What do we want our army to do?

Listening to those who lead and manage our armed forces, I have been struck by the significant change in the army as we detach ourselves from Middle Eastern conflicts. During the Blair/Brown/Cameron years the UK made a substantial military commitment to Iraq and Afghanistan, as allies of the US and as part of a wider coalition of the willing. The UK accepted the US analysis of the need to respond to the atrocity of 9/11 by seeking to root out terrorists from some parts of the Middle East, and sought to assist in defeating terror groups in the interests of establishing more stable democratic states. Over the years of these conflicts the army had to direct its training to the difficult task of counter insurgency, to fighting with restraint in troubled urban environments. It required a change in equipment as well, with arguments over the number and effectiveness of armoured personnel carriers, and over the best style of military policing of areas with a terrorist presence or threat.

The nation rightly remained strongly loyal to our armed forces, who usually showed bravery, restraint and professionalism in difficult circumstances. The political nation was more divided and unsure about the remit given to our armed forces, and over the wisdom of these military interventions. It was one thing to support troops who did succeed in moving terrorists out or in stabilising an area. It was another thing to be able to assist in the creation of a stable democratic system, a good government and a more flourishing economy to replace the terror ridden troubles of many communities. The interventions did not create stable prosperous democracies quickly, and maybe could not do so. If there was a failure it was a failure of politics, or an over reach by the West who may not be best placed to transform the domestic politics of the area. I was one who thought we intervened too much. I also thought we asked a lot of our young soldiers on the front line, who had to show great restraint when afraid of attack, unable to speak the local language and finding it difficult to identify who the enemy might be amongst a civilian population they were trying to protect.

Today we need to ask what do we want our army to do now? To be ready, seems to be the answer. It needs to be ready in case danger or need arises. That makes training difficult, as you cannot be sure what you are training to do. Some in the army think it makes managing the army more difficult. Providing a positive and exciting career if you all you do is train is a challenge. Whilst most of us like peace and are pleased to be spared the risks and dangers of war, some who join and train to be soldiers do so to be placed into dangerous situations where their actions can make a difference.

The last thing we should want to do is to find a dangerous situation to put our troops at more risk. It is the highest success if having an army there are no wars for it to fight. I am one who thinks the main reason we have a good professional army is as an insurance and deterrent. What do I most want the army to do? To persuade any adversary that it is not feasible to take military action against our home islands and protectorates. My second wish is to have armed forces that are strong enough and professional enough to be able to intervene many miles from home should need arise. That capability means our diplomacy has teeth, and makes negotiated solutions more likely. At the end of any war you need to sit down and organise the peace, establish a new rule of law, and allow self government where you have intervened with force on the ground. If you can sort things out like that without the war, we are all better off. As a member of the Security Council of the UN and a country with interests around the world, we do need to be able to project and use force away from home.

So I invite you to tell me what you want our army to do.

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Mr Barnier should tell us EU proposals for their border

As the EU has previously said they think technology works well without new physical barriers at the border, why don’t they just drop their misplaced and unhelpful interventions about the Irish border? The UK will make its own border arrangements and has made clear it doesn’t plan new barriers.

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Taxes and threats of taxes hammer diesel car sales in UK

The UK car market was doing well before the Brexit vote, and continued to grow  after the vote. September 2016 with the new registration  letters was a very strong month at 469,696 newly registered cars. July and August had also been good compared to previous years.

September 2017 was a much weaker month, at 426,170. July and August had also been considerably weaker than a year earlier.  The sales and output figures show that the car market fell off a tax cliff in April 2017 of the UK Treasury’s own making.  April 2016 saw 189,505 new cars registered. April 2017 saw this drop away to 152,076. The new high rates of Vehicle Excise duty for dearer cars, the general attack on diesels, and the threat of further future tax and regulatory action against diesels led to a sharp fall in diesel car sales.  Over the year to date this year diesel sales are 28.7% down on the same period in 2017 which included three good months before the new taxes.

I was sorry to learn that as a result Jaguar are putting some people onto three day working at Castle Bromwich for the balance of this year. Jaguar Land Rover have a very high proportion of diesel cars in their sales mix, so they have been particularly badly affected by these tax changes and anti diesel policies. The government should think again about its vehicle policies. It spent a lot of time getting investors into the UK to make diesel car engines and whole vehicles, and into regulating diesels to make sure modern diesels meet high standards over exhaust gases and particulates. This appears to be a tax rise too far, as it is now doing damage to jobs and car making in the UK.

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Let’s reassure BMW

Once the UK runs its own  borders there is no need for the government to impose new checks and delays at our ports to impede motor components. I trust the UK government will reassure BMW and others that it has no plans to delay imported components. It could go further and say the UK place will not place any tariff on motor car components from anywhere in the world, making it easier for manufacturers here. That’s the advantage of running our own trade policy and customs.

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Was the EU really trying to help Mrs May with its change of view?

Yesterday’s well  briefed stories in pro EU UK papers told us the EU is willing now to admit that the Northern Ireland border issues can of course be resolved by technology and checks away from the borders. Just as the Eurosceptics have always claimed, and as the UK government argued at the beginning of the Brexit process, there is no need for new barriers at the border and long delays whilst goods are checked at a border post. In this electronic age the issues of Excise,VAT and safety of product are already sorted out by electronic manifests and checks where needed away from the border. Most does not need physical inspection, as regulated operators file the necessary information so the authorities can do what they need to do without troubling the lorry driver. The authorities only need to do a few random inspections to keep the system honest, or to inspect where there is evidence of possible fraud, as they do today whilst we are still in the EU.

There was a suggestion this was designed to help Theresa May. I did not quite understand that part of the story. Mrs May has been arguing that it is because there is a problem with the Irish  border – a problem many of us say does not in reality exist – that she needs to dream up the elaborate fix of Chequers. The imposition of the EU rule book for goods and the offer to collect EU tariffs for them was designed to remove the need for these things to  happen at the Irish border. If the EU now rightly says there is no such problem  it is difficult to see why we would need Chequers at all.

If we lift the nonsense that there is a problem with the Irish border, then a Canada plus plus trade deal is easy to do if both sides wish. The EU said they were up for a Canada style deal but wished to exclude Northern Ireland, leaving that in their customs union. That was clearly impossible for the UK. If this is no longer their  view, then why not just agree a Free Trade Deal. It is easy to do technically, unlike most FTAs, because we start from a position of having no tariffs and having common standards.

What is strange is the PM is ploughing on with her very unpopular Chequers proposals, just at the point where it seems there is no need for them for the reason originally set out. It may be she knows the stories yesterday were false of course, though they looked well briefed and went to EU friendly papers.  The alternative explanation is she wants to keep us in the common market for goods for reasons other than the Irish border. If so we need to  know why. I see no good reason to make any such proposal.

Meanwhile the IMF is back with bad forecasts for what might happen if we leave with No Deal. Once again it appears a major forecasting outfit fails to understand the positives from leaving without signing the Withdrawal Agreement. There is that £39bn to spend, and then there is the up to £13bn of tariff revenue on EU imports into the UK that can be given back to business and consumers as tax cuts. Any discounted cashflow calculation of the money shows the UK is clearly better off without signing the Withdrawal Agreement. Why do they always leave that bit out, and go for silly models showing big falls in trade that are unlikely to happen?

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Deutschebank reported today as moving assets out of London announced last year it was signing a new 25 year lease on 469,000 square feet of office space in Moorgate London.

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The WTO option is clearly better than Chequers

There are several options for our departure, but if the Prime Minister says the choice has to be Chequers or just leaving, just leaving is best.
The trouble with Chequers is it offers us a detailed and unattractive Withdrawal Agreement followed by 21 more months in the EU with more uncertainty. Many MPs have no wish to pay the EU £39 bn for that.

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End austerity

People are rightly tired of austerity politics on the continent, where it is an integral part of the Euro scheme which has led to deep cuts in pay and jobs in many of the participating countries. It is important the UK uses its freedom outside the Euro to follow a policy that promotes more jobs and higher pay. The good news is that the last eight years have been good years for jobs growth here, but we could do better on the pay front. We have not had to suffer the cash cuts in pay in the public sector seen in some Euro countries.

The UK economy has been deliberately slowed by policy since March 2017 when I first started highlighting the actions being taken. Tax hikes on homes and cars allied with a marked tightening of credit and money did slow the growth rate, led to a sharp decline in car sales, a big fall in buy to let activity and to a big drop in turnover in parts of the housing market. The policies were designed to do just this and they succeeded. We were told this was necessary for a combination of reasons, including the need to be more prudent and the wish to accelerate electric car sales at the expense of diesel and petrol before there were sufficient good value and attractive electric cars to buy.

The government should now relax policy a bit. Take home pay should be lifted by tax cuts, as the current tax take from employee earnings is too big. Stamp duties should be lowered to make homes a bit more affordable. Sensible rate reductions will also boost tax revenue which has been reduced by penal rates. Vehicle Excise duties should be put back to pre 2017 levels, and car loans to buy new vehicles freed up a bit. Business rates, particularly on shop premises, should be reduced.

The public services including schools, defence, the police and social care are in need of more money. They should be asked to submit bids for what extra service they could supply for increased funding, with payments made for good plans for improvement.

The tax cuts and spending increases should be financed from the EU savings, as I have explained before.

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Project Fear caricatures itself

The latest round of Project Fear stories are usually re runs of past versions of the same thing. This time they are often repeated in even shriller and more apocalyptic tones, as the clock ticks down to our exit in March 2019.

Let’s deal with a few of them:

1. They said ” The UK will lose the advantage of the EU policy removing roaming charges for use of mobiles around Europe.” This was often mentioned in the Referendum campaign as one of the few examples of a positive from the EU. This week the main mobile companies confirmed they will not be imposing new roaming charges when we leave! There is enough competition in the market to keep prices down. A company like Vodafone anyway offers free roaming for non EU countries like Norway and Turkey as well as Iceland, a country which cancelled its application to join the EU. It is always wise to check your contract, as the so called EU free roaming may well have a usage limit.

2. They said ” The trade deals the EU has with other countries around the world will cease for us when we leave”. Six countries have already confirmed in an international Agreement they will continue these more favourable terms with the UK after we have left. No country who has signed an EU trade deal has said it intends to cancel it for the UK.

3. They said “There will be delays and queues at the UK ports leading to food shortages”. The UK government has made clear it is not going to impose a new range of delaying checks and procedures at our ports to hold up food we wish to buy from the continent after we have left. Why would we want to do that?

4. They said “The NHS could run out of medicines and we need to stockpile before departure”. No EU pharmaceutical company that currently supplies the NHS has said it wishes to cancel its contract the day we leave the EU! They will be legally bound to carry on supplying us. The NHS and UK port authorities have not announced any new checks or delays they wish to impose on medicines approved here for use here and imported from the continent.

5. They said (Treasury and Bank of England) that we would have a recession in the winter after voting to leave, with 800,000 job losses and a house price collapse. None of this happened, with continued economic growth, record levels of employment and a stable house market.

6. The press say the Bank is now forecasting a 35% house price fall if we just leave without a Withdrawal Agreement. This has recently been denied by the Bank, which is relief, as there is no way just leaving the EU could lead to any such house price fall.

7. Some still say airlines will not be able to fly into London after we leave. The leading continental airlines are busy selling tickets for trips into the UK after March next year, and assure those buying the tickets they will be flying.

How much more of this nonsense do we have to listen to? When will more journalists push back on these absurd stories?

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Ten years on from Lehman – there was an alternative to buying shares in the banks

I reproduce today a post I wrote almost ten years ago, as one who saw the banking crash coming. I urged lower interest rates on March 10 2008, March 28 2008 and finally proposed halving rates on July 18 2008 to relieve the fierce squeeze and the difficulties rates were imposing on borrowers. I argued against the severity of the money squeeze administered in 2008, and argued that bank shareholders and bondholders should take the hit of the losses incurred, with private sector refinancing to create strengthened banks. RBS, for example, had plenty of assets and trading businesses to sell to generate cash and slim its bloated balance sheet. This approach was finally adopted for future crises, with the living wills idea for banks, but was not adopted for the crisis we were living through. As a result it took longer to sort out the banks and additional resentment grew against them given their easy access to taxpayer investment in shares.

We need a better recovery plan

First Published: October 19, 2008

It is usually dangerous when the establishment unites behind a single policy and says there is no alternative. The last time that happened in the UK we were lumbered with the Exchange Rate Mechanism which gave us a rapid inflation followed by a recession.

Recently in the USA the Republican and Democrat leadership united with both Presidential candidates behind the Paulson plan. That plan turned out to be bad politics, failing its first vote in Congress, and bad economics, leading to subsequent modification by its own author.

Today I suggest a threefold aproach to the crisis.
The first is to amend the government’s way of handling its approach to the banking crisis.
I fully support the provison of liquidity and longer term loans to the banks. They must take full security for these advances to protect the taxpayer. The withdrawal of too much liquidity at times over the last fifteen months has intensified the crisis.
The government should not spend £37 billion it cannot afford on buying bank shares. It should refuse to finance the HBOS/Lloyd’s merger, leading to Lloyd’s going it alone in the private market for its capital needs. The Regulators should give HBOS and RBS time to increase their capital ratios, whilst the government makes it clear it stands behind both banks with loans and cash if needed. They could both improve their capital ratios by stopping dividend payments, cutting very high pay and bonuses, reducing staff through natural wastage and other cost reducing measures, and reducing their loan books. It should be their choice which combination of these measures they adopt.
The government and Bank are right to experiment with other ways of lending and using guarantees to get the banking markets moving again.

The second is to get control of the public finances. Cancelling the £37 bllion will help. There are many other ways of starting to control public spending, whilst keeping every nurse, teacher, doctor and teacher and other important public service workers.

The third is to take action to stimulate the private sector, which is crashing downwards rapidly. That means cutting interest rates by 200 basis points or 2% immediately, with the prospect of more to come if needed. It means working with the energy, water and transport industries to see which larger investment projects can be brought forward to provide some work for the construction industry. It means redoubling efforts to help people back into work who lose their jobs as the redundancies build up this winter.

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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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