Why more nationalisation is a bad idea

I was asked to explain why I do not favour nationalising the railways, the Post Office, the water industry and the energy utilities yesterday on the radio.It was a trip down Memory Lane to the arguments of the last century, when Labour made the case for continued or more nationalisation despite all the evidence of the damage their policies did.

Nationalisation was the best way to lose more employees their jobs, to charge customers more, and to sting the taxpayer to pay the losses. The coal industry lost most of its workers when nationalised. The workforce of 704,000 of the newly nationalised industry in the late 1940s had fallen to as few as 235,000 by the time of the election of the Margaret Thatcher government. Despite all the closures of mines and sackings, the losses mounted to be paid by taxpayers.

The railways under public ownership experienced continuous decline. In 1950 they employed 606,000 staff and had 19,471 miles of operating track. By 1976 then under a Labour government staff numbers had more than halved to 244,000 and route miles had fallen to 11,189. The market share of the railways halved, and the number of stations fell by two thirds. The nationalised steel industry too, under Labour and Conservative governments, spent most of its time discussing how to curb the losses by cutting back on capacity and jobs.

Labour say they wish to renationalise the railways. The truth is the main cost and the main assets of the railway are already nationalised. The tracks, signals and stations are owned by Network Rail, itself wholly owned by taxpayers and financed by the Treasury. Many of the delays which affect rail services are the result of signalling failures or other Network Rail caused events. It is Network Rail’s job to expand capacity by improving signalling so more trains per hour can run on the railway.

I was asked why we did not buy shares in water companies whilst keeping in place current private sector management so we participate in the profits. I replied that we have other more important priorities for public sending. In the past government ownership of industries has not brought dividends and profits overall, but losses and the need for more subsidised capital.

The main way to improve service quality and bring down prices of utilities is to increase competition. That is what we need to do in some cases, as there is clearly room for improvement. What we do not want to do is to go back to a world where customers, employees and taxpayers all get a bad deal, which was the typical experience of our nationalised industries.

Labour’s big nationalisation programme has not been costed and is unaffordable. From past experience it would lead to worse service and huge bills for taxpayers.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

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Real incomes and taxes

There has been a squeeze on real incomes in most of the advanced world this year. Inflation has risen to higher levels in The USA and Spain than in the Uk and almost the same as the UK in Germany. The two main causes have been the higher oil price affecting motor fuels and domestic energy, and rises in Chinese export prices as the Chinese reflect higher commodity prices and increasing Chinese wages. Wages in the west have struggled to keep pace with prices, so real incomes have been squeezed. The good news is it looks as if we have seen the worst of the commodity price rises. Many forecasters expect real wages to be rising again in these western economies including the Uk next year.

The big collapse in incomes during the credit crash of 2008-9 followed by a slow recovery has left many people feeling squeezed. The government in the UK needs to do more to accelerate real wage and spending power growth. Only the Conservative Manifesto promises to take more people out of Income Tax altogether, by lifting the tax threshold to £12500, benefitting all Income tax payers. It also promises to raise the 40% tax threshold to £50,000 as £40,000 is too low an income to have to face such a high rate. Lower taxes on Income will help boost family spending power. They will also stimulate the economy to generate more jobs and incomes.

The government has also promised to do more to promote apprenticeships, technical training and higher educational standards. The main way to a better paid workforce is to have a more productive better equipped workforce with the skills and training that command higher wages. I want to help build such a world. The alternative government on offer would tax success and hard work, drive people abroad by triggering a brain drain, and put taxes up to try to meet some of the huge public sector bills they wish to incur.They might start by only taxing the rich more, but once they had taxed them into doing less or leaving, they would have to tax everyone else more.

Prosperity, not austerity is what we need. The deficit has been brought to down to sensible levels. Some tax cuts and reasonable spending increases for health and education will help boost the growth rate and bring in more revenue.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG 40 1XU

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Spreading prosperity more widely in the UK

One of the central themes of the Conservative Manifesto is to promote growth and prosperity more widely around the UK. This is an aim I strongly support. This week the ONS brought out some figures to remind us just how much needs to be done to generate more income and wealth in large parts of our country. The ONS calculated tax revenue per head by region, and public expenditure per head by region.

The figures revealed that the UK’s single currency area is also an important transfer union, switching large sums collected in taxation from the richer areas to the lower income areas through higher levels of spending. London topped the lists for tax revenue per person, contributing £15,756 per head. The South East provided £12 449, and the East of England £10,833. At the other end of the revenue table was Wales at £7986 per person, the North East at £8200 and Northern Ireland at £8581.

On the expenditure side The South East was bottom at £10582 per head, with the East of England a close second at £10592. The highest spending per head was in Northern Ireland at £14018, and second Scotland at £13054. London at £12 686 was relatively high, but London still contributed the largest amount net to the rest of the country owing to its very high levels of tax contribution. Only three regions put in more revenue than they took out in spending, London, the South East and the East of England.

The Scottish figures in the past when they have been calculated have been the subject of some controversy, as you could either allocate most of the oil revenue to Scotland, or allocate it according to population on the grounds that it is a national resource for the UK. Last year, the year for these figures, it makes no difference how you do it as there was no North Sea revenue.

I draw several conclusions from this. The first is you do need large transfers of money in a currency union to make it work. The absence of these transfers in the Euro area lies behind the rolling Euro crisis we have seen in recent years as the zone struggles to find ways to send the surplus from the rich areas to the rest of the Union.

The second is the gap between London and the rest is high. We need to help bring the others up by adopting policies that promote more enterprise and new business in the lower income areas.

The third is transfers help balance things up, but they do not in themselves correct the longer term imbalances which stem from too little successful private sector business in the lower income areas. It is that issue which education, training, transport, planning and other policies need to address to encourage more businesses to expand their provision in the areas away from London.

Successful modern cities are particularly good at attracting or producing well educated and highly trained people, and linking them up with entrepreneurs. Cities like Oxford and Cambridge are showing the way outside London. This raises the average income which creates demand and jobs across the spectrum of economic activity.
Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1 XU

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This election and Brexit

I have spoken to various Remain voters so far during this election. Many say to me they accept the result of the vote and just want the government to get on and do the best deal they can. Some tell me they voted Remain because they did worry about the possible economic consequences, and they are now relieved to see the bad predictions of recession this winter and collapse of confidence did not come true.

A few have told me they still cannot accept the decision and still fear there will be bad economic results in due course. They seem to think when we leave there will be all sorts of new barriers and restrictions imposed which will get in the way of normal travel, trade and collaboration across the Channel. They have perhaps been Lib Dem voters in the past and are often particularly concerned about academic and student links, research and cultural exchanges.

Let me try to reassure. The UK government has made very clear it wants a UK open to talent and university collaboration. The UK is not planning closed borders, making it more difficult for people to come here to courses in UK universities. We will still welcome tourists,visitor performers, people with good qualifications, entrepreneurs wanting to invest. The government will be generous with visas for talented and qualified people wanting to come to the UK to be faculty members, just as we are today with academics coming from the USA and other non EU countries. It will also want to see a continuation of the many musical, artistic and cultural links and exchanges that take place with EU and non EU countries today.

Nor do I expect the rest of the EU to want to stop EU citizens travelling to the UK or undertaking university work here. Under international law the EU would not be able to block people and ideas to and from the UK, nor can I imagine they would want to. There are no restrictions the EU could place just on the UK – they would have to be common restrictions against the rest of the world. I do not think the EU wants to cut itself off.

The UK has several world class leading universities and many other good ones. Their interests will be upheld by the government. More importantly, as the UK and the EU both pride themselves on a belief in freedom and on a pluralistic society, universities,individual students and academics will remain free to travel, study, work and collaborate in each other’s countries as they see fit. I want to live in a free society. Such a society does not stop free institutions doing as they wish, and allows them under the law to pursue their aims and development. Some people think government is more important and more powerful than it is, and have a very dim view of how the EU will seek to behave.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

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Forecasting and the unknowns

Today I am publishing another piece with no reference to the UK or the election. I will resume normal posts tomorrow when national campaigning starts again.

Events, dear boy, events. Policy makers, governments and companies need to forecast the future as they shape their policies and decide what to do to serve their citizens or customers better. In recent years the main international forecasters like the IMF and World Bank, the ECB and the US authorities, have struggled to anticipate the banking crash of 2008-9 or the Euro crisis that followed. Many companies have expressed surprise at the turn of events from Tokyo to New York, and were not anticipating the election of Mr Trump.

As someone who tries to set out a view of what might happen next by way of important background to policy debate, it is important to think through how you can improve your chances of understanding the trends and the risks. You begin as most do by forecasting the “knowns”. You can people your forecast with factual dates for future elections, Central bank rate setting meetings, publication of important results, dates of Budgets and the like.

You can then move from this easy bit, to trying to forecast the unknown element within these events. I know the Fed will consider interest rates at its June meeting. I do not know what it will decide to do, though with many others I expect it to raise rates by another 0.25% based on what I have read from the various statements and analyses put out by the Fed and its members. Sometimes your chances of success are high because the organisation has given a steer or clear briefings in advance. Sometimes the data they will consider is available and again it may be obvious what they have to decide. I did not know Mr Trump’s budget, but a lot of what he is proposing was in his programme for government put out by candidate Trump, so it was not that difficult to guess. I did not know Mrs Merkel would decide to cancel all her nuclear power, but could see that might happen by watching the pressure she was under from the anti nuclear lobby.

There are then the unknown unknowns, as Mr Rumsfeld once famously said. No one could know that a Japanese nuclear power station would be badly damaged by a tidal wave, leading to a major change of energy policy. All you can do is adjust your view promptly if such a thing happens.

The reason some of the world institutions are so bad at forecasting economies is they have a vested interest in stability and come to believe their own reassurances. They missed the build up of excessive credit because they persuaded themselves that the world could suddenly handle levels of debt and gearing through derivatives that would have been dangerous before. Worse still, they then brought the whole structure down by lurching to too tough a stance, presumably because they did really believe all these positions were risk reducing! An outsider could see more clearly. Many of us saw the build of debt and gearing in the EU and US was excessive and said so. A few of us saw the change of stance by the authorities was disastrous. If there is too much debt around the last thing you want to do is so tighten money that people cant afford to service their loans.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG 40 1XU

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India and China will help the world economy this year

There will be no campaigning today in the General election. Parties wish to respect the memory of those killed so cruelly in Manchester. I provide a blog today about an unrelated subject.

Between them India and China account for almost two fifths of the world population. Both have in recent years been growing quickly. China enjoyed a major growth spurt based on industry, exports and heavy investment. More recently India has moved ahead of the slower Chinese growth rate based on a more balanced growth, coming from a lower average income level.

China is now the world’s second largest economy thanks to the size of her population and the dominance of her industry. She makes half the world’s steel and similarly large proportions of many manufactured goods. There are constant fears expressed in the West that China will experience a hard landing. Commentators who missed out on predicting the western banking crash think China might have one of her own. It’s an odd argument.

They usually compare total economy debt in China with state debt in the West. If you compare total debt with total debt as a percentage of GDP China is still below a number of western economies. It is true there are potential bad debts within the Chinese nationalised sector. As the Chinese authorities own both sides of the transaction they can sort it out without bringing down the banking system.

Meanwhile India is getting the taste for modernisations and reform from Mr Modi. Following his successful conversion of a lot of cash into bank account money, he is now turning to sales tax reform. He wishes to sweep aside numerous complex transaction taxes imposed on a state by state basis and replace them with one GST India wide. It will greatly simplify doing business across borders within the country.

It looks as if this year again both India and China will make important contributions to world growth.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG 40 1 XU

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Manchester bombing

I send my condolences to the families of those who died in the explosion, and my wishes for a speedy recovery to the injured. This is reported as a senseless and cruel act of terrorism, attacking families just having a good time on a special evening of entertainment. Such evil violence wrecks the lives of those caught by it.
I have delayed the publication of the piece I had written for this morning and will not be campaigning in the election today.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG 40 1 XU

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Social care

I am glad the Prime Minister has confirmed that the social care policy will be set out in more detail in a Green Paper with a proper consultation, as I assumed when I first wrote about it. That was why I decided to consult through this site on the changes. She has also made clear that there will be a cap on how much social care cost someone has to pay. This means there are now two ways the proposals are more generous than current policy. There could be a £100,000 higher cut off for anyone in a care home having to spend their own money on the fees, four times the current permitted capital sum. There could be a ceiling on how much care cost someone living in their own home has to pay, where there is none for someone with substantial savings today. The Prime Minister also confirmed that under the proposals no-one living in their own home would have to sell their home to pay the social care costs.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

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Why I am still optimistic about our future relationship with the EU

Those who fear no deal or a bad deal are too pessimistic.

They exaggerate the importance of government, treaties and rules. They underestimate the energy, good will and positive approach of most people on both sides of the Channel.

The first thing to grasp is the UK will not be on her own. Under WTO rules which govern the EU as well as us, the EU cannot do anything adverse to us that it does not also do to the USA, China, India and the other major countries of the world. Similarly, under international law, the EU cannot pick on UK people, evict our citizens from their homes on the continent, or impose special taxes and requirements on UK people and companies that it does not also apply to Americans, Chinese and all other non EU citizens and companies.

The second thing to grasp is many people and governments on the continent think it a good idea to get on with their neighbouring states, particularly where they sell lot of goods and services. Just in case they don’t, the Treaty they all drafted and signed makes them pursue good relations and trade with the neighbours. I alway find it odd that the people who most love the EU have such a low view of the way it will behave, expecting it to be petty, nasty and to seek to operate outside international law and outside the norms of civilised behaviour. I think many of them are better than that, and those who might fall short have self interest to push them to keep open their access to the UK.

The third thing to grasp is all those companies on the continent wanting to carry on selling us goods and services, all those individuals wanting to come to the UK to take skilled job or to study, will still be a pressure on the governments of the EU. Just as there are many people in the UK who value their ability to travel on the continent, to study there, or to trade there, so there are many people on the continent wanting the same access to the UK.

Of course the EU institution will try it on and ask for lots of money from us, as they will miss our large contributions. They also know there is no legal basis or political reason why we should pay them any special extra payment on leaving. They also know that in the end, after much huffing and puffing, they need a deal. We know we can get on fine under WTO terms, if they really do want to be difficult.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

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Options for social care

The current system has been uneasily defended by the main parties in recent years,with growing criticisms. This system seeks to define a distinction between normal living costs, and care costs. An elderly person,whether living in their own home or in a care home, gets some state financial support with care costs but is expected to make their own provision for accommodation and daily living and to pay for other social care provision. All healthcare is free for all.

This means when someone moves from their own home into a care home for the rest of their lives a decision has to be made about the use of the home they are vacating which will have implications for any means tested benefits and support Clearly the elderly person no longer needs the home they leave, and that home should be used. The most likely outcome is sale to a new owner occupier, releasing capital. This capital is then used to pay for the day to day living costs at the care home. Alternatively, if the property has a high rental value, the elderly person could rent it out and use the rental income along with any other income to pay the care home fees.

There have been many critics who say this is unfair on grown up children hoping to inherit. If their parents live in their own home until death they will inherit a valuable property. If the last surviving parent moves into a care home they may inherit very little. To address this different outcome the Conservative Manifesto says why not increase the amount of capital someone in a care home can keep to 100,0000 pounds from the current 23000 pounds, but also have the same rule for people continuing in their own home.

Judging this needs detail over how the distinction between healthcare, free to all, and other care which you will be billed for, would work out. The proposal allows an elderly person living in their own home to defer any payment, making it a charge on the estate.

The different outcomes that will still arise come from the high costs of care home provision. The basic accommodation and meal costs will tend to be much higher than living alone in your own home. Many more staff are involved and we want them to be decently paid.The owner also needs to cover the cost of capital to provide the property.

A lot of the grown up children, many of them pensioners themselves, have their own homes and savings by the time their last parent dies. The debate is whether they should pay more tax to help pay more of the costs of living of their parent’s generation through the state, or whether they should accept as possible heirs that their own parent has to spend more of the money they have accumulated during their lives to pay the bills of their old age. One way or another the children have to help finance the very elderly. The truth is the state has no money, only the money it takes off us one way or another.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

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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.

    Promoted by Fraser McFarland on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

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