, up from 55.2 in November and above economists' forecasts of 54.7.
A reading above 50 indicates growth.
11.02am GMT
Kezia Dugdale, the Labour leader in Scotland, has used a new year interview with the BBC's Good Morning Scotland to renew her call for the UK to adopt a federal structure, with Scotland getting more powers. She told the programme:
For me, the big question in 2017 is how we save the Union. I think the United Kingdom is in terrible peril because of a gamble the Tories have forced with Brexit and the SNP's obsession with independence. So, 2017 has got to be about protecting the Union.
Our country is divided. The way to bring that country back together is by an Act of Union to save the Union. Let's have a federal solution for the United Kingdom that offers the solution that we need.
I am arguing for a federal solution for the whole of the United Kingdom ... Jeremy Corbyn has already put his support behind a constitutional convention for the United Kingdom.
10.48am GMT
Lord Marland, the Conservative former trade envoy, told the Today programme this morning that he did not think Whitehall had the skills set to conduct a good Brexit negotiation. (See 9.20am.) Later Mats Persson, who worked as David Cameron's EU adviser in Number 10, told the same programme he disagreed.
My experience is Britain has some of the best civil servants in the world. Whitehall does have the skill set to deliver it. I think the UK government is actually quite far advanced in its plans, there's been a bit of unfair headlines recently.
I think that of course this is complex, and I'm on the outside now, but there certainly are other civil servants in Whitehall on top of their game. This is about identifying a deal which involves benefits on both sides, both sides have to have something to gain. Britain has some leverage, it's a massive market.
It was a deal that was far from meaningless, but could we have got more? Maybe. I think played differently, over a longer period of time, we could have achieved more reforms, yes.
10.35am GMT
The Today programme also interviewed Tom Fletcher, a former UK ambassador to Lebanon and a former Number 10 foreign policy adviser, about Sir Tim Barrow. Fletcher said Barrow was "bulletproof".
It's the toughest negotiation in our life times and I think [Barrow] is up to it. I have seen him in Brussels. He knows the corridors, he knows the characters.
But actually more importantly I saw him in Moscow where he was incredibly resilient as ambassador there, dealing with [Vladimir] Putin in a very testing time in our relationship and Tim had a reputation of being bulletproof out there.
I think people feel that the scale of the challenge is enormous. But we've got a lot of our best people on it. I think people get a bit fed up of some of the coverage that says why aren't we being more public with the plans. Muhammad Ali didn't brief everyone in advance on the Rumble in the Jungle [his boxing victory over George Foreman].
Ex amb @TFletcher tells #BBCR4today that Ali didn't "brief everyone on Rumble in the Jungle". But a) he wasn't democratically accountable
b) I'm pretty sure everyone knew what Ali's ultimate objective was
10.11am GMT
On the Today programme Sir Robert Cooper, a former Foreign Office diplomat who has also worked for the EU, welcomed Sir Tim Barrow's appointment. Asked about him, Cooper said:
He's honest, he's tough, he's someone how knows Europe very well, although not so much the community part. He's done lots of foreign policy in Europe ... At least we've got somebody, he may not know all the technical stuff, but he knows how Europe works in terms of dealing with people.
I think at the moment there is a policy vacuum. It's not surprising. This is a gigantic enterprise that's been taken on and needs a lot of thought. I think at the moment probably the atmosphere is difficult because people don't know where they are going. You need to have a sense of direction.
9.44am GMT
Lord Livingston, the former chief executive of BT and a trade minister in David Cameron's government, was on the Today programme talking about Brexit. He said that negotiating a trade deal with the EU would take time.
First of all of course we have to actually sort out what's broadly going to be our relationship with the EU. Are we going to be in the single market? Probably not. Are we going to be in the customs union?
Then you can turn your attention to other countries but the trade deal for instance with Canada still isn't fully implemented and that's about seven years on.
9.34am GMT
Nigel Farage, the former Ukip leader, has got a new job.
New for 2017: Nigel Farage to host a nightly show on LBC. Starting this Monday https://t.co/UXocGmqlxZ pic.twitter.com/KwSs8Vjrpr
Am a big fan of LBC but it's not exactly a job in the White House, is it? https://t.co/4802OrdaPJ
9.20am GMT
Yesterday Theresa May acted swiftly to fill the vacancy created by the surprise resignation of Britain's ambassador to the EU. Here's the Guardian's version of the story.
Related: Sir Tim Barrow appointed as Britain's EU ambassador
Theresa May has moved swiftly to calm tensions over the resignation of Sir Ivan Rogers as Britain's ambassador to the EU by appointing career diplomat Sir Tim Barrow as his replacement.
The decision means the prime minister has ignored calls to appoint a wholehearted Brexiter, in a move that will reassure those in the civil service who feared the role would be politicised.
My fear is that Whitehall as a whole has really not got the skill set to deliver a really hard-nosed negotiation and I think we have really got to up skill in that area to do it.
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