Ed Balls and the politics of jealousy

It has been amusing to watch Ed Balls trying to understand the support for Donald Trump in the USA. Quite a lot of the time Mr Balls seems thrilled to be part of the car loving outdoors lifestyle of the typical Trump supporters. He seems very at home with  the not so rich that he rubs shoulders with, and wants to enjoy his time with the wealthy and glamorous. He leaves it to his individual private talks to the camera after his social events and interviews to confide in us that he still disapproves, with some large moral objection or other to this democratic phenomenon of a popular movement.

The main issue Mr Balls keeps coming back to is how can the low income Trump supporters back a billionaire? How can they vote for a man who gives the rich tax cuts? He seeks to stir up jealousy. So far he has had no success. The replies come back that they like the fact that Mr Trump is a businessman – he might help them make some money just as he has made some money for himself. They are very relaxed about the higher income people getting tax cuts, because they are getting tax cuts too. Some of the Trump supporters on lower income reckon they might be much richer one day anyway. As one said this Sunday, I am $100 a week better off with the Trump tax cuts which helps me so I don’t mind the rich getting tax cuts as well.

I am surprised Mr Balls finds this absence of jealousy surprising. The whole idea of the American dream is someone can go from Bell boy to hotel owner, from a kid in a deprived neighbourhood to a top paid lawyer or banker . It is at best a get up and do society, where many want their government to get out of their way, and to let them keep more of the money they earn.

In the UK where Mr Balls learned his politics maybe he hopes the politics of jealousy will be more successful. Here too there are many more people who are not jealous. They vote for parties and candidates that can improve their lifestyle, incomes and life chances, not for parties and people who will do down those who have succeeded. Labour wanted to get rid of grammar schools by giving the vote to decide their future mainly to the parents of children who did not get in. The first ballot failed to deliver the closure many in Labour craved, because the parents of children not at the grammar were not jealous of those who went to the grammar. They gave up and grammars survived.

Mr Balls as often on the left also argues from contradictory positions. He both thinks poorer Americans should shun Mr Trump because he is rich and privileged, then argues they should shun him because he has had business failures and was not the in past rich enough! So is he too successful to represent people, or too much of a failure to do so in Balls land? And does it matter, as enough US voters backed him whichever.

I will enjoy the remainder of this mini series. I like it when Mr Balls looks thrilled to be there and is visibly enjoying lifestyles he would normally condemn. I then like it even more when we get  the private musings to camera to shore him up with the left wing UK audience that will see the programme as he struggles to find things to complain about. He is going to have do better than the crusade for jealousy, which is an unbecoming political emotion.

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Change in the High Street

I am a man who likes going to the shops. It is good to see the merchandise, look at how the stores present and price their products, and be able to talk to the staff about the rival claims and characteristics of items on display. When buying fresh  vegetables and fruit it is good to choose the items in person. When buying clothes it helps to try them on before purchase. I am well aware I need to buy some things from my local convenience store on a regular basis if I want it to be there in future when I need an item in a hurry.   I am also busy, so I find the internet is a great way to buy things I already know about. I can buy them  quickly at any time of the day or evening, any day of the week, often at good prices.

Collectively we consumers are voting for more and more of our buying by internet. The market share of mail order never got much above 10%. Internet purchases are now fast approaching a quarter of all things bought from retailers, which is taking a large chunk out of the turnover of traditional High Street stores that rely on sales through their shops. As a result some High Street chains and individual shops are struggling to compete and survive. The big brand retailers that have developed a good internet offer alongside their stores, and have learned how to use internet and shop together to meet customer demands, work well and are still profitable.

The recent decision of Mr Ashley to re brand House of Fraser as the Harrods of the High Street, seeking to trade from most of the old House of Fraser units, will be a bold challenge. Can he find the right merchandise at the right prices for these stores? Can he train and maintain  the right expertise and customer friendliness in the staff so people come back to the stores? Will he be able to add an on line offer and approach that is complementary to the shops?

The Treasury  has done it bit to hasten the decline of the weaker shop groups by combining high business rates on retail premises with demands for  National Insurance on higher wages ( wage rises which are needed), and new  pensions and training levies that raise the staff costs more for the traditional retailer than for the internet competitor. I hear the Chancellor sounding off about imposing an extra tax on the internet competitors on the principle that if it is working and going well let’s tax it. I don’t understand why he thinks we need to tax business more when you can never  have enough successful business. He would be better employed working out how to get the tax burden down on the High Street, than on thinking up plans to tax the successful newer businesses in ways which may discourage their investment in the UK.

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What can a Leave voter do to expedite our departure from the EU?

Many who write into this site are keen to leave the EU. They often write in condemning  most of the current elected politicians, and either make no positive suggestions on what to do or ask Parliament or the Conservative party  to do things for which there is no majority. Today I would like to make a suggestion. In a Parliamentary democracy it is of course the prime duty of elected people to lead the debate and to make the  decisions only Parliament and Councils can make, but it is also crucial to a successful democracy that the public are engaged and public opinion is  an important part of the democratic process.

The first thing all Conservative supporters can do is to reply to the letter they have received from the Prime Minister. They could make clear to her that the draft Withdrawal Agreement and the Chequers style Future Partnership do not give us back control of our laws, our borders and our money as required by the majority in the referendum vote, as they tell me on this site. They should urge her to move on from the Chequers proposal, which the EU does not accept anyway. She should now table a comprehensive Free Trade Agreement and complete preparations for leaving on WTO terms with no Withdrawal Agreement. She should make this clear to the EU that that is now the UK’s intention.

Anyone with a vote in the UK can also write to their own MP and stress to them they find the Chequers proposals and draft Withdrawal Agreement unacceptable, and urge them to oppose them. If the MP has already stated their opposition you could even write to them and offer  support for the stance they have taken.

Anyone can also let the media know by ringing phone ins, writing letters to papers and putting out messages on social media that they oppose Chequers and oppose the draft Withdrawal Agreement. The people made this wise decision to leave. The people now have to help deliver it in the face of opposition from some in  big business, Parliament and the civil service. The opponents of Brexit  need to be reminded the people meant their decision and intend it to happen in a timely and positive way.

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Reply to a letter from the Prime Minister

Along with the rest of the Conservative party I have received a letter from the Prime Minister about  her Chequers proposal for a  deal between  the UK with the EU.

I agree with much of the content of her letter. In it she assured me “We will take back control of our money, our laws, and  borders, and begin an exciting new chapter in our nation’s history”…”We will leave the EU on 29 March next year”  “I remain clear that no deal is  better than a bad deal – and we are stepping up our no deal preparation” “The two options on offer from the EU (for a future partnership) at the moment are  not acceptable to me, or to the UK”.

So far so good. Unfortunately the letter then seeks to persuade me that those fine principles and aims as stated often by the PM are reflected in the draft Chequers proposal and in the detailed clauses of the draft EU Withdrawal Agreement that the government has said it is happy with if all else is agreed. It appears the PM has been misled by her advisers, as the Withdrawal Agreement as so far drafted, the transitional period and the Chequers ideas for the future relationship do not in any way reflect those aims and principles.

The transitional period so called means we do not leave the EU on 29 March 2019 as promised. Instead she will ask Parliament to amend the Withdrawal Act we have just passed to give many powers back to the EU.

The proposed settlement on people means we live with a new version of freedom of movement.

It delays taking back control of our fishing grounds and agriculture.

It leaves us accepting large swathes of EU law in perpetuity, in return for the privilege of being able to import their goods and food!

It enslaves us to making  payments to the EU for many years distant, not just for the final two years of our departure, when there is no legal requirement for us to pay anything after March 29 next year when we leave.

The draft Agreement and the proposed future relationship does not achieve the PM’s aims as stated in the second paragraph of the  letter, aims I agree with wholeheartedly. She needs to press on with the WTO option so we can get all our money back from March 2019 onwards,

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The government should not sign the draft Withdrawal Agreement with the EU

I have advised the government not to sign a one sided Withdrawal Agreement. They have always confirmed they will not sign it unless and until it is balanced by a good Future Partnership Agreement, which is still nowhere to be seen. I need to remind them why the present draft Withdrawal Agreement is thoroughly unsuitable for the UK anyway.

The UK voted to leave the EU and its complex binding legal Treaty architecture. We will do so thanks to Parliament passing the Notification of Withdrawal Act and the EU Withdrawal Act. We did not vote to recreate much of the legal structure by immediately signing a new binding Treaty with some of the characteristics of the one we are quitting. The long and complex document is mainly written for the benefit of the EU, to lock the UK into continuing financial and legal obligations that are not appropriate to an independent country.

Several clauses assert the supremacy of European law and the ECJ. The EU side believes any such Agreement is ultimately a matter for the ECJ to interpret. Article 4 requires the UK and UK courts to follow ECJ decisions when taking cases under the Agreement. The Joint Committee to be established to police the Agreement can refer matters to the ECJ for adjudication where the two parties disagree, and the EU side thinks they should have the right to do this even where the UK does not want the ECJ involved!

Extensive rights are to be granted under the Agreement to EU nationals who come to the UK after we have left  but are still in transition, and family members qualify after we have left even though they have not come to the UK prior to departure. In other words the UK does not have the right to decide its own borders policy after departure for many EU citizens.

The draft Agreement also seeks to restrict the UK’s freedom to run its own benefits policy after March 2019.

The Agreement is wide ranging, seeking to bind us in to elements of the common Home and defence policies, trade and goods regulation, public contracts and various regulatory bodies.

It offers comprehensive immunities and exemption from UK taxes to a wide range of senior EU officials, and provides for secrecy over various EU matters.

The financial provisions are particularly detailed and onerous. Clauses 133-6 provide for continuing budget contributions and pension payments long after we have left, with prolonged exposure to the European Investment Bank risks without access to any new loans.

We voted to leave intimidating legal restrictions and Agreements like this one, not to volunteer for another.

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Tax rises do economic and political damage

Let me have another go at persauding this government to turn away fom raising tax rates and finding new things to tax.  Their own record should tell them that such proposals are usually unpopular with many voters. Where they have gone for higher taxes they have proved to be economically damaging.

Even the government now sees that the higher Stamp Duty rates imposed by Mr Osborne have hit the amount of revenue. Coupled with other adverse tax changes they have cut the flow of buy to let property investment, led to a substantial decline in turnover in various types of residential property, and reduced other tax revenues from the hit to the property market.

The Higher Vehicle Excise Duties imposed on dearer cars in the 2016 budget, coupled with the threat of new and additional taxes on diesel and maybe on petrol cars to come, led to a sharp decline in new car sales and to some decline  in UK car industry output. That too cut various tax revenues that the government would otherwise have enjoyed.

The proposal in the Conservative Manifesto that people would need to make a larger financial contribution to their care when living in their own homes was greeted with a hostile response and was seen as a new tax. It had to be dropped, after it damaged the chances of a Conserative outright victory in the General Election.  The government says it is looking again at how to pay for social care. It needs to be careful. There is little  support for a new death tax.

The Treasury is always threatening some group  or other with the possibility of new or higher taxes. There is little support for the bad idea of making the self employed pay more National Isurance. We need to be making it easier for people to work for themselves, not dearer.

Some want to tax technology more because it is popular and fast growing. Why not sit back and enjoy the higher revenues that will come as its growth takes place, rather than try to get more of the high tech success stories to go offshore altogether.

The way to get more tax revenue in is to cut rates and promote growth. In a very footlooose and competitive world the USA has just got a lot more competitive thanks to the Administration’s tax cuts. The UK needs to go the same way to succeed.


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Iran and a conflict of laws

The US President brought sanctions against Iran into effect on 7 August, with more to come in November. UK and EU companies are warned that they need to comply with the bans on automotive, oil trading and other goods with Iran being introduced in two phases. The US Executive Order  takes powers to enforce this against foreign companies by warning them that if they do not comply their assets and income in the USA can be distrained to pay fines and penalties, actions can be taken against their executives on landing in the USA, and they will find they cannot use US banks to facilitate their trade and business anywhere in the world. Many EU and UK companies have accepted this extra territorial assertion of power and are cutting their Iran trade in order to keep the far bigger US and global trade that could be damaged otherwise.

The EU acting for  the  member states argues against accepting these US sanctions. It has rushed out a reprise of the EU Blocking Statute of 1996 which was designed then to deal with US sanctions against Cuba, a legal instrument which was never used. It has added to this document provisions to cover trade with modern Iran, and seeks to impose a ban on EU companies complying with the US sanctions. Were this to be effective legally it would mean a double jeopardy for EU companies, facing legal actions against them and their US business if they bust the sanctions imposed by the US, and facing EU legal actions if they comply with the sanctions.

The form of the EU legal document is unclear. There is to be a committee of member states to supervise its actions. Member states themselves are invited to put in a penalties regime for companies breaking the Blocking Statute requirements. Bringing a case where a company simply  decides against doing business in Iran could be difficult if the member states do put in place the necessary legal enforcement, though it would be easier if an EU company had broken an existing contract for fear of US retaliation.

This development of a further trade spat between the USA and the EU is unhelpful. Meanwhile we await the talks between the EU and the US over car tariffs and other matters.

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Spending the £39 bn – cutting VAT

Once we take back control of our money and laws we can review the incidence and level of VAT. It becomes a UK tax on 29 March next year, after years of it being an EU imposition.

I have set out before my wishes. Surely most can agree we should abolish VAT on green products. We wish to encourage people to have more draught excluder and insulation, and to have better controls on their heating systems, yet the EU charges them top rate VAT on it all. Lets simply abolish it.

I would also like to see us abolish VAT on domestic fuels. Fuel is expensive, and hits those on lower incomes particularly hard. Successive governments say they want to tackle fuel poverty. The best contribution they could make would be to remove the tax on fuel.

We should also abolish VAT on female hygiene products.

These changes would create some loss of tax revenue, but are easily accommodated within the savings of £39bn if we leave without giving the EU a present. I set out the costings of all this in the Brexit budget I offered as an illustration of the scope prior to the referendum.

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Government tightens fiscal policy more to help slow the economy

The latest figures for borrowing show a further reduction in additional borrowing in the first quarter of the new financial year, as forecast here. Tax revenues are well up on a year ago, by more than the rise in spending, so additional borrowing falls again.

The authorities just need to be careful lest they slow the economy too much. Then they will find the deficit stops falling, as tax revenues are sensitive to the rate of growth. As expected, the combined fiscal and monetary tightening is slowing the economy, at a time when other advanced countries are offering more stimulatory policies.

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More lies about second referendums

I have never supported two referendums on whether to Leave or Stay within the EU, contrary to some misleading stories.

Years ago before the Conservative party agreed a simple Remain/Stay referendum there was a proposal to ask the people if they wanted to renegotiate our relationship, to be followed by an In/Out referendum. In the end the government  held a renegotiation without bothering with a referendum to approve such a renegotiation.

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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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