The UK establishment thinks we need to help save the Euro and thinks the Euro can be saved

The UK government – Coalition Ministers, senior officials, the Bank, the FSA and the rest – buy the argument that a collapse of the Euro would do untold damage to Euroland, and therefore to us, given the trade we do with Europe.

Their predecessors took a similar view of the Exchange Rate Mechanism. They spent and borrowed huge sums to try to peg exchange rates at levels markets thought wrong. All the time they tried to keep the impossible pegs in place they triggered inflation, recession and other extremes. The ERM first gave the UK inflation, then it gave us recession. It meant we always had the wrong amounts of money and the wrong interest rates.  They discovered that it cost large sums of money to try to buck the markets. In the end they were overwhelmed by the force of the markets against them, and abandoned their quest.

The Uk economy started recover as soon as we left the torture of the ERM. Our currency found a competitive level to help exports. The Bank and Treasury could return to following a sensible monetary policy. The country no longer had to throw good money after bad trying to keep the pound at an artificial rate and then losing large sums as a result. Interest rates came down rapidly.

Nicholas Ridley and I kept the flag flying against the ERM in government, but lost to the Treasury and Foreign Office combined. Eventually the Treasury realised the game was up and made the brave decision to tell the Prime Minister he had to abandon his policy and try something better. Our exit from the ERM ushered in a good period for the UK.

I find it difficult to grasp why so many people think the Euro is good for Greece or Portugal. They have lost their democracy over it, as they now have to be run by a committee of lenders to them. Their politics rests on the regular inspections of the bank managers. They cannot devalue to make themselves more competitive. The Euro scheme encourages some in those countries to think that the answer to their problems lies in bigger transfer payments from outside, rather than in coming up with local solutions to their problems and being responsible for their own destinies.

It is also difficult to see why Germany thinks it is such a good deal and a good idea. Of course some of her leading export companies enjoy selling goods into other parts of Euroland at advantageous exchange rates . More and more of Germany’s exports however need to go to places outside the EU given the slow growth or economic declines within the zone. Germany used to be a successful exporting country with a rising DM.

On the other side of the account Germany is about to pay a large price for her politicians’ enthusiaism for the Euro. German taxpayers will have to pay more tax to bail out other Euro countries. Germany’s own credit rating could be damaged by assuming debts on behalf of others.

The nonsense that a single market needs a single currency needs knocking on the head. The North American free trade zone does not require a currency union. Many non EU countries trade quite happily with the EU without sharing a currency. The UK still trades with the EU  whilst keeping the pound.

Others mutter in hushed tones that they have to save the Euro to save the EU banks. It is the Euro scheme and the excess sovereign debts it has allowed that has weakened the banks. Keeping the Euro does not solve these problems, but will probably make them worse. The banks need sorting. It is not easier to do if you keep the zone together, as you are not sorting out the underlying problems.

Extend and pretend cannot work. Deficits have to be curbed by spending less or raising more revenue. Weak banks have to be sorted out by raising more capital, selling assets, and making proper provision for losses.

 

The truth is that the Euro is an ERM that does more damage, that will lose its participants more money and be more painful to split up. It is not an ERM that works.

 

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109 Comments

  1. Single Acts
    Posted October 13, 2011 at 6:29 am | Permalink

    Oh if only Mr Cameron had said this at the party conference! Instead we got trvia about gay marriage.

    • lifelogic
      Posted October 13, 2011 at 7:05 am | Permalink

      Indeed pathetic distraction from the real issues and statement that we would go no faster and no slower than the EU members on the absurd “green” energy agenda.

      The government is hooked on mad policies by the EU. It just goes along with the mad EU all the way and is left with silly distractions like Gay Marriage. Vote every 5 years for whatever distractions you want – seems to be what democracy has now become.

      Another report showing how the NHS care of the elderly is often dreadful I see as if everyone did not know already.

    • lojolondon
      Posted October 13, 2011 at 11:58 am | Permalink

      And plastic bags !?!?!?!?

      • APL
        Posted October 15, 2011 at 10:50 am | Permalink

        lojolondon: “And plastic bags !?!?!?!?”

        Yea, what is it with plastic bags? As I remember Brown had a mania about plastic bags.

        Another instance where you cannot put a cigarette paper between the two parties. Their leaders talking utter rubbish.

    • lifelogic
      Posted October 13, 2011 at 12:33 pm | Permalink

      I see today he has found another distraction – succession to the British throne and first born women.

      The rules already discriminate against almost everyone who does not have a “do as I say not as I do” allegedly “green” but Aston Martin owning purveyor or (is it ex-purveyor) of expensive biscuits, teas, conserves, sausages, dairy products and other groceries also against anyone who is a Catholic.

      So if they discriminate against yet another person why correct just that one over all the millions of others?

      Does Cameron have a special “Department for the creation, and publicising of, trivial distractions from the substantive issues”.

      • lifelogic
        Posted October 14, 2011 at 9:42 am | Permalink

        Second paragraph should say “Does not have……… as a father” but it seems to have been lost somewhere between my brain and the keyboard.

    • Chris
      Posted October 13, 2011 at 1:56 pm | Permalink

      I too was appalled by the refusal to address these issues and instead to deal with issues of far less import. Re the future direction of the Euro negotiations it would seem that the ESM that is being developed behind closed doors is very worrying in that further very far reaching powers, with apparently little accompanying accountability, are going to be bestowed on unelected individuals to commandeer ever more “rescue” funds from those in Europe without apparently having to go back to the electorate to request permission – a blank cheque arrangement, which appears to be potentially highly dangerous.

      • zorro
        Posted October 13, 2011 at 11:17 pm | Permalink

        Don’t be appalled, perhaps he realises that it’s beyond his capabilities to understand, let alone solve the problem.

        zorro

  2. lifelogic
    Posted October 13, 2011 at 6:50 am | Permalink

    It is an absurd idea that a single market needs a single currency especially with credit cards, banking systems and computers that can convert currencies in an instant. It has like the ERM been done for reasons drawing power to the centre away from the people in short to destroy such democracy as existed.

    You might think they would have learned something from the ERM but no once the EU fools have attached themselves to an idea they stick like glue to it until they all go over the cliff together. Just like Major will it bury Cameron for 3+ terms too.

    Mean while we have unemployment increases of 114,000 to 2.57m a 17-year high. Osbourne said yesterday – the last thing business needs is more regulations and taxes but that is exactly what he, Cameron and the EU have delivered in spades.

    • lifelogic
      Posted October 13, 2011 at 3:07 pm | Permalink

      You say “I find it difficult to grasp why so many people think the Euro is good for Greece or Portugal. They have lost their democracy over it, as they now have to be run by a committee of lenders to them.”

      You answer your own difficulty – that is why the EU think it is good for Greece they have lost their Democracy the EU has taken the powers. The UK is half+ way there too thanks to Major, Blair, Brown and Cameron.

      But the committee of lenders cannot run them very well from a distance – blood on the streets will surely ensue if they continue with this absurd agenda.

      Meanwhile they talk of Gay Marriage and what happens if the next royal baby is a girl and pretend to be creating the conditions for growth while doing the opposite in reality.

  3. Duyfken
    Posted October 13, 2011 at 6:59 am | Permalink

    Yes, it is a specious argument put forward by idiots who fail to recognise they are idiots. There is also a measure of hubris involved and an inability by the perpetrators to admit they are wrong because of their previous deep-seated commitment to the EU Cause. I fear the moon will be blue before the Cameron brigade first come to their senses and then do something constructive about it (like sacking the MPC and culling the upper echelons of the Civil service).

    Conservation of the nations’ resources should be the top priority for the government (especially for Conservatives), but Cameron and co just seem hell-bent on waste and allowing our money to be leeched away abroad to support mad-cap schemes peddled by charlatans.

  4. lojolondon
    Posted October 13, 2011 at 7:47 am | Permalink

    John, I think you are too kind to the politicians – I really feel a ‘Fourth Reich /USSR’ power grab going on in everything they do.

    I believe that is why German politicians are so committed, not because they think the EU is good for German people, but because they are addicted to the money and the power of ruling the whole of Europe. No matter how bad the system is for the people of Europe.
    I think you will find out in the next 24 months what the people of Europe think about their attitudes.
    That is why, after a lifetime of Tory support I will vote UKIP again. Not because I think we can win the election, but I refuse to support a party that is inside the EU.

    After all, simply recognising a power above Westminster is treason, a very good reason in my view for the return of capital punishment.

    • Jon Burgess
      Posted October 13, 2011 at 10:39 pm | Permalink

      It should be treason, but don’t forget that Bliar had that particular law changed…

    • BobE
      Posted October 14, 2011 at 12:25 am | Permalink

      I agree

    • Disaffected
      Posted October 14, 2011 at 10:01 am | Permalink

      I agree and will do the same.

  5. Martyn
    Posted October 13, 2011 at 7:54 am | Permalink

    Have just been watching the BBC Breakfast presentation which makes it quite clear to us that the Greeks work harder and longer than we do here in the UK and all are taxpayers. It is not their fault, says the BBC, that Greece is close to financial meltdown and only by saving the Euro will the UK be able to survive.
    I can’t tell you how impressed I am at the BBC’s open, honest, unbiased and objective reporting. Not…..

    • APL
      Posted October 15, 2011 at 11:35 am | Permalink

      Martyn: “I can’t tell you how impressed I am at the BBC’s open, honest, unbiased and objective reporting. Not…..”

      Yes the BBC is dire. Their business coverage is abysmal – presenters who don’t know what they are talking about, wittering on in the most superficial terms.

      But it has been eighteen months of this nominally Tory government and not much changes with the BBC.

  6. Greg
    Posted October 13, 2011 at 8:13 am | Permalink

    All the more reason to distance ourselves from the EU. It is a failed idea built by big state enthusiasts who seem unable to learn the lessons from history. When it comes to government less is most certainly more.

  7. Sue
    Posted October 13, 2011 at 8:34 am | Permalink

    Mr Redwood. Aren’t you getting frustrated with your party? I just don’t believe that a man who writes with such integrity can bring himself to continue with the Conservatives.

    • Jon Burgess
      Posted October 13, 2011 at 10:42 pm | Permalink

      I second that!

    • BobE
      Posted October 14, 2011 at 12:28 am | Permalink

      Income and a good pension my dear. In a few more years John can retire in comfort.

      Reply: I deeply resent the insinuation of this piece. I was elected as a Eurosceptic Conservative and intend to serve as a Eurosceptic Conservative.I am not “clinging on” for a pension, but because I have an important job to do for my constituents, and to raise the EU and economic issues more widely.

      • BobE
        Posted October 14, 2011 at 7:19 pm | Permalink

        John, I apologise. My cynicism got the better of me. I have enjoyed your blog for a long time and I realise that you do try as hard as you can.
        Please accept my apologies.
        BobE

  8. alan jutson
    Posted October 13, 2011 at 8:57 am | Permalink

    It really does make you wonder who the government are taking advice from, that they seem so tied to helping out the Euro, and the Banks, at almost any cost.

    On another topic:
    I see the Think Tank have come up with another revelation, that to try and get growth, you need to encourage businesses with less regulation, pay less corporation tax, and that workers should get a tax cut so that they have more to spend to stimulate demand.

    Given that only 24 hours previously they suggested that middle income earners were going to feel the squeeze and that living standards would drop over the next few years, one is forced to wonder how long it has taken them to reach such stunning conclusions.

    Perhaps in a few weeks time they will suggest that by raising the personal tax allowance, all those in work, those on fixed incomes, and those who rely upon income from savings income, would all be better off, because they will have more of their own money to spend.

    John just out of interest.
    Is this Think Tank very large, how often does it meet, what is its remit, and who is in it ?

    Reply: If you are talking about the CPS it does manage a number of publications, working lunches, meetings and press conferences. No UK think tank is very big as they all survive on modest budgets.

  9. stred
    Posted October 13, 2011 at 9:19 am | Permalink

    Who was Norman Lamont’s errand boy during the ERM disaster? David Cameron?
    One would have thought this experience would have added to his handling of the present mess. Instead we have a repeat of staggering amounts of taxpayer’s money being chucked into a hole, to be plundered by the new verions of Soros.

  10. stred
    Posted October 13, 2011 at 9:22 am | Permalink

    Please substitute ‘improved’ for ‘added’.

  11. Brian Tomkinson
    Posted October 13, 2011 at 9:23 am | Permalink

    JR: “I find it difficult to grasp why so many people think the Euro is good for Greece or Portugal. They have lost their democracy over it, as they now have to be run by a committee of lenders to them. ”

    That is precisely why they want Greece and Portugal and all the others to be in the Euro – the loss of democracy is the key issue. All these countries, and ours as well if we let them, are to be denied democracy and be governed by a centralised EU government. We have surrendered most of our law making powers already. The Russians must be observing with interest the way this proceeds compared to their military entrapment of neighbouring countries. The final solution will, as ever, end in uprising and a break up of an unwanted enforced union.

  12. NickW
    Posted October 13, 2011 at 9:25 am | Permalink

    It is vitally important to remember that the Euro elite are serial and proven liars and nothing they say can be believed.

    National Parliaments were persuaded to sign up to Lisbon and preceding treaties on the basis of a “No-bailout “clause which the Eurocrats had no intention of keeping.

    Any National politician who accepts the words and promises of the Eurocrats and believes the caveats and exemptions in any new treaty is gullible and negligent.

    It is manifestly clear that these people cannot be trusted to keep their word and can, in fact, be expected to break it without hesitation or conscience.

    • uanime5
      Posted October 13, 2011 at 10:42 pm | Permalink

      At least 4 National Governments are happy that the ‘no bailout clause’ wasn’t enforced and many others are happy that 4 countries haven’t defaulted on their debts.

  13. Gary
    Posted October 13, 2011 at 9:26 am | Permalink

    Since we are not allowed to know what goes on at those secret Bilderberg meetings and the like, attended by our politicians who are supposed to report to us, we must assume that the Big EU project and One World Govt project is being co-ordinated from such gatherings. Or otherwise what else is there to explain the pig-headed march onwards ,regardless, with this project that will destroy us ?

    • uanime5
      Posted October 13, 2011 at 10:42 pm | Permalink

      If you want to know what happens in the EU you can read their publications, which are available in a variety of EU languages.

      • Electro-Kevin
        Posted October 14, 2011 at 9:21 am | Permalink

        There is already one common EU language. It’s called gobbledegook.

        The greatest tools of the EU have been esotericism, jargon and the method of boring everyone into submission.

  14. Peter van Leeuwen
    Posted October 13, 2011 at 9:35 am | Permalink

    Could we not hold out some hope that the euro will yet become an ERM that works? After all, some severe lessons are being learned now.

    • lojolondon
      Posted October 13, 2011 at 9:53 pm | Permalink

      Yes, and as they ‘muddle through’, destroying not just families and communities but entire economies, we should just give them time to get it right ‘because it will all be worth it in the end’.

    • Jon Burgess
      Posted October 13, 2011 at 10:55 pm | Permalink

      We certainly could hold out hope that the Euro will eventually work, but I wager that the bailouts will just get ever bigger, and the longer this mess is allowed to continue the worse the eventual collapse will be for all of us.

      The most important lesson is certainly not being learned by the EU elite – that of not throwing good money after bad. How many more Greek bailouts do you want to see before accepting this approach is flawed?

      I’d love to know what severe lessons have been learned (and even better acknowledged and tackled) by Jose Barusso?

  15. backofanenvelope
    Posted October 13, 2011 at 9:36 am | Permalink

    Given that Governments always make things worse, we should just do nothing. Defend our interests; don’t agree to providing any more money and sit tight. The Greek government is now governing without the consent of the governed, something is going to give soon.

  16. Iain
    Posted October 13, 2011 at 9:37 am | Permalink

    Yep, whole heartedly agree. what is staggering is the callousness and fanaticism with which they pursue their EU project, everything is to sacrificed for their project, even the interests of their own people.

  17. Mike Stallard
    Posted October 13, 2011 at 9:41 am | Permalink

    We have just suffered the catastrophe of the DfE banning our Free School. It doesn’t matter that much, because the DfE had taken it over more or less anyway, so it was in no sense free.
    “Freedom” had become “Freedoms”, curriculum had to be “delivered” and “good practise” (sic) had to be observed.

    The Civil Service bureaucracy is all powerful and, quite often, heading in quite the wrong direction it seems. And this matters a very great deal. On all fronts.

    Meanwhile we sit by and wait for the inevitable collapse.

    • forthurst
      Posted October 13, 2011 at 10:55 pm | Permalink

      “The Civil Service bureaucracy is all powerful and, quite often, heading in quite the wrong direction it seems.”

      The Civil Service bureaucracy has been seriously infested with Frankfurt School Cultural Marxists. It is heading in the right dirction for them as I indicated yesterday. Remember history is not what is written but what actually happened. If you do not think this country is being undermined by design then it is time to wake up.

  18. Adam5x5
    Posted October 13, 2011 at 10:05 am | Permalink

    Cameron has shown through his actions so far that he will drag us further into this mess.

    If the “conservative” party do not nail their EU-sceptic colours to the mast in both deed and rhetoric soon, they will lose a lot of votes to UKIP.

    If I get the chance to vote UKIP at the next election I will be doing. Whether I will or not depends on the new boundaries and if UKIP put up a candidate. They didn’t last time so I had to vote Tory.

    • BobE
      Posted October 14, 2011 at 12:38 am | Permalink

      I do as well

    • BobE
      Posted October 14, 2011 at 12:39 am | Permalink

      Spoil the paper if no UKIP candidate

  19. Jer
    Posted October 13, 2011 at 10:15 am | Permalink

    The collapse of the Euro might well be a bad thing for the UK even if it is a good thing for the Greeks and Portugese.

    One of the things I was delighted to hear when the coallition was formed was that the focus would be on the national economic need. Sadly this does not seem to have been followed in practice much, but perhaps it is here?

    You are both a respected commentator and a representative of the people, in the above you seem to be writing as the former. Does your view change if writing purely from the perspective of the poor UK taxpayer?

    Reply:< No, the Euro is also bad for the UK taxpayer. We are being dragged into rescues through the IMF which cannot work

    • lifelogic
      Posted October 13, 2011 at 9:19 pm | Permalink

      You reply – No, the Euro is also bad for the UK taxpayer. We are being dragged into rescues through the IMF which cannot work.

      Absolutely right – so why just circa 20 votes against where is this Eurosceptic Tory intake all hiding somewhere?

      • BobE
        Posted October 14, 2011 at 12:40 am | Permalink

        Pensions my boy, pensions.

  20. Caterpillar
    Posted October 13, 2011 at 10:20 am | Permalink

    “Our currency found a competitive level to help exports.”

    I agree that an artificially high currency harms exports, but I wonder whether the artificially low, race-to-the-bottom, rate that the UK now pursues as policy rather than its inflation target is equally / more harmful. As well as the obvious import price problem, by artificially weakening a currency it is possible to relieve exporters of competition that drives improvements in efficiency / innovativeness. The consequences of this do not show until the medium term, by which time the companies/countries against whom ‘we’ have competed unfairly have pursued such improvements.

  21. frank salmon
    Posted October 13, 2011 at 10:56 am | Permalink

    Very good John. But we have to rememer that the Euro is displaying the the symptoms of the dying patient, it is not the cause. The cause is down to the the EU as an institution and variant ineptitude of individual countries. It comes down to corruption – most particularly corruption in politics and European policy making, banking and money policies, and big business monopoly. Britain thrived when ditched from the ERM because we had been taken in at too high a rate. Again, not so much the Euro per se at fault as the ineptitude of Major and Lawson as chancellors.
    Leaving the Euro will not sort out the political and econmic corruption in Greece or Italy. They should leave, of course, but unless they change their ways they will fail outside the Euro as much as they have inside the Euro.
    In a nutshell, it is not the Euro that is the biggest problem, it is the individual countries, and the European Union with its anti competitive rules and regulations.

  22. Denis Cooper
    Posted October 13, 2011 at 11:11 am | Permalink

    Spot on article, and maybe I can add something.

    On March 24th I circulated an email to contacts with the subject heading:

    “Tory MPs vote for UK to join euro”

    simply pointing out the Deferred Division which had taken place the previous day (Budget Day), Column 1063 at the bottom of the page here:

    http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm110323/debtext/110323-0004.htm

    That was the Commons vote to pre-authorise Cameron to agree to the radical EU treaty change in what is now European Council Decision 2011/199/EU:

    http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:091:0001:0002:EN:PDF

    The result of the ballot was 310 – 29 in favour of the motion, with JR joined not only by some of the other usual Tory suspects but also by a number of Labour MPs – notably Gisela Stuart and Kelvin Hopkins – in voting “no”.

    The first problem with that EU treaty change is this: it is intended to save and strengthen the eurozone, but it does nothing to hinder the subsequent expansion of the eurozone until eventually, inevitably, it swallows up the UK.

    Which it will do, because out of the present 27 EU member states there are already 17 in the eurozone, and 8 more are under a legal obligation to join the euro at the earliest opportunity, and that same legal requirement is imposed on all new member states under the terms of their accession to the EU – that’s just been done to Croatia, with Hague’s agreement – and there are no treaty provisions for a country to leave the euro once it has joined; only 2 EU member states, the UK and Denmark, have treaty “opt-outs” so that they are under no legal obligation to eventually join the euro.

    Given those facts, for me it’s in the category of “the bleedin’ obvious” that if the euro survives this crisis then as things stand it’s inevitable that some way down the line we’ll have a government which decides that the UK cannot remain isolated as one of the very few EU member states, or possibly the only EU member state, that is still outside the eurozone, and which will use its Commons majority to bounce us into the euro – whatever that party may or may not have promised at the general election, and with or without a referendum.

    There’s already belated concern that the countries in a more highly integrated eurozone will form a “caucus” under Franco-German leadership, which with the present 17 out of 27 EU member states will be close to having an assured qualified majority in EU Council meetings (213 votes out of the total of 345, the minimum for a measure to pass being 255), and which is only a few countries short of having that assured majority now, and which even without more countries joining the euro will have that assured majority from 2014:

    http://conservativehome.blogs.com/thecolumnists/2011/10/anthony-browne-as-much-as-the-coalition-may-want-to-avoid-one-a-fight-over-eurozone-integration-look.html

    “When the new national voting weights from the Lisbon Treaty enter into force in 2014, the Eurozone 17 will get a qualified majority, meaning that whatever they agree between themselves, they can impose on other European countries, including the UK, whether we like it or not (unless it is an issue where we have a veto). We could potentially be in the position of having to accept legislation on issues of vital national importance, without having even been allowed into the negotiating room.”

    So I still stand by my March 24th claim:

    “Tory MPs vote for UK to join euro”

    because that is in effect what they did when they pre-authorised Cameron to agree to European Council Decision 2011/199/EU.

    Not to immediately join the euro, but to eventually, inevitably, join it; and then all the federalist measures that Osborne is now urging on the hapless peoples of the eurozone countries will also apply to us.

    • uanime5
      Posted October 13, 2011 at 10:48 pm | Permalink

      How exactly are the Conservatives going to convince the public to accept the Euro? Have high levels of inflation until the pound devalues to such an extent that the only way to fix the economy will be to join the Euro? Oh wait.

      Reply: it is Conservative policy n ot to join the Euro, thanks to peo[ple like me who fought for this policy from within.

      • Denis Cooper
        Posted October 14, 2011 at 3:02 pm | Permalink

        While I maintain that the Tory MPs in effect voted for the UK to eventually join the euro, whether or not they realised that, I don’t assume that it would necessarily be a Tory government which took us in.

        My prediction is that:

        “… some way down the line we’ll have a government which decides that the UK cannot remain isolated as one of the very few EU member states, or possibly the only EU member state, that is still outside the eurozone, and which will use its Commons majority to bounce us into the euro”,

        without making any assumptions about the party political composition of that government.

        As for how that government would convince the public to accept the euro, as we saw with the Lisbon Treaty there would be no need for a government with a secure Commons majority to do that because the views of the public could simply be disregarded, and afterwards it would be held to be irreversible.

        Anybody who assumes that the so-called “referendum lock” law would guarantee a referendum before we joined the euro hasn’t realised how easily that law could be circumvented if the government of the day preferred to avoid holding a referendum.

        • lifelogic
          Posted October 14, 2011 at 5:30 pm | Permalink

          I fear you are right here.

  23. Robert K
    Posted October 13, 2011 at 11:13 am | Permalink

    Hopefully, your consistent message is being absorbed in Parliament – on the backbenches and in Cabinet.

  24. MickC
    Posted October 13, 2011 at 11:14 am | Permalink

    Nicholas Ridley was the best Chancellor we never had. His departure from the Government was an absolute catastrophe-a fine man whose talents were much under-rated and certainly unappreciated.

  25. Damien
    Posted October 13, 2011 at 11:40 am | Permalink

    A euro collapse could mean that the bailouts given to Ireland would have to be renegotiated. The situation there is stabilising however that is because the bailouts are currently covering the banking losses on the books. The Uk has considerable exposure in the event of euro breakup. Even under the new rules private bondholders have to absorb the losses from 2013. That could mean that the negative equity of e13 billion on residential mortgages in Ireland could be a direct hit to the bank shareholders in 2013. If the euro collapse came sooner then the UK would have to replace the EU bailout funding of Ireland or allow the banks to take the losses.

    I am slowly coming to the view that the lesser of the two evils is fiscal unity and all that entails for the eurozone members.

  26. Bill
    Posted October 13, 2011 at 11:44 am | Permalink

    The trouble is that those of us who are persuaded about the toxicity of the euro have been persuaded for a long time and those who are unpersuaded are apparently beyond rational argumentation.

    The question is why does our elite entertain these ideas? The answer appears to be related to the psychological world in which they live. Our suave senior civil servants are happy to pal up with counterparts in Euroland. Our politicians come and go without much impact while the civil servants provide continuity. Euroland offers employment protection and civil rights and fosters a coalition between minorities and small countries and euro bureaucracy. None of this is conducive to British prosperity.

  27. Posted October 13, 2011 at 12:11 pm | Permalink

    In order to keep this manageable, let weak countries leave the Euro one by one. The Greek deficit, as a % of GDP, is more than a year ago (but then the GDP is less). They must leave the Euro and inflate, repaying their debts in clipped coinage. No other way is remotely acceptable, especially to the German electorate.

    • sjb
      Posted October 13, 2011 at 9:34 pm | Permalink

      “Yet the Marshall Plan was only passed against heavy U.S. domestic opposition. American isolationists resented having to spend American taxpayers’ money on foreign countries that had already defaulted on their previous debts from World War I. ”
      http://www.hoover.org/publications/hoover-digest/article/7689

      Fast-forward to 2011, the torch now passes to Germany (a key beneficiary from the Marshall Plan) to transfer resources to weaker members of the Union.

  28. sm
    Posted October 13, 2011 at 12:19 pm | Permalink

    How can we effect a non violent change so that our democracy is fully representative as evidenced by transparent referenda or other independently validated methods like direct democracy (recall powers).

    I have no confidence in our parliamentary democracy.

    Anyone got any legal measures that can be taken and followed by others.
    1) Cancel your BBC subscription.
    2) Cancel your party subscription.
    3) Reduce the power of banks by refusing debt, or pay it down or off, move to cash based payments.Move your cash to mutuals or 100% reserve banks if we have any?
    4) Vote UKIP at Euro-elections.
    5) Vote for anyone who commits to legally binding manifesto’s and referendum.

    • Bob
      Posted October 13, 2011 at 10:14 pm | Permalink

      That’s a full house for me!
      It’s nice to engage with people who think alike to compare notes and hone your arguments, but there is a danger that we end up preaching to the converted. We must debate the issues with people of the left or of no particular persuasion at all.
      The Fabians are playing a long game and gaining control of the BBC was a major coup for them, so whatever can be done to choke of their means of support is all to the good.

  29. Posted October 13, 2011 at 1:17 pm | Permalink

    I’d like to see the currency broken up to the extent which is necessary to stabilise the economic situation.

    It would be nice to get back to working on the aspects of European co-ordination on which we do agree.

    Some people try to credit the EU as stabilising Europe politically but I prefer to give credit to deeply far-sighted projects such as twinning, mass communication and improvements in education.

  30. Javelin
    Posted October 13, 2011 at 1:28 pm | Permalink

    I have a very interesting story about the ERM. I worked the ex head trader at the BofE, called Jess Tigre, 15 years ago who was taking orders from the Treasury to try to keep us in the ERM. He was the guy who told the Chancellor to stop throwing good money after bad. Funnily the Treasury didn’t even have a Reuters terminal and were relying on Jess to tell them they were wasting their efforts.

    Basically somebody, somewhere will have to tell the Eurofanatics that they are simply throwing good money after bad. Not only is a Greek default inevitable the longer this goes on the more money they are wasting, the later the next recession, the lower the business confidence, the deeper the debt.

    The truth is exiting the ERM will not be catastrophic. Life will continue. Traders are not vengeful it is crucial to understand they are looking for a fair price. Greece will recover quicker. The French and German banks will take hits bit the markets have priced most of this in. The markets know exactly how deep everybodies pockets are and the price would be on the floor if catastrophe loomed.

    The other truth is that the free capital movements of the Euro in the form of reverse capital flows at the first sign of recession is what turned the 2008 fallout from a mild problem to a crisis. Markets know this they see this and next time the capital flows will be faster and deeper. The Eurozone is an economic yo yo. This is the deeper and longer term problem. Capital is like water on the deck of the Herald of Free Enterprise – sloshing from one country to the other.

    Back to the ERM. So what will call time on the ERM – probably an accountant in Greece. Maybe the head of the army when salaries don’t get paid. At any rate Greece WILL default just like the Herald of Free Entetprise sunk. The captian can do all they want but the maths doesn’t add up and Greece is going down an economic spiral – minus 5% growth.

    The Euro leaders are driving down hill a car with no brakes, no power steering and there is a wall at the bottom. They can steer the car as hard as they like the crash will come but it’s only a car crash at low speed. Every body will get out and things will carry on. The only thing that will be shattered are the Eurofanatics day dreams.

  31. Posted October 13, 2011 at 1:28 pm | Permalink

    >>ERM first gave the UK inflation, then it gave us recession.

    No it didn’t.

    Maybe you are confusing the shadowing of the DM for the ERM?

    The ERM did not give us inflation, Lawson did that by cutting taxes when the economy was already booming. Thatcher did that by fighting Lawson over every interest rate increase and asking for interest rate cuts when they were not appropriate.

    The ERM was a factor in the depth and length of the recession, it did not cause it. It was political cover to hide the fact that the Conservatives had lost control of inflation just years after we worked so hard to defeat it in the first place.

    Remember, Lawson claimed an end to boom and bust before Brown did.

    The ERM was also responsible for the record low inflation in the years afterwards. The devaluation on leaving the ERM gave us a boost without causing inflation because spending so long in the ERM reduced inflationary expectations.

    The golden economy that we are so proud of was a result of the ERM. The ERM may have been wrong (at least we went in at the wrong time and the wrong rate), but lets not rewrite history to ignore the benifits of that policy error or blame it for problems caused by the other policy errors in the 1980s.

    Reply: No, the inflation came from printing pounds to sell to buy DM to try to keep the pound down. This began before entry into the ERM and contineud during the first phase of ERM membership

  32. Posted October 13, 2011 at 1:33 pm | Permalink

    If by “Greece” and “Grmany” we mean the people of those nations, as we should, then I don’t suppose they do think the current policy is a good idea. They may be a little more quiet han they should be (yes, even on nthe streets of Athens) but there is certainly no sign from the peoples that they approve the policy. Somewhat the reverse.

    It is, as we know, the political class in those places and across the EU which thinks it can walk on water to achieve full integration any time soon. That they are wrong is unlikely to stop them and a bigger crash can be expected, before the resurrection of the member state economies outside the Euro.

    And HMG says, we support full fiscal integration and we will do anything to assist.

  33. Posted October 13, 2011 at 1:33 pm | Permalink

    >>Nicholas Ridley and I kept the flag flying against the ERM in government, but lost to the Treasury and Foreign Office combined.

    Do you agree with Lawson that if we had gone in earlier at a lower rate then we would not have been thrown out in 1992? His logic is that if we had been in the ERM from, say, 1986 then we would not have had the boom which caused the bust.

    In some ways you and Nick Ridley are partly responsible for that mistake, even if you were absolutely right in the long run that the Britain in the ERM was not sustainable.

    Reply – No , there was no right rate.

    • lifelogic
      Posted October 13, 2011 at 9:22 pm | Permalink

      How can there ever be a right rate?

      These are moving ships the right rate today is wrong one tomorrow.

  34. Bob
    Posted October 13, 2011 at 1:50 pm | Permalink

    When people who have never done an honest day’s work try to run an economy you know where it will end. And when a politician talks about creating jobs, we all know that he really means non-jobs. The best thing the government could do to stimulate the economy is less. In fact the less they do, the better off we will all be. And that goes for the mob in Brussels too!

    • lifelogic
      Posted October 13, 2011 at 9:24 pm | Permalink

      Indeed other than defense, law and order and a decent efficient legal system.

      Alas they are not even providing that very well.

      • Bazman
        Posted October 15, 2011 at 10:33 am | Permalink

        A transport and health system with a safety net for the unemployed would be handy too. We are still awaiting your reply to what will be paid for and who will pay in your new healthcare system Roads?

    • Bazman
      Posted October 15, 2011 at 10:30 am | Permalink

      Has that worked so far with now record levels of unemployment?

  35. Disaffected
    Posted October 13, 2011 at 1:52 pm | Permalink

    John,

    The arguments have been cogently laid out before and your reasoning and analysis of this subject is spot on. However, you also fully understand that this is not about sound economics nor national interest, this is about politicians thinking they know best irrespective of the electorate or its wishes. Generally most are arrogant, obtuse and out of touch with reality (generalisation).

    The PPE courses at Oxbridge need to be scrapped and replaced with media studies or a course of similar calibre. Clearly these courses are badly educating these hoons at the country’s expenses. We need to get rid of the courses as they are doing untold damage to the country.

    • lifelogic
      Posted October 13, 2011 at 9:31 pm | Permalink

      One cannot help wondering if PPE is a course, essentially just teaching people how to cheat the tax payer and ride the government system entirely for personal advantage – just as a career move.

      Then again academia, like many charities, so often becomes essentially a left wing ever big state pursuit. Lots of clever frustrated people with little money seeking a role or purpose and some funding. Hence the absurd anti science global warming exaggerations.

      • uanime5
        Posted October 13, 2011 at 10:56 pm | Permalink

        If global warming is ‘anti-science’ can you explain why pro-science groups haven’t been able to show this? Could it be that climate change is actually real?

        • lifelogic
          Posted October 14, 2011 at 8:32 am | Permalink

          Climate change is indeed real (it clearly always has changed) CO2 is also one of very many factors in determining the climate.

          The absurd exaggerations about C02, pushed by Al Gore etc. are clearly just that – absurd exaggerations for political, religious and financial ends.

          Most sensible scientists (whose funding does not depend on toeing the line) know this only too well. It is very clear indeed that the wind and PV solutions proposed (and pushed by Huhne’s absurd subsidies) simply do not work in any real sense – with current technology.

          Anyway who says, a bit hotter, might not be rather better than a bit colder – and how do you know that without C02 would not perhaps be getting colder due to sun activity changes anyway?

          Why do you believe people, who cannot tell you the weather in 6 weeks time, when they make predictions for 100 years time? Then tell you to spend pointless billions to prevent it!

          • Bazman
            Posted October 15, 2011 at 1:10 pm | Permalink

            I’ll put this to you again.
            CO2 Emissions despite the uncertainty of the effects on the climate because of it’s complexity, you are certain they have no effect, and even if they do as no other country is doing anything we are all doomed anyway?
            How are you getting along with your fantasy of high energy bill are caused by green issues now we have found out from OFGEM that the average utility bill of £1345 up from £865 in 2007. That is just the ‘average’ bill, is made up of 27% tax and environmental costs?
            The big six energy companies making up to three billion in profits from their ten thousand different tariffs. Could be a bit closer to the truth. Interesting to know how much is from industrial customers. The sooner they get lower cost the sooner we will all get a pay rise huh?

      • alan jutson
        Posted October 13, 2011 at 11:48 pm | Permalink

        Lifelogic

        A lot of truth in what you say.

        Academics promoting Academia for academia sake, and not for gaining knowledge for the purposes of ever earning a living.

        • Bazman
          Posted October 16, 2011 at 11:31 am | Permalink

          This is just anti intellectual crap. Many inventions like the computer, radar and microwave ovens existed for along time as just theories and now are part of everyday life.
          How do you think a Ford Mondeo came about? Even if they could imagine one in the 15th century they could not build it as the metallurgy, plastics theory and electronics etc. had not been developed. Art and religion also playing their part in the development of this ‘pointless arty farty thinking.’
          My education is quite limited, but even I can see this. I often wonder how many on this site are able to hold down a job, But also have theory on that.

    • forthurst
      Posted October 13, 2011 at 11:23 pm | Permalink

      “The PPE courses at Oxbridge need to be scrapped and replaced with media studies or a course of similar calibre.”

      As far as I’m aware PPE was introduced to replace the Classics as an appropriate academic hurdle for administrative civil servants. It’s not for me to suggest bearing in mind all those who appear to have obtained a first in PPE that Classics is probably harder.

      As far as politicians are concerned, I would have thought there was no substitute for real experience: a commission in the Armed forces putting their lives on the line on behalf of a typically rebarbative collection of carpet chewing Neocons would seem appropriate.

      That politicians should all be indoctrinated by the same bunch of Marxist tutors seems highly inappropriate.

      • Disaffected
        Posted October 14, 2011 at 10:06 am | Permalink

        And there in lies the problem. Your last sentence is central to the failure of politicians and government, generally speaking. Why is there a necessity to have a course to become a politician?? Perhaps it ought to be revised to Politics, Public service and Ethics, another form of PPE..

      • Posted October 14, 2011 at 10:37 am | Permalink

        Where’s the like button?

        How about adding that after the military experience they should go and work in the real world – with a quota of places in the party held for people who have worked in the public sector. It’s a disaster that this government contains no-one with any real experience in education.

        They should listen to Alex Salmond on this.

  36. A different Simon
    Posted October 13, 2011 at 2:35 pm | Permalink

    Our politicians seem to be completely dellusional about the U.K.’s rank in the World .

    Their enthusiasm that the U.K. should donate money left right and centre far outweighs our actual ability to help .

    Just like the U.K. “leading the World” on unilateral reductions in CO2 emmissions when nobody else has the slightest interest in following .

    Can’t they get it into their thick heads that there isn’t an innexhaustible supply of taxpayer money for them to waste and that the golden goose is on it’s last legs ?

  37. Electro-Kevin
    Posted October 13, 2011 at 2:44 pm | Permalink

    “Extend and pretend cannot work. Deficits have to be curbed by spending less or raising more revenue. Weak banks have to be sorted out by raising more capital, selling assets, and making proper provision for losses.”

    Until you’re blue in the face, Mr Redwood.

    Never mind. We hear you.

  38. lola
    Posted October 13, 2011 at 2:58 pm | Permalink

    Excellent summary. The trick that needs pulling off is to get enough MPs (on all sides of the house?) to see this and act on it in our interests and not theirs of their party’s. Fat chance.

  39. badgerbill
    Posted October 13, 2011 at 4:01 pm | Permalink

    The EU and the Euro are all about Germany’s need to dominate either through military means or economic means. Herr Kholl indicated this during his term. The French will hang on to Germany’s coat tails as they have doen in the past.

    You are quite correct in saying that a common currency is not required. Cameron does not have the back bone to go to the country because he knows he will loose although a ‘No’ vote would strengthen his position. Billions of our money taken in taxes under threat of imprisonment are been used to prop up this failed experiment which we all know is doomed.

    It is time for a change at the helm before the country is dragged further in and more of our money is wasted which could be put to better use here at home. We have enough problems with too many unemployed and state employees being a law unto themselves with ever increasing salaries paid for by the poor. The current situation is little different than Russia under communism when the rulers had everything and the rest had nothing.

    It is time that the Tory right got a grip!

    • zorro
      Posted October 13, 2011 at 10:59 pm | Permalink

      Indeed, German foreign policy since 1871 has been about extending its control and influence within Europe. It is slowly slowly, inch by inch achieving its aim of economic control within Europe. This ‘crisis’ is quickening that process.

      With regards to the cost to Germany for this result. I think, relatively speaking in historical terms, it has been achieved rather cheaply for what it will reap in return.

      zorro

  40. rose
    Posted October 13, 2011 at 4:32 pm | Permalink

    Didn’t Nigel Lawson start the trouble by shadowing the D mark even before we went into the ERM? Wasn’t that what all the rows so beloved of the media – and which they of course took the wrong side over – were about? “Advisers advise, ministers decide…etc.”

    • lifelogic
      Posted October 13, 2011 at 9:34 pm | Permalink

      Indeed the great Alan Walters was it not. Still Lawson is right on the global warming religion.

      • forthurst
        Posted October 13, 2011 at 11:32 pm | Permalink

        Lawson is the same as Al Gore: a politician who has attached himself to an opinion on a subject on which he is entirely unqualified to speak.

        • lifelogic
          Posted October 14, 2011 at 5:34 pm | Permalink

          Yes but unqualified or not Lawson’s approach on GW (unlike Al Gore’s absurd hyperbole) is very sensible.

  41. Mike Fowle
    Posted October 13, 2011 at 5:05 pm | Permalink

    Basically, I think you are right. I don’t think that the ERM was an unmitigated disaster, however. I believe it did squeeze inflation out of the system rather than create it. But once it had served its purpose we stayed in too long. As Tim Congdon so memorably said when asked when the recession would end: “On present policies – never”. Apart from the Euro, I believe we are right to concentrate on reducing the deficit now, but I wonder if we are making a similar mistake in our economic policies, in clinging to one idea?

    reply: It was shadowing the DM that gaveus the inflation in the first place

    • lifelogic
      Posted October 13, 2011 at 9:45 pm | Permalink

      I don’t think that the ERM was an unmitigated disaster it certainly was it cost me about £3M.

      Positive feed back – economy bad – so weak pound – so problem with DM rate – so interest rates up – so economy weaker still – so weaker economy and even weaker pound …….. Da capo.

      At least engineers and scientists usually understand positive feedback systems – alas it seems not PPE graduates with double firsts or people like Major with half an O level or whatever it is. They are as bad as each other – then again perhaps Major has a better genetic excuse.

      • lifelogic
        Posted October 13, 2011 at 10:16 pm | Permalink

        Now we have Euro positive feed back – Euro in trouble, government too big – s0 tip more tax payers cash in, have more regulations and make the state sector bigger still – so the economy declines further – so the euro is in even more trouble – so more tax and tip into the black hole ………. – Da capo.

        Self strangulation.

        Interestingly ignorant arty reporters, usually BBC types, often seem to think “positive feed back” is a “positive thing” when discussing global warming. Thus showing the usual complete lack of even a basic understanding.

        • Caterpillar
          Posted October 14, 2011 at 12:24 am | Permalink

          To lifelogic on system dynamics: I agree, if someone suggested to the “arty” BBC that they instead use the terms “reinforcing” and “balancing” they might manage to reduce such notational errors. That said, give them a system with more than a single loop and a couple of delays and I think they might struggle to think through the dynamics. (You’d have thought with all the climate change stuff, the econometricians coping with endogeneity in their models and even engineers getting the simple ‘Senge’-fied version in their studies, that this would now be in the ‘national’ curriculum, but perhaps Mr Gove prefers a touch of humanities to thinking.)

          • lifelogic
            Posted October 14, 2011 at 8:38 am | Permalink

            The other thing they (BBC think types) fail to understand is bus (train) occupation – people tend to catch the full ones so when you tell them average occupancy depot to depot is usually in single figures they do not believe you.

            Telling them about sampling theory is a waste of breath the one they caught was full and that is that. They clearly replace 70 cars and reduce congestion they will say!

          • lifelogic
            Posted October 14, 2011 at 8:49 am | Permalink

            Mr Gove seems to be basically a good egg but there is rather more to understanding the world than just remembering a few irrational and arbitrary spellings and dates and names in history.

      • lifelogic
        Posted October 14, 2011 at 8:45 am | Permalink

        I remember the ERM as London streets full of repossessed properties nearly all building work stopped – apart from councils pointlessly reworking all the junctions with extra lights, silly bus and bike lanes and large new islands blocking all the roads.

        If we come out of the ERM interest rates will have to go up further they said! The fell like a stone total insanity by Major who took us in – encouraged by the Foreign Office.

  42. oldtimer
    Posted October 13, 2011 at 6:00 pm | Permalink

    Time and time again, establishment group think has turned out to be wrong and the precursor of disasters. You have described the latest example. UK energy policy, in so far as there is one, is another contemporary example.

    • lifelogic
      Posted October 13, 2011 at 10:19 pm | Permalink

      Energy policy seems to be based on the Tellytubbies – perhaps Huhne rather liked the primary colours and turbine landscape.

  43. Quietzapple
    Posted October 13, 2011 at 6:28 pm | Permalink

    I gather the Americans and Chinese are keen to save the Euro too.

    • lifelogic
      Posted October 13, 2011 at 9:46 pm | Permalink

      Fine let them pay for it I do not want to.

  44. British National
    Posted October 13, 2011 at 6:32 pm | Permalink

    I well remember the ERM My mortgage rate went up over 2% in one day and I was panicking that I could not afford the new repayments. Just 24 hrs later, the Government were humiliated by the Market and lost Billions on the foreign exchange markets, defending the pound over a one day period. Then Norman Lamont the Chancellor of the day, had to humiliate himself and John Major, from a microphone in front of NumberTen ,when he was forcved to say that The UK Government had left the ERM BANG!!! The pound fell quite a long way on the markets, but we recovered to a good decade of growth. No Longer, if the Cameron/Clegg Brigade support the Euro game, we are in for some huge debts for the next 25 years.

    Mr Redwood you are again right, but cannot you stop this mess, with the Votes of Others with you?? The Government is “Playing Politics” thinking of their Voter Plans. It will end end in disaster if no sensible, experienced economic or business voices cannot be heard, right now. Mr Redwood, what about an open letter to Number Ten? I tried to get a Petition going to make you the Chancellor, but No 10 refused my Petition on the grounds, it did not qualify??? Sometihng to do with Honours? Why cannot the Public and your Bloggers be allowed a Petition to offer you the Chancellor job? They allowed a Petition to get rid of Brown!! Please aske the Government why voters cannot place their views on positions on the Government being changed, if they have lost faith in the present Occupant

  45. Samuel
    Posted October 13, 2011 at 6:43 pm | Permalink

    John, why aren’t you posting the links on twitter anymore?

  46. BobE
    Posted October 13, 2011 at 7:30 pm | Permalink

    The Elite need to maintain the gravy train that the EU has become. Else where will their jobs com from after the next election?. Kinnock and wife earnt a cool million out of being commisoners.

    • lifelogic
      Posted October 13, 2011 at 9:46 pm | Permalink

      Just their pensions are worth more than that surely.

    • Jon Burgess
      Posted October 13, 2011 at 11:27 pm | Permalink

      Neil Kinnock is a prime example of how promises of wealth and favour can be used over time to poison a politicians mind on the issue of Europe. (Maybe darker arts were at work also – like blackmail? Who knows.)

      Should we be surprised at such weakness in the face of these tactics? Before the expenses scandal I might have been more understanding, but I can’t help but feel that supporting the “right” politics is now employed by some as a route to great and unimaginable personal fortune.

  47. PedroelIngles
    Posted October 13, 2011 at 7:53 pm | Permalink

    Common Sense, History, Economics and the blatantly obvious are all totally ignored by the unelected EU elite when it comes to the Euro. Doubtlessly their own personal fortunes are securely kept in Swiss Francs rather than the Euro which they milk and convert until it collapses. The EMU and its wobbly currency is a purely political matter driven by Communists and Quasi-Communists to form another totalitarian state namely the European Soviet Socialist Republic with considerable personal gain en route. Not quite a Fourth Reich and neither Stalinistic (objectors are not being shot – yet) but it must fail as the Markets will win in the end.

  48. Posted October 13, 2011 at 8:20 pm | Permalink

    I think, at last, the game is up. Ironically it may be Mr Barosso’s speech today and bad figures coming out of Germany that were the last nail in the coffin.

    John, you are absolutely right: the world will not come to an end when the Euro ends.

    The most sensible thing to do now is for the Eurozone governments to put in place a plan of action to manage conversions to individual currencies.

    They will need to bypass Mr Barosso and find a government which is willing (eager, perhaps) to say enough is enough. I suspect that could be the Netherlands.

    Germany and France, who are on a collision course if they carry on as they are, can save face this way.

  49. Mark
    Posted October 13, 2011 at 9:49 pm | Permalink

    I took a look at our trade with the EU. Year to date (Jan-Jul) figures from HMRC show:

    Exports total £92.7bn, imports £116.8bn. That’s a gap of £24.1bn in seven months, or a rate of about £41bn p.a. that we could do with closing.

    Looking at the detail, we find among exports that £18.2bn is oil, £9.8bn nuclear reactors, boilers, machinery and parts, £8.2bn is vehicles and parts, £6.6bn is electricals, TV and AV, £5.8bn pharmaceuticals, £3.5bn is organic chemicals, £3.3bn is plastics, £2,7bn is precious stones, jewellry etc., £2.6bn is optical/photographic/medical equipment, another £2.6bn is iron and steel, and at number 11 is £2.4bn of aircraft/spacecraft and parts. It is noticeable how dependent that list is on oil and petrochemicals and metal bashing. Of course, the oil element is in decline as production drops like a stone in response to Osborne’s taxes. Many of the other exports are under threat not from the EU but from Chris Huhne’s disastrous energy policy, which becomes even clearer when we examine our imports.

    Top of the list is £19.4bn of vehicles, then £14.0bn of nuclear reactors, boilers, machinery and parts, £10.2bn of electricals, TV and AV, £7bn of oil products (we have lost refining capacity), £5.7bn of pharmaceuticals, £4.9bn of plastics, £3.7bn organic chemicals, £2.9bn optical/photo/medical equipment, £2.9bn paper and paperboard, £2.3bn iron and steel, and £2.0bn beverages, spirits and vinegar at number 11.

    Many of the items appear in both lists. That shows how Sovietised some production has become, with parts being shuffled around the EU to build finished products. Disruption from a Eurozone breakup is likely to be far less severe than the consequences of the breakup of the Soviet Union on their production. In some cases, there will be specialisation: cancer drugs in one country, antibiotics in another perhaps.

    Lurking in subcategorisations is the massive deficit in food items: we imported £15.0bn worth, while exporting just £6.6bn. Perhaps all that rapeseed for biodiesel and sacrifice of fisheries and gold plated health and safety regs isn’t such a good idea.

  50. Jon Burgess
    Posted October 13, 2011 at 11:13 pm | Permalink

    Of course you are right on this issue, as you were right on the ERM and not joining the Euro in the past. It’s just a shame that your party does not agree with you. Or on reintroducing selection in education (other than that insidious selection by faith or wealth or both, so beloved of Prime Ministers past and present) . Or on basic economic policy. Or on Lord knows what else besides.

    You, like a handful of your colleagues, remain conservative but your party has been usurped by a liberal clique under your noses. Will you fight to wrest it from them, or tell them where to go and leave them to their fate at the next election or just muddle on as though nothing has changed? Time is running out, and despite what you think about UKIP, they will benefit from your inaction.

  51. Atypical
    Posted October 14, 2011 at 12:18 am | Permalink

    Are we going through another version of ‘peace in our time’ on an economic-war footing? Cameron waving the white flag to Merkel. Germany leading europe at any cost and under any conditions. France selling out.
    Oh drear, history goes round and round but with different players.
    If only we someone like Alec Salmond leading us, putting our country first.
    Where is our leader to restore this country?

  52. MajorFrustration
    Posted October 14, 2011 at 12:42 pm | Permalink

    These are the same people who are dealing with above level inflation target for the last sixty months. Something soon is going to snap.

  • 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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