Dealing with the deficits

The UK has been running a substantial balance of payments deficit for many years. The main origin of this is the large balance of payments deficit on trade account with the EU, which has persisted throughout our time in the single market and is partly related to its asymmetric construction in ways favourable to continental agriculture and industry and against UK services.  In the twenty years before we joined the EEC our balance of payments on current account was roughly in balance. During our time in the EEC up to the completion of the single market in 1992 our current account was typically in modest deficit. After 1992 in the single market our current account deficit ballooned to £40bn  to £90 bn a year. Under Labour in their later years the UK also ran a budget deficit which became enormous with the banking crash.  Since 2010 the budget deficit has been brought down from 10% of GDP to under 3%. The balance of payments deficit has stayed at around  5%.

I am more worried about the balance of payments deficit than about the budget deficit. There are only two ways we can finance the overseas deficit. Either we have to borrow money in foreign currencies, or we have to sell more and more of our assets to foreign interests. So far this has proved relatively easy, as foreign investors have found UK assets attractive. They like our property, technology companies and the rest. Our markets are particularly open allowing them to buy up businesses and real estate.

Where we borrow to sustain our excess consumption of European imports we run currency risk of having to repay in a  foreign currency that has got dearer against sterling. Where we  sell more assets we forgo future profits and dividends, and may see the foreign buyer transfer some of the economic activity elsewhere if they wish to help their home production at the expense of a former UK competitor.

This is why stopping EU payments is doubly important. If we stop all the EU payments but spend all the money saved at home we still make a big reduction in the external deficit as this is money which no longer has to be sent across the exchanges to overseas . Every pound we save on net contributions is a pound saved from the balance of payments deficit. I would like the Treasury to be more concerned about the government’s role in boosting the external deficit, and keener to bring it down.

The Treasury does want to cut the budget deficit. That too is easier to do if we cut the amount we are sending abroad. If more of the overseas aid money was spent on the wages of UK public sector  who go to help abroad ,and more on UK supplies and equipment which we give to the aid recipient, the aid budget would be less of a strain on the balance of payments. If more of the actual costs incurred by our military and NHS in helping abroad was properly accounted as aid spending that would help the general budget. If more people who come to the UK for asylum were given housing and other financial support as part of the overseas aid budget that too would assist in cutting the overall deficit.

The Treasury needs to tighten up on the money spent abroad, as it imposes a double strain on our accounts.

 

 

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.

91 Comments

  1. Duncan
    Posted September 26, 2017 at 5:44 am | Permalink

    John

    Why would a fiscal conservative like yourself use any savings that we may generate when we leave the EU to spend on public services? These services generate zero income, generate zero wealth and pay zero tax

    Any savings should be used in two ways. Cut taxes to the wealth creating sector encouraging further capital investments, start-ups and more employment incentives. And two, reduce the national debt

    What is it with politicians of all colours and persuasions? Do they not understand that spending other peoples money is not a virtue. It is not a political achievement. We can all spend other peoples money. It is creating the circumstances that generate the prosperity we all enjoy that is the achievement.

    You cannot circumvent the fundamental laws of finance and economics. Let’s leave that to the idiots in Labour who, should they get back into power, will absolutely destroy this nation with their re-nationalisation plans designed to transfer power to their union paymasters. The cost of this programme, if ever enacted, will lead to massive tax rises and higher bills across all areas.

    • Lifelogic
      Posted September 26, 2017 at 6:47 am | Permalink

      Not all public service generate nothing at all and operation might get someone back to work and a train get someone to and from work. But most of them generate even little of value and many even cause positive harm. HS2 is probably a net negative, the renewable agenda and the green crap subsidies certainly are.

      The truth is that most of what the state does do could be done far better outside state control. Cut in the state and tax cuts are a far better investment in the UK than letting the government tax ’til the pip squeak then largely waste the proceeds.

      As A. J. P. Taylor put is in his “The Effects and Origins of the Great War” – Until August 1914 a sensible, law-abiding Englishman could pass through life and hardly notice the existence of the state, beyond the post office and the policeman. ……

      In 1913 we paid taxes at about 8% of GDP – now the government spends (and largely waste nearly 50% of GDP) much of it spent tying up the productive in red tape and preventing them doing things – and yet the government wonders why the UK find it hard compete! Look at the attacks on the gig economy like UBER.

      • Hope
        Posted September 26, 2017 at 12:24 pm | Permalink

        Hammond over spends by £10 million pounds an hour. This from a party who claimed to eliminate the deficit by 2015. Hammond has kicked the target into the long grass of never never land. He wanted to fleece the self employed at the last election until he realise it was against his manifesto! He has flipped flopped about being eurosceptic like Cameron or a remainer like Osborne.

        He calls people who voted to leave simple, that would be 17.4 million people and the likes of the Lord King, Lord Lawson who are far more respected than him. Under Osborne the Treasury got every prediction wrong as did the BoE. It did its best to scare e public by ridiculous claims that have not come to fruition. Has Hammond done aanything to crow about while in office? Why is Hammond and those civil servants at the Treasury still in office?

    • Loui Binnz
      Posted September 26, 2017 at 9:46 am | Permalink

      Labour rarely do or mean what they say. They are trustworthy in being untrustworthy.They will waste money however trying nationalisation knowing it will fail at every level. Their task is to get salaries to take them through the next Parliament, extra dosh for being on a committee and hopeful a stupid electorate next time round. It might just work.

      • Hope
        Posted September 26, 2017 at 12:28 pm | Permalink

        This is not confined to Labour. The Tory party have been pretty shocking at the security and safety, economy, immigration, public services, criminal justice and the EU. Let us not forget the promises from the MP scandal kicked into the long grass and rules changed to make it more difficult to find out their wrong doing. Pay rise while imposing a pay cap, changed pensions from RPI to CPI except themselves. The list is truly endless.

        Let us not forget Lybia and the terror and mass immigration we face because of Cameron wanting regime change like Blaire before.

        • Redbard Kipper
          Posted September 27, 2017 at 12:59 am | Permalink

          Hilary Benn, still elected, wanted regime change too. Perhaps he still does. He is the MP for Damascus South, hence his concern..

    • spike
      Posted September 26, 2017 at 11:58 am | Permalink

      Duncan
      Ministers of all colours have no interest in reducing the national debt. George Osborne increased VAT to 20% to raise £750 Million to go towards the national debt.
      Within seven calendar days David Cameron announced an increase of £750 million in aid to Pakistan to build infant schools.

  2. Liam Hillman
    Posted September 26, 2017 at 5:51 am | Permalink

    The problem isn’t our balance of trade, it is our membership of the European union.

  3. Richard1
    Posted September 26, 2017 at 6:04 am | Permalink

    The labour conference had been a revelation. Corbyn and McDonnell have been given an amazingly easy ride by BBC interviewers. Their EU policy is clearly all over the place and momentum had ensured, absurdly, that the issue has been suppressed at the labour conference. McDonnell has proposed £100bns of nationalisations. In a particularly absurd interview he said utility assets would be seized with compensation at “the market value determined by parliament “! Having never worked in the private sector and having no understanding of capital markets, mr McDonnell probably doesn’t see the absurdity of this phrase. He proposes compensation with government bonds (as if this was an alternative to money). Interestingly, this is what the mugabe regime in Zimbabwe did in the 1980s when seizing assets from citizens they didn’t like. I hope the Conservatives will note this comparison and point it out. After all such policies haven’t been very good for the investment climate in Zimbabwe – or Venezuela etc.

    • Prigger
      Posted September 26, 2017 at 9:30 am | Permalink

      “Corbyn and McDonnell have been given an amazingly easy ride by BBC interviewers” You are right. They speak to them as if they should give positive criticism helping them build a dollhouse to be sold off by their school for a worthy charity.

    • Mitchel
      Posted September 26, 2017 at 2:13 pm | Permalink

      Revolutionary socialism can be lucrative for Big Finance as Professor Anthony Sutton pointed out in his controversial 1993 book “Wall St & the Bolshevik Revolution”:

      “Both the extreme right and extreme left of the conventional political spectrum are absolutely collectivist….both recommend totalitarian politico-economic systems based on naked,unfettered political power and individual coercion.Both systems require monopoly control over society.While monopoly control of industries was once the objective of JP Morgan and JD Rockefeller,by the late 19th century the inner sanctums of Wall St understood the most efficient way to gain an unchallenged monopoly was to “go political” and make society work for the monopolists under the name of the public good and the public interest.”

      • Weep luvvie country
        Posted September 26, 2017 at 10:44 pm | Permalink

        Writers have made fortunes out of anti-communism. Anti-apartheid stuff was another good little earner for pretty mediocre writers. Then Mandela was released and put them out of work.

        • Mitchel
          Posted September 27, 2017 at 10:38 am | Permalink

          It wasn’t an anti-communist diatribe though,it was a well referenced and researched account of how Big business/finance will very happily accommodate extreme leftism.

    • NickC
      Posted September 26, 2017 at 5:41 pm | Permalink

      Richard, I’m not terribly interested in Labour at the moment. They are not in government, the Conservatives are. And both want a “soft” (ie fake) Brexit extended out to 5, or 6, or more years.

      Mrs May has even gone one better (or worse) than Labour by desiring us to sign up to a new treaty with the EU on defence, diplomacy, aid, criminal justice etc. If May’s Florence Fantasy comes to fruition we aren’t going to leave the EU properly at all.

      Perhaps Labour wouldn’t be so close to forming the next government if the existing Tory government actually gave us a proper Brexit. The Conservatives only have themselves to blame.

  4. eeyore
    Posted September 26, 2017 at 6:10 am | Permalink

    With respect, JR, there is now a far bigger economic problem facing Britain than the deficits. Labour’s policy of expropriation across huge areas of investment will have investors running for the hills as the next election draws near or the polls favour Mr Corbyn.

    This is doubtless intended as part of a Marxist strategy of deliberate economic destabilisation. Of course, if we’re confident they won’t get in again then there’s nothing to worry about. Is there?

    Actually there is. Win or lose, they are deterring investment already, encouraging withdrawal of funds, and robbing Britain of its shining reputation as a safe place to put your money. What’s more important than that?

    • Prigger
      Posted September 26, 2017 at 9:39 am | Permalink

      My major concern is that so many electors seemingly do not have the savvy to see through Labour. They have a track record even in memory of thirty somethings of being money and time-wasters. So why the public-collective amnesia? They can be forgiven for not seeing Mrs May as a valid alternative. Potential Tory voters will stay at home come the next election.

      • eeyore
        Posted September 26, 2017 at 11:40 am | Permalink

        Were Labour but money and time wasters, were they merely to trash the economy, throw millions out of work and rob all who have anything worth stealing, that would not be so bad.

        Alas, that would be but the softening-up. Simultaneously comes the real business – subverting the Constitution so Marxist Labour can never be removed from power, and ensuring that power itself leaves Parliament and resides in perpetuity with the chiefs of the Party.

        Hysterical fantasy? Only yesterday John McDonnell warned his conference to prepare for “financial chaos” and “war games” if Labour wins the next election. “Scenario plans,” he revealed, were even now being “worked up” by “teams of experts”. Mr McDonnell is of course right about chaos. He is personally making sure it will happen.

        If these sinister scenario plans do not includes states of emergency and suspension of habeas corpus, I for one would think us lucky.

        Not that we needed his warning. This is how every other Marxist government round the world has acted for a century. Why should Britain be different?

        • Leon Trotsky
          Posted September 26, 2017 at 10:20 pm | Permalink

          Labour MPs , especially Local labour activists will go to the camps first. Marxists always literally backstab half or more of their own comrades. I urge everyone to vote Labour in the short term. ! 🙂

          • Mitchel
            Posted September 27, 2017 at 10:42 am | Permalink

            Dear Bronstein,stay clear of anyone wielding an ice pick.

    • mickc
      Posted September 26, 2017 at 7:13 pm | Permalink

      Corbyn Labour will win the next election.

      There have been far too many losers under the elitist New Labour/ Blue Labour era which May is continuing.
      The Tories have persisted in kicking their own supporters, and will cave in to the EU….not a good way to huild electoral support.
      Labour will build housing, greater rights for tenants, probably a wealth tax to pay for it all. This will appeal to many…

  5. Dave Andrews
    Posted September 26, 2017 at 6:17 am | Permalink

    As an exporter, our company is doing its bit. However, it doesn’t help when the government does what it can to nobble British exporters. We have just had to complete an export audit demanded by HMRC. This consumed many hours of time, cost far in excess of any profit on the export sale and generated a mountain of data which I can’t see is going to be any use to anyone. I can imagine the official in HMRC just putting the document on the scales (metaphorically) and then chucking it in the bin.
    Who will deliver us from this pestilence?

    • Know-Dice
      Posted September 26, 2017 at 11:09 am | Permalink

      A large percentage of what the state does is “box ticking”

      Gender Equality – Tick
      Ethnicity – Tick
      How well did we do? – Tick
      Intrastat – Tick

      It goes on and on…

    • Peter Wood
      Posted September 26, 2017 at 11:52 am | Permalink

      Mr. Andrews,
      First, thank you on behalf of UK plc for exporting, anything! Your complaint is felt by most if not all self-employed or self-assessed taxpayers, you are not alone. The UK tax system needs a major overhaul, it simply is not fit for the task of addressing the economy of the 21st century. The country may well have a social upheaval before the system is changed. Keep the faith, you are valued by the silent majority.

  6. Mark B
    Posted September 26, 2017 at 6:20 am | Permalink

    Good morning.

    It is largely the bloated State sector with it good rates of pay, job security and benefits that is placing and increasing strain on our finances. We also borrow to spend on White Elephant projects that have no sense in a truly capitalist economy. If HS2 and the like are so good, why does not the city choose to invest in it ? To answer my own question, it is because it is high risk and low return. So why should I pay for it ?

    A lot of our problems come down to poor management of the economy and various government departments. Too much virtue signalling and not enough common sense and analysis of what is to be done, if anything.

    Let’s hope this gets past moderation this time. It seems some people do not like being told some home truths about election results 😉

    • Lifelogic
      Posted September 26, 2017 at 12:42 pm | Permalink

      Exactly right plus the daft renewable subsidies and the over prices Hinkley at least they eventually cancelled the Welsh mad lagoons at least. Government have not got a clue of what is a good investment, it is not their money so what do they care.

      • stred
        Posted September 27, 2017 at 7:06 am | Permalink

        Corbyn said he will back the Swansea lagoon, currently about 4x the cost of offshore wind and guaranteed intermittent. Economic lunacy to the core.

        • Diogenes
          Posted September 27, 2017 at 10:01 am | Permalink

          Brilliant comment: by construction, a lagoon energy system relying on tides is intermittent, and tides being linked to the moon it is indeed a lunacy.
          You could not show better the deep level of your understanding.

  7. Lifelogic
    Posted September 26, 2017 at 6:24 am | Permalink

    All spot on.

    The only real way to export more and to import less is to become more competitive. To do this we need far smaller, efficient and well directed government, a bonfire of red tape, real competition in banking, more scientists, builders, sales people and engineers, fewer lawyer, bureaucrats and other often essentially parasitic workers, easy hire and fire employment law, no threat of confiscation by Corbyn types and Labour, cheap no green crap energy, no daft Vanity projects, fewer silly subsidies to farming, green craps and the lazy feckless, we need to relax planning too. We do not need government to tell us to be come more productive we need they to get out of the way.

    But May and the current Government largely want the opposite. She even want to build on EU employment regulations and attack the gig economy. She go on about the non existent gender pay discrimination and seems set to play the race card next week. The appalling Corbyn (now unbeleivably is favourite to be next PM – thanks largely to May) and wants to turn the county into Venezuela and confiscate people’s assets. This is hardly likely to encourage UK investment.

    The government is the problem as usual.

    • stred
      Posted September 26, 2017 at 8:00 am | Permalink

      I have the impression that if you gave a quid to Treezer and asked her to pop into to Waitrose for a pint of milk, she would come back with a fancy French loaf costing £5, paid for on her credit card.

    • a-tracy
      Posted September 26, 2017 at 8:47 am | Permalink

      I feel the UK don’t train the salespeople sufficiently, without orders you can make the best, value-added products in the World but they sit in a warehouse gathering dust. Far too often selling is left to early school leavers, telesales is a tough job always lots of vacancies, the people taking them get little training and move from job to job until their lack of hitting targets gets found out. The marketing side is often left to women who often aren’t as risk-taking and willing to drop everything to sell overseas.

      • Lifelogic
        Posted September 26, 2017 at 11:29 am | Permalink

        Selling is an important job indeed, a shame Cameron is not become a secondhand car salesman he would have been good it is – rather than pretending to be a low tax a heart, Eurosceptic Conservative.

    • Lifelogic
      Posted September 26, 2017 at 11:36 am | Permalink

      Abolish gender pay reporting, all the green crap, the work place pension nonsense, simplify employment laws to easy hire and fire, scrap energy performance certificates, scrap the apprentice tax, bring NI and income tax into one simple system, scrap the common import tariff and fire half the state sector – all that just for a start. If they really want better productivity but clearly they do not.

      Then encourage more private education and health care competition with tax breaks and vouchers. Also scrap all the state funding for the useless and hobby degrees (about 1/2 to 2/3 of them).

      • Fedupsoutherner
        Posted September 27, 2017 at 7:56 am | Permalink

        LL , you are so spot on in what you say.

  8. Bryan Harris
    Posted September 26, 2017 at 6:39 am | Permalink

    Isn’t it interesting that our trade deficit has been huge with the EU – It also became progressively huge when our friendly socialist Mr Wilson was in power, and that took some reversing. Then, at least they had the nerve to announce on a monthly basis how much in the red we were – Why haven’t governments carried this forward? I suspect blair found it embarrassing.
    The Treasury seem to be stuck in a time loop, still applying EU policies to promote and reward the centre of the EU, without concern for individual nations – the concept being that the EU would be in control, so why bother do think for ourselves.
    It is time we managed our money effectively, and started to think for ourselves

  9. Nig l
    Posted September 26, 2017 at 6:41 am | Permalink

    Not only does this make economic sense , politically I think it is a thread that can be worked up to differentiate you from Labour and use against the Remainers.

    You using our money to benefit us whilst the others continue the status quo allowing money to be squandered and having to put taxes up etc to make up the shortfall.

    Frankly I think it is pathetic that your government does not have the cojones to unilaterally break from some of the corrupt and self serving UN’s rules to benefit us domestically. No doubt you will say you are tied by parliament but I don’t believe that some great legal mind or other cannot find a way round it.

  10. Roy Grainger
    Posted September 26, 2017 at 6:56 am | Permalink

    The usual Labour Remainer argument is that Brexit is bad because it has caused the value of the pound to fall. That is nothing to the fall that will happen if Corbyn is elected. SO to be consistent Labour Remainers should argue for a vote against Labour.

  11. alan jutson
    Posted September 26, 2017 at 7:09 am | Permalink

    Your solution today JR whilst all sensible given the huge size of the foreign aid budget, seems to suggest you are trying to make the best of a bad job, because you do not believe that our Government can get their minds around changing the fundamentals.

    We simply need to sell more than we purchase to and from abroad to get into surplus.

    I can remember way back in the 1960’s when the trade deficit figures month by month were given headline news, we then had, i’m backing Britain as an encouragement for people to purchase home made goods rather than imports.

    We do not even see the trade figures now at all !

    All we seem to be concerned about now, is how much more we can raise in taxation and then spend.

  12. margaret
    Posted September 26, 2017 at 7:13 am | Permalink

    My financial acumen as far as national interests are concerned is zilch, however I feel that selling too many assets leaves us in a vulnerable position. Once it has gone it has gone. At present I am not aware of any other gathering of assets as Europe seems to have an interest in all consumables and the markets ( well; my investment knowledge equals that of an infant) . When we have lost assets by recovering monies, how do we accrue other assets?
    In my world selling off the worst , keeping the best , tightening up in some places , looking for new money is the way forward . Complacency is a dirty word and spend spend ,spend leads to disaster.

    • graham1946
      Posted September 26, 2017 at 2:10 pm | Permalink

      The biggest waste of all time was the sale of our oil assets for the benefit of the big corporations who could not pump it fast enough. The government wasted billions of pounds in taxation received from oil and we have literally nothing at all to show for it. The Norwegians set up a national wealth fund for the benefit of Norway, whilst we just frittered it away and let the oil companies pump our wells dry as quick as they could. Now we have virtually nothing. Where is the next windfall coming from, because it does not seem that they are interested in encouraging wealth production.?Like Mr. Micawber they are waiting for something to turn up.

  13. Peter
    Posted September 26, 2017 at 7:46 am | Permalink

    Overseas ownership of public assets is not something a country should envisage. It is just as much a loss of control or sovereignty as having important decisions made by enelected politicians.

    For this reason many countries prohibit such sales as a matter of policy. Companies like Cadbury would not have passed into foreign hands if they were based in other European countries rather than the UK. Still less would critical public utilities such as rail or water be sold off overseas. That is as it should be too.

    Free trade should be free trade when it is in the UK interests only. Otherwise barriers can and should be raised. Pat Buchanan the US commentator offers a good analysis of the folly of a blind adherence to a free trade in all circumstances.

    • Mitchel
      Posted September 26, 2017 at 1:45 pm | Permalink

      In July 2000 President Putin “invited” the 21 most important oligarchs(excluding a few he had already deemed to be beyond the Pale) for a meeting at the Kremlin.They were told they could hang onto their ownership of former state assets no matter how dubiously they had acquired them during the Yeltsin years provided they stayed out of politics,stop the asset stripping and sell-offs to foreigners,cease employing so many foreigners with dubious allegiances in senior positions and start investing for the future benefit and in the strategic interests of the country,rather than short term profit maximisation.

      Thus control of the “commanding heights” of the economy(as we,borrowing from Lenin,used to call them back in the 60/70s) was restored.I’m not suggesting we should(or even could) do something similar but the government does need to do something to restore sovereignty over the economy.We will not have political sovereignty without it.

    • forthurst
      Posted September 26, 2017 at 2:13 pm | Permalink

      “Overseas ownership of public assets is not something a country should envisage.”

      Barnier: “You will agree to our ransom demands or we will turn off your water and electricity!”

  14. Michael
    Posted September 26, 2017 at 8:02 am | Permalink

    It will be interesting to see how Hammond is received at party conference.

    His level of popularity will doubtless influence our direction of travel.

    I shall not be clapping.

    • Lifelogic
      Posted September 26, 2017 at 11:43 am | Permalink

      Anyone who maintains tax of “profits” that have not even been made (thus pushing up rents for tenants) and retains an up to 15% stamp duty (turnover tax) is clearly totally unsuitable to be a chancellor and an economic illiterate.

      He surely must go he is just as appalling as Osborne – he even thinks HS2, greencrap subsidies and Hinkely C are sensible expenditures!

  15. Ian Wragg
    Posted September 26, 2017 at 8:05 am | Permalink

    HS2 is a classic waste of money and a deficit generating project

    No doubt procurement will be during our never ending transition period so all the steel for rails will come from the EU. All the rolling stock will be foreign and no doubt labour will have to be imported due to skills shortage.
    Probably 70% of the cost will be for overseas companies.
    EU rules innit.

  16. James Neill
    Posted September 26, 2017 at 8:15 am | Permalink

    Problem is that in the case of an unexpected general election Corbyn and Labour are likely to get in and if we listened carefully to McDonnell yesterday we can see where they are headed- with more reckless borrowing with increased deficit- back to the future.

    On another note if we agree that we are not going to pay another penny to the EU as suggested here then that is the cliff edge as far as the EU is concerned- no doubt about it- so how will that effect the longer term balance of payments and deficits- probably a long term of belt tightening, contraction of business, growing unemployment?

    DD is saying now that nothing will be paid to the EU going forward unless agreement is first reached for an transitional/ implementation period- but Barnier has been very clear about this that no discussion can take place about the future until the past is settled ie. the three things, movement of people, the irish border and the money owed for past decisions taken in our name- so just why is DD persisting with this line? Time is moving on and we havn’t yet got to grips with any of this and the way we are going March 2019 is not too far away- the A50 notice will run out with possibly no agreement, and as we have absolutely no idea who is going to be the PM by that time, maybe Boris, maybe Hammond, Maybe Rudd but maybe Corbyn- Looking at it this way I can see that we have real problems looming, problems of public confidence in the whole political system itself- talk about deficits, budgetry or balance of payments is only the start of it?

    • graham1946
      Posted September 26, 2017 at 6:43 pm | Permalink

      The only solution to your first para is to get rid of First Past The Post and get some proper proportional representation (not the gerrymandered version offered to the public before, which could not but be turned down).

      Individual Politicians (PM’s) when in power have far too much power because of their sycophantic MP’s who would rather keep their lucrative cushy jobs and see the country done down than do what is right.

      Is coalition really any worse? I think 2010-2015 was probably one of the better times politically. Yes many mistakes were made, but each party stopped the craziness of its partners. With unfettered power it could be that if Corbyn and his henchmen get in it could be the last general election we have.

  17. JimS
    Posted September 26, 2017 at 8:22 am | Permalink

    “They like our property, technology companies and the rest.”

    So we have sold them our ‘farms and seed corn’. Doesn’t that just leave us as ‘slaves and farm labourers’? Not very smart.

    • Mitchel
      Posted September 26, 2017 at 1:56 pm | Permalink

      “Eventually one comes to an understanding that politics by itself is virtually impotent in the face of such an acquisitive economic system.Inevitably,capitalism pushes the body-politic inexorably back into a kind of serfdom and then back into slavery,kicking and screaming”.(Lenin-Imperialism,the highest form of capitalism).

      Lenin was writing just before WWI when globalisation was at an advanced stage before being torn asunder by the war.He wasn’t wrong!

  18. Fed Up and Angry
    Posted September 26, 2017 at 8:23 am | Permalink

    So under Mrs May, we can expect a sterling crisis then as she continues to keep us shackled to the EU and our balance of trade deficit spirals further out of control. Then of course the calls will be that we must join the Euro. I’ll probably sound like a conspiracy theorist, but it’s kind of convenient to certain interests wouldn’t you say?

    • Lifelogic
      Posted September 26, 2017 at 11:45 am | Permalink

      What a choice we have, the appalling, dithering socialist T May or the even more appalling socialist on steroids Corbyn.

  19. a-tracy
    Posted September 26, 2017 at 8:38 am | Permalink

    In relation to the Overseas Aid Money, the Conservatives have been in power now for seven years why haven’t you just got on and done this, what is stopping you?

  20. A.Sedgwick
    Posted September 26, 2017 at 8:39 am | Permalink

    The third way surely is to import less. A minor pastime when shopping is to check country of manufacture and I continue to be astounded how we import products even from Europe that are small mass machine production items. With increasing use of robotics and 3D technology the benefit of cheap overseas labour will continue to diminish in theory. Just in time over long distances is bonkers and hopefully on the way out.

    McDonnell is on his financial armageddon bandwagon again and a report shows public sector pension liability at £1.8 trillion, up 30% in a year apparently. Greece or Venezuela here we come, whether you are an optimist or pessimist.

  21. Epikouros
    Posted September 26, 2017 at 8:48 am | Permalink

    In the normal run of things a trade deficit is not a problem as the deficit returns in the form of foreign investment which by and large it does. However being a member of the EU, our foreign aid budget and the benefits of UK businesses creating more goods and services for domestic and foreign consumption are obviously considerable. The first two are nothing more than self inflicted harm and the last would be an added bonus.

    EU membership does not confer a fair and free market as Brussels, Germany and France have contrived to rig the market in the latter twos favour so that UK’s producers are severely disadvantaged. Foreign aid is a luxury that is afforded only by giving away an unwanted surplus of wealth and the the UK does not have any. We can barely sustain our own internal aid; the welfare state, NHS etc. Charity begins at home and the sooner we realise that we already have a means of giving foreign aid without parting with our hard earned money and that is capitalism and international trade that has and is taking billions out of poverty the sooner we will act sensibly and stop the nonsense.

    • Dennis
      Posted September 26, 2017 at 10:12 pm | Permalink

      What about the foreign aid that the UK is getting? We seem to need many foreign workers to keep our economy going. Needing foreign aid doesn’t say much for our sovereignty if we outside help.

  22. Duncan
    Posted September 26, 2017 at 8:53 am | Permalink

    The problem of course is that the Conservative Party is either naive, completely unaware or simply unprepared to confront a new phenomena that is the union dominated, hard left Labour Party that is now unshackled from its New Labour prison and will not stop at nothing to achieve their aims

    The Tories need an attack dog as their leader. Aggressive and prepared to confront this new Marxist threat to this nation. Unfortunately we have May and Hammond are about as intimidating as the Chuckle Brothers

    The Tories should be utterly ruthless in targetting Labour, their union paymasters and their allies in the press starting with the BBC. If they don’t they will be swamped

    *Privatise the BBC

    *Abolish the opt-in system in the public sector and starve the union-labour party scam of using the taxpayer to fund their activities

    *Legislate to prevent the re-nationalise of all privatised companies or make it so impossible that the Marxists will simple be unable to do so

    • Hope
      Posted September 26, 2017 at 12:32 pm | Permalink

      If Labour move left Treezer follows and builds on it! Like Ed Milibands energy policy or price capping!

    • Mark B
      Posted September 26, 2017 at 12:54 pm | Permalink

      The second and third will never work as no parliament can bind another. Unless we sign up that is to treaties with supranational and international bodies like the EU, UN and OECD.

      Clever that !

    • sm
      Posted September 26, 2017 at 1:47 pm | Permalink

      And all three of your proposals would need the co-operation of a very healthy Government majority in the HoC and the Lords, to say the least.

      And the Conservative Party has neither, thanks to the last GE.

    • Derek Henry
      Posted September 26, 2017 at 3:00 pm | Permalink

      Tax payers fund nothing Duncan.

      Where do you get your £’s from that then allows you to pay your taxes ??

      Answer – government spending of course it’s written on the front of every note beside that signature.

      You think we are still on the gold standard when it used to work like that.

      There won’t be one person on here who knows who we owe the £1.8 trillion debt to not one ?

      The answer of course is to ourselves as it our savings to the penny.

      • Mitchel
        Posted September 27, 2017 at 9:01 am | Permalink

        Yes we have re-created our very own version of Soviet state capitalism.And as that debt (our accumulated savings)cannot be repaid,it is worthless.

  23. BOF
    Posted September 26, 2017 at 9:09 am | Permalink

    ‘ foreign investors have found UK assets attractive. They like our property, technology companies and the rest. Our markets are particularly open allowing them to buy up businesses and real estate.’

    This must be one of the most worrying aspects of government non policy. In spite of the PM , when she came to office promising to do something about it. Alex Brummer in the Mail is worth reading on this subject. These acquisitions by China especially cannot be regarded as selling to a friendly ally. There is not only the loss of intellectual assets, but also the loss of employment and tax as well as security implications.

    Otherwise I agree with comments from all your previous contributors this morning.

  24. Bert Young
    Posted September 26, 2017 at 9:32 am | Permalink

    All forms of debt are wrong . Living within one’s means is a moral truth and should be embedded in the growing up process . I was shocked to read in the press the amount of support money that was provided for the one illegal immigrant who was recently accused of a major crime ; he is now over 21 years of age and should be immediately sent back from whence he came . The sort of exposure is an indication of just how stupid we are .

    The outflow of money to the EU has always been a mistake . Why should our GDP determine what we give to them when the trading balance is heavily in their favour ?. The rich aiding the poor is one thing but when it adds to the weakening of one’s own strength it is nothing but an equation for future disaster . Margaret Thatcher was on the right track when she demanded a kick-back in funds from the EU ; she was respected for this action and showed what sensible leadership could achieve .

    • Anonymous
      Posted September 26, 2017 at 2:54 pm | Permalink

      Debt is irreconsilable with greenism.

      You eat more of the world than you are worth.

  25. VotedOut
    Posted September 26, 2017 at 9:34 am | Permalink

    “This is why stopping EU payments is doubly important.”

    Indeed.

    So why are you supporting the PM voluntarily handing over up to £50 billion?

  26. Christine
    Posted September 26, 2017 at 9:49 am | Permalink

    Here’s an idea – cut the foreign aid budget, we clearly can’t afford it. It is folly to be paying out this huge amount of taxpayers money every year just to make a few politicians feel good and to allow their friends to rake in vast sums of money working as CEOs for charitable organisations. I despair at the way successive governments have managed our finances. If I managed my household finances in this way, I’d be out on the street.

  27. Freeborn John
    Posted September 26, 2017 at 9:49 am | Permalink

    The biggest concern on the economic front has to that there is a part-time Chancellor who is spending the vast majority of the time on brexit and his leadership ambitions. Yesterday he was visiting the Scottish Conservative party leader to discuss tactics. Recently he was in Dublin after which the Irish have been singing his tune about the UK needing to stay in the EU customs union. He dropped the ball last year on NI contributions and has been undermining the governments brexit position this year creating the impression of goernment-wide incompetence. I don’t recall any part time Chancellor before spendings so little time on the day job.

  28. Prigger
    Posted September 26, 2017 at 9:53 am | Permalink

    Labour’s plan is to decrease the Deficit by increasing the Deficit. The voter knows the idiocy of their plan but has become so cynical of politicians they will go for a temporary hand over fist handout of money. It is not that our people are daft. They just believe that “grab it while we can” is good because quick silly money can still spend if you do it right away. Tories, they actually know speak sense. But the cash reward with Tories is on the other side of the hill..and it may have disappeared by the time we get there.
    Tories need to give a massive income tax reduction, now, not later. Money, now! Labour will never do that.

  29. BOF
    Posted September 26, 2017 at 10:00 am | Permalink

    Otherwise I agree with comments from all your previous contributors this morning.

    To list: Duncan; Richard1; eeyore; Mark B & LL

  30. They Work for Us?
    Posted September 26, 2017 at 10:14 am | Permalink

    Your article and previous commenters are of course correct but ignore a lot of the electorate who believe that “free stuff” Mr Corbyn, yes please. Personal and family fiscal prudence are not popular and saving up for things or understanding that “we can’t afford it, perhaps never” have been replaced by “big business” promoting a lifestyle that says that you can have it all now on credit, new cars, foreign holidays, cakes and circuses.
    It will be a brave and unpopular politician that answers NO! to the electorate in work asking the question “but aren’t I worth it, I work hard and pay my taxes?”.

    • Derek Henry
      Posted September 26, 2017 at 2:51 pm | Permalink

      It does not operate like a household budget that’s just lazy thinking.

      The government surplus is the private sector deficit.

      The government deficit is the private sector surplus.

      That’s why the UK government has ran budget deficits for nearly 300 years. Without a budget deficit none of us would be able to save.

      So the real question that needs to be asked his why does a conservative hate people saving if you work hard ?

      It is very clear that government spending has to be sufficient to allow taxes to be paid. In addition, net government spending is required to meet the private desire to save (accumulate net financial assets).

      It is very clear if you study the accounting between HM Treasury and the central bank if the Government doesn’t spend enough to cover taxes and desire to save the manifestation of this deficiency will be unemployment.

      So it would be a very stupid politician that says taxes fund government spending. You can’t pay your taxes unless the government spends first. Or as they say in banking. You can’t do a reserve drain without doing a reserve add first.

  31. Iain Moore
    Posted September 26, 2017 at 11:09 am | Permalink

    It is estimated that migrants remit something in the order of £10 billion back to their home countries each year. This is another cost to the country, another income we have to generate. With Aid spending going to 53 countries, EU payments going to another 20 countries , and with migrant remittances , it is probably easier to total up the countries we aren’t sending money to. With the British Governments following fiscally incontinent polices, that shower the world with our money, its no wonder why our country looks so run down.

  32. MikeW
    Posted September 26, 2017 at 11:19 am | Permalink

    You say “If we stop all EU payments” but if we go as suggested we’ll be out on our ear without further ado which is where some one eyed brexiteers would have us do. They are usually the well funded types in good salaried jobs dabbling in the stock market with business connections and connections in politics. If this is the case then there will be no transitional agreement nor any agreement for future trade arrangements..theEU side have already said time over that cherry picking will not be allowed, that the UK can never be better off trading with the bloc from outside..also we cannot have our cake and eat it..furthermore Barnier has said clearly..it will not happen..and still we have David Davis still trying it on.. talking in vague terms about regulatory divergence during transition. Transition to where?..the only ones talking about transitional arrangements is the UK side..the EU has not even mentioned the subject..as far as they are concerned march 29th 2019 marks the final date. And before that date the three priorities of the divorce will have to be settled, citizens rights, Ireland and the brexit bill..so walking away will be the end..we’ll presumably have plenty of time then to apply ourselves to the questions of deficits?

    • Iain Moore
      Posted September 27, 2017 at 8:35 am | Permalink

      Why can’t we have our cake and eat it? If I buy a cake, I do so in the anticipation of eating it.

    • Denis Cooper
      Posted September 27, 2017 at 9:26 am | Permalink

      Barnier has said this, and Barnier has said that, and some people in this country jump up to agree with him and support him rather than looking out for the interests of their own country. I’m sure he’s quietly pleased that he can rely on so much support from within the UK.

  33. Know-Dice
    Posted September 26, 2017 at 11:26 am | Permalink

    Not just a Money Tree from Corbyn & McDonnell it’s a whole forest…

    Better get planting now…before our Prime Minister gives the Crown Jewels to Mr Tusk…

  34. Peter
    Posted September 26, 2017 at 11:31 am | Permalink

    IDS understands the best way forward on Brexit negotiations. We have put our case. Now we need to put pressure on the EU. We do that through ‘no deal’ preparations :-

    ‘The first is that we publicly, and through strong cabinet leadership, make it clear that we are going to throw resources at the plans for leaving the EU without an agreement. We need to up the pace dramatically on the process, giving regular public updates on progress.’

    Otherwise the EU will believe there is no real will to leave and we are just supplicants to be browbeaten.

    Personally, I believe a timely ‘no deal’ is the best probable option anyway.

    I also believe we need leadership not dithering. Mrs. May has passed the day when it is useful for her to remain as Tory leader. A clean change at the top will help in driving Brexit forward.

  35. ian
    Posted September 26, 2017 at 11:59 am | Permalink

    John has given you people a extra 5 years of his life to see through brexit to the best of his ability and, all you lot can do is to shoot him down in flames when he put ideas forward to try to improve thing for the better. The subject today is deficit not tax cuts or something else or how to get better value for your money, so that money goes further.
    I have always seen that john does not mind people going off subject and, writing about something else but, to shoot his ideas down out of hand is not very supportive or encouraging.

  36. Mark
    Posted September 26, 2017 at 3:06 pm | Permalink

    I see Mrs May has failed to be robust with Mr Tusk. The negotiations now remain stymied with no sign of any progress possible. She should have been blunt with him, and told him that the EU are not living up to their obligations to negotiate and to be a good neighbour promoting free and fair trade, and while it was understandable that with many elections taking place there would be delay before an EU position could be agreed, now it is time to get on with it.

  37. ralphG
    Posted September 26, 2017 at 3:22 pm | Permalink

    The most dangerous man in UK politics today is probably john McDonnell and the next most dangerous is Boris Johnson..both in their own way would have no qualms about dragging the country down just to suit their own ideological and selfish egotistical beliefs irrespective of the longterm damage that could be done to the country.

  38. Denis Cooper
    Posted September 26, 2017 at 3:22 pm | Permalink

    Apparently Donald Tusk thinks that there hasn’t yet been enough progress with the Brexit negotiations. Well, I’ve seen people drawing up various lists of the concessions made by the UK since these so-called “negotiations” started, but I wonder if anybody has compiled a list of the concessions made by the EU?

    https://petition.parliament.uk/petitions/200165

    “Leave the EU immediately”

  39. Know-Dice
    Posted September 26, 2017 at 3:35 pm | Permalink

    Feels like it’s “Walkies” time – Mr Tusk says “not enough progress has been made in talks” & “we can’t have our cake…”

    It’s simple really Mr Tusk, if you want access to the UK market then it will cost you £10 billion a year. On the other hand you could have access on the current terms for free as long as we have the same access to EU markets – simple really.

  40. acorn
    Posted September 26, 2017 at 3:56 pm | Permalink

    Sorry to say but there is an endemic low level of economic understanding on all Brexiteer websites. Today on this site there is misunderstanding, for instance. “There are only two ways we can finance the overseas deficit. Either we have to borrow money in foreign currencies …”. Also “Where we borrow to sustain our excess consumption of European imports we run currency risk of having to repay in a foreign currency that has got dearer against sterling.” These don’t happen.

    We pay our EU club fees in Euro, so as the Pound goes down the bill will need more Pounds. Trade is a simultaneous transaction of goods going one way and the payments going the opposite way, at the same time, using the necessary currency swaps in the FX market. The swap could be at the buyers end or the sellers end, don’t matter.

    “And note that this all came about because governments operated neoliberal policies that didn’t understand net-importing causes a paradox of thrift effect that has to be compensated for by government action.”

    In simple terms that means if the UK is importing the equivalent of 5% GDP; and, the government has over reduced the government deficit to 3%, the other 2% is private sector households maxing out their credit cards! Which by the way, is exactly what Mr Osborne intended to happen!

  41. Iain Gill
    Posted September 26, 2017 at 4:01 pm | Permalink

    Ah just print and borrow more money, import ever more immigrants, regulate out of existence anything productive, keep the political class in their gold plated pensions, give large sums away to foreign powers.

    Where is the sensible main stream party to vote for? They have all decended into nonsense.

  42. Peter Martin
    Posted September 26, 2017 at 4:06 pm | Permalink

    There are only two ways we can finance the overseas deficit. Either we have to borrow money in foreign currencies, or we have to sell more and more of our assets to foreign interests.

    We have an overseas deficit with Germany. Germany ends up with more pounds from stuff they have sold to us than we have euros from stuff sold to them. So what do they do with excess pounds? They have either to buy our assets with them, as you say, or they buy gilts (treasury bonds).

    So how is this us borrowing in a foreign currency?

  43. Christopher Hudson
    Posted September 26, 2017 at 5:27 pm | Permalink

    I said it a while ago, until the government looks again at sending 13bn of taxpayer money abroad every year as gifts, then they’re not serious about getting a grip on this country’s finances

    Make whatever moral excuse you want for the payments, they’re actually borrowing it to give it away

    When we can’t, is there an adjective stronger than can’t?, afford it

    Somebody explain to me how borrowing money to give away when you can’t afford it isn’t insanity

    Only when a new Chancellor is appointed who steps to the microphone and announces that all foreign aid spending stops today will I believe that this government is serious about getting its finances in order

  44. hans christian ivers
    Posted September 26, 2017 at 5:48 pm | Permalink

    John is right that the trade deficit is the big problem for the UK economy but his solution is short term and not very viable.

    If, we look at a country like Denmark which ad major deficits even before 1992 during the EEC and the single market ad with a both public sector bigger than the public sector in the UK and with an equally large service sector, the Danes have had significant trade surplus for more than 10 years.

    This has nothing to do with EU contributions (the Danish contribution is higher per capita) and it has nothing to do with foreign aid which is higher per capita than the UK as well.

    This is about building a competitive economy for the long-term with better infrastructure, on the job training, better schooling and education, which usually leads to higher productivity and higher competitiveness and a smaller trade deficit.

    A trade deficit of 5% is not solved by a net contribution of £ 9 billion to the Eu saved and transfers of part of the foreign aid budget of 0.7% of GDP, this is surface treatment and no more.

    John, you really need to get the figures and facts better sorted out to find better long term solutions, instead of just EU bashing, it does not solve the underlying issues, as I do not believe your arguments stand up to deeper scrutiny.

  45. G
    Posted September 26, 2017 at 7:23 pm | Permalink

    Off topic I know, I apologise.

    But the comments of Macron are highly significant. Breaking ranks one could say….

    I object to the whole tone of these negotiations to date. They stink. They are playing us for mugs and fools.

    Please someone get the good JR in the driving seat!!!!!!

  46. Christopher H Sheldr
    Posted September 26, 2017 at 10:38 pm | Permalink

    I’ve watched party conferences since the early 1970s and I have to say that the Corbyn and McDonnell show has been the most extravagant in history. Even Tony Benn wouldn’t have made reckless spending pledges like this lot and they make Gordon Brown look like Scrooge.

    No wonder McDonnell is “war gaming” a run on the pound. If he were to get anywhere near No 11 it wouldn’t be a run, it would be a rout. He would become the second Labour chancellor to have to call in the IMF.

    Against this background, all talk of the current deficit is utterly pointless. Labour wouldn’t have a deficit, they would empty the Treasury so fast they would bankrupt the country.

    In any other decade, Corbyn’s policies would exceed the length of Michael Foot’s longest suicide note in history by some margin but something has changed in the public mood and a manifesto that has no credibility whatsoever could well look attractive to many voters.

    I suspect this is because the Conservatives, initially pushed by Clegg and Cable, have taken millions out of tax and they have no vested interest in keeping public spending under any semblance of control.

    This has been a huge strategic mistake continued by Hammond and it will come back and bite the party. Hard.

  47. David Price
    Posted September 27, 2017 at 6:07 am | Permalink

    You make some excellent points, in particular;

    “Where we sell more assets we forgo future profits and dividends, and may see the foreign buyer transfer some of the economic activity elsewhere if they wish to help their home production at the expense of a former UK competitor.”

    Readiness to sell off valuable intellectual and enterprise resources is a big mistake, it trades years of education, innovation and effort for the immediate profit of fund managers and barrow boys. Such activity damages our economy and ability to compete in an increasingly competitive world.

    The problem is – in a country where it seems the rewards are many for those who undermine us in such a way, where many are too lazy to understand the consequences or simply don’t care how do you change things around.

    • hans christian ivers
      Posted September 27, 2017 at 3:23 pm | Permalink

      so how comes that generally when acquisitions are made in this country of corporate entities, they employ more people and invest more as a general rule in teh acquired business?

  • About John Redwood


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

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page