The EU is not ready to negotiate yet

Listening to the EU reactions to Mrs May’s generous and sensible proposals on residence and citizenship, I concluded we are still months off the EU being ready to discuss our future relationship in a productive way. They seem to think it is our problem, not a joint problem. They seem to think we have demands, when they have rather more demands that we do not have to grant.

It will take time for the EU to understand that they are the ones who want us to pay them money when there is no legal basis for such a claim. They do not seem to be proposing paying us to leave. They are the ones who have large exports in agricultural products and cars where under WTO rules we could impose tariffs that will hit demand for their products. Most of our exports to them are tariff free or low tariff under WTO rules. They are the ones who wish to take advantage of our jobs market for many unemployed people on the continent. The UK is not seeking more access to jobs in the rest of the EU.It is the EU that values all the intelligence and security support and back up we give them.

The good news from their point of view is we do not wish to place barriers in the way of their trade with us. We will not throw out the many people who have come here legally to live and to work. We will continue to offer them security and Intelligence assistance. All we ask is similar treatment in return.

It is quite normal of the EU to leave agreements to the last minute. They may well go on posturing and misunderstanding for many months. It is crucial that all the time the EU think the UK will shift its position or change its mind the UK government remains strong and shows we have no need to make concessions or change our stance. The UK is making a generous offer which will be much needed by businesses and farmers on the continent, by EU citizens living in the UK and by all EU people who benefit from the UK’s many contributions to the life, trade, culture and security of our continent.

Over the months ahead more voices on the continent will demand that their national governments and the EU put in place good arrangements to carry on with our trade and other links. The UK media should calm down and realise this is all going to take time, and see that the UK must not shift its stance at all during what could be a period when the EU misjudges and thinks they are in a strong position to dictate.

They need to keep in mind the government’s instructions from the UK voters – take back control of our money, our laws and our borders. That is exactly what we will do. That leaves plenty of scope for a strong and good future relationship, without us being under the jurisdiction of the ECJ and without us paying them money we do not owe them. There is plenty of time to ensure border checks work, trade flows, planes fly and tourists arrive, just as happens today, and as happens for non EU countries into the EU.

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Being in the media and being powerful are not the same thing

Some people write in to this site complaining that I am not on the national media enough. Some seem to think publishing things here is some kind of secret society, a way of me keeping things hushed up instead of putting them out there on the BBC. This is a silly way of looking at it. When I publish here anyone can read it. If I said something unpleasant or wrong it would soon be taken up by the better known media. Many in the media read this site without going on to quote it. It nonetheless gives them useful background. Some do quote it or use it.

It is a mistake to confuse being in the media a lot and being powerful. It is true powerful people with important roles will be in the media a lot. Any Prime Minister will be news, because the office confers great power which they will exercise. Lots of people who run departments, quangos and big companies are never in the media though their decisions affect many. It is also true people with important offices who in practice exercise little or no power will also be in the media. The media rarely probes why someone in office writes, speaks or acts as they do, though many people in such roles are but actors and actresses reading out other people’s lines. The media rarely probes this situation. There are then many people who get into the media a lot because they say controversial or difficult things, though they may have absolutely no influence over government and events at all.

It is popular with the media to report splits and disagreements within parties. They will both condemn a party for being split, and at other times complain it is brain dead if it does not have enough arguments about the best way forward. The media both says it wants more open debate, and tries to make that impossible by declaring anyone of us who holds a different view from our leadership to be disloyal. There are times when the media does more than report splits. They often seek to create them. It will invite two people from the same party who are not in disagreement to create a disagreement in a studio to illustrate some thesis they have of what is going on.

There are of course factions and splits within major parties and sometimes these matter and should be reported. Again there needs to be some assessment of numbers and influence. Today Anna Soubry is a much quoted and much interviewed MP, because the media expect her to be critical of the PM and of the Brexit policy of the government. She may be good box office, but it is difficult to believe she is influential given the difference between her views and those of most of the party.

I do not usually complain about the media. Some of it is just a freak show, seeking the extreme, the bizarre and the unimportant for greater drama. If I manage to stay off that it is probably good news. Over the last week I have produced at their request articles for the FT. Guardian and Sun. I have also been on several radio and tv shows. Some of these try to make it as difficult as possible for their guests to put forward an informed and sensible case. There seems to be a hatred of new arguments and facts at the BBC , and a wish to endlessly repeat the old, stale and often simply wrong.

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Who is to blame? Where does the power lie?

There is little limit to what you can achieve in politics as long as you are happy for others to take the credit. Some people have considerable influence but are happy to let others take the starring roles and to decide and implement the new ideas. Some with influence are civil servants, some are consultants, some are serving politicians. Much of government is a slave to the ideas of old economists and other thinkers. Much of modern government is driven by consultants who come in to recommend courses of action, design media strategies, and then take on the role of helping implement the decisions. The public never knows who they are.

Some politicians define their roles by the media. This became an acute preoccupation with New Labour, and has continued with many in government since. Some politicians have the strange idea that they can manage the media. They get upset when their agenda is displaced by events or someone else’s agenda. Too much concentration on the media can divert their attention from the day job. Often the reason they are doing badly in the media is not media mismanagement, but mismanagement of a part of government which then attracts justified public anger. They need to spend more time trying to fix the real problem, and less time trying to fix the media.

Advisers advise, and politicians decide. The media reports decisions and reactions to them. That is the constitutional theory. Sometimes it works out like that. There are frequently other models.
Sometimes officials decide and politicians do not realise what is going on. Sometimes officials recommend strongly and politicians acquiesce. Sometimes politicians do query an approach but are told it is the only technical, legal, practical or safe way to proceed. It then takes a strong minded and well informed politician to insist on a different way of proceeding. Sometimes the media have their own agendas and want to make the politicians follow them.

There are government Ministers who take a Manifesto or political agenda and drive it through, using officials to improve and implement. There are other Ministers who are but actors and actresses voicing the lines of departmental officials, both within and outside government.

We see in the questions about who is to blame for the Tower inferno these same issues of responsibility, knowledge and advice in local government. Is an elected Councillor allowed to rely on the technical expertise of his Council’s Building Regulation Department and the Fire Department? Does he or she ever need to challenge their technical advice and decisions? If he is told of what they are doing does that make him to blame if it is wrong? Or is he to blame even if he was not informed and it was handled as a delegated matter? Should a Councillor approving expenditures to improve the thermal insulation and look of a building have to do enough research to satisfy himself of the safety, or can he rely on the professionals designing and procuring the building to do that? The Councillor wants to take the credit for the improvement, so should he therefore take the blame if it goes wrong?

These are difficult issues. I would be interested in your views. The danger is we make the role of the Councillor too difficult so no-one good will want to take it on. The other danger is we expect too little, and the Councillors’ collective power to challenge and to improve the work of professionals and officers lapses or fails to do its job. In the worst cases in the public sector no-one is to blame. They all become good at laying off the risk, because they can claim that no one person ever took the decision. It just happened.

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Constituency email service

The Parliamentary email system has been the subject of a cyber attack. Yesterday I was able to get access to my Parliamentary emails and to answer them. Today the system has been closed, so I have no access. I am therefore unable to provide the same day reply service I usually offer, and will answer them as soon as I have access again.
Anyone with an urgent query should notify me through this website and leave me a contact so I can get back to them.

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Mrs May and Mrs Merkel

Some in the press and media wish to personalise the negotiation between the UK and the EU into a battle between Mrs May and Mrs Merkel. As always on the UK side there are those who want to portray it as a fight between a weak UK and a powerful Germany. They seem to think Mrs Merkel is in a strong position, whilst they wrongly allege Mrs May is in a weak position.

It starts with EU spin trying to suggest Mrs May is in a weak position owing to the recent election. That is an odd allegation to come from the continent. Mrs May and the Conservatives received 42.4% of the popular vote in June. Mrs Merkel and her party received 41.5% in the last German election. Mrs Merkel’s party currently stands on 38% in the polls, and has not been above that for two years and has often been well below it. Mrs Merkel won just 33% of the seats in the German Parliament with her party, Mrs May won 49% of the seats in the Commons. Mrs May need not face another election for five years. Mrs Merkel has to go to the polls in three months time and looks set to do worse than last time. Mrs May can govern as a single party. Mrs Merkel has to govern in coalition partnership with the SPD, the equivalent of Mrs May having to govern with the support of Labour. I would rather be in Mrs May’s position than Mrs Merkel’s.

The posturing by the EU in response to the UK proposal on reassuring UK and EU citizens resident in each other’s territories shows they are misjudging the strength of their position. It looks as if they think delaying and being difficult could lead to the UK giving up and staying in the EU. That would be a bad misreading of the situation, and of the recent election where voters decisively rejected the Lib Dems who offered just that approach.

If the EU wastes too much of their negotiating time on making silly claims for large sums of money, and on pressing for future freedom of movement as well as accepting past free movement, they will run out of time to secure tariff and barrier free access to our market. French dairy famers, Danish pig farmers, Dutch market gardeners, German car producers and many others who would face tariffs will not be amused if that happens. Maybe Mrs Merkel’s forthcoming encounters with the German electors will make her more realistic. It will certainly remind her of how she lost popularity over her migration policy since she last asked the voters to vote for her.

There are signs that business on the continent wants their leaders to get on with it to ensure smooth trade in 20 months time. It would be good news if the UK media started submitting the other EU governments to the barrage of difficult questions over how their businesses will fare in 2019 that they give us daily at the UK end.

Posted in Uncategorized | 152 Comments

Home ownership

Many more people want to own their own home than currently do so. Generation Rent tells us they want more opportunity to buy, but feel crowded out of the market by high prices and scarcity of homes.

I agree with the majority view that home ownership is usually the best answer for people.  It is good to have control of our property, so you can decide how to decorate it, how to arrange the internal space, and how to organise the services. Above all home ownership is a good lifestyle choice as you get older. Once the mortgage is repaid it is much cheaper living in a home you own than living in rented accommodation. Those who rent all their lives end up paying most for their property once retired, on a lower income than they had when working.  If you pay rent for 60 years rather than a mortgage for 25 years, you pay so much more. If you rent a property for £1000 a month that would be £720,000 over a lifetime, but of course it will be so much more as the rent is likely  go up a lot over the next 70 years. If you buy  the home instead for  £250,000 home on a mortgage you might end up paying £400,000 of interest and capital repayments over your lifetime.

None of these numbers requires house prices to go, though in the past they have done so. If they do then of course the home owner is better off again. In old age they can sell the property and move to a smaller place, releasing capital to spend if they wish. The person living in their own home also can pass it on to their heirs  or to a charity of their choice , whilst the person in rented accommodation just leaves the termination costs of the tenancy to their estate.

Many Conservative MPs and advisers think there is an urgent issue of how we can help more people to own. We want to empower a new generation of home owners. The last government put in place schemes to help purchasers. There is the Help to buy scheme to assist with raising the money for the deposit. There are various affordable homes for sale projects. The question is what more needs to be done.

Reducing the numbers of new migrants arriving and needing homes would help. This is something the government can do with its new border control scheme for when we leave the EU. Increasing the supply of new homes would help, which the government is working on.  Looking at ways to help finance homes and to make them more affordable is moving to the top of the agenda.

There can be more sales of public sector owned homes at a discount to tenants. There could be a rent to mortgages scheme, where good public sector tenants get credit for regular rent payments and build a stake in their home. There can be more shared ownership schemes, with easy ways of a person buying a   bigger share as they can afford it.

We need to make the case again for ownership. Doubtless we will be told that selling existing public sector homes reduces the supply and adds to the problem. This is the most absurd criticism of them all. If a tenant buys the home they are living in the supply of homes is totally unaffected, as the same family are living  in the same home after the transaction. The advantage is twofold. That family have something they want , and the state has money from the sale that it can spend  on building an additional home, thereby expanding the supply of property.

Yours thoughts on what we could do would be appreciated. I will return to this topic with more specific proposals in due course.

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The economy one year on from the referendum

The Remain campaign told us it would be bad short term news for the economy if we voted to leave.

They told us  interest rates would go up.  One year on the base rate is down from 0.5% to 0.25% ,and the government 10 year borrowing rate is down from 1.4% to 1.02%.

They told us the economy would dive and there would be a winter recession. Instead the economy has grown by 2% over the last year, more than the Eurozone.

They told us the stock market would fall. Instead the FTSE 100 Index of leading shares is up by a massive 25%

After the vote with the FTSE 100 rising, they said they meant the FTSE 250, the Index of domestic companies, would fall. That is up by 20%

They said housebuilding would be hit and there would be a housing collapse. Starts of new homes are up 15%.

They said the car industry would be damaged. It has instead achieved record output and record exports for this century.

I said none of the above would happen, and forecast continuing growth. I was told I must be wrong because the IMF, the World Bank, the President of the USA, the UK Treasury and the leading US Investment banks all knew voting leave would do short term economic damage.

They got one thing right. The pound did go down more – it was falling well before the vote. I always ducked that question, as I thought it might go down.

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Adjusting the Manifesto

The lack of a majority has confirmed a rethink on some of the Conservative party’s Manifesto policies. That would have happened anyway, as many Conservative candidates in the election disliked the policies themselves, or came to dislike them when they heard the public reaction. I did not want to remove the triple lock or leave many pensioners fearing the loss of the winter fuel allowance. I certainly did not welcome the social care proposals. That was why I did not include any of these in my personal election address, and did treat these policies as consultations, encouraging people to write in with their views.

There is no mention of legislating for changes to social care or winter fuel payments or the triple lock on pensions in the Queen’s speech. The Conservative party in Parliament assumes these have been dropped and is happier for their disappearance. It was strange during the election that our cries for more information and for sensible changes to these policies went unheeded. Many of us said if they insisted on removing the winter fuel allowance from some, would they please tell us what the income cut off would be to put the minds at rest of the many who would presumably still receive it. Some thought it should be removed from higher rate taxpayers, others thought it should be made taxable. I was in favour of no change. We also urged them to tell us what the cap on social care costs would be, an important part of their draft policy. Again there was no figure given, leaving many worried about how much they would have to pay.

I spent considerable time during the election explaining by email and in conversation to electors in Wokingham what the current social care system entails. Many did not know that if an elderly person has to move into a care home then the home they are leaving is taken into account in their assets. If they have money then they have to pay themselves for the care home. There was also some confusion over the need to pay social care costs if you carry on living in your own home. The boundary between healthcare, delivered free, and social care that you pay for is a difficult one to define. The public tends to the view that social care is healthcare.

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The DUP : No deal is better than a bad deal

It is proving difficult to explain to some politicians how negotiations work. If you want to buy someone’s house you do not say you want to buy it whatever the price, and then pay up when they take advantage of your folly. If they ask double the market value you refuse.

So it has to be with political deals. A Supply and confidence agreement with the DUP would be helpful. People would know in advance that the government has a majority to get through spending plans and to see off any No Confidence motion. If we do not have a formal agreement it is still very likely the DUP will vote with the Conservatives, given their views on Brexit and Mr Corbyn. There is a lot of common ground on the EU, the Union and the economy.

The main issue that has held up an Agreement seems to be money. How much extra can we afford for Northern Ireland, and what will be the reaction of the rest of us representing English or Welsh or Scottish constituencies?

I am relaxed with or without a deal. I think the government will have a majority to pilot the main legislation through, even allowing for the likelihood that Labour will be difficult and seek to undermine the very Brexit they proposed in their Manifesto.

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The rich and their responsibilities.

 

To Labour anyone earning more than £70,000 a year is rich.  Many people on such an income  do not see themselves as rich.  It seems as if having savings and assets is also a crime to some in Labour. Yet many people save hard for their retirement pension, and struggle to repay the mortgage on their homes. They do not see themselves as rich either. They also like it if something remains to pass on to their children. Today we are witness to a big debate about who is rich, and what contribution should they be expected to make to the wider society. In the recent UK election Mr Corbyn claimed that the rich as he defined them  should pay more tax to help those on lower pay and pensions.

 

There is no agreed definition of who is rich. People’s idea of what rich looks like is heavily influenced by how much wealth and income they have. If you have nothing someone on £40,000 a year is well off. If you own no assets someone with a £200,000 house  is well heeled. Someone living in a £200,000 house with a large mortgage, family commitments and an income of £40,000 may not have anything over at the end of the month and may feel a bit squeezed. They do not think they are rich.

 

A better description of rich is probably one based on lifestyle than on any particular figure for assets or income. Let’s consider two widows, as I have done before on this site. One lives on her own on a State Pension and top up benefits  in her one bedroom flat in prime London. It is worth £1.2m but she has no other assets and finds it difficult to afford the living costs .All the time she lives there she is hard up.  Another lives in a £200,000 larger  property  200 miles from London and has £1 million in financial assets to augment her State Pension. She can afford a decent lifestyle.  Are either of these millionaires rich? Or does a rich person  need to be someone with a £1 million plus home of their  own, and several millions in investments so they do not need to work but can live on their investment income?   Or is true rich a senior Director or executive of a large corporation, or a footballer, with a telephone number salary and plenty of assets from past earnings? How much more of these people’s earnings should the state take?

 

In the end these are political judgements which have to be translated into tax law. All parties in UK government believe in income redistribution, taxing the better off more highly to provide support for others. Governments also impose some taxes on capital, usually when assets are  bought and sold. These questions  are also attitudes of mind which affect how people live together in society. If you try to tax at too high a rate rich people leave the country or find legal ways to arrange their affairs that thwarts the aim of the tax rise. 

 

Many people with savings have thought it a good idea to buy an extra property or two and let it out. They like the rental income, and have usually benefited from rising capital values as well. It does mean the rich individual has a special relationship with his or her tenants. The wealth is on show, and there can be difficult relationships if the landlord is thought to be too hard or unreasonable. Modern tenancy law has tried to move the balance a bit in favour of the tenant. In a world where the leader of the Opposition says the homes of the rich if they are not being properly used should be requisitioned for those in need,  the  landlord has to be sensitive to the mood. The  individual who has bought a holiday home or spare property which they do not live in may be unpopular in the community where  the property usually stands empty.

 

In this climate of opinion those with higher incomes and assets have to be well on the right side of tax law. Tax evasion is a crime and  some see clever tax avoidance as equally unacceptable even though it is legal. Portfolio investments in bonds and limited liability companies have advantages over direct ownership of property or companies for the better off , as the investor is shielded from much of the responsibility of ownership by the professional managers employed. If a multinational treats its employees badly or causes deaths by lax safety management it will be the well paid Directors and executives, not the shareholders, in the dock. If you are the landlord and the tenant is put at risk, or if you own the company and the employee is badly treated, you will be in the dock.

 

Limited liability companies were a great breakthrough for everyone because they allowed people to put up money without putting the rest of their wealth at risk. It also now means the investor lays off the risk for misconduct on those who run the company for them, which in the current climate is also important in keeping people investing. It should  not be an excuse however for  no-one being to blame.  

Who do you think is rich, and what more should we expect of them? 

 

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  • 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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