Mr Cameron’s EU welfare and migration proposals


I was asked when campaigning in Earley on Saturday to set out more of the details of Conservative proposals on migration and welfare.

Mr Cameron has pledged to negotiate a new deal with the EU to reduce and limit their power in the UK, and to base the relationship more centrally around membership  of the single market.

He wishes to regain more UK Parliamentary control over the UK’s borders and welfare policies, to hit his target of a substantial reduction in net migration into the UK.

His particular policy changes include

Asking anyone who has been in the UK from the rest of the EU looking for a job to leave if they have not found one in 6 months.

Removing Child Benefit from EU migrants in the UK or any child not resident in the UK

Remove all in work benefits from any EU person with a job in the UK for the first four years of their stay.

No out of work benefits for EU jobseekers on arrival in UK

He has stated that he will legislate for the In/Out referendum in the first 100 days of a Conservative government.

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Quantitative easing – what does it do?

When Labour first embarked on Quantitative Easing I was uneasy. My preference was for them to mend the commercial banks quickly. Indeed, my prior preference had been not to damage them so much in the first place. If they had mended or not damaged the commercial banks through their wild monetary and regulatory policies, swinging from too hot to too cold too abruptly, we would not have had to consider QE.

If the commercial banks had been buttressed swiftly – preferably in ways which left the original shareholders and senior executives with their losses, and the taxpayer with contingent guarantees or remunerated loans – we would not have needed QE. Instead, buying shares in the banks and then demanding they held much more capital meant painful surgery and a long delay before those banks could help finance a recovery.

Quantitative easing was very much a second best policy. It achieved something, but it also has lots of side effects which are difficult to handle. The main aim of a QE programme is to drive down long term interest rates, in the hope that then more people and businesses will invest and borrow. The programmes surely drove down the rate, but all the time banks are under a regulatory cosh to raise more capital, and all the time markets are hesitant about the future, not a lot of long term borrowing and investment takes place.

The secondary aim of a QE programme is to get people to take more risk. This again did work. By definition the individual investors and the investment funds that sold bonds to the Central banks, usually bought riskier shares with the money. Some of this money found its way into hands that would create new investments, and the stock markets were able to raise some money for companies in need of it.

The main side affect of the QE programmes has been to enrich the holders of bonds and shares by raising prices substantially. This has been most noticeable in US shares and in some continental European government bonds. The late and large ECB programme has already driven bond yields to crazy levels in Germany. Anyone lending to the German government for any time period up to nine years has to pay the German government for the privilege of lending to it!

Successive programmes of QE in Japan have not proved to be inflationary in terms of general prices, though there too they have proved inflationary for the prices of bonds and shares. It is a reminder that if there remain problems in the commercial banks, and if a society is determined to save more and spend less, QE does not solve all the problems.

QE mainly enriches the state. It allows governments to spend and borrow more at surprisingly low cost. It also gives a bonus to savers who own financial assets, but they need the capital gains to offset the loss of savings income, given how low the interest rates go.

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The next five year plan

There has been a lot of nonsense talked about budgets for the next five years. The Conservatives have set out their plans in the last 2015 Budget book from the Treasury. Few seem to have read it, so here is a reminder.
The aim is to eliminate the budget deficit. Spending will rise from £737 billion (£11,497 per person) to £797 billion (£12,434 per person) , an increase of £60 billion. Taxes will rise from £602 billion (£9391 per person) to £746 billion (£11,638 per person). This will more than remove the deficit after other income is taken into account. The rise in tax revenue comes from growth in the economy, not from higher tax rates.

Spending is effectively frozen for the first couple of years. The rate of cash increase should keep up with pay, prices, and productivity growth, given the current low level of inflation. There is no need for there to be a real terms cut, unless inflation takes off. This allows for the extra £8 billion for NHS spending.
Revenue will grow well assuming as the Treasury does that the economy continues to grow faster than 2% per annum.

So we can sum up the last five years and the Conservative plans for the next five years in two simple rounded figures – in each of the 2 Parliaments, spending goes up by one thousand pounds per per person,and tax revenue goes up by two thousand pounds per person, eliminating the need to borrow any more.

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English and Scottish nationalism

There are cries today from the left in the press and media that by publishing a Manifesto for England the Conservatives are fuelling English nationalism and dividing the UK.

What nonsense.

All main parties publish Manifestos for Scotland – why don’t those same commentators and interviewers complain this fuels Scottish nationalism and splits the country? Maybe because it doesn’t.

It is also bizarre that Labour has spent most of the General Election just talking about the NHS in England, ignoring their old Scottish voting heartlands.

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The 5 year Coalition plan and the deficit

In 2009-10, Labour’s last year, the state spent £669bn and collected just £479 billion in taxes. The deficit (after allowing for other income) was more than £150 billion. That represents spending of £10,437 for every man, woman and child in the country, average borrowing per person of £2340 in a single year and average tax per person of £7472. These figures are averages including children.

In 2014-15, the Coalition’s last year, total spending reached £737.1bn, total taxes £602.4bn and borrowing was down to £87.3bn. That is £11,497 of spending per person, £9,391 of taxes per person, and £1362 of additional borrowing per person.

How does that compare with plan? The spending is exactly as forecast in 2010. The tax revenue is £54 billion less than forecast, so the borrowing is up on original forecast.

How does 2015 compare with 2010? Spending is up by £68 billion or £1060 per person, tax is up by £122.7bn, or £1914 per person, and the deficit is down by £63 billion or just under £1000 per person.

All who wish to debate the UK economy and austerity should start by examining these figures. The official statistics show us that real public expenditure rose a bit under the Coalition. Over the last five years public spending has made a small positive contribution to economic growth and output. It has not reduced or slowed our economy as some have argued.Welfare spending has risen, despite a fall in unemployment, mainly owing to upratings of benefits.

The main tax rise has come from the increased rate of VAT and from increased transactions in the economy boosting VAT receipts more. Income tax revenue is only slightly up, as natural gains from more output have been reduced by taking 2.5 million people out of tax altogether and by the 50% rate in place for part of the period.Over the five years more than an extra £500 billion or £7800 per person was borrowed. It is difficult to believe the state could have borrowed much more without triggering higher interest rates and a loss of confidence in financial management.

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St George’s day

Happy St George’s day. England awakes.
Just the day for a Manifesto for England. Which party or parties do you think will produce one?
The emphasis in this election on the issues of Scotland should make us ask what is on offer for England, on this day of all days.
The media decided to give the SNP star billing in the tv debates. The Scottish voters have decided to propel the SNP to new highs in the polls, making them of more interest to the commentators. The main parties left unfinished business from the last Parliament, to transfer new major powers to the Scottish Parliament from Westminster.
Only the Conservative party saw this also meant we have now to tackle the problem of England. Labour and the Lib Dems have contented themselves with saying they will look into it in the next Parliament. Their lack of enthusiasm for the task comes through in their limp and feeble proposals, and in their belief that somehow a bit more devolution to Councils can answer the problem. It most certainly cannot.
The minimum England needs is the same rights to settle matters for our country that Scotland will achieve through the new devolution Act planned for the first year of the new Parliament. In some cases it will be England, Wales and Northern Ireland deciding things, in other cases just England, depending on the degree of devolution elsewhere.
Today I repeat my campaign for EVEN – English votes for English needs. If Scotland decides her own Income Tax, so must England. If Scotland decides her own local government settlement – within the bloc totals – so must England settle hers. If Scotland can legislate for herself without England, then so should England be able to legislate for herself.
The UK is a country which believes in fairness. Today of all days we should seek fairness for England.

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Labour and the Lib Dems want to protect you from Brexit

There is a deafening silence in the Lib Dem and Labour manifestos about the need for a new relationship with the emerging political and monetary union on the continent. It is surpassed by their arrogance in seeking to deny us an In/Out referendum on whether we want to stay in the EU. They apparently know best. They shout at us that we must stay in, without ever examining the options for a new relationship based on trade and co-operation outside the federal treaties. They appear not to understand the dangers of our present course, accepting more and more rules, laws and invoices needed for a political and monetary union to which we do not fully belong.

We need to ask why do these parties and people think they are right this time, when they have been so wrong in the past? Many of them who now just assert we have to stay in come what may, urged us to join the Exchange Rate Mechanism. I remember how they disagreed with me and the few of us who opposed it, how they briefed against us and claimed we did not understand the stability and growth that membership of the ERM would bring. Instead, as we forecast, it brought us boom and bust. First it brought us too much credit and money, then it brought a sterling crisis leading to our forced exit. It gave us a nasty recession based on interest rates which were far too high for UK needs, as the authorities slavishly tried to follow the European model.

Learning nothing from this bitter experience, many of these same people then urged us to enter the Euro. I and others fought a more successful battle to stop that. Had we been in the Euro in 2008 I suspect the banking crash would have forced a UK exit, as I doubt Germany and others would have wanted to stand behind our weakened large banks in the way the Bank of England and UK government did.

Now these same parties assert we have to stay in the EU to be able to trade with them. Why? Doesn’t the rest of the world trade happily with the EU without joining? Hasn’t the German government already said it would need a free trade agreement with the UK if we left, as Germany sells us so much more than we sell to Germany?

It is high time these luminaries of the left who are in love with our current EU membership had to answer some tougher questions. Why do they accept dear energy, a central EU policy? It means less industry and fewer jobs in manufacturing, it means more fuel poverty. Why do they put up with it?

Why do they put up with the economic policies of the Euro and the wider EU, which generate unacceptably high levels of unemployment in many Euro countries?

Why do they accept the EU policy of controlling government deficits to a maximum of 3% of GDP per annum, when at home they are always urging larger deficits?

Why do they endorse policies which entail massive cuts in public spending in countries like Greece, Portugal and Spain, whilst resisting any cut at home?

We need a new relationship. It needs to be one that gives us more freedom to govern ourselves, and allows the Euro area to complete its union without the UK slowing it down or making it more difficult. If one cannot be negotiated, then the British people need the opportunity to vote out of what we have at the moment, as it is far from ideal. Whatever the negotiation brings, the people should decide. Labour, Liberal Democrats and SNP are united in wanting to deny the British people the choice. If they do not trust the people, why should the people trust them?

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Construction, growth and our environment

One of the oddest things about  some Green Party interviewees is their apparent disinterest in the impact of more and more development of homes and commercial space on our environment. They seem unwilling to discuss the issue of growth in population, though growth in population is one of the main drivers of more carbon dioxide output,more use of the planet’s resources, more factory output of kinds they often do  not like.

For an individual country like the UK accepting tough targets for carbon reduction are made much worse if the country is experiencing a strong flow of migrants into it. The international targets are not adjusted to take account of more people. If an individual country wants to hit the targets a tough migration policy would be a good help.

For the many voters who love the English countryside, better control of migration would be very helpful. We do need to build many homes if we continue to invite in so many additional people. Environmentally it makes little sense to build many new homes on greenfields in England in order to leave an equivalent number of homes empty on the continent as people leave their own country and come to live here. It means more natural resources and energy are needed to build the homes here, and adds to the misery in the country losing the people with empty homes disfiguring urban environments and reducing incomes in those communities.

You would have thought true greens would wish to help in the task of creating more jobs and wealth in continental countries, so we have to use fewer greenfields for new building. If only. Part of the left’s problem is they will never criticise the EU/Euromodel, or criticise the dear energy policies which destroy jobs and keep people in fuel poverty. They just want to criticise England and complain that it is all our fault.

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EU asylum and the sad deaths at sea

The spate of deaths by drowning this spring has been harrowing. More must be done to prevent the problem arising, and more to rescue those where a disaster does occur . The policing,patrolling and life saving where needed has to be done by those EU countries  and North African countries with ports nearest to the problem, as they have the vessels able to deploy quickly.

The countries and authorities who could do most to stop this problem are the North African states whose ports the ships leave. The ships should be properly checked for seaworthiness and to prevent overloading before departures.

There is a common EU asylum policy. Broadly the policy has to be applied at the first EU country an asylum seeker reaches. They should be permitted entry if they are fleeing persecution and in need of asylum, but not if they are economic migrants. The EU’s borders are as good- or as weak- as the weakest link in them in all the member states. That is one reason why many in the UK would rather have complete national control of our borders, and make our own judgements about asylum without EU law.

The EU itself has been asked to help Italy, currently facing a large part of the present  problem.The Italian authorities, assisted by the EU, need to do more to track down the criminals who take people’s money to risk them in unsafe boats. This vile trade which has led to so many deaths needs a strong police response, and may well need co-operation between EU member states and the countries allowing the people to travel in these dangerous boats. All member states who are part of the common border need to discuss the EU contribution to the policy costs.

The EU needs to stress there is a fair and safer way for people to be assessed for asylum status, than trying to turn up on unsuitable vessels.

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More talking, less warring

War breaks out when politics fails. All too often in recent years in the Middle East and on the eastern fringe of the European Union politics has failed, governments have lost authority or have lacked the power to resist powerful enemies. The UK has tried military interventions in the Middle East with our allies, and has wisely avoided military intervention in Eastern Europe. Neither course of action or inaction has brought peace and democracy to those areas. So what in future should we do?

I want the next Parliament to rebuild the UK’s diplomatic strength. The last five years have seen some strengthening of the Foreign office’s capability to understand foreign countries and represent us more widely abroad. By 2010 the FCO lacked the language skills and intelligence staff needed to have a thorough understanding of the Middle East and Russia. Policy analysis and the presentation of our viewpoint was made more difficult by the shortage of skills. The Defence Select Committee has reported on this.

Armed with better information and advice, our diplomats and senior military staff will be in a better position to work with allies and with any democratic governments in the specified areas who are worthy of support. The Middle East needs more talking, and Eastern Europe needs more talking. This is not some vague hope of peace through asking people to be nicer to each other. I am far from naive about the magnitude of the problem faced in these troubled areas. I am also very conscious that we have tried military solutions in the Middle East, and the Ukrainian government is seeking a military solution in its unhappy territory, with no obvious signs that this route creates a stable peace and good democratic practice.

It takes many years or decades even for a country to establish democratic practices that are reasonable. It takes even longer for democracy to become a reflex reaction, to be part of the social and political fabric. It is only when people assume governments can be dismissed by voters, recognise that minorities have rights and protections, understand the power of the state cannot be used for party political purposes, and realise everyone is beneath the same law administered by independent judges,do you have the makings of a democratic state. The UK’s unique contribution in future could be to do more to build confidence in democracy,to explain to more people how democracy works, and above all to show it is an attitude of mind and an approach that has to be shared by government and opposition alike.


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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.

    Published and promoted by Thomas Puddy for John Redwood, both of 30 Rose Street Wokingham RG40 1XU

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