Better jobs

The UK economy has been good at creating many new jobs over the last seven years. It has been successful at taking unemployment down substantially. One of the main aims now should be to promote higher skilled and better paid jobs. This is the essence of  how to tackle the so called productivity problem.

It is  normally easier to get from a job to a better paid job, than to get from unemployment into work. It is possible for many to work with their employer. Good companies have schemes to foster training and to help employees achieve qualifications. This usually leads in turn to promotion within the firm.

There are many skilled areas where the UK is recruiting where we could do with more skilled young people from our own Colleges. Various companies and industries complain of a shortage of good people with the right skills. Often they turn to inviting in people from overseas to fill the gaps. The UK economy has been great at generating jobs for new migrants as well as for people already settled here.

Raising employee productivity can take place in several ways. The company may just get better at selling service or product, and raise the amount supplied per worker through good sales combined with processes that allow the existing workforce to service some of the growth. The value of the company’s output may rise for other reasons. When, for example, the oil price goes up the employees of the oil producers become more productive because the  value they each produce rises. A company may introduce better product or service which commands a higher prices which also boosts productivity.  A company may invest more capital in computing, automation or more modern process which can allow the same workforce to produce and sell more.

The UK has a great opportunity to replace more imports with domestic production given the improvement in our competitiveness in the last couple of years.



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So the EU budget rebate is at risk

In the endless referendum debates and interviews about the money I always stressed that the £350 m was an accurate official figure for the gross amount. I also quoted the various  net amounts if they were relevant to the specific question.

Quite often Remain speakers claimed we do not send the gross amount, but retain the rebate at home. We have further confirmation from the EU that we do send the gross amount and have to reclaim the rebate later. Now there are stories that the EU will not pay the last rebate owing. In that case we should only send the contribution net of estimated rebate.

We also read that the EU thinks we should accept some  future liability for Ukrainian loans from the EU. This reveals an interesting EU worry. EU policy towards the Ukraine has been problematic. The wide ranging Association Agreement was part of the reason for political change in Ukraine which led to the loss of Crimea and to a bitter civil war which damaged the economy. The EU and the IMF were drawn into offering substantial financial support for the troubled economy.

It is difficult to see why the UK when out of the EU should have to stand behind loans the EU has made when we will not be receiving any financial gains the EU might make on other assets.

If this  is the best the EU can come up with we should continue to plan  to leave under the WTO option. The UK should not make any concessions.

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Timing of postings

I moderate this site, when I can spare a few minutes to do so.

I post short contributions first.

I delete postings that make unsubstantiated allegations about named people or companies for legal reasons. Mr Corbyn gets the same protection as Mrs May.

I delete contributions using bad language or smearing groups of people. Links  from sources I have not checked will delay a posting and may result in deletion. A link to a source like ONS or the World Bank can be helpful and does not delay a posting.

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Housing at the centre of the debate

There has been a tussle going on over how to finance a larger housebuilding programme. The Prime Minister announced her intention to build more homes in her Conference speech, but was only able to agree modest sums of public money for the affordable housing she had in mind. The Treasury is seeking to limit the expenditure of taxpayer cash, and to look at other ways of relaxing the housing market to foster more development.

This week  we read that the independent Office of National Statistics who put the £70bn of Housing Association debt onto the government’s balance sheet in 2015 is now going to take it off. The Office is apparently now satisfied that the Housing Associations are sufficiently  independent of government so their debt is not part of the state’s obligations. This follows legislative changes concerning Housing Association finances and management.

This is significant because it removes Treasury concerns that more Housing Association borrowing impedes reducing state borrowing as a percentage of GDP, one of the government’s chosen targets. It will allow Housing Associations to borrow more to build more, subject to their own balance sheets and credit worthiness. It means that the Communities Secretary’s plea to borrow more at these current low interest rates to invest in housing has just got a bit easier for part of the housing sector.

Thursday we saw the PM out and about highlighting the housing issue. The Communities Secretary made a speech urging Councils to achieve more with their local plans. There remains the issue of the capacity of the housebuilding industry. Successful large companies dominate the activity, and have their own reasons to limit the pace of growth in their activity. They worry about maintaining standards, and recruiting and training sufficient skilled people. Local Colleges can help by putting on sufficient places for building trades courses, and promoting these to potential students.

As the government turns its attention to more affordable housing it is important it includes enough affordable housing to buy, as that is still the preferred tenure for most people. It also needs to expand shared ownership and rent to mortgage models to create additional pathways to ownership. The government should also bring forward its proposals for a new migration policy for post Brexit.

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David Davis was right to urge the EU to engage on the future relationship for their own sake

The EU is trying to stick with the idea that you can settle the Irish border issue without deciding the basis of our future trading. They  hope that by delaying trade talks they will get more money out of the UK. The Brexit Secretaary was right to offer no money and to remind them that a Free Trade deal is in their self interest.

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Germany still does not have a government with a majority

I wrote after the German election that after her large loss of votes and seats Mrs Merkel would find it difficult to form a coalition. Her own party polled just 26.8%. So it has proved. I drew a contrast with Mrs May and the Conservatives where the  vote went up to 42.4% and who could form a coalition with the DUP.

Two months on she missed the deadline for agreement yesterday.It was difficult enough keeping her coalition with the CDU’s sister party the CSU to take her up to 32.9% of the votes. To consolidate that she needed to reassure on migration which makes it more difficult to get the Greens into a government. The Free Democrats and the Greens also have substantial disagreements with each other over coal, energy generally and approach to business.

It is still possible they could reach an agreement, but the long delays  imply the best that could happen for Mrs Merkel is a weak government with limited capability given the big disagreements between the parties. If she fails to form a coalition her party may want a new leader and there might be another election.

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Why I am very positive about the UK economy post Brexit

As there is a concerted attempt to misrepresent my views on the prospects for the UK economy let me repeat why I am very positive about the UK post Brexit, as I have always said.

I see the UK as a great destination for inward investors and for domestic investors wishing to set up businesses, create jobs, build factories and new properties. Only a month ago I was  being criticised for daring to say we needed more realistic forecasts which would be more optimistic ones. My critics ignored the fact that I had disagreed with the Treasury and Bank of England view that the Brexit vote would plunge the UK into recession last winter and had been proved right by events.

It is those who cannot accept the resuit of the referendum who are being gloomy about UK prospects and constantly talking about businesses thinking of moving out. They have been wrong about commercial property and about the expansion plans of overseas investors in the UK

Brexit is full of opportunity for businesses already in the UK, for new businesses that can be set up in the UK, and for businesses thinking of investing from overseas. The UK has a large  balance of payments deficit which we can cut by making and growing more things for ourselves. The UK is very competitive at the current rate of exchange. Freed of the constraints of the EU agriculture and fishing policies we can start to reduce the huge deficit in food that we have built up with the EU over the years. The Common Fishing Policy has restricted the amount that can be landed by British vessels in UK ports. We could do better  by our fish and our fishermen with a UK fishing and conservation policy. Past quota policies damaged parts of our farming industry. A UK policy needs to include the promotion of more growing of our own food.

The swing lower  in the pound against the Euro both before and after the vote makes UK manufactured products like cars that much more competitive compared to EU imports, which should help our domestic industry. The UK is establishing  itself as a great centre for knowledge based industries in general, and for technology based companies in particular.Today there is an optimistic view of the prospects for the Oxford Cambridge corridor.


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11pm 29th March 2019

The date of our departure from the EU is determined by the EU Treaty. Under Article 50 we gave notice. We leave at any time when there is Agreement between the UK and the rest of the EU, or at the  two years point if there is no agreement.

It now looks clear that the EU has no wish to reach a mutually beneficial Agreement to get us out of the EU before March 2019. They are still refusing to discuss the future relationship and trade arrangements which the UK thinks it is in our mutual interest to discuss.

The question now comes up for debate in Parliament about when the UK needs to bring into full effect the EU Withdrawal Bill to ensure legal continuity and certainty following our departure. The government is therefore moving an amendment to make the time and date 11pm on 29th March 2019.

This should not be contentious. It is the date and time we will cease to be a member state under the Treaty and Article 50 procedure. The reason it also needs to be written into the Withdrawal Bill is that we need to bring in its provisions at the same time as we cease to belong to the EU in international law. Domestic law has to take over. It is also the likely earliest time when there could be an Agreement.

So why is it a matter of grave concern to some MPs that the government wishes to ensure this legal continuity? For the rest of the Bill they are desperate to ensure anything is debated in Bill Committee and does go through full legislative scrutiny, yet they don’t want to do the same for the important matter of when we leave.

The reason seems to be that they think we might get into the position where we are very close to an Agreement by 29 March 2019 but would somehow be thwarted in concluding shortly afterwards if we had in the meantime left the EU. It is difficult to see why this should occur. We have 16 months prior to departure to try to reach an Agreement. That Agreement could include an implementation period to follow exit if it required changes that are difficult to put in place quickly. The government has already said there will be additional legislation for any Agreement to be implemented in the UK.

I cannot see having a deadline 16 months ahead makes it more difficult to conclude an Agreement. If the EU does want a mutually beneficial Agreement there is plenty of time to get one. If the EU does not really want one or intends to try to squeeze more and more concessions out of the UK, an extension of a week or two after March 2019 is not going to suddenly provide a suitable Agreement after months of failure.

When Parliament legislated to send the Article 50 letter it legislated for us to leave in March 2019. The main reason we want that on the face of the Withdrawal Bill is to provide certainty and continuity of law given it now seems inevitable we will not be leaving by agreement any earlier.

On Tuesday the crucial Clause 1 which repeals the 1972 Act and therefore takes us out of the EU according to UK law passed by 318 to 68. The official Labour party abstained, as they realised voting against would be to vote against Brexit itself. The rest of the Bill is about creating legal certainty by carry over of EU laws.


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Ownership for everyone

I would like the budget to do more to help create a new generation of owners.

Surveys show that many people would like to be able to buy their own home. Many would like to be their own boss and run their own business. In recent years the UK has established a good rate of new business formation, but has struggled more with widening home ownership. The government’s Help to buy schemes have assisted, but the proportion of people owning their own home is still below levels it reached in the past.

One of the issues that government needs to consider is that of planning. Councils who want to help get homes built can find they suffer from ways the development industry can game the system. A Council often wants to concentrate new building in a given location so that the costs of providing decent roads, schools, surgeries and the rest are kept under some control, and the strains imposed on public services and the transport network in the rest of the area are minimised.

Developers who can take advantage of the planning permissions for the new settlement or for the extension of the settlement can decide to build out the permissions at a slow pace. They can then with other  landowners apply for planning applications elsewhere, claiming the Council area is not keeping up with the demands of the local plan to provide more homes. The developer may say they have a good reason to go slow on the main site for commercial reasons. This can lead to the grant of further planning permissions outside the local plan, which then will require further infrastructure and public service investment that has not been in the budget.

In a plan led system this can be difficult for the Council concerned and can impose more disruption from building work around a local community that had signed up to growth in stated locations. The government needs to think how this perverse incentive can be removed in areas where the local plan is allowing a good rate of new build where developers co-operate.

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European defence

The UK is firmly committed to NATO which remains the main way that Europe’s defence is organised. NATO ensures the participation of the USA. It preserves individual country control over when and whether their forces will be committed to NATO missions, whilst also including the important NATO guarantee for members  to assist if any NATO country is threatened.

The EU is now pushing towards more defence integration with an EU role. The aim is to bring together the defence industries of the member states, to enter common procurement programmes, and to move from there to defining more EU  defence operations. The USA is in two minds about this development. On the one hand the USA would like the European countries in NATO to make a bigger contribution to their own mutual defence. On the other hand the USA does not wish to see the NATO system undermined in any way.

There are doubts about whether the EU has in mind spending more and buying more equipment. It is more likely they wish to exercise more control over the  budgets that member states already have. The UK out of the EU should examine each of the main procurement projects and see if it makes sense to join as a co purchaser and contributor to the project, where the EU would like the UK’s purchases and or expertise. The UK can also offer to join EU missions and assist with troops and equipment where that is in our mutual interest and compatible with NATO’s views and role. What we need to avoid is being sucked into a system of defence procurement and mission definition that impedes our role in NATO or leaves us without central capabilities we need as an independent country.

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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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