Ease the squeeze – Business Post article

Business Post
Rt Hon John Redwood MP

There is a nasty squeeze underway on people’s incomes. Most wages and salaries are going up by less than inflation. The prices of food and energy have soared, putting the most intense squeeze on those on the lowest incomes, who spend more of their money on the basics.
The government says it feels our pain. It is doing nothing to alleviate it. Indeed, in many respects it is making it worse. Every time the price of oil goes up, the government increases its tax take on petrol and diesel because the VAT it charges automatically goes up with the price. I am glad the Opposition has suggested a sliding scale of tax rates on petrol, which would go down when the price goes up to help stabilise pump prices, and go up when the price goes down to maintain the revenue. We need a cut now in petrol and diesel tax to reduce the rip off at the pumps.
Electricity to heat our water, and light and heat our homes is also soaring in price. The last ten years have seen no major decisions taken to licence new power stations, so we are facing shortages as the older nuclear and coal stations are retired. We need an urgent programme of new works, to produce more and cheaper power, with less waste and fewer harmful emissions than the present.
The Prime Minister’s line at the recent G8 summit was to blame someone else and pretend he could nothing. He told us the slow down or recession was made overseas, refusing to see the policy errors made here at home that have given us first an inflation and now a slow down. He told us we should waste less food to solve the food price problem, and blamed OPEC for producing too little oil. What we need is a government which not only says it shares our pain, but does something to ease it.
If only Gordon Brown had said at the Summit:
“Today we face the twin problems of energy and food shortage, driving the world prices of both higher. This is damaging the prospects of recovery for the rich western economies trying to overcome the Credit Crunch. It is far worse for the poorer countries, where more will be forced into undernourishment and greater poverty by the surge in prices of these basics. We had planned at this summit to concentrate on the response to global warming and African poverty. We need to concentrate on African poverty, and to see that any attempt to ease this requires us to grapple more successfully with the world shortages of energy and food than we have managed over the last few years. We cannot solve the African problem unless we can resume faster growth in the West and supply them with better market opportunities for their goods. We cannot resume faster growth in the West unless we can get on top of scarcity and inflation in the prices of the basics. We cannot help Africa by expanding ourselves if we drive the relative prices of the basics so high they cut Africa’s effective income further whilst raising our own overall.
The cases of food and energy are different. The West needs to change its approach to food production and trading dramatically to be fair to the rest of the world. I will be pressing to dismantle the Common Agricultural Policy, which prevents poorer countries selling us as much as they would like at the same time as restricting our domestic output by encouraging set aside and non productive use of land. At current world market prices – and at lower ones than now – we should abandon managed prices and assume world prices, allowing free trade in food. The US should also dismantle its protectionism. The European system needs to be changed, to allow idle land to be brought under the plough where farmers have been subsidised to do nothing with it.
To ease energy shortages I will be bringing forward the permits and licences necessary for the UK to construct a new set of power stations that do not need fossil fuel, and I will be encouraging the development of clean coal technology and carbon storage as the UK has plenty of coal. I am also today reversing the tax increases I have imposed on North Sea oil in a way designed to encourage more exploration, development and recovery from existing fields. I am sorry I have wasted the last ten years in doing none of these things, and now wish us to catch up on the missing years of underinvestment in new energy”

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One Comment

  1. ordersomabuyg
    Posted September 21, 2008 at 9:07 pm | Permalink

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  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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