The work of an MP – as local advocate

One of the important parts of an MP’s job is to act as advocate for his or her local area to government. It may necessary to take up financial issues like the level of Council grant or access to government programmes. It may require lobbying for some change in rules or regulation that are impeding progress. In Wokingham’s case it is often seeking to secure financial assistance with projects needed to  support Wokingham’s growth, as with new schools, roads, flood prevention  and health facilities.

In recent years Wokingham has done  better, with three new primary schools, a new station, a new doctors’ surgery and the start of the Shinfield and the Arborfield bypasses. Now we need to work on the n9rthern and southern distributor roads for Wokingham, further flood prevention measures as more homes are built, and on secondary school provision. I also wish to see considerably more progress with fair funding between Wokingham schools and the schools elsewhere that receive considerably more per head.

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Seats and votes – the two main parties start to rise

The last General election brought a new low for the combined vote of the Conservative and Labour parties. It was no wipe out or complete meltdown, Euro style, but it left the two sharing just 65% of the total vote. The remaining 35% of the vote meant 57 Lib Dem MPs and 28 others, mainly nationalist or regional party MPs, arrived at Westminster. The UK ended up with a coalition government no-one had planned or argued for.

The latest polls suggest that the two main parties are now polling around 70% together. That’s well up on 2010 and may lead on to further gains in vote share for one or both  as more people may wish to directly help fashion the choice between a Cameron and a Miliband led government.

The two main parties remain  close in the polls, and the vote going to others though down is now much more powerfully concentrated in Scotland in favour of the SNP. So on the present reduced 30% vote for others, the number of MPs from outside the two main parties could stay quite high  if the SNP gets 40 plus MPs to Westminster and if the Lib Dems still keep enough  of their seats.

The election should get more competitive from here, as the campaigns proper kick in with full manifestoes after Easter. Will UKIP supporters who want out of the EU really let a chance for an EU referendum slip through their hands by not voting Conservative ? Will recent Green voters stick with their new party? Will some  Scottish Unionists vote SNP in the hope of a still better deal for Scotland, or will they see the damage that can do to the Union?

What is for sure is that England can no longer be ignored. The politics of the next Parliament may well be dominated by the business of Scotland, which will also trigger the business of England.

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The cost of living

The UK used to have a bad inflation problem. UK politics in the 1970s and early 1980s was fought over rises in the cost of living and which party had the best way of  controlling it.

Mr Miliband wanted to take his party on a trip down Memory lane, by making a central issue out of what he called “the cost of living crisis”.

This followed hard on the heels of his forecasts that the UK economy under the present government would go into double and treble dip recession and would end up with worse unemployment than it had suffered under Labour government. He abandoned that attack as the news gathered momentum of many more jobs being created, and many people getting out of unemployment into work.

This week the government announced that the present rate of inflation is zero. For the whole of the last year prices overall have stayed the same. Forecasters expect prices to fall a  bit from here. Wages are rising, so people are now experiencing some increase in living standards, after the sharp fall in real incomes at the end of the Labour period in office, and the continued squeeze in the early Coalition years when inflation remained high.

The government and Bank do wish to see better pay rises and further progress in raising people’s spending power. For the time being none of this threatens low inflation, which remains as a welcome achievement which eluded most post war UK governments.

 

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Euro 2 billion to help Greece

 

The EU came to Greece’s aid, with Euro 2bn to ease the Greek “humanitarian crisis”.

It’s all part of their “too little, too late” strategy towards the Euro. Forcing Greece into the Euro prematurely was a mistake by Greece and the other members. Offering the new government 2bn Euros of charity is not going to tackle the underlying structural faults of the scheme, nor will it get Greece back to work. Once you have allowed unsuitable economies into your single currency scheme, the whole zone has   a problem as well as the problem country.

The recent meeting between Mrs Merkel and the Greek Prime Minister may have defused a few  of the extreme tensions between Germany and Greece, but it did nothing to resolve the fundamental issue – who will pay the Greek bills coming up. Mrs Merkel was doubtless  sincere in saying she wants Greece to experience economic recovery and rising employment, but such words create no jobs.

The Greek state and economy needs more money. The Greek PM says he does not want to borrow more, yet that is exactly what he has to do if the rest of the Euro area will not give him the cash he needs. The Greek commercial banks are dependent on support from the European Central Bank, and have had to borrow from the ECB to handle deposit loss. The Greek state needs to borrow more cash to pay its day to day bills, as it seems a tax shortfall once again leaves the government spending more than it raises in taxation. The Greek state also needs to find the money to repay some of the older borrowings as they fall due.

Greece cannot just print its own cash for its banking system as a country with its own currency can. Nor can the Greek state simply issue more Treasury Bills or bonds to borrow more to carry on spending, as all of Greece’s borrowings are under control as part of the loan agreement called the Master Financial Assistance Facility.  The truth is Greece can run out of money, and can be squeezed by borrowing rules, loan covenants and by the European Central Bank.

Mrs Merkel’s fine words about growth, and the EU’s 2bn assistance is a sign of some willingness to compromise. It is still way off the scale of the debt relief or new money that Greece needs to repair the damage to its recession ridden economy with mass unemployment at worrying levels.

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Buying a home

 

I was pleased to read in the week-end press that the Conservative Manifesto is likely to include a better right to buy offer for people renting from Housing Associations. We have been talking about this for sometime in  the Parliamentary party with Ministers.

I am also pleased that the more radical idea of gifting the properties to tenants who have paid rent and behaved well for a specified time period has been vetoed. It would seem to be very unfair on all those who have saved and struggled to buy a home in the normal way, or on those who have to rent from the private sector because they have not qualified for Housing Association property, that they have to help pay for free homes for those who do rent from the state.

There will be the usual left wing protests against this policy, as there were against Council house sales in the 1980s. They are already out and about saying it is quite wrong because it means fewer social homes for people to rent. It means nothing of the sort. The day after the purchase has gone through the same people are living in the same home. The home is not destroyed or made empty. It is still the family home. The only thing that has changed is the state has some of its money back from the sale, so it can reduce its debts or build a new property with the money.

The impact on state finances is usually positive. The new owner takes over the costs of maintaining and repairing the property from the Housing Association. The Housing Association saves costs and has a receipt which it can use for other purposes.

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Risk and burden sharing

 

If you share a country with others, you sign up to sharing burdens and risks. It also means you sign up to sharing successes and riches.

In Europe today some of the separatist movements are from parts of countries that are richer than the rest. They get fed up with sharing their success with others. Thus many in Catalonia in Spain, Padania in Northern Italy and Flanders in Belgium think they would better off without the poorer parts of their countries which they have to help finance.

The case of Scotland is a bit different. Scotland is not the pre-eminent richest part of the UK. London is. However, Scotland feels rich thanks to the presence of oil reserves. Much of the debate about Scottish independence entailed the two sides throwing around different calculations of tax revenues, income per head and general prosperity depending on how much of the oil was regarded as Scotland’s, and how bullish you were about future levels of extraction and future oil prices.

The case of Greece is similar. Germany and other richer parts of the Euro Union do not  want to accept full burden and risk sharing with Greece in the way West Germany does with East Germany or Northern Italy does with southern Italy. Germany says  No to propping up Greek banks, to sending  Greece more money to pay benefit bills or for local authority programmes.

The Scottish case has served as a great reminder of why risk sharing and burden sharing can help. Scotland now has to accept that volumes of oil extracted will be well down on peak levels, and at least for the time being prices well down on Nationalist expectations last autumn. If Scotland were on her own that would mean big spending cuts. Inside the UK the loss of revenue is manageable, and it will be covered from elsewhere.

It reminds us that to be a successful union most in the union have to accept the idea that success is shared and risks are underwritten throughout the whole union. Because many parts of the Euro area are not ready top accept that, the area will remain crisis ridden and unhappy.

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Greece, austerity and reform

One of the ironies of the Greek predicament is that thanks to the previous Greek government the state deficit there reached low levels, beneath the EU ceiling and considerably better than some of the countries judging the Greek response. Unfortunately for Greece the election of a higher spending government coincides with the need to repay debts and to recognise that a low deficit was reached only after the most massive build up of debt which is now difficult to afford.

In the Eurozone France, Portugal and Spain are unable to get their state deficits down to the 3% maximum permitted, though they are more  hawkish over what to do about Greece. Germany has eliminated her deficit, just as many wish she would spend and borrow more to reduce her surplus and provide some stimulus to other parts of the zone.

The so called negotiations are bizarre. Greece says she does not want any more debt and wishes to make her own decisions about social and economic policy. The troika, renamed the “institutions”, remind Greece that she is borrowing more and needs  permission to do that under the Euro scheme. The price of more borrowing, to repay old debts and pay local bills, must be that Greece accepts the reform agenda of the Eurozone. Greece responds that she will not follow Euro austerity policies, labour market reforms and the rest which Syriza sees as damaging to the Greek chances of growing again.

The European Central Bank wishes to stop Greek commercial banks buying Greek government bonds and demanding financing from the ECB to help them do so and to pay for the deposits that are being withdrawn. The institutions want the ECB to go on  financing Greece – or allowing Greece to finance herself by selling more Treasury bills – whilst they see if they can broker an agreement.

The troika briefs that they can live with Greece leaving the Euro if she will not  accept the old medicine of the zone and the loan agreements. Few believe them. The Greek government briefs that they do not need new loans and are planning to do only what they want to do, which is mainly to spend more. Few believe them.

The truth is the two sides are locked in an acrimonious marriage where neither seem to believe in divorce. Both think they need each other, whilst disliking each other and telling the outside world they are just fine leading their own lives and having separate bedrooms.

How much longer can this go on? How much more damage will this scheme do? All the time the two sides bicker, half of all Greek young people remain out of work. None of it is a great advert for people to take a holiday in Athens this summer.

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1932 public spending

In 1932  total UK public spending was £1 397 million. If you adjust for inflation that is £82 887 million.

So as the UK government this year is spending £737 100 million, what is all this nonsense about returns to the 1930s?

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Trends in public spending

The government has recently published more figures showing the real changes in public spending in recent years. These reveal that real spending has gone up in several large programmes, including health, social security and general public services. It has also risen in international services including overseas aid, EU contributions, science and technology and environmental protection. There have been real cuts in defence, public order, recreation and culture, and enterprise and economic development. Overall general government consumption went up by 1.5% in 2014, and is going up by another 0.8% this year,  in real terms ,  according to the Budget Red Book. General government investment rose by 7.3% last year and by another 2.3% this year in real terms. Real household disposable income rose by 1.4% last year and is forecast to rise by 3.7% this year.

One of the difficult areas to research is what has happened to local authority grants and spending. Many Councils argue they have faced large cuts. The figures are difficult to deduce because in 2013-14 the government reclassified large sums, with the localisation of business rates and of Council tax benefit. In a recent  government publication it shows the pattern of so called Local Government Resource AME as £284 m in 2009-10, rising to £11,123 million in 2013-14, whereas Resource DEL fell from £26.805 billion in 2009-10 to £16.281 billion in 2013-14. If we add the two together the sums rose from £27.089 bn in 2009-10 to £27.5bn in 2013-14, a modest rise which also needs to be adjusted for any changes in responsibilities. There was also at the same time some redistribution of grants undertaken to give a bit more relatively to Councils that received very little central grant.

The 2015 Budget Red Book has a figure for locally financed current expenditure. This rose from £33 bn in 2013-14, to £35.8bn in 2-14-15, and is forecast to rise to £37.6bn in 2015-16. These are cash figures and are not adjusted for any change in responsibilities. Locally financed capital spending is constant at £7bn a year for the three years. The good news is public satisfaction with Council services has not fallen during this period, despite many Councils stating they have faced cuts in their grants and budgets.

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Carbon dioxide, jobs and the UK

Some green policies   really do destroy jobs, plunge people into fuel poverty and make our lives difficult. A recent report says that the UK should make its carbon dioxide targets even more taxing, to allow for all the CO2 emitted in places like China when making items to export to us.

So let’s get this straight. The UK has lost a lot of industrial capacity, in no small measure because Green energy policies have driven up our price of energy and helped make us uncompetitive with lower energy cost countries. This at least allowed us to hit CO2 targets a bit more easily, as we no longer use all that energy to make things. Under international rules each country accounts for the CO2 it generates. If a country decides to gain industrial market share, it has to do more to cut CO2 emissions elsewhere in its society if it is going to be part of the international agreements on these matters. If a country decides on deindustrialisation as one way to hit CO2 targets, that works under current accounting rules.

Some of us have gone hoarse warning that pushing up UK and EU energy prices will simply shift CO2 generating activities from us to parts of the world who do not share this concern. Now that has come to pass, it is amazing that we are being told it is our fault and we need to penalise ourselves further. If we do so, then we will lose even more industry, and doubtless be told that we need to tighten further to allow for more imports.

When interviewed on the radio, a proponent of this  approach said he wanted people to change their behaviours. He gave two examples. People should not expect to own their own car, but should use public transport or hire and share cars when needed. He also thought that  we should run household appliances like fridges for many more years than we currently do, with more repairs. He seemed to think this would save a lot of energy, reducing the amount expended on making new machines. It would also mean running older less fuel efficient equipment for longer, whilst  destroying the jobs of appliance and car makers. More reliance on public transport can raise the amount of CO2 and other emissions , depending on bus and train utilisation  rates, age of the trains and buses, and on the way they are driven.

We also hear the good news that there are no US tornadoes in March, a most unusual outcome. The climate change forecasters who have told us to expect more extreme weather, have now amended this forecast to less frequent extreme weather but more extreme extreme weather. Maybe that covers the good news this March. It just goes to show how difficult forecasting is.

Personally I want the UK to have a stronger industrial base, not a smaller one, and want people to afford enough energy to have decent lives. The idea that we need more wind energy, which in turn means we will need more back up energy for when the wind is not  blowing does  not sound to me to be very green  let alone cost efficient.

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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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