Month: October 2011

We are told that the government has brought the debate on the EU referendum forward to today so the Foreign Secretary can join  the debate. The debate will be led by Mr David Nuttall, the mover of the motion.
            Some have suggested the government switched the date because they want to stop the lobby of Parliament by the Peoples Pledge on the Thursday in favour of a referendum. I feel sorry for all those who had booked their tickets and were ready to come on what they thought would be an important day. However, I am prepared to give the government the benefit of the doubt. The Foreign Secretary does have to be in Australia on Thursday, and  his wish to be called in the backbench debate does show he is taking it seriously.
            I suspect the Conservative leadership wants  Mr Hague to speak as  a respected Eurosceptic. If the Speaker calls him to speak in Mr Nuttall’s debate, as doubtless he will, the Leadership hopes that some undecided backbenchers will be swayed by Mr Hague’s arguments and pedigree on the issue. It is for them  Mr Hague of the burning building speech to the rescue, the man who said the Euro would consume all it devoured in flames.
               Eurosceptic backbenchers are increasingly looking at what Ministers  do, not at what they say or have said. They judge Ministers not on words but on whether they resist powers going to the EU, whether they fight to stop the ever advancing swathes of EU law and regulation, whether they set out an alternative view in their area from that of the Commission. They want the Foreign Secretary to tell them how he is going to reverse the tide of regulation and powers which is still flowing to the EU.

             Some MPs present will  remember that in 1997 when Mr Hague became leader he argued that the UK should keep open  the possibility of joining the Euro. He came later to the view that the Euro was a bad idea. Today he argues that the Euro is a good idea for other countries, and wishes to help them make it a success by allowing them many more central powers. It is  apparently a burning building which only burns the UK.
           The government is likely to  rely on three main arguments, I suspect.
           The first is that we need to stay in the EU in order to trade with Europe. This is a silly argument. The USA, Norway, China all trade successfully with the EU without being a member. International trade is now guaranteed under international trade rules from the WTO. Germany will still want to sell us BMWs, whatever we say about our future relationship with the EU. They sell us more than we sell them. Our trade is not in jeopardy, whatever the British people decide.
           The second is  we need to stay in to have an influence over the rules for that trade. Well the US, China and Norway do not sit round the table and influence the rules. They can trade under WTO rules. Some of the rules the EU dreams up apply to us and not to them, and do us economic damage. The demand for a renegotiation anyway would not stop  us influencing  discussions around the table, if the British people vote to stay in. It means if successful we could have more influence.
          The third is the doctrine of the unripe time. Ministers  – and their  friend and ally in this, Mr Miliband the Labour leader- will say that as the Euro zone is in crisis, it would not be fair for the UK to raise the issue of our relationship now. Why not leave renegotiating and seeking powers back until a convenient date like 2015, after the next General Election?

           There are two great reasons for renegotiating now. The first is the EU needs our consent to Treaty changes to legalise what they are doing and to allow them further powers for Euroland. The second is, once the new Euroland has its strengthened powers within the EU the UK will by definition be in weaker position. A relationship which the government and Opposition  thinks works well at the moment would not work so well when Euroland meets more often and forms a clear and strong inner wheel to the EU.
            If the British people wish to stay in this new EU they will need and want a much looser relationship. My suggestion is a simple one. In return for letting them go ahead with full scale union we will need to have the right to opt out of measures we do not like. This must apply to past measures as well as to future ones. We would offer them the chance to repeal the measure for all EU members, or amend it to mutual satisfaction. If they do not wish to do so we must have the right to repeal it in the UK.
            That would be a single simple technical  change to the Treaty to balance their Treaty change to allow them to bail out Euro members with Euro and EU cash.
              I think  MPs today should  thank the government  kindly for its views, but  vote for the motion. It is strange to see the Lib Dems in the Coalition impose a three line whip to vote down a referendum, when it was their policy to demand an In/out referendum on Europe. It is even stranger to see Mr Miliband use the might of a three line whip to ensure the government he opposes succeeds in defeating its own backbenchers. Of course we all want Euroland to sort out its debt, deficit and currency problems. We are also very keen to ensure that the UK avoids the bills and as much of the damage as possible, as a reward for keeping out of this dangerous scheme. Minimising the damage to us requires strong minded negotiation.

           There was some good news in the September figures for public spending and borrowing. So far this financial year spending is only up 3%, a bit below the forecast. Meanwhile tax revenues are up 5%, usefully ahead of costs, even though they are down on forecast.  Between April and September this year the government added  £54 billion to total state borrowing, down £3.4 billion on the same period in 2010-11. 

             The Treasury tells us this means we are on track. The government should they say be able to limit additional borrowing to £122 billion for 2011-12, compared with  £137 billion in the previous year. The government  needs to redouble its efforts to explain to people that it is only trying to cut the growth rate in borrowing. It is not in the business of paying back debt.  The pace of planned deficit reduction is quite slow in years one and two of the plan.

                The more worrying figure was the Public Sector Net cash Requirement, which came  in at £19.9 billion. The Treasury says not to worry. This was inflated apparently by interest payments on the debt. It is still cash outflow, and those interest payments are going to continue to rise, as the government continues to borrow more.

               Over the year to June 2011 the  number of public sector employees fell by 240,000, whilst the number of private sector employees rose by 264,000. The consolidated debt figure of £2.3 trillion which includes the state owned banks is still very high. It argues for the UK government  to find ways of shedding more of its banking assets and liabilities. That  is the quickest option to cut or limit the debt, and to cut the risks taxpayers are still running by owning these companies.

           Mr Barroso made clear in his recent speech in Brussels to the European Parliament that the EU needs more integration. To him  the answer to every tension and problem is more EU central power.

            The Commission plans a “single coherent framework for the better economic governance based on the community method. …The proposal will ensure the compatibility between the euro area and the Union as  a whole.. It will be done in a way that aims to integrate the Euro Plus Pact because coordination and integration must be carried out on a single Community level. ….It is essential that we do not create a division between the 17 members of the Euro area and the 27 members of the EU – most of whom wish to join the euro….”

This is a bureacratic way of saying the EU wishes to control the UK economy as well as Euroland ones.

 His detailed measures include rapid implementation of the 6 pack (economic surveillance and budgetary control) and incorporating them into the “Community” method, as opposed to just confining them to the 17 euro members.

            Despite UK government messages to the contrary, much of this work programme applies to the UK. The banking system measures apply to the UK, even though the UK authorities say they have done the job and all is fine. Mr Barroso wants more EU financial regulation which will affect us, and still of course presses the Financial Transactions tax which the Uk government says in certain circumstances it will oppose.

               Mr Barroso says “We have to complement the monetary union with a real economic union”. “We will further reinforce the role of the Commissioner for economic and monetary affairs in full respect of the Treaty”  … “we urge for more discipline, more integration. It means more Europe…”

                 This is all clearly on the public record. The UK government has to wake up to this reality. It has to say we cannot possibly go along with this. This huge push for more control and more power is why the UK needs now to negotiate a different relationship.  Mr Hague’s burning   building is well on fire. We need to be well outside the burning Euro building, and  keep it well hosed down to stop  catching light to the UK. We need to control the hose ourselves.

               The latest YouGov poll shows 67% of the public are for the motion on Monday and only 16% against. It also shows that 74% think MPs should defy their 3 line whip if they wish, and only 15% think they should obey it.  47% want to negotiate a new relationship with the EU, 28%  want to pull out, and only 15% want to stay in on current terms. It will be interesting to see how many MPs are in tune with public opinion in all three main parties on Monday.

             I am all in favour of saving energy, of promoting fuel efficiency, saving the greenfields and the  best heritage of England. Much of the green agenda is popular. Many are happy to recyle, to insulate, to buy more fuel efficient vehicles when money permits. No-one wants to see the Green Belt concreted over or the ANOB sprout an industrial estate.

             What is more contentious is a green agenda built around cutting carbon dioxide emissions. The government embarked on several talismanic policies to promote this form of greenery. Several are now experiencing some difficulty.

            The idea that London does not need any more airport capacity has come up against a concerted business lobby saying the UK needs more flights to emerging market centres if the UK is compete with Frankfort and Paris, New York and Los Angeles. The Mayor of London advocates a whole new London airport to the east of the capital. Others want more runway capacity at Heathwick, with a better link between the two main London airports.Exporting the airlinks abroad does not cut oevrall carbon dioxide emissions.

             The proposal for a High Speed train from London to Birmingham, Manchester and Leeds is encountering strong opposition. Some think it is too dear and will be  too heavily subsidised. Some doubt the need for it. Some dislike the impact it will have on the countryside where the track would be placed. It is by no means clear that such long distance fast trains do save carbon dioxide when you add in the car and taxi rides to get to the stations.

            The idea that the Uk will pioneer high cost  carbon capture technology for power generation has just been hit by the cancellation of the Longannet proposal. Business wants cheaper energy. Carbon capture is both untried and expensive.

             Some  renewable power has been delayed  by Mr Huhne’s indecision over renewable subsidies. There are rumours that he is going to have to cut back on the generous regimes made available to encourage solar and wind energy.

           This autumn there is a public backlash against dear energy. All three main political parties, who have been united behind the carbon dioxide agenda, are saying  the answer to higher prices lies in more competition and shopping around. I am all in favour of more competition.It is the best means to stop unacceptable profit margins.  However, the energy companies do need to make some profits, so they have the money to invest in the large amount of new energy plant this country badly needs. If the investment is to be in carbon capture and storage and in certain renewables it will be much bigger than conventional power generation. This will require bigger profits and higher bills for longer to pay for the investment.

                Carbon dioxide policies are now adding nearly  10% to the total cost of typical bills. This is going to get bigger if current policies continue. Energy is now hot politics. People want a break from high and rising bills.

                   The BBC climate change  show this morning told us there is a new independent scientific study which proves the world’s land surface is now 1 degree hotter than in 1950. They jumped from this to imply  that therefore the global warming powers of carbon dioxide have been proven. We need to know if the temperature increase was consistent , correlated with the build up  of carbon dioxide. We need to know what other explanations for the warming  they have examined and rejected. I think from what the BBC said the paper does not go into causes . If it did not the BBC should say so, instead of implying that this is the long awaited proof after the East Anglia problem. The only genuflection to sceptics was the statement that there remains an argument about whether to tackle carbon dioxide now or to leave it until the world economy has grown more.

Many Conservative MPs want a new relationship with the EU. They fought the last General Election saying they wanted powers back. They value a relationship based on trade and co-operation, but think the EU regulates, taxes and interferes too much. They were pleased that the Coalition Agreement, despite Lib Dem enthusiasm for the EU, said no more transfer of powers.

Since the government started they have seen a continuing high volume of EU regulation which affects and some thinks damages the UK economy. They have seen the government opt in to new powers in Criminal Justice and  go along with the increasing ambitions of the EU in foreign affairs. They have seen the Lib Dems get their referendum on voting systems. Many now want the Conservative vote on the EU that was Conservative policy pre Lisbon but ceased to be on ratification.

There are various EU initiatives being undertaken by a variety of Conservative MPs. Bill Cash has tabled a Bill to seek to sort out the growing legal and sovereignty difficulties.  Bill through the European Foundation keeps up a stream of informed comments on the evolution of the EU. As Chairman of the EU Scrutiny Committee he and his colleagues daily seek less or better rules and regulations, and try to strengthen the government’s hand in negotiations about the new measures.

Peter Bone has proposed a Bill to repatriate our fisheries. The way our fishing industry has been affected by EU policy is a long running sore. The Conservative party has often argued for UK control of UK waters. Peter Bone is a leading light of the Backbench Business Committee, the body which can choose Parliamentary business for the days the government allows backbenchers to select what happens. He is a doughty fighter for less EU in the UK. He is backing the approach of selective repatriation of powers, the approach set out in the last Conservative manifesto.

From the new intake is the independent  and tough minded campaigner, David Nuttall. He has tabled the motion for a three way referendum which will now fall for debate and vote on Monday. Many Conservative MPs have apparently told him they want to vote for his motion. Now there is some suggestion of a three line whip against we will have to see how many show resolve to do so if and when advised not to. The Chairman of the 1922 Committee and other senior MPs are advising a free or less heavily whipped vote

George Eustice set up another body to study the problem of the EU and come up with proposals for alleviating the obvious extremes and tensions for the UK. So far his initiative seems to have been overtaken by events, though he would say it will in due course come up with practical proposals that may command majority support. It will be interesting to see how he votes on Monday. I note his name is not yet on the motion.

There is a growing sense of impatience over the whole EU issue in the Conservative Parliamentary party. The gathering Euro crisis and the likely substantial strengthening of EU central powers worries people. The way the UK is being dragged into paying some of the bills of the folly of the Euro is a growing concern. The avalanche of new regulations which could make the UK more uncompetitive angers many Conservatives. Most feel the government should draw up a list of the things the UK needs to grow faster and create more jobs, and then negotiate a position for the UK on the back of the constitutional Euro crisis which allows the UK to carry them through, whether the EU wants to as well or not.

Most Conservative MPs are focused on the need for faster growth and more jobs at home. They do  not take kindly to the EU if it gets in the way of achieving just that. The current situation is pushing more to the radical view that the UK will have to leave the EU, as they do  not see progress being made with an approach based on sceptical engagement with the project of European Union. Most still hope the UK will negotiate a better relationship and would like the government to  try.  This of course remains a federalist Parliament, as there is no Conservative majority, and the other main parties are fully committed to EU government. Only a handful of MPs would currently vote to pull out unilaterally and rapidly. In the words of Monday’s motion, there is probably overwhelming   majority support amongst Conservatives in an unwhipped vote for a new relationship based on trade and co-operation.

           The Bank of England and some commentators seem to think the higher rate of inflation we now have was a necessary side effect of action to boost the growth rate. They do not apologise for almost two years of inflation above the   2%  target, or for the very high level of 5.2%/5.6%  (CPI/RPI)  it has now reached. They imply that if they had not taken monetary action to boost price rises, we would be experiencing even worse results on growth.

             In the 1970s this country learned a very expensive lesson. It could not keep on borrowing and inflating its way out of debt. Then inflation was  considerably higher than  today. There were  high levels of public borrowing. High inflation and excessive borrowing  depressed activity and led to a trip to the IMF and interest rates above 15% for longer term loans by the government. Government resolved to mend its ways.  In the 1980s better controlled public spending and borrowing, and lower inflation, enabled faster growth.

            In the last two years inflation has lost us some growth. Price increases have outpaced wage increases. Consumers have been able to buy less as a result. This has knocked demand. The high price rises in energy have adversely affected the UK’s attractions as a manufacturing centre.

           The government’s search for a stronger growth policy has to include as a central requirement, bringing inflation down and keeping it  down. Inflation is not yet in the dangerous territory it reached in the 1970s. Most commentators think it will come down in 2012. It is most important the Bank helps it down and then keeps it down. Taking the fear of price rises out of the system would do more good than printing more money. Reassuring people that there will be no further squeeze on their real incomes from prices rising faster than earnings would be an essential first step.

          The Bank needs to set realistic interest rates which are fair to savers as well as to borrowers and which bring base rate back into play for the private sector. Today base rate only seems to  apply to the government. The Bank  will find if it delivers its first duty to keep inflation to around 2% that will make a better contribution to growth than monetary experimentation linked to faster price rises.

           The government has this week acknowledged that energy price rises are a problem. Shopping around, and creating a more competitive market are part of the answer. So is pursuing an energy policy geared to providing more good value power from the best available sources. Mr Osborne has said the government no longer wishes to outdo the EU with dearer power and more rapid moves to carbon dioxide targets. The government needs to recognise that we are trying to compete with India and China as well, and energy is an important cost. They also need to see that we need more demand, and that requires lifting the inflationary burden from family budgets.