The Economic Affairs Committee

Yesterday Conservative MPs held the first Economic affairs backbench committee meeting which I have been elected to chair. As early twilight descended on a Westminster preoccupied by the start of the summer recess we discussed the future economic agenda. We decided to concentrate immediately on a response to the government’s consultation paper on banks and the financing of recovery. There were also requests subsequently to examine the roles of lower taxes and less but more effective regulation in achieving higher levels of economic growth.

Bloggers may wish from time to time to make suggestions on suitable items for our attention. The Committee’s remit extends beyond Treasury matters to include the work of other economic departments.

It is good news that this Parliament will resume in September as there is plenty to do.

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21 Comments

  1. Posted July 28, 2010 at 8:32 am | Permalink

    Yes there is a lot to do in September I hope all the MP's enjoy their summer break however i am sure they will still be working during this time as many of us just cant take our foot of the acelerator for any time at all.

  2. Alan Jutson
    Posted July 28, 2010 at 8:52 am | Permalink

    Looks like you will be busy during this term in Parliament, as there are clearly many things to discuss.

    Just out of interest, who else is on the Committee, and do you co-opt people in from time – time.

    Reply: Any Conservative MP can attend, and we can invite in guests for discussions.

  3. A G
    Posted July 28, 2010 at 8:56 am | Permalink

    The BBC's economics editor says that large companies are awash with cash and that it's the small companies that are being starved of cash because the banks won't lend. Might it not be best if the banks, who have shown a very poor performance in backing good investments in the recent past (housing, CDS's etc.), are by-passed and a way found for the big businesses to directly go out and select and fund new small businesses. Big companies get a bad reputation for taking too much short term profit at the expense of long term sustainability and a regulatory climate which made it worthwhile for them to increase competition by finding and funding new enterprise might also help to address this problem. Sums needn't be large and could operate on a 'micro-finance' basis. Let's face it, who understands business better than our existing big businesses? This might help stop the stultifying effect of the winner takes all endpoint in the markets game which the public so loathes.
    On another point, I would like you to have a good look at the rural economy. I have noticed that rural areas close to the large northern conurbations seem to be tidy, smart and have luscious fields full of prime beasts where as the more remote rural areas of say, Worcestershire and Gloucestershire look tatty and run down with derelict houses and boarded up pubs on every corner. This seems to be a reversal of the usual North-South divide we are always hearing about. Prime beasts mean good food, exports and tourism and it would help if the whole country could take part in what should be one of this country's best natural assets ie. it's good climate. I would like the closed pubs to be taken over by local producers selling their produce directly to locals and visitors. It shouldn't all be about the power house of London because they will just leave when the going gets tough.

  4. Posted July 28, 2010 at 9:08 am | Permalink

    I would suggest futher investigations into the value we get from the remaining Quangos.
    If we cut waste from everywhere it exsists there will be no need to cut essential services. Perhaps a list of the things each government dept should be involved in and then stop the rest. If we put real wealth back into the peoples pockets the economy will look after itself.

  5. Rob
    Posted July 28, 2010 at 9:27 am | Permalink

    Dear John,

    As I have commented previously, the poor performance and regulation of the ratings agencies (along with the monolines) was fundamental to the recent crash.

    A dual agreement with the US is needed to control their operation given the level of trust that is put in them inside the investment banks. Until that is addressed we are risking another high-yield product bubble and crash.

    Thanks, Rob

  6. Acorn
    Posted July 28, 2010 at 9:41 am | Permalink

    I think we get the first set of Whole of Government Accounts (WGA) this October. You should ask the Treasury guys how this will advise the next spending review. Also, get the guys in from ONS Geography, they may have ideas about restructuring local government from an economic point of view. And; get an early grip on the "Total Place" bandwagon. The latter should be put on hold until you clear up the current mess that is local government in England. The sooner we get a unitary structure and coterminous boundaries for all other services the better for "local-ism".

  7. Jonathan
    Posted July 28, 2010 at 10:12 am | Permalink

    Mr Redwood.

    One item I would like to see discussed.

    i) The concept of a basic income paid to all uk citizens that would replace all existing benefits and tax credits. This could be set at say £10,000, with a personal allowance of £11000 and then a basic tax rate of 25% . No other benefits would be distributed, except for the most serious disabilities and medical care.

    My question is whether the savings in admin., the end of people trying to game the system, and the removal of the dis-incentives the benefits systems introduce outweighs the costs of this idea.

    I don't know the answer to this but a basic income seems a much simpler solution than the myriad of systems we currently have.

    • Colin
      Posted July 28, 2010 at 1:32 pm | Permalink

      From a couple of google results, the total UK tax receipts are about £500billion. There are roughly 50 million citizens ( because some of the population are children ). £10000 x 50 million = £500 billion, so practically all of the tax goes into your £10000.

      Now you could argue that income tax receipts would go up, because practically all income is taxed now , but you are only saving £200 billion on benefits.

      I don't think it adds up, although without better analysis I can't be sure.

      • Alan Jutson
        Posted July 28, 2010 at 7:52 pm | Permalink

        Colin your figures are interesting, as is Jonathans idea,

        Always worth a look at anything from a completely different angle.

        When you did your ballpark figures, did you take account that at the moment all women over 60 and men over 65 get paid a state pension. Thus you save this total spend as well if the cost of them being paid was included in your figures, as clearly they would not be paid twice.

        Clearly I guess anyone in full time education would also not be paid which must leave another good number which would be excluded.

  8. Mark Demmen
    Posted July 28, 2010 at 11:12 am | Permalink

    It might be beyond the Committee's remit, but some consideration should be given to the likely impact of Huhne's insane energy policy. This must represent a clear and present danger to the future economic prosperity of the UK.

    What are you and your backbench colleagues going to do, Mr Redwood?

  9. Richard1
    Posted July 28, 2010 at 11:31 am | Permalink

    I suggest you initate a study of the banking sector with the question being: how to increase choice and competition in banking and at the same time remove the uncapped liability of the taxpayer to support banks which run into trouble. This distortion is one of the root causes of the present troubles. Far from being an argument against free-market capitalism as socialists argue, the bank collapses and rescues are lessons in the short-comings of implicit & explicit state backing for a particular industry and the associated attempt to use more & more regulation to control it.

  10. oldtimer
    Posted July 28, 2010 at 1:31 pm | Permalink

    I add my own voice to that of Mr Demmen, above, re the economic consequences of Mr Huhne`s climate change and energy policy. Among other things, the Daily Telegraph reports it involves building 40000+ wind mills. Will you enquire if these are to be unsubsidised (like new nuclear power stations)? And will you also, please, enquire what efficiency and service life assumptions are used by his department – and how they compare with experience of wind farms in Germany and Denmark? I have read reports that it is necessary to build significant reserve capacity to meet those inevitable circumstances when the wind does not blow hard enough;. What assumptions are made about this?

    • THE ESSEX GIRLS
      Posted July 29, 2010 at 11:25 am | Permalink

      We agree. A detailed review of the costs of wind power and the subsidies involved is long overdue. We have more than enough structures in and off the UK to evaluate the real costs before we go helter skelter into more. Comparison with overseas performance is also needed.

      From the figures we've seen so far there is a weak case for developing wind power. We cannot over-emphasise the urgency for this government to grip the far bigger priority of building new power stations to plug the looming energy gap and we are surprised and disappointed that no solid plans have yet been announced after the 13 years of Labour dithering and ineptitude.

  11. Posted July 28, 2010 at 2:49 pm | Permalink

    the biggest single regulatory burden is employment regulations. get of industrial tribunals. they confuse employment relationships and keep manufacturing out of the country entirely.

  12. Posted July 28, 2010 at 4:07 pm | Permalink

    Please continue with your focus on getting the banks lending again.

    We desperately need loose monetary policy to help ease the transition to tight fiscal policy. We need to get the banks lending as much and as easily as possible. As you say, there will be plenty of time once the recovery is secured and the budget is balanced to come down hard on the banks and make sure they don't doom us all ever again.

  13. s matthews
    Posted July 28, 2010 at 4:40 pm | Permalink

    One of the first things to look at must be the cost of energy and the current policies. Christopher Brooker of the Telegraph can say it better than I can;

    Has any Minister In History Seemed More Hopelessly Unfit To Do His Job?

    By Christopher Booker

    Last updated at 9:26 AM on 28th July 2010

    The penny is fast dropping that by far the most disastrous appointment made by David Cameron to his Coalition Cabinet was that of the ultra-green, Lib Dem millionaire Chris Huhne as our Secretary of State for Energy and Climate Change. Yesterday, after Mr Huhne issued his first annual statement on Britain's energy future, it was clear that we should all be very, very concerned about the future of Britain. As was only too predictable, the overall theme of Mr Huhne's message was that 'climate change is the greatest global challenge we face'.

    etc – please refer to Telegraph if you want to read their article.

  14. s matthews
    Posted July 28, 2010 at 4:41 pm | Permalink

    continued

    But, most disturbingly of all, Mr Huhne is so infatuated with wind power that he seems to have convinced himself that, in cash terms, it is 'intensely competitive' with other means of making electricity.
    To make such a claim makes me believe that he's never done a moment's homework on the actual cost of wind power.

    Allowing for the cost of those vital back-up plants, it is twice as expensive as gas, coal or nuclear – while the power from those colossally expensive offshore turbines, costing anything up to £10 million each, is up to three times as costly as that produced by conventional power stations.

    If it wasn't for the 100 per cent subsidy we all unwittingly pay to the developers of wind turbines – through a compulsory levy in our electricity bills -no one would dream of building these ludicrously inefficient machines at all. Yet Mr Huhne tries to kid us into thinking that they are 'intensely competitive'.

    So, if there isn't the faintest chance that our electricity needs can be met with windmills, how does our energy minister hope to keep his promise that 'the lights will not go out on my watch'? He tells us he is not prepared to subsidise the building of any new nuclear power stations (although he fails to explain that he wouldn't be allowed to do this anyway by EU state-aid rules, which allow subsidies to renewable energy but not to CO2-free nuclear).

    Yesterday, there was one very small concession. Through gritted teeth, Mr Huhne said the first of a new generation of nuclear power stations would be built by 2018 – but they'll be funded privately. But so brainwashed against nuclear power has Mr Huhne become by years of green propaganda, it seems he will do nothing to encourage all the new nuclear reactors energy experts are crying out for.
    Equally, Mr Huhne won't allow the power companies to build any new coal-fired power stations to replace those nearing the end of their life, unless these are equipped to pipe off all the CO2 they produce to bury it in holes under the North Sea. But the technology to do this hasn't even been developed yet – indeed, some experts say it can't be done – and even if it could be, it would be so expensive that it would double the cost of coal-fired electricity.

    Then our energy minister talks about those wonderful electric cars he wants us all to drive – without apparently being aware that these travel only about 100 miles before they need re-charging with electricity, almost all of which has to be generated by CO2-emitting fossil fuels, thus wiping out any supposed 'planet-saving' advantage anyway. It is hard to recall any minister of the Crown in history who has seemed in practical terms more hopelessly unfitted to do his job than Mr Huhne.

    Here is the man we all need to be capable of getting his head round a few very basic, practical realities, such as how much electricity does Britain require to keep its computer-dependent economy functioning, and what are the cheapest, most effective ways of supplying it. Yet on every single count it seems he has not even got to square one in knowing how to do that job. We all know the old phrase about the disaster supposed to follow when the lunatics are put in charge of the asylum.

    There could be no better illustration of it than the decision to put Mr Huhne in charge of Britain's energy policy. The only way he can hope to honour his promise that 'the lights will not go out on my watch' is for him to be removed from his post before darkness engulfs us all.

  15. adam
    Posted July 28, 2010 at 8:50 pm | Permalink

    A trouble-shooting chief executive brought in by a cash-strapped hospital is costing a staggering £2,557 per day – more than a nurse earns in a month.
    Derek Smith was paid £248,041 for just 97 days work with the Dorset County Hospital NHS Trust in Dorchester.
    The interim boss also claimed £19,539 in expenses to cover his travel, food and 'subsistence'.
    Mr Smith's quarter-of-a-million pound salary was paid by an NHS trust to a recruitment agency, in exchange for three or four days work per week.
    Three other temporary executives who were brought in to turn around the hospital's £4.7m deficit have also been paid huge sums.
    Terry Tonks, the interim director of finance, was paid £222,106 for 158 days work, or £1,194 a day. He also claimed £16,755 in expenses.
    Tracey Peters, interim director of human resources, was paid £115,491 – £663 a day for 174 days work – and £4,040 expenses.
    James Shillito, interim turnaround director, cost £110,712 – £1,230 per day for 90 days work – and claimed more than £8,000 expenses.
    The figures have been revealed in the newly-published Dorset County Hospital NHS Foundation Trust's annual report and accounts.
    http://www.dailymail.co.uk/news/article-1298337/F

  16. Max
    Posted July 28, 2010 at 9:49 pm | Permalink

    John, can you ask when the Chancellor will do away with the enterprise and wealth destroying 50% rate and the marginal 60% rate over £100,000 when allowances are removed. I am considering a move to the US if this doesn't change before the end of the parliamentary term. The job in the US is better paid for the same sort of work, while costs and taxes are lower. If the coalition doesn't remove the 50% rate they will see a number of people from my industry (creative and tech) disappear from the country into the US.

    Also could you ask about removing the child tax credit and working tax credit and replace them with tax allowances. The child tax credit for poor families just encourages them to have more children while a tax allowance system would enable working parents to have children while discouraging unemployed people from bringing up children below the poverty line. I know this sounds harsh, but this has to happen otherwise we are going to end up with the chav class having more and more children to claim more and more tax credits. It is a Labour vote creation machine that needs to be dismantled.

  17. THE ESSEX GIRLS
    Posted July 29, 2010 at 11:26 am | Permalink

    On a different note we want to know why MPs travel overseas so often.
    For example Denis McShane seems forever to be jetting off somewhere; what good does this do his constituents? Who pays the fares and hotel bills – and how was Gordon Brown’s recent trip to Africa justified and funded?
    Apart from the costs involved these MPs should be servicing their constituencies, not grandstanding around the globe.
    There is more than enough self-indulgence presently being shown by the Labour leadership contenders with their grand tour of the UK and the 50+ hustings. Do the tabs get picked up by their party or do we taxpayers fund their travel as well as their time?

  18. simple soul
    Posted July 30, 2010 at 2:11 pm | Permalink

    Everybody has now been talking about banks for an interminably long time and they seem likely to continue to do so with modest results. Could there be some other issues lurking in the economic universe which are being neglected while we pursue this singleminded obsession?

    What about productivity for example? The lost generation of under twenty-fives? The energy gap? And the creaking infra-structure?

  • 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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