John Redwood (Wokingham) (Con): I draw the House’s attention to my entry in the Register of Members’ Financial Interests.
The good news is in the forecasts. I am delighted that the Government have gone back to the forecasts they put to us in March 2016, when they rightly said that the UK economy would grow by 2% in 2016, and by little over 2% in 2017. I welcomed those forecasts at the time and held to them throughout the past year. I am delighted that the Treasury has now largely backed those more sensible forecasts.
However, we need to ask why the Treasury, the Office for Budget Responsibility, the Bank of England and many other independent forecasters got the forecasts so comprehensively wrong in the summer of 2016, and why the autumn statement forecasts were still so wrong at the end of last year. I wonder whether we need some efficiency improvements in their economic forecasting departments. Do we really need all those forecasters in the OBR, the Treasury and the Bank of England, if they are going to get it so comprehensively wrong and make the Chancellor’s job so difficult? He is trying to chart a consistent and stable course through a set of forecasts that are rather like a wild ride to some kind of nightmare world, only to discover that there is no nightmare but rather a good outlook.
Alison McGovern (Wirral South) (Lab): The right hon. Gentleman says that we ought to get rid of forecasters in the OBR and the Bank of England if they get the forecasts wrong. Plenty of modellers and forecasters in the City of London got their forecasts wrong before the crash in 2008, but I am sure he does not believe that we should end the banking trade in the City of London.
John Redwood: I do not think that the hon. Lady was listening to what I said. I asked whether we have too many of them, because we do not need quite so many to get it wrong; I think that we could be more economical in getting it wrong, if that is what they persist in doing. Certainly, the official forecasters completely missed the banking crash of 2008-09, which some of us did not miss. Then, of course, they got the Brexit impact completely wrong. The Scottish National party is redefining what it believed at the time of the remain campaign. I remember quite clearly it supporting a campaign that said, in terms, that those official forecasts were right—that confidence would be damaged, and therefore consumer expenditure would fall, whereas it has actually gone up very strongly. It said that investment would collapse, but it did not, because the demand was there, and companies need to meet it.
George Kerevan (East Lothian) (SNP): I clearly remember being in the Treasury Committee when we interviewed the Chancellor, and clearly remember holding him to account for his bogus forecasts, which were clearly over the top, clearly bound to turn people off and clearly led to the wrong result on 23 June.
John Redwood: I am delighted that the hon. Gentleman shared my scepticism. I just wish that he had said rather more at the time when we were fighting the referendum campaign, because I do not remember him being on my side or making similarly helpful comments before people went to vote.
Mark Prisk (Hertford and Stortford) (Con): One of the difficulties I found when I was Minister with responsibility for construction was that statistics from the Office for National Statistics are often incomplete and based on only partial information. Does my right hon. Friend agree that if forecasts were more infrequent, we might get the numbers right more often?
John Redwood: That might be worth looking at. We need to consider why the forecasts went so comprehensively wrong on this occasion. We also need to probe further why they went so wrong in 2007-08, when they disrupted the world economy in the west. They disrupted the Labour Government very dramatically, because there was absolutely no foresight about the consequences of the actions they were taking over the banking system, first allowing it to expand too fast and then collapsing it far too quickly, with awful consequences, as we know. I am delighted that I can fully support the Government’s latest forecasts, because they are in line with where I have been throughout.
That brings me neatly to the monetary situation. The Government need to recognise that there is a new move afoot. We will probably see an interest rate rise in the United States of America next week, and we might see two or three rises of 25 basis points over the course of this year, because it recognises that its recovery is sufficiently advanced. There is quite a bit more inflation in the American system, and it needs to start to normalise interest rates a little more. We might even hear from the European Central Bank tomorrow that it is no longer thinking of cutting rates further; they are already negative. It might need to think in due course about tapering its rather generous quantitative easing programme.
We are moving into a world where interest rates tend to go upwards, rather than going downwards or staying stable. If we are too slow in responding to that mood, we will find undue pressure on the pound. I do not think that has anything to do with Brexit; I think it is to do with interest rate differentials. The pound started to fall away in the summer of 2015, and most of the devaluation we have seen to date actually took place by April last year, before the vote, but there has been more pressure in recent weeks. When people look at these interest rate differentials, they will say, “Why don’t I hold my money in dollars? Not only will I immediately get a pick-up in interest, but I think there will be further rate rises in America.” We need to factor that in. That is why I welcome the Government’s decision to increase public spending in certain areas. As a constituency MP, I want more money spent on social care. I represent a high-cost area of the country, where the shoe is pinching and there are more people needing that assistance. The Government were right to make a sensible contribution, and I look forward to seeing the details.
Stella Creasy (Walthamstow) (Lab): Will the right hon. Gentleman give way?
John Redwood: I am running out of time, so I cannot take any more interventions. I welcome the decision to have more money for schools and the NHS, because there, too, my area has been poorly funded for many years. We are looking forward to getting a much better settlement for our schools under fairer funding, and I hope that there will be something for our schools as a result of the Chancellor’s sensible decision to make some increases. I think that colleagues will generally welcome the Government’s attention to schools, the NHS and social care funding. I hope that the rate relief fund will be generous, because I represent an area where there are likely to be substantial increases in the rates, but where businesses are not necessarily generating the extra turnover that makes it easy to pay those sharp increases. We particularly need to look after small and growing businesses. I hope that the fund will be well targeted and will deal with what will otherwise be a series of tough, hard cases.
I welcome the extra spending and relief on tax, because I am not as worried as some about the level of UK debt. We need to remember that the figures the Government are giving us are for the gross debt. They are saying that the debt, at 86% of GDP, is high and needs to be brought down, but of course quite a bit of that debt is owned by the Bank of England on our behalf, so we owe the money to ourselves. The adjusted figure is about 65%, which is a perfectly reasonable level, particularly at a time of very low interest rates. Whatever happens with advanced country monetary policies, we all think that interest rates will remain abnormally low for quite a long period of time—well below the averages we were used to before the banking crash.
This is not a bad time for the state to borrow, particularly if it is investing in projects that we need and that may have some return. We definitely need better transport and strengthened broadband, much of which can be done by private finance. We also need better flood control and, at the same time, more water reserves for the fast-growing areas of the country. We need a lot of extra housing, which brings with it the need for more provision of schools and hospitals.
If we are to carry on growing at something like the rate at which we have done in recent years, we have to accept that there is a backlog of infrastructure requirements—everything from roads to water supply, through to getting our broadband up to speed and sufficient in capacity. I want as much of that as possible to be financed in the private sector, and a lot can and will be, but the Government have an important role in all these areas. They have to offer licences and organise planning permissions. They may need to pump-prime. Parts of the networks may not be financially viable without Government money. That is certainly true of our road system, because we have a system that is free at the point of use, owned by the state in all its manifestations. As we need better roads, Her Majesty’s Government clearly need to invest a decent amount in roads.
I note that the Budget was mercifully short of measures on the tax side, although I am always in favour of measures that cut taxes, rather than increase them, and I would have welcomed rather more of those. The Chancellor understandably wishes to go to having one Budget a year, in the autumn. We look forward to a Budget that deals with taxation in the autumn. He has set out a number of ideas for consultation, or perhaps pre-announcements; I trust that there might be some modification to those by the time we get to the proper Budget in the autumn. I urge him to understand just how crucial flexibility is to our economy, and that flexibility comes from having so much, and a growing volume of, self-employment. We need to ensure that it is as easy as possible to get into self-employment, and that it is as worthwhile as possible when people are successful.
I always think it is a good idea to try to confine taxes, and certainly tax rises, to things that we do not approve of very much. We have quite a number of sin taxes, which are rather easier to sell to the public. We should not go out of our way to tax work, enterprise and success. I know we have to do some of that, because we need a lot of revenue for the range of public services we offer, but our taxes on those things are quite high enough. We might actually find that we raised more revenue from more work and more enterprise if the rates were lower, because there is definitely a beneficial effect if we can get our rates to a competitive level worldwide. We need to understand that other countries around the world are getting the idea of cutting tax rates. The new President of the United States of America is working with Republicans on the hill on a major set of tax proposals that could cut American corporate tax rates and income tax rates dramatically, which would give America an important competitive advantage and make it a much more attractive place for talent and inward investment. We need to bear that in mind as we go into our autumn Budget cycle here, because I want the UK to be the most competitive major economy in the world.
My last point, in response to the previous speaker from the Scottish National party, the hon. Member for Dundee East (Stewart Hosie), is that he should not start painting this picture of misery and collapse in three years’ time, given that there was no collapse immediately after the vote. Were we to end up on World Trade Organisation terms, we would collect £12 billion in tariff revenue, which we could give back to businesses and consumers here; other countries would collect only £5 billion in tariff revenue from our exports to them, so we would be better off financially in that transaction. We would also be better off because if countries placed large tariffs on food exports to us, which would be an extraordinary type of self-harm on their part, we would presumably substitute a lot of imported food from cheaper parts of the world.
March 9, 2017
Forecasters suffer from “group think”, “state sector think” and “what does the treasury/chancellor/government want to hear” think.
They are not genuine forecasts. We should only take forecast seriously if the forecaster has put ÂŁ100K of their own money on them being right. Even then these largely lefty dopes would struggle.
March 9, 2017
Hammond has made a huge mistake ratting on NI. Trying to claim is was not ratting on the manifesto is another huge mistake on top of the first one. It is very clearly a blatant lie. What is the JR view?
Hammond would be very wise to reverse it and to further to de-rat on Osborne’s IHT promise of many moons ago while he is at it. The increase is a huge mistake economically anyway.
The government should be encouraging the rather efficient “gig” economy and business in general not endlessly mugging it. Increasing the benefits available to the self employed would be a big mistake too. Encouraging people to abuse the sick pay and take period of unemployment too.
March 9, 2017
So now we see the Osborne/Treasury doomsday line resurfacing. The tax increases were due to Brexit. So that’s what we can expect to hear for the next umpteen months. What rubbish We knew Hammond was a Remainer and now he is punishing us for our decision and preparing to hand over Billions to their mates in the EC.
Despite your protestations/assurances what a number of us thought would happen, seems to be starting.
March 9, 2017
As JR says, Article 50 obliges us to pay them nothing. Any billions paid would be charity, a gift out of the kindness of our government’s hearts.
March 9, 2017
The last part of your speech was the most valuable, pointing out that organisational issues aside, we would be far better off with tariffs between the EU 27 and ourselves than without.
Businesses and politicians alike need to bear in mind the additional ÂŁ7bn in income to the country when they make a paranoid call for membership of the so-called Single Market and Customs Union.
With modern computer systems there need to be no customs clearance checks at Dover or anywhere else. When we were importing boats from the USA there were no delays at the port and I cannot remember once finding a boat that had its shrink wrap cut open for an internal inspection. The import tariff was a miniscule 1.7%, by the way.
March 9, 2017
I get the impression that the EU contributions are paid by the tax-payer and that CBI members and international businesses are net recipients of EU largesse.
I cannot other wise explain their dogged support for the EU.
March 9, 2017
The striking thing for me about economic forecasters, is that despite being so wrong, so often, politicians still keep listening to the same old sources that have an ulterior motive and an agenda to push. If we were talking about weather forecasters, people would go elsewhere by now, or sack the incompetent ones who weren’t worth a candle.
As far as the 2008 crash is concerned, even a ten-year-old could see it was all going to go bang, because the indicators were all there to point to it. In the case of Brexit, the indicators that there might be a crash if the UK voted to leave the EU, were absent. I suggest that in each case, vested interests played a massive part in trying to sway people toward a particular way of thinking, so we need to be very suspicious of the so-called ‘experts’.
As far as George Kerevan (SNP) is concerned, I would readily bow to his knowledge of aviation history, but his party’s stance on the EU is absolutely ridiculous, and it astounds me that any party could be so wedded to such a flawed policy that would seek to ruin an entire nation in such a dramatic way. I am left to wonder which forecasters the SNP have relied upon for their own guidance – Andy Pandy’s school of economics maybe?
Tad Davison
Cambridge
March 9, 2017
Forcasters are no better than poker players although I would say poker players have more skill.
It runs in the same category as climate change. A pseudo science dressed up to look respectable.
Breaking a manifesto pledge was par for the course. How can you tell I’m lying. My lips are moving.
The idea that the Tories are low tax business friendly is now well and truly juncked.
It makes me wonder what Brexit will look like.
March 9, 2017
I see no mention any where about the cuts the justice minister has made to the NHS budget of billions of pound in extra compensation for bad medical treatment of patients, it could be as much as 5 billion extra a year, is the money going to come out of cancelled operation or the drug bill or bother, how many life will this cost, to give few people more money, do you have a death wish for the people of england sir.
March 9, 2017
First class observations John . There are few in the House who have the background and competence to make the points you did . Theresa should sit up and reflect now on the consequences of Hammond’s dull budget ; it has not gone down well and has signalled many wrong messages to the public .
Enterprise should never be curtailed by any Government intervention – particularly when a manifesto promise has been broken . This morning on the radio Hammond was trying to say black was white ; it was we who have confused ourselves not him or his advisers ! . I sincerely hope that the extra tax on the self-employed will not be voted through , equally the extra limitation on dividends – many retired savers rely on their investment income to enable them to pay for their retirement , they have few opportunities to influence what they receive .
I fully agree that there are too many economic advisers in the Treasury and the OBR . They all belong to a sort of club where suppositions are purely vague indicators and reality is not considered ; they have made many blunders and definitely should be thinned out .
March 9, 2017
“many retired savers rely on their investment income to enable them to pay for their retirement ”
Thank you Bert.
March 9, 2017
If he was going to go back on the manifesto he should have admitted he was doing this and have said clearly why he felt this was needed. His approach of I am not breaking it is just pathetic.
Far, far worse than the pasty tax and just as bad as Osborne’s dishonesty over inheritance tax.
March 9, 2017
Another excellent speech, a genuine contribution to the debate rather than mere repetition of points already made by others.
March 9, 2017
It was a good speech; but, sadly, it will have little, probably no influence on the Finance Bill 2017 at all. In the UK democracy, the “executive” rules OK!
March 9, 2017
The NI ratting will anyway only raise ÂŁ2 billion (probably rather less than that as people will adjust their behaviour). Yet this government can piss about ÂŁ100 billion (which it will end up as) just on HS2 alone.
March 9, 2017
Off-topic, I watched David Davis answering questions this morning and he gave a very bad answer when asked why the government opposes the second amendment that the Lords have made to the Article 50 Bill, which will return to the Commons on Monday.
He merely said that the amendments were “unnecessary” when that is not the case at all, because that second amendment is important to give the Lords the power to obstruct and preferably prevent our withdrawal from the EU, which of course is why they passed it.
It’s not quite the same thing but it’s worth remembering that under Section 20 of the Constitutional Reform and Governance Act 2010:
http://www.legislation.gov.uk/ukpga/2010/25/section/20
the Lords do not have the power of veto over the ratification of a treaty. They can debate it, they can vote against it, but they cannot veto it against the will of the Commons.
MPs should think extremely carefully before they vote to confirm an amendment which is designed to place this power of veto in the hands of 800-odd unelected legislators-for-life, when it is quite obvious that they would almost certainly use it to attempt to frustrate the decision made by 34 million voters in the EU referendum.
March 9, 2017
Here! Here!
March 9, 2017
After listening to the labour leader after the budget, it seems to me that he has a much better idea of what is going on and also has a better plan for the country, the problem is he is being shut down by the media and the 550 liberal mps in parliament, you would be better off with a builder for the future who is not a wasteful person, than people who shut everything down and rise taxes all the time while selling everything off, you might think he is a waster but that is not the case, you only have look at the man to see that he is a man who cuts his cloth to suit his means, now the majority of pms in his party are wasters just like the majority of mps in the con party are wasters which has been shown to be true, he is a much better person to lead the country forward after you leave the eu and build the country out, you only have to look at 8 years of con party rule, no housing, health care in decline infrastructure falling apart and big money going to all the wrong projects and after 8 years of con party rule the people have nothing to show for it but debt and the highest taxes ever with not even good jobs and pay show for it.
March 9, 2017
On the very last point, namely the ÂŁ12bn of tariff revenue… doesn’t that come from us, the consumer? If Govt chooses to apply import tariffs on foreign-produced products, then all you’re doing is pushing prices up for everyone, in order to protect domestic producers. It’s not clear to me how collectively we’re better off, especially when this then involves Govt deciding how to redistribute our money back to us, with all the usual inefficiencies and special-interest-pleading that entails.
Why not declare a unilateral zero tariff on everything, regardless of whatever our European neighbours decide? People are richer when they have more choice in what they can purchase, so if we allow everyone to buy what they want from wherever we want without excess Govt intervention then surely we’d as a whole be better off?
March 9, 2017
As for real growth next year, there won’t be any, in fact when you take inflation into account you will have minus growth so growth will be all inflation and with departmental cuts in all department apart from overseas aid and the eu which will go up with growth inflation, the NHS will be badly hit the with justice minister pay outs for patient which mean real cuts with inflation added on between 4 and 5 percent in the service and then the council with on going cuts with inflation of three to four percent on top of all departmental cuts which are going with another 3.5 billion a year with inflation on top of that which will come in at 4 to 5 percent real cuts to services with no money going in anywhere apart from Scotland, Wales and Ireland, you are now moving to a just about managing world for the majority of people living in this country.
March 9, 2017
“I just wish that he had said rather more at the time when we were fighting the referendum campaign,”
A lot more people would have voted Brexit had he and others done so.
The true number of people who are enthusiastic to stay in the EU is more like 28% – not 48%.
They were scared into voting Remain.
March 9, 2017
A person who told me he was an ex-Special Branch officer once also told me “You can tell alot about a person by looking at their friends” . The Years tell,- few people have genuine friends. A person’s enemies can be informative. I see Alison McGovern (Wirral South),George Kerevan (East LothianSNP and possibly Stella Creasy (Walthamstow)Lab may be political opponents of yours JR. You can’t be all bad.
March 9, 2017
I find it strange that you, who I generally think of as a supporter of low taxes, are telling us how wonderful WTO tariffs are. Is tariff just another word for tax?
This might explain why some comrades (Corbyn etc) voted for the government’s brexit bill.
As regards food imports are you advocating a return to the old Corn Laws or just a re-branding of the Common Agricultural Policy?
Reply I want us to lower our tariffs with the rest of the world once out of the EU!
March 9, 2017
“Is tariff just another word for tax?”
It’s another form of tax, ultimately paid by consumers of imported products; but the overall effect would depend on whether the government treated that new source of revenue as additional to its existing sources, or as a partial substitute for those existing sources. At least all the money that was collected would go to our government rather than 80% going to the EU as it does now.
March 9, 2017
Keep going John. There may be a vacancy for Chancellor quite shortly !
March 9, 2017
Dear John–I deprecate your commenting in such relaxed fashion on the ginormous and apparently increasing level of debt–Halligan in the Torygraph makes much more sense to me. Mind you, I confess that I certainly do not know much because if I were asked to explain why our debt is increasing at all never mind so much when we are supposedly doing so well, I wouldn’t know where to begin. I do know Hammond has expended a ton of goodwill for very little indeed. I hate the idea of the IFS (meaning one or two bods therein) telling us their opinion (and that’s all it is) on whether NI should be the same for self employed as employed, just as if there were some principle involved, when for years the principle was I almost want to say universally thought to go 180 deg the other way. All very strange. Let’s hope he hasn’t gratuitously knocked the country off its upward curve. And that’s without mentioning the Manifesto commitment which to me should have been sacrosanct. Did he not notice the overnight destruction of the Liberals?
March 9, 2017
I agree that a large part of the problem with these forecasts are collective group think from people who all share the same fundamental assumptions and therefore reach similar conclusions. In regard to the referendum, too many could not think outside the straitjacket imposed by accepting the shibboleth that membership of the EU and the single market were vital components of U.K. economic prosperity.
I am interested to read Mr Redwood’s observations regarding the anticipated changes in interest rates in America, and how this will impact upon the United Kingdom. I find it remarkable that I have seen no commentary upon this in the media here, despite the clear signals emerging from the Federal Reserve over the last week or two.
Do we not have another example of damaging group think from economists in their belief that extremely low interest rates are essential to support the economy and an inability to escape that straitjacket ? These rates were intended as an emergency measure – by no stretch of the imagination can the economy at present be described as facing emergency conditions and such damaging rates should long since have been adjusted.
Mr Redwood has long seen through the posturing of Governor Carney. I would appreciate an article on how the U.K. ought now to respond to the changing interest rate situation. I suspect we will see further depreciation of the pound caused by this, but have a chorus of media commentators telling in us it is all caused by Brexit uncertainties.
March 9, 2017
“We need to ensure that it is as easy as possible to get into self-employment,”
I’d say most self employed people would love the security and predictability of being on the state payroll or working for an established employer with pension, holidays, sick leave…
Those jobs are few and far between these days.
March 9, 2017
Mr Redwood usually writes in a relaxed fashion and is a master of understatement . We get the occasional exclamation mark (thank goodness it is only the odd one as people who write hysterically bore me ) and every now and again a nonsense, yet (untrue comment left out ed)
I don’t think much of the budget, but there again it was tempered down.
Why do people not listen properly or read properly and then come out with remarks out of context. There are many cases I come across where due to lack of understanding of English, things are misunderstood , but in the house this pseudo cleverness based on incorrect propositions just muddies the debate. I really think that MP’s should go on courses regularly to update their presentation skills .. the repetition and mindless meandering just circumvents the focus and doesn’t help keep us awake when sitting down to TV debated after lunch.
re CAPATCHA I think I am a robot; some pictures are so unclear ( a bit like the speeches in parliament.)
March 9, 2017
I didn’t know there was a manifesto promise not to increase NI for five years. So that isn’t good as we’re just to Labour and Lib Dems going back on this. The reasons for the increase should have been explained properly.
I’m sick of reading about Employees extra benefits for the increased NI when it’s simply not true and comparing even 10% with an Employees 25.8% doesn’t warrant unemployment benefit. Once more small employers pay the holiday pay, sick pay, sick holiday pay, maternity holiday pay. These generous social payments aren’t paid out of welfare.
March 9, 2017
“try to confine taxes, and certainly tax rises, to things that we do not approve of very much.”
Like pensioners with dividend income?