HS2 under review

I would be interested to hear from people about whether HS2 should proceed, be cancelled or built from the North first, leaving open the question of improvements into London.

I voted against HS2 when Parliament made the original decision and set out then the problems I saw with high costs, possible cost escalation, and optimistic revenue forecasts. Following the Mrs May review I accepted that government and Parliament want to build it, but now there is another government review after further large cost escalation.

Posted in Uncategorized | 168 Comments

Collapse of Italian government

The decision of the Italian Prime Minister to resign rather than face a Confidence vote brings to an end a curious government experiment. 2 populist parties with very different programmes and outlooks tried to govern together. Both found the restrictions of the EU budget rules and Euro scheme difficult to live with. Lega were keen to cut taxes and 5 Star wanted to introduce a more generous basic income payment by the state. The PM, not elected for either governing party, sought to keep the government more in line with EU requirements and tried to keep co-operation between the two leaders of the two main parties in the coalition against a background of disagreements. Meanwhile the Italian economy stagnated, and fell into a shallow recession for the second half of last year.

There will be efforts for the pro EU New Democracy party to ally in government with 5 Star to avoid an election both of them might do badly in. They might be able to establish a temporary government. It would have to pass a budget that appears compliant with EU rules. If they do this Lega will look for any way to bring on an early election which they think would give them more seats and more clout in the Parliament.
They will be looking to the new EU Commission to see if there is any scope to relax the current tight settlements, given the wish of many in Italy to spend more and be taxed less. They will also be hoping the new President of the European Central Bank follows an even more accommodating policy, and will expect Italy to continue as the number one borrower from that Bank under the Target 2 balances arrangements.

Italy is an interesting test of whether populist parties can govern in any way in the Euro area that keeps faith with what their electors want and what they promised. The Lega/5 Star coalition compromised with the EU to avoid a worse conflict in ways which prevented the implementation of much of their respective economic and financial programmes. Mr Salvini of Lega is hoping to bring about an election which he thinks he can win, when he would doubtless be less willing to compromise. This in turn raises bigger questions of Italian electors. Would they trust a committed populist government to challenge these EU orthodoxies? How far would they let such a government take their demands? When Syriza in Greece tried it they ended up backing down. Greece is a much smaller country that does not have the same weight as Italy financially and economically, so we would be in uncharted territory. Italy owes large sums to the ECB, which is Germany’s problem as well as they have lent most of it.

Posted in Uncategorized | 82 Comments

All eyes on the Fed

This Friday at Jackson Hole Jerome Powell, Chairman of the Fed, will make a most important speech. The financial markets are expecting confirmation that there will be further interest rate cuts from the USA to promote faster growth and a weaker dollar. The self same market commentators  that claim not to like Mr Trump very much nonetheless back the President’s often repeated mantra that the Fed is holding up growth and more jobs and needs to cut rates by at least 1%, almost halving them.

Others point out that the US economy is growing much faster than the European or Japanese economies already, that money growth is strong, job numbers are increasing and real pay rising. They worry that further rate cuts could fuel an inflation after a decade of no serious  inflationary pressures.

The Fed did it get badly wrong at the end of last year, when it was threatening major rate rises at a time when the world economy was slowing and markets were worried that slowdown could become recession. Jerome Powell backed off then, and reversed policy, promising not to raise rates. He went on to cut them. Now he needs to set out a new theory of how the Fed will set rates in future, to avoid the problems the current system created in 2018. The data on the economy suggests there is less need for rate cuts than many commentators suggest.

The Bank of England needs to study the work being done by the Fed as they seek a new consensus on how to run their monetary policy. UK money policy has not this year assisted the economy, being very tight at a time when the world and UK economies are slowing. The Bank has not followed either the Fed or the ECB in trying to offset some of the slowdown with monetary easing. China has now announced some more easing, alongside rate cuts from Australia, New Zealand, Russia, Brazil, the USA, Indonesia, Turley, Thailand and others in recent weeks.

Posted in Uncategorized | 141 Comments

The Withdrawal Agreement without the backstop is still a bad Treaty

The PM is trying to get the EU to revisit the Withdrawal Agreement by asking them to first strike out the 165 pages of the backstop. It is by no means clear Parliament would vote through the WA minus the backstop, as it still leaves us staying in the EU for another 21 to 45 months, paying them large sums, keeping us under the ECJ and various other undesirable features often discussed here. To a leaver the WA is not Brexit, and to a Remainer it is clearly worse than staying in.  The PM would need to require other changes as well. The EU has repeated the mantra it put into the delay agreement, that it will not reopen the Withdrawal Agreement, so it looks as if there will be nothing to put to Parliament anyway. .

Posted in Uncategorized | 255 Comments

Taxing the rich

Recent Treasury figures demonstrate that Mr Osborne’s assault on Non Doms in the UK has meant some have left the UK.  Rather than have to pay UK tax on their worldwide assets and income a good number of very rich people have decided they will not stay at all in the UK and will no longer pay UK taxes on UK  investments and  no longer earn money and profits here in the UK and pay tax on them. It means we lose the ability to tax  their purchases of homes, cars and the other items they enjoyed when here. The  number of Non Doms fell from 90,500 in 2016-17 to 78,300 in 2017-18. Their payments of CGT, Income Tax and NI fell from £9.5bn to £7.5bn. We also lost other consumption and transaction taxes they would have paid including Stamp Duty, VED, VAT and others. It is true some of the Non Doms converted to being domiciled here and now  pay tax as a resident  as an offset,  but others simply left and pay  nothing. The Treasury does not give us an overall figure of total tax paid by rich foreigners in both categories.

I am defining rich here as someone who has substantial investment wealth above and beyond their home or homes, people who do not have to work to earn a living and who can sustain an expensive lifestyle without getting a job. I am not talking about the well off who sustain a high quality of life by well paid employment income and who work for UK based companies or institutions.

In a world where people are  rightly condemned for saying unpleasant things about  groups or categories of people, an exception is made for the rich. Politicians of the left delight in tribal incantations against the super rich, often condemning them for the crimes of a few. I have met various rich people in my time in politics and government. I have met or read about  saints and sinners. Some are modest, caring and keen to help others. Others are  self seeking and self promoting. Some are scrupulously careful to do the right thing, others keen to push the boundaries of the rules. A few I see in the media   are criminals who have broken laws to make their fortune or to try to sustain it. Most are law abiding, and take advice to try to comply with very complex tax and property laws that countries now apply.  There is no evidence to suggest that there are more rich cheats as a percentage than cheats from any other income level in society. We should exercise the same care when seeking to describe the rich as a group, as we do when trying to describe a national or religious grouping.

Some argue that there is no trickle down, that there is no advantage to a country in attracting globally rich people to spend time and money in our community. I find this difficult to understand. There is clearly a first round effect when a person arrives in the UK and invests money in homes and businesses. They may bring a new business we need, or they may fund businesses here that require cash. There is a continuing benefit from the employment they generate from the things they buy and the services they need. There may be a final benefit if they come to love our country, as they may go on to endow charities or leave some other legacy.

To those who say they have driven the prices of homes up needlessly against the rest of us, I would say they competed to buy homes most of us  could  never afford. They have brought forward a new export business especially for London of building high specification very expensive flats we would not otherwise have developed. These in turn spawn substantial employment to furnish them, service them, supervise and manage them. The German business model has been to sell rich people expensive cars they do not  need but want. The UK model has been to sell them expensive homes they like but do not need.

The UK over many centuries has welcomed entrepreneurs and other wealthy investors to our shores. From the Hugenot cloth makers to the middle European bankers, from the oil sheiks to the Russian emigres, the UK has provided a home for people who can make a difference and who soon contribute from their UK incomes substantial UK tax revenue. Maybe it is time to revisit this question of how we tax them. We need to tax them to make a good contribution to our needs, whilst remaining competitive internationally.

Posted in Uncategorized | 115 Comments

Successful town centres

Yesterday I wrote  about one way to get more customers into shopping centres. Today I will range more widely with suggestions for improving and modernising town centres.

Government does need to cut business rates on retail premises. It has done so for small retail businesses but not for the larger chains which represent a large part of the High Street. Rents are falling  and are likely to fall further as retail adjusts to the lower cost base and competitive prices of on line business.

The ratio of bars, restaurants, coffee shops and other food outlets to traditional shops has  to rise, as people want an experience beyond just buying goods. The High street can also be a good location for hairdressing, nail bars, health and fitness services and the rest where services are delivered by a person which could not be delivered by the internet.

The modern High Street does need traffic free areas with space for seats, displays, street markets, and events. A successful Town Centre is sustained by continuous promotion with festivals, seasonal events and pop up retail alongside the established retail. Anything which creates more footfall is good for the centre.

In some cases High streets are too extensive. There needs to be conversion of retail premises to residential or compatible other commercial uses. It should be made easy to change a retail planning permission into residential. Councils  need to give guidance and support, helping the town define  its shopping contour.

Posted in Uncategorized | 148 Comments

Project Fear reappears in old leaks recycled

The latest outpouring of nonsense about how the ports will  cease to work and we will be short of imports is bizarre. Both Calais and Dover have said they are ready for smooth working after October 31, whilst other Belgian and Dutch ports  are applying competitive pressure as  they would love to take more of the business. Calais/Dover have to deal with VAT, Excise and currency changes whilst we are in the EU so adding a few tariffs if some are needed does not create some new problem we haven’t already solved for other taxes. HMRC have said they don’t want to hold imported goods up with lots of new checks.

Posted in Uncategorized | 214 Comments

More free parking for shopping in towns

One of the reasons sone town centres are struggling is the difficulty and cost of parking. People can buy on the internet without stirring from their armchair. They can drive to the out of town retail park and park for free outside the shop door. Shopping in many town centres can require a difficult journey, can pose difficulties sometimes in finding  a car park  space, and results in a charge. It’s an important part of the background to the decline  of many a town shopping centre.

What can be done?

The first thing is to get the most out of the car parks we have. You can get more cars into a piece of land and it is easier to park if the  spaces are marked out at 45 degrees to the access and not  at 90 degrees as most currently are. Private and public car park owners could sort this out and benefit from doing so. Convention should dictate you park front in. A one way access and exit route then minimises loss of parking spaces.

Councils could increase the ratio of parking spaces to shops when authorising new developments or  improving their centres.There is often spare public land near a centre that can be used. In Council car parks they could allow a charge free period to encourage shoppers. Where this represented unfair competition to private car parks the Council could pay the private car park to make free time  available on a similar basis as public car parks from its town centre promotion budget.

You can’t easily go food shopping or shopping for larger items by bus or train as you need to get the goods back to your home. Councils need  to place sufficient spaces near to the shops. They also need to improve the main routes into the  cities  and towns so people can drive to these car parks more easily.

Getting business rates and rents down on more shops will be helpful to assisting town centres, but the thing they  need most is more customers. One of the most  important ways of boosting numbers is to help people get to shops, restaurants and coffee bars in the towns. Shoppers resent time lost in traffic jams  and money spent on car parks.


Posted in Uncategorized | 146 Comments

Time to boost the economy

Interest rates have been cut in the USA, Brazil, India, Australia, New Zealand, Thailand, Turkey, Russia and elsewhere. The USA , France and others have offered some  tax cuts. Italy is seeking to make the country more attractive to investors and entrepreneurs through tax changes. The Italians are pushing to be allowed some fiscal reflation to ease the pain of their adherence to Euro disciplines against a background of very weak growth and high unemployment.

The UK economy has performed very well considering the severe monetary and fiscal squeeze administered  by the outgoing government. It is good to hear the new Prime Minister make clear his commitment to a prudent relaxation of the squeeze, with planned spending on police, schools, the  NHS, prisons, and infrastructure.  He should ensure tax policy is reviewed to make us internationally competitive and to maximise revenues around rates people are prepared to pay and which continue to attract talent, investment   and business to the UK.

The PM has pledged to accelerate the roll out of fibre to every home and business to increase capacity and line speeds. More and more business, learning and entertainment will be delivered by internet, so we need the capacity to compete and to handle the volumes of data and film, likely to be involved. We also need more to be spent on  roads to bust congestion, improve safety and reduce journey times. Road budgets were badly cut by the last Labour government and kept low  by the Coalition.

The latest German figures show that the world manufacturing downturn in general and the bad hit to the car industry in particular have dragged the German economy into a quarter of  negative growth, with poor prospects for the rest of this year. Italy was in recession last year in the second half, and remains very weak this year. The Eurozone as a whole is likely to avoid a recession but is widely forecast to record very slow growth. The internal logic of the debt and deficit rules and the inability to exploit the dugital revolution unleashed  by the USA will keep the overall Eurozone performance poor. Germany will still worry about the extent to which the whole zone is financed from German deposits of its surplus at the Central Bank for lending on to the deficit countries.

Now is the time for the UK to promote growth, more jobs and better incomes. New freeports, more development of the internet economy, and stronger global trading links with the faster growing parts of the world are all possible after October 31.The UK is better at  tec and services and well placed to be an important  global player.


Posted in Uncategorized | 240 Comments

The tragic death of PC Andrew Harper

I was greatly saddened to learn of the death of Andrew Harper while on duty in West Berkshire. I send my condolences to his family. The whole local community is shocked by the tragedy.

It reminds us to thank  all those in the police and our other uniformed services who put themselves at risk to help the rest of us to live in safety.

Posted in Uncategorized, Wokingham and West Berkshire Issues | 50 Comments
  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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