Railway improvement?

What should be on the agenda for the new Chairman of Network Rail?
I would like him to start with an analysis of who the users of the railway are, and where the growth in passenger and freight demand might come?

The opportunity seems to lie mainly in two big areas. The first is travel into and out of the larger cities, especially but not only at peak times. The second is more rail freight, taking heavy loads off trucks for longer distance haul. The first is genuine demand, even at current high ticket prices in the case of peak travel . The second is desirable new business which will be price and convenience sensitive.

I would want him to see the problem from the traveller’s point of view. The traveller wishes to go from A to B, where neither A nor B is a railway station. The traveller is interested in speed and convenience as well as price, and will look at total journey time rather than time of the train. This means the successful railway manager does have to ensure good car parks, set down points, bus and mass transit links to mainline stations. The problem with the commuter railway is the problem of peak usage. The railway has to allow for much greater demand at busy times, and have surplus capacity for the rest of the time. More flexibility in running shorter or longer trains would help adjust. Taking too many trains out of the off peak timetable makes the total service less desirable.

Trains need to be lighter, so they can brake more quickly. It would then be possible to increase throughput on lines, from around 30 an hour to 40 an hour in the peak, greatly improving services and adding 33% extra capacity when needed. The long lengths of empty track visible in the morning peak is testimony to an old technology and an unwillingness to innovate to help customers. None of this requires a change of traction from diesel to electric. Customers do not on the whole want electric as opposed to diesel trains, though they would like new trains with more capacity for busy periods.

The problem of freight is one of access and single wagon marshalling. Few businesses have a trainload of traffic for the railway each day. British Rail allowed freight to run down, losing much of the old single wagon business it enjoyed on pre war industrial parks with rail access. The railways came to rely on coal, steel, cars, cement – a few large businesses with large quantities to haul. These in turn have declined or found other cheaper ways of sending their goods.

The railway should ask how can they put freight branch lines back into larger industrial parks and urban industrial areas, so they can pick product up for large manufacturers who lack a trainload? How can they provide marshalling yard access for businesses which are prepared to drive a container to the railway to travel longer distances by train? How can they start to match or beat the price of road haulage? They should be able to cut costs of manpower, as a long train needs but one driver, and cut the costs of fuel. There has to be an allowance for the extra costs of getting to and from the railhead. Maybe the railway has to offer tractor units and delivery drivers to take freight from main freight depots to end destinations.

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The euro versus democracy- a Greek tragedy

The Greek government’s wish to put the latest Euro area/IMF offer to voters for decision is a game changer. It has left a wounded and surprised Euro area fulminating against the way Greece behaves.

The European Central Bank with the support of the Euro area has cut off all supply of Euro support to Greek commercial banks. As a result we now have our third Euro, the Greek Euro. Like the Cypriot Euro in their crisis, the Greek Euro is not freely convertible into the regular Euro as you cannot draw it out of a Greek bank when you want to. What kind of a currency is this European single currency, when the Central Bank does not stand properly behind all the banks in the system, and when in part of the zone they have to close the banks on a normal trading day?

I am on neither side in this damaging row. I think Greece should leave the Euro, devalue, write off debt preferably by agreement and have a fresh start.No-one with a powerful part in the crisis wants that answer.

My head is with the Euro area when they say Greece should honour her agreements, repay her debts, and seek to live within her means. The problem is their approach causes misery and mass unemployment,so my head also says they are wrong in the wider scheme of things.

My heart is with the Greeks, when they say current economic policy is not working, they cannot on present plans repay their debts, and their democracy opposes the bad medicine the Euro area is offering them. My heart loses sympathy if their responses plunge themselves and the wider economic world into danger by their inability to get on with their creditors.

Many UK people are with the Greeks in opposing a mindless austerity policy at a time when Greeks have already lost a quarter of their national income,
have a quarter of their workforce unemployed, and lack demand and tax revenue to pay the bills. We are also with them when they say their democratic will and their elections should be able to change things for the better, and need to be recognised by the rest of the EU as important.

What a predictable tragedy the Euro has become. If you want a single currency to work you need a single government to back it, a single demos to decide who rules, and an economic policy which generates prosperity for the many. The Euro area still lacks all these features, so it is no wonder it limps from crisis to crisis.

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What price a new railway?

Some of the most difficult emails or letters I receive tell me we need to nationalise the railways. I write back pointing out that is exactly what Labour did when they took over Railtrack and put it into 100% taxpayer ownership, and strengthened the controls of the state over the contracts of the individual train operating companies that run trains on the nationalised railway. Today’s problems in the railways are the direct result of having a nationalised monopoly railway with access to huge sums of taxpayer cash.

In the year to March 2014 the Network Rail accounts show that the five executive directors were paid £990,000 (2 people successively in the same post),£922,000, £880,000, £890,000 and £567,000. It is difficult to understand why the state sector pays such huge salaries to people who presumably have some sense of public service and duty, and when the railway pre subsidy is heavily loss making, offering an indifferent service to its users. The only explanation for such large salaries must be the talent and ability of the people concerned and the results they are achieving. In which case, why aren’t the financial and operational results better?

I raised the issue of Network Rail’s poor financial performance and high cost base in the Commons during the productivity debate, before the latest problems were known. I also met with representatives of the industry at the Commons recently and asked them about the high costs of work being done. Why I asked, did the welcome improvements at Reading station cost somewhere between £850million and £900 million when the original estimate was reported at £400 million? Although this was the prime project Network Rail reported last year no-one at the session could tell me which was the right figure for the cost or why the original cost/plan had been so much lower. The representatives of the industry did not come across as regarding cost or taxpayer money as that important. I still await a written reply to my queries at the meeting.

I also pointed out to them that when I travel on the railway I see plenty of evidence of poor management. I see large areas of unused land close to stations and town centres, with no sign of anyone trying to use or develop it in ways which could improve the facilities and bring in private sector investment or cash. I see supplies of building materials, sleepers and engineered products lying around decaying. I see old coaches, engines and wagons left in sidings to rust. I see sidings and branch lines with weeds growing high between the tracks. It does not look like a well run business, with proper control of its stocks and assets. They need to clean the place up, see what they have lying around, use the stocks and assets or sell them off for scrap or recycling.

The present failure to proceed on time and budget with the electrification schemes the railway top management have always said they need to run a better service is shocking. I have myself been sceptical about the need to change traction to get a better railway, but it is this railway management’s mantra and if it brings better trains and more services then all well and good. Electric traction should be dearer than diesel, as it is a secondary fuel. There are substantial fossil fuel energy losses when generating the power in the first place and losses in taking the power to the tracks as well as the energy inefficiencies in the electric engines themselves.

I hope the Minister will use his unwelcome pause of modernisation schemes to review whether there are quicker and cheaper ways to give people a better service with more trains when needed. The new Chairman needs to review his top team and see if with better leadership they can do the job, or whether some of them need replacing as well. What is clear is so far the state is overpaying the management of the railway for what they do, and proving again that nationalisation does not work well.

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What the Queen really said in Germany

Some in the media tried to trivialise, distort and politicise the Queen’s speech in Germany this week. They wrongly thought she was saying the UK has to stay in the EU. This was a curious interpretation of one sentence in a speech which did not mention the European Union by name, and which certainly did not break the rule of the monarch staying out of current political controversies at home.

By doing this the media missed a much more significant feature of the Queen’s speech. Far from being a eulogy to the EU it was a short serious analysis of the state of Anglo-German relations based on an 800 year perspective. I thought it was remarkable for how honest, tough and balanced it was.

The speech began by reminding her audience that we are currently commemorating events in the Great War in 1915, and marking the 70 th anniversary of the end of the Second World War. To reinforce the point she was making she told them of Magna Carta and England’s early march to democracy, going on to say

“Tomorrow I shall visit St Paul’s Church where the first freely elected legislature in Germany met in 1848. The Frankfurt Parliament turned out to be a false dawn; it took another century and the loss of the most terrible wars in history to set Germany on the path to democracy”

Here was the Queen of Great Britain and Northern Ireland telling our German neighbours that we are glad we are now friends, that democracy is the ally of peace, and that Germany only got onto the path of democracy after 1945. The UK as the Queen reminded her audience has been involved in European affairs, and had to fight two dreadful wars which none of us wish to see repeated.

To underline the sombre message more she told of royal visits to the sites of Jewish concentration camps, and of her own immediate visit to Bergen Belsen.

I would say this was a profound and brave speech to make in the circumstances, backed by a visit whose very steps wished both to highlight the past and point to the peace we have now created on the back of a new relationship with a more democratic Germany. She spoke of reconciliation.

It would be good sometimes if the media tried to report what is interesting in what was said, instead of trying to impose their own bizarre agenda onto words that mean something else. If the Queen had been helping the stay in campaign she would have visited a series of sites built with EU money, praised the work of the EU in her text, and directly linked the EU to the peace in Europe which has been created by other forces and means. Now that would have been a story,because that would have been unwarranted interference in politics by a Queen who is usually an impeccable judge of where she should stay silent.

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The European disunion

Yesterday we saw yet again just how dysfunctional the EU has become. Far from creating union, peace and harmony, it is creating rows and conflicts between European countries. Germany and Greece are showing great dislike of each other in public and have no ability so far to compromise and to understand each other’s point of view. Greece cannot accept Germany’s austere economics, and Germany has no wish to send financial assistance to a part of her currency zone with mass unemployment, deep recession and much reduced pay. France is at loggerheads with Italy over migrants admitted by Italy. France and the UK disagree over Calais and the Anglo-French border. The EU supporting part of Ukraine is fighting a hot war with other parts of that country as the EU stands and watches. Euro outs are getting a bad deal from Euro ins, southern states feel hard done by the richer northern states, the richer north has no wish to subsidise the south. The UK and Denmark opted out of the common approach to migrants.

Meanwhile the EU damages national democracies by preventing them taking action or legislating in ways they wish without providing a good working democracy of its own. There is no official opposition to the EU government. No-one has the duty at Council meetings or in the Parliament to expose the problems with EU policy, lay bare the waste or to show which policies are doing harm. As we saw last night, trying to govern by needing the agreement of 28 countries is absurd. They spend hours just having one round setting out their different attitudes, and then more hours as the hapless Chairman and Commission try to broker compromises between the more extreme views around the table, in the hope that tiredness will eventually cause all to give in and agree with something, however modest or inappropriate or vexatious.

The people who say we should stay in the EU whatever the EU offers us confine themselves to just two main arguments.

The first is the lie that 3 million jobs would be at risk if we left.
Our trade is not at risk, as Germany has made clear.
The day after we leave Germany will still want to sell us her cars and will make sure she can do so with sensible free trade rules.
Under WTO rules which we have automatically trade can flourish, as the rest of the world shows when trading with the EU.

The second is the EU guarantees us peace in Europe. If only. The EU has intervened clumsily in civil wars in former Yugoslavia and now in Ukraine, in ways which often make things worse.
Meanwhile it is obvious that the peace has been kept amongst the main powers of Europe and Russia since 1945 by NATO. The UK will remain a leading member of NATO, and NATO will continue to guarantee our security.

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Mr Redwood’s contribution to the debate on the European Union Referendum Bill, 16 June 2015

John Redwood (Wokingham (Con): I hope that, when the Government bring the Bill back on Report, they will give further consideration to the question of campaign spending limits. We are all freshly back from an energetic general election campaign, and one of the finest things about the United Kingdom’s traditions that ensure fair and free elections is the fact that we have pretty strict expenditure limits in each constituency. Those of us who were the incumbents fighting to retain our seats were rightly subject to rules stating that we could not use our incumbency in any way, as that would have provided us with an obvious advantage. We could not use our ability to raise more money, for example, because there were strict limits in place.

Those strict limits applied for a five-month period. We had the long campaign period, which was subject to expenditure control, followed by the short campaign period. It is the short campaign period for the referendum that we are talking about today. I believe that it was right to impose the campaign limits early, because political parties are increasingly campaigning well in advance of the general election proper, and it looks as though the referendum campaign will kick in well before the referendum proper. Indeed, there are clearly already stirrings, even before this Bill has passed through the House of Commons.

It is good that we all have to face the challenge from a number of candidates, any one of whom has a reasonable chance of raising the maximum that we are allowed to spend in a given constituency. It is quite a large sum for an individual to raise, but it is quite a modest sum for someone who has a reasonable amount of support or who asks for small or medium-sized donations from a range of people. It is not that difficult for a relatively popular party or candidate to raise the money needed in order to spend right up to the constituency limit, to give them the maximum chance in the challenge.

I understand that the sums will be rather bigger in a national referendum campaign, and that if one side is a lot more popular than the other, that would give it an advantage not only in the vote but in the amount of fundraising it could do. But I do think that, under the current Bill, the very large sums that would be available, because of the way the parties and some of the supporting organisations are thinking, are thoroughly disproportionate. That would give the impression of unfairness, and the British people have a great sense of fairness. Many people on the yes side have a sense of fairness and would prefer it if the referendum campaign were conducted with more equal sums of money, so that the weight and quality of the argument matter more than access to funds and special ways of messaging.

My second point is to support those who are talking about the duration of the campaign. The campaign proper could well be limited to four weeks. An awful lot can be said in four weeks. Those with little interest in politics will get rather bored if the referendum campaign dominates the news and media for more than four weeks. Given the natural interest of quite a lot of people in this subject, and the enthusiasm of many of those who wish to campaign on either side, there will, in reality, be a longer period. There should be a long and a short period, as there is in a general election, so that there is proper control of the messages and the money spent in the longer time period, although it would be up to either side, or both, to take the view that they really do want to concentrate their spend and their message in the last four weeks because they might be afraid of overdoing it. I suspect though that they will want a longer period, so we will need some kind of regulation on the longer time period—the full duration of the campaign proper.

My third point is to support those who have raised serious issues about the expenditure of public money, particularly about the expenditure of European Union money. It would be wrong for the European Union to spend any money intervening in a British referendum over whether the United Kingdom stays in the European Union. It is, after all, United Kingdom taxpayers’ money. On current polling, we know that there is a split of opinion, with very substantial bodies of opinion on both sides. People would be very reluctant to see their tax revenue taken by the European Union and then spent on putting out messages and propaganda on just one side of a very contentious referendum.

Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): I must remind the right hon. Gentleman of what happened in the Scottish referendum. The only difference was the way that it was funded. In the United Kingdom, funds are collected centrally and go to London. If the European Union had the same model, they would be collected centrally and go to Brussels and then given out again. The point is that it is taxpayers’ money. In Scotland, we saw our taxpayers’ money come back to the UK Government and used against one side of the referendum campaign.

John Redwood: I quite understand, but I am suggesting something different. I am suggesting that to have a completely fair and independent referendum, there should be much stricter controls over the expenditure of Government money.

Mr MacNeil: I am very grateful to the right hon. Gentleman for his revelatory tone and words. He said that he wants a stricter and fairer system, so his commentary on the Scottish referendum is instructive and very welcome.

John Redwood: The result in Scotland was pretty conclusive, so the expenditure of Government money was not the crucial thing that made the difference to the result. The result speaks for itself. But we can always learn from past experiences. For my choice, I do not favour the expenditure of public money on interfering in elections and referendums. I am known to be careful with public money anyway, and I would not want the money to be spent on this area. It is for individuals to decide what they wish to do by way of political intervention, and they can make their own decisions. If we let them have more of their own money to spend, they may wish to spend it on interventions in elections. That is how I would rather it was done. In this case, it would be particularly counterproductive for the European Union to spend some of our money, which we send to them, on intervening on one side. It would cause enormous resentments. Indeed, the no campaign might even welcome it as it would be a cause in itself which it would make use of if this became a clear use or abuse of public money.

Kate Hoey (Vauxhall) (Lab): I raised the issue of the EU on Second Reading. I had a helpful letter back from the Minister for Europe this week. Will the right hon. Gentleman comment on his final paragraph? He says:

“I would trust the proper diplomatic relationships with Governments and institutions, and encourage them to stick by their duty to respect the right of the British people to take their own decision responsibly.”

I do not feel that I can trust the EU on this very important issue. Does the right hon. Gentleman feel that?

John Redwood: I am afraid that I do share some of the hon. Lady’s worries. I would like to see that clearly stated in writing and as an act of policy from the EU itself. That would probably be much appreciated in many sections of the United Kingdom, so that we can be sure that there would not be clumsy, unwarranted or unwelcome interference. It would be a double irony if the EU were using our money to do it. That is what makes it particularly difficult. UK taxpayers of both views would be paying the money to the EU, but only one side of the argument would be funded by that money.

Mr Christopher Chope (Christchurch) (Con): Surely the Government could do something on this front. They could ask the European Commission and the European Union not to intervene and not to fund the referendum campaign. They could then get a written undertaking from the Commission not to use European Union funds. That is outside the scope of the Bill, but the Minister could give such an undertaking.

John Redwood: Indeed. I am speaking to amendment 10 tabled by my hon. Friend the Member for Stone (Sir William Cash), who seeks to clarify this point and prevent the use or abuse of EU money. I hope that the Minister will respond and that he will have his own proposals on Report. The Electoral Commission has given exceedingly good advice across the board on this referendum. It seemed to suggest that it would not be right for the EU to give money for the campaign, and it would be nice to have a reassurance that the Government share that view and accept the advice of that august body, which is there to guide us. There is an additional issue with EU money, to which some colleagues have referred. What do we do about the EU money that is routed to bodies or organisations within the UK that choose to make a donation to a referendum campaign? That is another difficulty. As I understand it, such a donation would be perfectly legal because the organisation giving the money would be able to say that it had other sources of money and it was not a direct gift of EU money to the referendum campaign. Such a body may be swayed by the fact that it had had generous access to EU moneys in the past. While one would hope that none of them were donating for that reason, people would suspect that a body in receipt of substantial EU moneys in the normal course of business that saw fit to give money to the campaign to stay in would hope that the EU would be better disposed to it when it put in its next application for money.

Sir William Cash: I do not know whether my right hon. Friend was here when we were debating part of this, but the Electoral Commission’s position is that a central principle of the regulatory regime that it supervises is that foreign sources of funding should not have undue influence on our democratic process. It has come to the conclusion that the European Commission does not fall within the list of bodies that can register as a campaigner. Does my right hon. Friend agree that we have to get to the bottom of that? It is highly arguable that the European constitutional arrangements are effectively embedded in our own constitutional arrangements by virtue of sections 2 and 3 of the European Communities Act 1972. We need to get this right.

John Redwood: I was present to hear my hon. Friend speak to his amendment, and I am aware of the legal minefield that the provision could represent. That is why I worded my remarks cautiously—I said that I thought it was the view of the Electoral Commission that it would not be appropriate for the EU to spend money on the campaign. As he reminds us, it has made a clear statement about being a principal donor to the campaign, but there are other ways in which it could help, and it might argue that it was a domestic institution for these purposes. It might say that the EU’s writ runs within the UK. There is an office of the EU in London; it might try and route it through the London office. We need to say that that would be unwise. The Minister may think that it is illegal or that it should be impeded in some way. We need clear guidance from the Minister.

I return to the issue of indirect funding of the campaign by grant-in-aid to organisations that are helped or partially funded by the EU. Of course, it is a matter for the referendum campaign to argue over the rights and wrongs of EU funding. I am sure the no campaign will want to say that the money we send to Brussels and which it gives back to our organisations could be given to them directly by the United Kingdom Government if Brussels were not in the way. It could be pointed out that the £11 billion we send to Brussels in tax revenue is spent outside the UK, so, were we to leave, that money would be available for either tax cuts or extra spending in the United Kingdom.

That would be a matter of debate in the referendum, but an issue for the Bill relates to the legality, morality and political wisdom and judgment regarding the point at which an organisation becomes so dependent on EU funding that it has a very strong interest in it. Restrictions or limitations—or at least a declaration of interest—might need to be made if such a body decides to become involved in the referendum campaign. It would be wise to let people know of such a clear financial interest if the body played an important part in the yes campaign.

Sir William Cash: Does my right hon. Friend think it would be possible to have a register of interests? Then, when companies go on the BBC and say, “We don’t want the United Kingdom to leave the EU,” we would know where their money comes from, what their actual policy is and the extent to which they are dominated by the EU system.

John Redwood: A register of interests would be one way of handling it. It would be quite complicated for large companies, but rather easier for grant-receiving organisations. The issue for companies is rather different. I am all in favour of business people taking an active part in our politics, but they may need to intervene as individuals, because if they are an executive in a very large company that has a broad shareholder base, they may not be speaking for their shareholders on a very political issue. People would ask them, “Is this your private view or are you speaking for the company and has it been tested in a company general meeting?” That is probably a debate for another day. I am all in favour of major business involvement, but unless someone owns the company they have to be careful in associating the company with their own particular views.

The conclusion I wish to put to the Government is that this Bill is extremely welcome, but it is work in progress. These are very complicated areas, because the EU is a unique and powerful institution. In order to have a fair assessment by the British people of its worth or demerits, we need to be very careful and to not in any way trammel our usual belief in independence and fairness when we test the mood of the people. I do not think the Bill quite yet meets that requirement, but I hope that, on Report, Ministers will have better and more detailed answers about how we handle the scale of campaign donations and the period prior to the referendum campaign proper with respect to controls over messages and financing, and that they will be able to address the very vexed subject of how much power, influence, money and messaging the EU itself can inject into what should be a United Kingdom debate.

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The emerging United States of Euroland

It has long been permitted to talk of political union on the continent, just as surely as it has been regularly denied in the UK. On 22nd June the “five Presidents” of the Euro area (EU Commission President, Eurogroup President, the President of the Euro Summit, the President of the ECB and the President of the European Parliament) set out their vision of how to deepen economic and monetary union.Their wishes include a common Euro area Treasury with binding commitments to converge the economies of the zone, controlling and disciplining fiscal policies for each nation and completing a financial union.

They recognise that there is too much divergence of economic performance across the zone and they are not happy with 18 million people unemployed in the area. They are concerned about the lack of social cohesion and the shortfall in democratic accountability. It’s good they have noticed these obvious weaknesses of the Eurozone. Their solution is more central control, moving gradually to a common Euro area budget and Treasury. They do not go into the detail of how this would imply substantial transfers of money from the richer to the poorer parts of the zone.

The Euro has always been an orphan currency in search of a country to be its parent.The 5 Presidents wish to get close to a United States of Euroland to act as the sponsor of the currency, and to direct the economic policies of the differing regions of the zone. They aim for a White Paper in 2017. They wish to direct national economic policies more strongly through the European semester process. They want each country to have a competitiveness authority to seek to bring economies more into line with each other. They wish to buttress their single banking regulatory system with a common deposit insurance fund and a single resolution mechanism for banks.

They seek an Advisory Fiscal Board to creep towards controlling budgets more directly, and a common macro economic stabilisation function with access to finance.They want the Euro area to have a single representative on the IMF and to speak with one voice in world economic fora. They want to supplement the economic changes with stronger social policies.They are vague over how democratic accountability can be strengthened, mentioning both the European Parliament and national Parliaments.

All this points to the creation of a United States of Euroland. Single currencies need single budgets, single social policies,and massive transfers of money within the zones to enable them to work. The EU first created its currency and is now belatedly trying to create the country to back it. The UK should understand the force of this movement, and should be clear it cannot join any part of it.

The UK now needs to stress to the EU that they cannot use the EU budget for these purposes. There will have to be a separate Euro area budget to take in extra tax revenue from the Euro area and to distribute it for their common welfare and regional policies. I raised this in the Commons yesterday with the Treasury Minister taking through the EU Finance Bill.

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Why we need to raise quality and productivity in the public sector

After making the Commons speech I found the figures for public sector productivity. Between 1997 and 2010 there was no growth at all in public sector productivity. If the public sector had been able to match the manufacturing sector longer term trend of say 2.5% a year productivity increases we would now have 37% more public service for our spending, or we could spend 27% less money to receive the same level of service. That is big money.

In the private sector what the public sector calls “cuts” are sensible reductions in cost to make things cheaper, or sensible improvements in quality by cutting out waste and error. One of the big differences I have seen between those parts of the public sector I have led as a Minister and those companies I have led as a Chairman or director is the approach to quality and cost. In the private sector lower cost is often seen as an ally of higher quality. The best ways to get costs down are to do things right first time, to waste less input, spend less time doing something, and avoid customer complaints by offering good product and service. In the public sector taking out cost is seen as a threat to staff, and is often used as a reason for poor performance or for the need to reduce service.

In a cost cutting shop the manager does not usually tell the boss that the next cut has to be a cut to the number of customers who can be handled, or a reduction in the number of products they sell to customers. The manager looks for ways of automating more, helping staff perform better, finding ways to sell more goods to bring in more revenue. In parts of the public sector, when asked to cut costs, managers parade a set of cuts to services in the hope that these will prove unacceptable to the boss.

Given the new enthusiasm for productivity gains on both sides of the Commons, now would be a good time to launch a plan to raise quality and productivity throughout the public sector.

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Mr Redwood’s contribution to the debate on productivity, 17 June 2015

I reproduce below my argument on productivity in the Commons, as I wish to go on to write further posts on this topic building on the central argument I set out. I am sorry that the site did not publish it early this morning on this part – it appeared under debates. I have only just realised and remedied.

John Redwood (Wokingham) (Con):The productivity puzzle can be understood and resolved. It is a combination of bad news and not such bad news. There was a sharp fall in productivity at the time of the crisis, because we lost a lot of very expensive output, a lot of people lost their jobs and the net result was a big fall. Since the crisis has hit, there has been a continued loss of top-end jobs in areas such as oil, financial services and banking, which score very well in terms of the way people compile productivity figures. An industry such as oil, which produces a lot of extremely valuable output and has a limited number of very well-paid people, gives an enormous boost to productivity, as we have learned today from Norway. We have just lived through a period when, through no fault of any of the three Governments who have been presiding over it, there has been a sharp decline in the output of oil—because it is now a very mature province—and a big fall in the oil price. That recent fall is down to market circumstance and to things happening well away from this country.

There was also a big loss of top-end jobs in banking and financial services. There will be mixed views in the House of Commons on the social value of those jobs, but they scored very well in the run-up to the crash. Some of those jobs have now gone all together and some have gone to lower tax jurisdictions elsewhere. The bad news side of it accounts for the drop in productivity during the crisis and the slow growth since the crisis.

The better reason why our productivity is below that of some of our continental comparators is that we have gone for a model—I think and hope with the agreement of all parties—of having more people in employment and of creating conditions in which this economy can produce many more lower paid jobs in the hope that that will lead on to higher paid jobs and more output and activity, which is a better model than those people being out of work.

Let us look at the way the productivity figures are calculated. If a country sacks 10% of the least productive people in the economy, which is the kind of thing that the euro was doing to some of our competitor countries in euroland, it can be flattering for its productivity figures, because the least productive jobs go, and the productivity of the total country rises, but the country is a lot worse off, because it then has 10% of its workforce out of work who would otherwise have been in less productive jobs. It is the same in a business. The easiest way for a business with below-average productivity to get to average or above-average productivity is to close its worst factory, but that is not always the answer that people in this House would like.

George Kerevan (East Lothian) (SNP): The right hon. Gentleman is making the best he can of a bad job. For instance, if we look at the share of research and development in gross domestic product in the UK, we see that it was down not just over the 1990s, when we had the last Conservative Government, but for the period from 2000 to 2007. R and D is a fundamental component of productivity and it is down. He cannot gainsay that.

John Redwood: One has to first understand a problem before one can address the problem. I think we are all in agreement on this issue. Would we like higher productivity? Yes, we would. Would we like more better paid jobs? Yes, we would, and that goes for Conservatives as much as any other party in this House—probably more than any other party in this House. We not only will the end—more high-paid jobs—but are prepared to take some of the decisions that Opposition parties always deny or query in order to allow those better paid jobs to be created.

Let me go on from the analysis. I hope that the hon. Gentleman will reflect on what I have said and understand that I have provided a good explanation of the path that productivity has taken since 2007, which is a matter of common concern but has some understandable things that we cannot address. For example, we cannot suddenly wish a lot more oil into Scotland, and that remains a fact. We will not be able suddenly to create all those high-end banking jobs. Some Opposition parties probably would not like them anyway. We are where we are. What we can do about productivity is to work away on those parts of the economy where the performance has been most disappointing.

Amanda Milling (Cannock Chase) (Con): Does my right hon. Friend agree that cutting some of the red tape that affects our small and medium-sized businesses would help with the productivity puzzle?

John Redwood: I agree, but only if we have ineffective or over-the-top regulation. Removing it can give more people access to the market and provide a greater competitive challenge, but we need some regulation, because we need rules and certain guarantees in the market.

Let us take a sector that I asked the shadow Chancellor about. It was a problem that, in the Labour years, we had a long period of practically no growth in public sector productivity. I am the first to admit that the concept of productivity is more difficult in parts of the public sector. People actually like more teachers relative to the number of pupils, because they hope that that will create better teaching and a better system in classes, but it means that productivity falls. That means that we need other parts of the public sector, where the productivity issue is more straightforward or more like the private sector, to be even better, so that the overall performance of the public sector does not lag behind and cause difficulties. As we have quite a big public sector in this economy, the performance of the public sector is very important. It also happens to be the area where Ministers have most control and most direct influence, so it is the area that this House should spend more time on, because we are collectively responsible for the performance of the public sector. I think most parties now agree that we want to get more for less in the public sector, so that we can control public spending. There are disagreements about how much control we should exert on public spending, but I hope there is agreement that if it is possible to do more for less while improving—or not damaging—quality, that is a good thing to do.

Bill Esterson (Sefton Central) (Lab) rose—

John Redwood: I am afraid I need to move on because many people wish to speak. Time is limited.
I draw the attention of my right hon. Friend the Chief Secretary to the Treasury to the issue that I raised with him in my intervention. One very important industry that is almost completely nationalised—the tracks, signals and stations are completely nationalised and the train operating companies are very strongly regulated and controlled by franchises, so they are almost nationalised—is the railway industry. It is a growing industry, and this Government are committing a lot of money to it. It is an industry which, I believe, all the main parties in the House wish to commit money to and wish to grow and invest in.

However, an independent study in 2011, the McNulty report, showed that our railway does less for more cost than comparable railways on the continent. It should be a matter of great concern, and I hope it will be a matter for review by those dealing with the railways and with public spending, because as we channel those huge sums of money into our railway to try to get expansion and improvement, we need to pull off the trick that the best private sector companies manage—of driving quality up and costs down at the same time. A myth in some public sector managers’ minds is that a cut in the amount spent is bound to lead to worse quality or impaired service, whereas every day in a good private sector company they go to work saying, “How can I spend less and serve the customer better? How can I apply new technology so that I get more for less? How can I have a better skilled and better motivated workforce?”—I hope it is not done by unpleasant management, because that usually leads to the wrong results—and “How can I motivate the workforce more so that they are empowered to achieve more and do less?”

That is the spirit that we need in the public sector, and if we began with the railways, it would make a very important contribution to improving our overall productivity rate.

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Referendum – framing the choice

Those who want to stay in the current EU will seek to pose as the champions of the status quo. They will doubtless propose all sorts of lies over what might happen if we left.

The true choice is rather different. If you vote to stay in under the current treaties you will be taken for a ride to political union. Being in is not a stable status quo, but a wild ride to more Brussels control, more EU interference, less UK democratic power. There will be more and more areas where UK voters will not be able to elect politicians to Westminster to settle matters for them as they wish.

Leaving the current treaties is not turning our back on Europe or saying good bye to French wine, German cars, and trips to the Spanish costas. Our trade is not at risk, our travel will not be impeded, our friendships will not be altered. Many of us will find it easier to be friendly with our neighbours when we no longer have to row with them over how they want to boss us about within the EU legal framework. Few can think further EU integration, visible in the Eurozone, has been good for friendly relations between Athens and Berlin.

Those of us who wish to leave the Consolidated Treaty need to explain just what a radical, activist document it is. It is not a steady state but a constant journey. It is progress towards ever closer union, or the road to a single state. That is why the UK finds it all so difficult and why Mr Cameron is right to want to take ever closer union out. If he succeeds, he also needs to take us out of the treaty architecture than locks us into the non Euro parts of ever closer union.

The government is beginning to frame the negotiating challenge as being can a country like the UK live outside the Euro without the Euro area coming to override and rule us. They are themselves clearly worried by the way new controls over banks, remuneration, trading, new taxes and other items are coming from the Eurozone and encroaching into the so called single market. They need to understand this is just the latest version of an old problem with the single market. It has long been used as a Trojan horse to establish EU controls over many areas of government that are not strictly needed to buy and sell cars or soapflakes. We need to change not just our future relationship with the ever more powerful Eurozone, but also with past treaties which have usurped our government in many fields.

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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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