May day

Yesterday Mrs May at last admitted she could not win the vote. She had to accept the Withdrawal Agreement was disliked by far too many MPs.

It was therefore a curious decision to spend the first half of the campaign rushing round the UK as if appealing to voters in a General Election, and to spend most of the last week-end wooing businesses as if they had some kind of bloc vote.

The Prime Minister did not once approach me about my intentions. Maybe she accepted my view and realised she could not change it. Her Chief of Staff told me I would be invited to a one to one meeting with her which never materialised. Several other MPs I have talked to were also left alone, when the government needed every Conservative to vote with it to give it any chance of winning. They had already lost the support of the DUP.

Stirring the country up did help generate a lot of constituency and nationwide correspondence. I received more messages to oppose her Agreement than to support, and many positive messages about the approach I took in the Parliamentary debate. It also shifted opinion against the Agreement. One recent poll says 62% wanted the Agreement voted down and only 25% support it.

Mrs May implied she can get some reassurances about the Irish backstop and then try again to get it voted through the Commons. That is very unlikely, given the magnitude of the opposition to it.  There should be no doubt that this is a completely unacceptable surrender of powers and money by the UK for no good reason. This is allied to the very worrying treatment of Northern Ireland as some new country called UK (NI), to be treated differently for customs purposes and with different legislation to the rest of the UK. Even if the whole backstop was removed  completely I would not vote for this one sided and unfair Agreement, and nor would a good many other Conservative MPs. What  bargaining power would we have left for a better Future Partnership after signing away powers over laws, borders and money?

Only a large defeat will send a clear message to the EU that a few cosmetic changes to the Agreement will not be sufficient to get Parliament to change its mind, and to get them to understand we will be leaving with no Withdrawal Agreement unless they radically change their approach. The Prime Minister’s decision not to press the vote means there would have been a big defeat.

I have given Mrs May and her team plenty of advice to avoid this outcome which they have ignored. This Agreement is Mrs May’s  Agreement, and this latest Project Fear campaign was her campaign. The more they run Project Fear and the more extreme they make it, the more most of the public shrugs its shoulders and scorns politicians who mouth such nonsense. Mrs May was unclear when she would bring this Agreement back for a vote, and unclear over whether it was even feasible to get changes to the legally binding text of the Withdrawal Agreement as opposed to the less important text of the vague Political Declaration.

Many MPs are asking why Ministers were made to go out and assert that the vote would definitely take place today, and why they had to maintain the fiction they would win. This has removed confidence in Mrs May from some more MPs who used to support her.

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The economics of leaving on March 29, 2019 with no Withdrawal Agreement

The economic gains and problems with 29 March 2019 departure from the EU

Gains:
Fiscal stimulus
Positive second round effects of affordable tax cuts
Advantages from extra public spending
Lower tariffs on non EU trade
Confidence boost from ending Brexit uncertainty
Substitution effect for home production as a result of tariffs on EU sales into UK

Losses:
Friction at borders?
Non co-operation by some continental authorities?
Loss of confidence?

Why several scare stories are untrue

• Planes will fly
• EU companies will still be exporting food and medicines to the UK
• UK port authorities do not need to create new checks and delays
• Where paperwork is incomplete trade will continue – as with the EU’s failure to lodge a compliant schedule with the WTO

Fiscal stimulus

• Spend most of the £39bn cost of the Withdrawal Agreement in the first two years
• This will provide a 1.8% stimulus to GDP, or 0.9% a year

Second round effect of tax cuts

• Take VED back to pre 2017 levels and drop special diesel taxes. This should lead to a 15% gain in car sales and domestic output.
• Take Stamp Duties where currently higher back to pre 2016 levels. This should provide a stimulus to transactions in the housing market.
• Cut Income Tax to 18%, providing a general boost to take home pay and consumption.
• Estimated second round effects 0.2% of GDP

Public service improvement

• Extra recruitment into NHS, education and police
• Additional investment money into transport

Estimated little additional boost above fiscal stimulus counted above

Tariffs

If we adopted the EU tariff schedule for all EU as well as non EU items we would collect an additional £13bn of annual revenue. This should be given back as tax cuts for the consumers.

Better to cut the average EU tariff when imposing it as our tariff on the whole world.

1. Remove all tariffs from intermediate goods needed for UK manufacturing
2. Remove all tariffs that collect little revenue, or are at low rates
3. Cut or remove all food tariffs on food items we cannot grow for ourselves
4. Reduce food tariffs on non EU food that we can grow to a more realistic level when imposing it globally

Confidence effects

Business claims the uncertainty over what our future trading arrangements and tariffs will look like is holding back investment.

Early resolution should bring forward delayed investment. The extent of this has been exaggerated, but let us estimate a modest 0.2% gain to GDP from this source.

Trade friction on imports

• Imports are two thirds of our EU trade
• Trucks arrive at Dover full of goods – about half of these make the return crossing to Calais empty
• There is no need to place new inspections or complex customs arrangements on our borders in our ports, as we control these entrances to the UK.
• In the first instance, the UK can continue importing EU products as today, with an inspection regime at the factory or packing house of the originator, and inspection at the customer facility on arrival
• If the UK does want more port inspection in due course, this can be introduced with sufficient capacity to avoid long extra delays
• Cross channel traffic by ferry or tunnel could have new inspections in transit on board the train or ferry
• Exporters to the UK are not threatening to cancel supply on 30 March
• Most have contractual obligations to continue supplying after 29 March which are legally enforceable. It is difficult to see why this should cause extra costs to the UK.

JIT Delays

• JIT systems regularly deal with delays or long journey times
• Were transit times to go up the supplier would just be told to send it earlier
• There need to be no extra delays at UK ports importing the goods
• JIT is more susceptible to disruption through strikes / bad weather / crashes on main motorways / disruption to ferries or trains. This hits trade from within the EU as well as from outside whether we are members of the EU or not.

Export friction or loss

• The base case is continental customers will want UK exports on 30 March as on 29 March, and many are contracted to carry on buying them
• Tariffs will make mainly UK food and cars dearer, but they will make EU cars and food dearer into the UK
• Over half our EU trade will be tariff free on the EU’s schedule
• The high food tariff and car tariff is likely to reduce imports more than exports given the large imbalance in trade in these two categories
• It will lead to more domestic production for the home market
• On a worse case there could be loss of 0.6% per annum of GDP from less exports, partially compensated by a gain of say 0.3% of GDP from more home substitution for imports

Sterling

• The pound fell against the dollar and the Euro in the eighteen months before the referendum, and was marked down on the result
• Its future from here will be more determined by relative money policy and interest rates than by Brexit news. It has been relatively stable in the last few weeks when the odds of no Withdrawal Agreement have risen.
• The UK still has a competitive advantage from the lower values of the pound since 2015.
• The balance of payments will get a good boost from ending EU contributions which will help the pound.

Summary of Effects

Annual as a percentage of GDP, years 1 and 2 after Brexit on 29 March 2019

Fiscal stimulus +0.9
Secondary benefits of tax cuts +0.2
Confidence effects from ending uncertainty +0.2%
Worst case export loss -0.6%
Import substitution offset +0.3%

Total net gains +1.0% per annum

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A reply to the Minister on the World at One

The Minister defending the government’s line said on the World at One that Conservative MPs who planned to vote against the Agreement did not understand it and had not thought it through.
Let me reassure him that I and my colleagues have read and thought about it in great detail, and have thought through the ramifications of signing this dreadful deal, and of not signing. It is not a good idea to pretend that we have idly decided to vote against a government we usually support. That will not make us want to vote for it. It is the absence of detailed government explanations and answers to our deep reservations that lead us to vote against. I do not make these remarks personal to the Minister, as I assume he was asked to take this line.

The Minister also wanted to know if they got some kind of tweak to the Irish backstop if then we would vote for the Agreement. It appears the Minister does not understand the reasons I and some others have given repeatedly and in public for rejecting this deal. Of course we would not suddenly support if there was a tweak to the backstop. Let me repeat for the Minister’s benefit I oppose

1. Signing away more than £39bn of our money for nothing in return
2. Signing a Withdrawal Agreement without having a legally binding text of a Future Partnership Agreement, despite the Manifesto promise that the two would be progressed together
3. Putting our country into a very weak bargaining position for 21 months or much longer, to try to get a future trade deal, having given away most of what the EU wants in advance!
4 Making us accept all existing and new rules from the EU for an indeterminate period, as they could then legislate without us present and do us harm if they wish

Any tweak to the Political declaration is irrelevant. What is needed is a dropping or complete re write of the legally binding Withdrawal Agreement.

The Minister also said I and my friends had to set out the detail of how our trade would work if we vote no. I suggest he reads the WTO rules and especially the 2017 WTO Agreement on non tariff barriers, and my submission to the Department of International Trade on the customs schedule we should set with lower tariffs than the current EU one. In particular they should make it clear the UK will not impose any tariffs on components coming into UK factories. He might also like to tell me when under the government’s approach he thinks they might be able to tell us how we will trade with the EU after the end of the so called Transition period, as of course the Political declaration is both vague and contradictory on these matters.

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“Conservative MPs have to tell the whips this morning how they will vote” – BBC

That’s news to me. More fake news?
In case Mrs May is in any doubt, I will be voting against the Withdrawal Agreement!

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It is Mrs May’s Agreement that would create the uncertainty

Mrs May’s surrender Agreement is not a deal. It is a requirement for us to enter months and months of possibly fruitless talks, with the UK’s future on hold and uncertainty maximised. Just leaving on 29 March as she originally promised would end the uncertainty and allow us to get on with our lives freed of all this argument and needless scare stories.

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Dont think the Withdrawal Agreement would just cost £39 bn

Most of us in the debate have accepted the Treasury estimate of the costs of the Withdrawal Agreement. However, there are no figures in the Agreement and certainly no cash limits on what we would have to pay. The readiness of the Remain establishment to use the £39 bn figure should be cause for concern. The out turn could be a lot higher.

The language is vague over how the sums will be calculated but tight and binding over our need to pay up. Under the Agreement the EU will set out how much it thinks we owe, and we have little power to push back and reduce it. No normal business or individual entering a contract would accept such an open ended and one sided arrangement. They will simply notify us of the bill, and charge us interest if we do not pay on time.

The pathetically weak Uk negotiation even lost out badly over the European Investment Bank. As they want us out of it we should be repaid our capital and share of the accumulated reserves, At some point we gave up our rights to the reserves and would get our starting capital back on its own over an eleven year period. Meanwhile we remain on risk for our full starting proportion of uncalled capital. The accumulated profits and reserves are more than twice the called capital. so we get back under one third of what we are owed. There’s a great one sided deal for the EU.

The EU told us the Withdrawal Agreement could not look forwards and tackle the future partnership, though it does where it suits them as over names of products from geographical areas. It also looks a long way forwards over money, requiring us to pay pensions for decades, to meet spending not yet committed and to meet benefit and public service charges for people not yet arrived here.

The UK is of course liable for full budget years 2019 and 2020 owing to effectively remaining in the EU without our vote and voice for the so called transition. We will pay our full share of own resources taxation and will continue to be liable after December 2020 for any money extra they wish to charge us. We will also be held liable for shares of commitments outstanding on December 31 2020 for payments to be made after we have left. and in the second year after we have left and beyond. There will be an attempt to have a final reckoning after 2028, though things like pensions payments go on long after that.

In other words the Treasury has effectively given them a series of blank cheques for a decade to come, without any apparent push back or argument over these huge and unspecified amounts. There are no figures in the main text of the Agreement to give the EU maximum flexibility to send us some big bills. What did the UK government think it was doing when it agreed to this?

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There is an alternative to Mrs May’s plan – leave in March 2019

Mrs May’s plan is not leaving the EU, but staying in for many more months, and buying the most expensive talks in history with more than £39bn of our money.

So the alternative is easy to explain and define. It is to leave in March 2019 in accordance with the EU Withdrawal Act and in accordance with the wishes of Leave voters in the referendum.

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Amber Rudd undermines the Prime Minister

It is open to backbenchers and members of the public to be as critical of Mrs May’s plan as we like and to propose an alternative. Those MPs who decide to stay in the Cabinet have to defend Mrs May’s position, which is her deal is the only proposal worth considering.

This early move in Miss Rudd’s probable leadership campaign is ill judged and ensures she will not get any Eurosceptic votes, as the Norway option is not leaving the EU. It means accepting EU laws, paying them money and staying in the single market and customs union which we voted to quit.

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I have more confidence in the government than Ministers do

Ministers fanned out yesterday to spread gloom and doom around the country about what will happen if we just leave next March. It was a poor version of Project Fear, without even any novelty to amuse connoisseurs of this most popular political genre. We were told that the ports will jammed by our own Customs officials, leading to long delays. I don’t believe them. The UK can put in the capacity it needs to handle any additional checks. If it fails to do so it will just have to let the lorries through against their pre filed electronic details as they do today whilst they put in capacity for additional checks. That is what I thought Customs officials had already told us.

So Ministers, I don’t believe you. I think the UK port and government officials will handle it just fine. You will not have to resign for failing to plan and equip our ports properly for the task. I am sure you are up to it.

I also enjoyed the contradictions in the stories. We were told that in a worst case there will be six months of delays, yet the Health Secretary only thinks we need six weeks of stocks of medicines. It was a curious irony from the BBC that to describe what it would be like they looked back to what had actually happened to cross Channel trade in 2015 when we were still firmly in the EU. It was unhelpful then to face the disruption, but we got through it. I cant see why this should be bad like that, when on both sides of the Channel the authorities tell us they want it to work on 30 March.

Still the UK government has failed to set out its schedule of tariffs for March 30th. The Trade Secretary has promised me it is due any moment, so why shouldn’t I believe him. I trust the schedule will say there will be no tariffs on imported components for UK car factories, shooting that particular fox of the Project Fear campaign.

Project Fear has done great damage to the reputation of the UK establishment. It has led them to make all too many nonsensical forecasts. It reminds Leave voters Remain still have nothing positive to say about the EU they seem to love so much. I was amused to see several Ministers decided to fulfill the instruction to meet business to tell Leave voters they were wrong in or near their own constituencies so their time was not completely wasted.

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My speech during the debate on the European Union (Withdrawal) Act, 5 December 2018 (edited)

Almost two and a half years have now passed since the people spoke in the referendum. It was the largest democratic vote in our history. The people voted in very large numbers to take back control of our laws, our money and our borders, and to reclaim the lost sovereignty of the United Kingdom electorate. They did so in the teeth of enormous hostility and propaganda from many elements of the political and big business establishment.

The people were told they were too stupid to understand the arguments and that there were huge dangers if they dared to vote to leave the EU. They were told by both campaigns, and by the Government in a formal leaflet, that we would be leaving the single market and the customs union. Rightly we were told that the EU would not allow us to cherry-pick bits of the single market and customs union and that those were an integral part of the whole. Voters were given a set of entirely bogus and dishonest forecasts about what would happen in the short term after the vote. Practically every one of those forecasts was wildly too pessimistic, which has led to the distrust between the vote leave majority and the establishment that pushed out those predictions.

I urge the House to move on from “Project Fear”, to move on from gloom and doom, and to understand that many millions of decent, honest voters made a careful and considered decision. They do not believe those who tell them it will all go wrong, that it must be reversed or that they must be told to think again and vote again because they did not do their homework. It is deeply insulting to the electors, and I am sure that this Parliament is worthy of something better than that.

The people were saying something wonderful for this Parliament. They were saying, “We believe in you, Parliament. We believe you can make wise laws. We believe you can make even wiser laws than the EU. We believe you can make better judgments about how to spend the taxes we send you than the EU, which spends so much of the money on our behalf in ways of which we do not approve. We believe, O Parliament, that if you help us to take back control of our laws and democracy, we will get better answers. Or, of course, Parliament, if you do not give us a better answer, we the people will have our sovereignty back, and we will dismiss you.”

One of the things that most annoys people about the EU among the leave-voting majority is that we cannot sack them. Whatever they do, however bad they are, however much money they waste, however irritating their laws, we have to put up with them. We cannot sack them; we cannot have a general election. [Interruption.]

Scottish National party Members say that they feel the same about the Union of the United Kingdom, but we gave them the democratic opportunity, and their people said that they like our system of government, because this is their democracy too. [Interruption.] The hon. and learned Member for Edinburgh South West (Joanna Cherry) should understand that her colleagues in Scotland, and her voters in Scotland, believe in UK democracy, and they have exactly the same rights of voice and vote and redress as all the rest of us.

Sir Desmond Swayne (New Forest West) I entirely agree with my right hon. Friend. Ever since the referendum, the narrative has been to find explanations for why the people voted as they did—any explanation other than the fact that they wanted to leave the European Union. Does he consider that the majority in favour of the amendment in the name of our right hon. and learned Friend the Member for Beaconsfield (Mr Grieve) shows that the game is up, and that there is now a majority in the House against leaving the European Union? The game for us must be to find some orderly way around that, irrespective of the majority who are now against us.

John Redwood: I do not prejudge the evil intents of other Members. I hope that all Members will agree that we must implement the referendum result. We had a general election in the summer of last year. I remember that in that general election Labour and the Conservatives got rather more than 80% of the vote in Great Britain, the Democratic Unionist party did extremely well in Northern Ireland, and all three parties said that they would faithfully implement the referendum decision of United Kingdom voters on leaving the European Union. I trust that they will want to operate in good faith in the votes that may be to come.

My advice to Ministers, as well as to the rest of the House, is that what we should now be doing is celebrating the opportunities and the advantages that we will gain after March, when we have left the European Union. We should be having debates about how we will spend all the extra money on improving our public services instead of giving it to the EU. We should be having a debate about all the tax cuts that we need to boost our economy, so that instead of growth slowing after we leave, we speed it up by deliberate acts of policy. We will be empowered in this place to take these good decisions if only Members would lift their gloom and their obstinate denial of opportunity, and see that if we spent some more money and had some tax cuts, it would provide a very welcome boost to our economy in its current situation.

I want to see us publish a schedule of tariffs for trading with the whole world that are lower than the tariffs that the EU currently makes us impose on perfectly good exporters, particularly of food products, from elsewhere in the world. Why do we have to impose high tariffs on food that we cannot grow for ourselves? I want us to have a debate on urgently taking back control of our fishing industry so that we can land perhaps twice as many fish in the UK and not let them all be landed somewhere else, and build a much bigger fish processing industry on the back of domestic landings from our very rich fishing grounds.

I wish to see us get rid of VAT on, for instance, green products and domestic fuel. We are not allowed to do this because we are an impotent puppet Parliament that does not even control its own tax system for as long as we remain in the European Union. I wish to see us take back control of our borders, so that we can have a migration policy that is right for our economic needs and fair to people from wherever they may come all around the world, rather than having an inbuilt European Union preference. I wish us to be a global leader for world trade. Now that the United States of America has a President who says that he rather likes tariffs, there is a role for a leading great power and economic force in the world like the United Kingdom to provide global leadership for free trade.

We will do none of that if we sign this miserable agreement with which the Government have presented us, because we will be locked into their customs arrangements for many months or years. We will not be free to negotiate those free trade deals, let alone provide the international leadership which I yearn for us to provide. I want us to have our seat back at the high tables of the world in the big institutions like the World Trade Organisation, so that with vote and voice and purpose, we can offer something positive, and have a more liberal free-trading democratic world than the one that we currently have. That is something that we are not allowed to do for as long as we remain members of the European Union.

I say this to Members. Lift the gloom. Stop “Project Fear”. Stop selling the electors short. Stop treating the electors as if they were unable to make an adult decision. Understand that they made a great decision—a decision I am mightily proud of—to take back sovereign control to the people, to take back the delegated sovereign control to this Parliament. It is high time that this Parliament rose to the challenge, instead of falling at every opportunity. It is high time we did something positive for our constituents, instead of moaning and grumbling and spending every day—groundhog day—complaining about the vote of the British people.

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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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