The UK Treasury needs to wake up to the power of those US tax cuts

I read in the papers that the Treasury is busy scrambling around to find more taxes they can put up. If they stopped giving away so much of our money to the EU and   stopped trying to find ways to carry on giving away our money to the EU  they would not need to worry about where to find the cash. If they fully embraced the idea that lower tax rates often lead to higher revenues we could make more economic progress.

This week the Republicans at last rose to the challenge of tax cutting. They announced a blockbuster package. If it or something like it passes it will increase US growth materially, it will  be a boost to the whole world economy, and it will suck business into the USA from higher tax regimes elsewhere.

The  Bill includes slashing the Corporation tax rate from 35% to 20%, and to just 12% as a one off to get large US corporations to repatriate profits they have been holding offshore to avoid high rates. It gives a big boost to the average earner by cutting bands of Income tax from 7 to 4, and lowering the tax take on all but the richest. It is costed as providing a $1.5 trillion stimulus over ten years. In practice I suspect the proposals will collect rather more revenue than the conventional official models predict, but it will certainly be stimulatory in its impact.

We do not need at the same time a budget in the UK looking for new ways to tax small business with extra VAT or National Insurance. We can live without a tax attack on the self employed. We do not need further tax attacks on homeowners. We need to match the US approach and show some enthusiasm for lower tax rates. We need a more dynamic economy, collecting more revenue, which comes from fewer, simpler and lower tax rates.

So much of the UK economic establishment is dominated by endlessly repeating the arguments of the Brexit referendum for no good reason.  Instead they need to talk about tax cuts and tax reform, appropriate deficit levels and Central Bank policy. There is a danger the UK will be left behind by the boldness of the US approach. If they carry this package or something like it it will have an electrifying effect on the US economy.

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131 Comments

  1. sm
    Posted November 5, 2017 at 5:33 am | Permalink

    I have been a life-long reader of (non-fiction) English and European history.

    For centuries, almost all governing authorities have blithely raised taxes, whether to fund Crusades, fight territorial expansionist wars, admonish certain sectors of the population for their bad behaviour or religious beliefs, or simply to line the pockets of the ruler and his cronies.

    Generation after generation, some nincompoop in power thinks it would be a good idea to bleed dry the workers and producers. And what happens? Revolutions, civil war, permanent damage to the economic structure of the country.

    Yet the practice continues. I despair, I really do – and coming on top of the all-too-credible stupidities that are being currently revealed in Westminster, and the unbelievably stupid reactions of the Prime Minister, my reaction is now ‘ a plague on all your houses’. Frankly, I do not know how you, John, and a handful of your saner colleagues, can continue without going crazy.

    • Peter Wood
      Posted November 5, 2017 at 9:50 am | Permalink

      As a student of history, you will also know that the economic cycle runs for 8-10 years; we are now 8 years or so into the ‘recovery’ and look at the state of our national finances. There is nothing left to throw at the next recession, so it will be a real depression.

      • Denis Cooper
        Posted November 5, 2017 at 2:50 pm | Permalink

        If a government gets itself into the position of having to borrow a quarter of all the money it’s spending then sorting that out won’t be a quick job.

        • Peter Martin
          Posted November 5, 2017 at 6:35 pm | Permalink

          ALL the money spent by Govt is its own creation.

          • libertarian
            Posted November 5, 2017 at 9:34 pm | Permalink

            Peter Martin

            No its isn’t you STILL dont understand money

          • Denis Cooper
            Posted November 6, 2017 at 10:05 am | Permalink

            But I said “borrow”, not “create”!

          • Peter Martin
            Posted November 6, 2017 at 12:32 pm | Permalink

            The pound is a fiat currency. An IOU of government. You might like to ask yourself if it is possible to borrow one’s own IOUs. Or if what is often considered to be borrowing is simply the process of creating new IOUs.

          • Denis Cooper
            Posted November 6, 2017 at 2:24 pm | Permalink

            I suggest that you have a look at a sterling banknote to see who has issued it. Not the Treasury, you will find.

          • Peter Martin
            Posted November 6, 2017 at 6:28 pm | Permalink

            According to its Wiki entry the BoE is wholly owned by the Treasury Secretary on behalf of the Govt.

            JR has expressed the opinion, with which I fully agree, that “The Bank of England is not independent”

            See his posting of 7th Oct 2016

      • Lifelogic
        Posted November 5, 2017 at 5:57 pm | Permalink

        Well we could throw some sensible, much smaller state, bonfire of red tape, cheap non green crap energy and lower tax policies at it. That after all would work.

    • alan jutson
      Posted November 5, 2017 at 12:49 pm | Permalink

      sm

      Have to agree with much of your posting today.

      I think we are all getting absolutely sick and fed up with the antics and policies of our present politicians of all persuasions in all Parties.

      Very few members of the HOC (I exclude our host) seem to not represent, or even have any idea how to represent us, their constituents.

      Whilst you will always get a fair share of bad apples in any organisation, our Parliament now seems to be filled with a majority of members who simply do not want or even know how to behave in a sensible and honourable manner.

      Tax as much as you can, waste as much as you like, seems to be the mantra for many.

      • Hope
        Posted November 5, 2017 at 4:50 pm | Permalink

        In 2009 we were promised real change and a right to recall. The introduction of IPSA changed nothing only costed us more in tax. MPs still police themselves and are literally above the law. Until a truly independent body manages discipline and a true right to recall is achieved nothing will change. These empty new procedures are farcical.

        MPs always make themselves exempt i.e. Tax exemptions to the rest of us, RPI for their pensions while imposing CPI on the public sector, pay rise caps of 1 percent then give themselves £77,000 for a part time unqualified job!

        In the expense scandal over 302 MPs were overpaid or fiddled their expenses. This included Clegg with his kitchen utensils, Cameron with his wisteria bush and Miliband with his gardening claims. All promised robust action, nothing came of it. What is worse there must have been a policy decision made who to prosecute as so few ever were, yet false accounting is an easy offence to prove. It is inconceivable that the half who did not commit any misdemeanour must have known what was going on but said and did nothing.

        Real change required by having an independent body free from any political influence. There is no credibility for the the civil service investigating members of the cabinet. Get real.

        Reply The MP pay rise was decided by an entirely independent b0dy, with many MPs saying there was no need for a rise.
        Most MPs who were asked to repay money were asked to repay sums which had been legally claimed and paid under the rules of the scheme at the time.

        • Hope
          Posted November 5, 2017 at 9:40 pm | Permalink

          No, JR. The rotten rules were written by MPs for MPs. Good grief get real. False accounting is very easy to prove, there was a policy decision who to and not to prosecute. Another establishment cover up. Law first then internal procedure as every other company or organisation.

          Cameron threatened IPSA when it did not do as expected. That is not independence. You have not addressed the key sentiment-MPs police themselves and are above the law. Politicos make themselves exempt from laws the rest of us are expected to comply with. We have all this hysteria about sex crimes when if all three parties did as they promised in 2009 or normal rules of employment and prosecution applied this would not be a story today. Look at the equality bulls… from your party over recent weeks! This has not changed your party, May ought to realise it is the one rule for us and one rule for you that is viewed as nasty. This is why change around the world is happening.

          Reply MPs who had used false accounting to steal money were rightly prosecuted. Most MPs who were asked to repay did so because they changed the rules retrospectively over what was eligible. MPs are under the law like anyone else. The only difference is MPs can collectively change the law for the future.

    • Fedupsoutherner
      Posted November 5, 2017 at 5:20 pm | Permalink

      SM your last sentence sums it up for me. How csna sensible Conservative like our host be happy with the nonsense coming from his party at the moment? If the voters are in despair then it must be worse being a part of it all.

  2. Duncan
    Posted November 5, 2017 at 6:40 am | Permalink

    May, it seems, is using the sleaze at Westminster issue to purge her government. If she’s not deposed she will remain as PM for the foreseeable and my party, my nation and indeed my sanity will be severely damaged

    Tax cuts are an anathema to Keynesians like May and Hammond. These two believe the citizen exists to serve the interests of the political state. I have news for them, we don’t.

    This liberal left PM and her obsessions with identity politics is a disgrace to my party and an offence to decency.

    It is incumbent on decent politicians to bring her down before she does even more damage

    • Lifelogic
      Posted November 5, 2017 at 9:29 am | Permalink

      “It is incumbent on decent politicians to bring her down before she does even more damage” – indeed it is.

      But to do so without letting Corbyn in is rather tricky after her failed – “vote for me and I will punish you even more with yet more taxes and loss of benefits” election.

      • Ken Moore
        Posted November 5, 2017 at 12:59 pm | Permalink

        Rising violent crime, tortuous Brexit negotiations, 1bn a week deficit , current account deficit widening … rising inflation and demands for an end to public sector pay restraint…a pensions crisis…public services overwhelmed.. a population crisis in the making…

        Almost every sector – construction, production and services – seems to be turning down. The sole previous driver of economic growth, which was debt-fuelled consumption, has hit the buffers because consumer credit is maxed out. Even car sales – perhaps the ultimate debt-financed component – have taken on an ominous downwards trajectory.
        Prosperity has been in relentless decline for years….

        I find it fascinating (in a morbid sort of way) that, with all of this coming down the tracks, the politicians and media are obsessing over sleaze, yet again. They were doing the same thing in 2008, I seem to recall just before the first financial crisis that apparently nobody saw coming….

        • Lifelogic
          Posted November 5, 2017 at 6:01 pm | Permalink

          Indeed the NHS is getting worse by the day & killing thousands, the police have virtually given up and politicians are concerned about MP’s touching each other’s knees or making pathetic, trivial suggestive comments.

    • NickC
      Posted November 5, 2017 at 11:50 am | Permalink

      The Conservatives put May before country, dithering before resolution, supplication to the EU before independence. Make no mistake, we are heading for fake-Leave. Like the BBC, the Tory party is unreformable. UKIP may be a poor option but, like democracy, it is better than the alternatives.

      • Lifelogic
        Posted November 5, 2017 at 6:02 pm | Permalink

        UKIP is not an option the choice is the socialist daft Tories or the very socialist Corbyn trip to Venezuela.

  3. Ian Wragg
    Posted November 5, 2017 at 6:52 am | Permalink

    If we had a true Tory government then what you say may happen. Having a limp dumb Prime minister and Chancellor means we will get more of the same.
    3 cheers for Donald.

    • Timaction
      Posted November 5, 2017 at 1:12 pm | Permalink

      Oh for someone like Trump/Farage who look after their people! Good luck to you Tory voters. Look what they do, not say! The Conservative Party no longer exists but in name only.

      • Fedupsoutherner
        Posted November 5, 2017 at 5:22 pm | Permalink

        Time action, got it in one.

      • Ken Moore
        Posted November 5, 2017 at 5:39 pm | Permalink

        May’s strategy is to tackle ‘burning injustices’ and thus repel concervative supporters and attract a small and vocal minority that will probably support anyone but her. Fool.

  4. eeyore
    Posted November 5, 2017 at 6:58 am | Permalink

    Wonderful. When companies conspire to fix prices it’s called collusion and bosses end up in jail. When governments do it with taxes, it’s called harmonisation and we’re invited to applaud.

    An end to monopoly government? A tax race to the bottom? Bring it on!

    • Lifelogic
      Posted November 5, 2017 at 9:34 am | Permalink

      Indeed also the state have a competition authority to try to ensure fair competition in the private sector. But the most unfair competition is in health care, education and social housing where the government largely kills all the more efficient private competition by using tax payer subsidies and free or uneconomic pricing.

      Giving dire, death causing, state monopolies. Take it or leave it mate we have you money already!

      • eeyore
        Posted November 5, 2017 at 9:59 am | Permalink

        All true. And why is there only one competition authority?

  5. Lifelogic
    Posted November 5, 2017 at 7:05 am | Permalink

    Lower simpler taxes from here would produce more revenue not less. We are taxed well above the Laffer point in most areas. Taxes should be well below this point and not at it for maximum good. The basic point is that people and businesses spend and invest their money far better than governments do, so leave it with them. We do not want government “help” or “advice” we want then to get out of the damn way.

    Also encourage more of the rich to use private schools, private medicine and the likes with tax breaks or vouchers.

    Meanwhile the public services we get for all this over taxation are generally second rate and often appalling.

    The treasury have already delayed a NI threshold increase that was planned. There is so much waste and state sector fat that could usefully be cut. So much of the state does nothing of any use anyway and so much red tape that cut usefully be cut too. Yet May and Hammond just keep giving us more drivel, such as enforced gender pay reporting. Childish virtue signalling by socialist dopes with a broken compass.

    • behindthefrogs
      Posted November 5, 2017 at 12:47 pm | Permalink

      It is totally wrong that anyone who is receiving benefits should be paying NI. The threshold should urgently be raised to match the starting level income tax

  6. stred
    Posted November 5, 2017 at 7:08 am | Permalink

    The Treasury and HMRC have behavioural insights teams working on our minds and seem to think we can be persuaded to enjoy paying more tax and collecting it. Possibly, this is why someone came up with the bright idea of encouraging enterprise by making small businesses with a very low turnover collect VAT for the good of their pay and pensions. When US companies decide that tax rates in Ireland are going up, under pressure from the EU, the Irish could always try behavioural insights on Google and Macs and possibly persuade them to stay.

  7. Lifelogic
    Posted November 5, 2017 at 7:28 am | Permalink

    The current tax regime in the UK, income tax, cgt, corporation tax, NI, vat, insurance premium tax, renewable energy tax, duty, bed, inheritance, stamp duty etc can easily take 90% of (what your capital would have been) off you over the years. Giving you just 10% of it to pass on.

    Why would anyone rich want to live and invest there? Unless their hobby is reading tax books, talking to expensive tax consultants, HRMC and tax lawyers that is. Plus looking forward to Corbyn’s version of Venezuela. Not that talking to HMRC is that easy. Last time I waited for about 15 mins on the phone then the system just hung up on me. Or perhaps their hobby is giving money to the government and watching them piss it down the drain.

    • Rien Huizer
      Posted November 5, 2017 at 8:10 am | Permalink

      Some of the richest people in the world are living in the UK. Very lightly taxed..

      • Lifelogic
        Posted November 5, 2017 at 9:45 am | Permalink

        Not really true especially now after the attacks on tax schemes and non doms, and I have looked at it in quite some detail with my tax advisers.

        You can, for a short while, as a non dom perhaps or you can spend a fortune on tax structures and advisers but to say they the rich are “very lightly” taxed is an exaggeration. They pay circa 15% of value when they buy a decent house for example.

        The top 1% of earners pay 27% of all income tax for example.

        The country would be far better of (and far more efficient) with a low simpler tax regime for all. We would almost all be far better off that way.

      • Edward2
        Posted November 5, 2017 at 9:52 am | Permalink

        The top one percent now paying a record 28% of income tax.

      • NickC
        Posted November 5, 2017 at 12:10 pm | Permalink

        And many of the richest don’t. The real issue is that multi-national corporations have much too much of a cozy relationship with the EU. The hand-in-glove, behind closed doors collusion of private corporations with the EU or state government used to be regarded as corruption, and was a characteristic of fascism.

        • Edward2
          Posted November 5, 2017 at 4:59 pm | Permalink

          Which is part reason why the new European rich elites and their friends running big multi national companies all love the EU.

          • Mitchel
            Posted November 6, 2017 at 11:06 am | Permalink

            And,furthermore,want -and conspire to achieve -world government.

      • libertarian
        Posted November 5, 2017 at 9:40 pm | Permalink

        I do wish people who dont understand the tax system wouldn’t keep telling us who isn’t paying tax

        For Rien Huizer

        Income Tax is a tax levied on earnings

        Corporation tax is a tax levied on company profits

        EVERYONE pays VAT on the goods they purchase, we all pay council tax on our properties, we pay stamp duties on house and share transactions, we all pay fuel and alcohol duties

        Which tax do you think they’re not paying?

  8. Liam Hillman
    Posted November 5, 2017 at 7:30 am | Permalink

    I guess this is what we get for having Authoritarian Remainer Socialists as PM and Chancellor.

    Replace them with Libertarians or anyone who has understood the concept of the Laffer curve, and our problem is solved.

    • Dame Rita Webb
      Posted November 5, 2017 at 7:58 am | Permalink

      Ladder curve eh? And what about those transnational corps that still will not pay up even when you lower corporate tax rates?

      • eeyore
        Posted November 5, 2017 at 8:51 am | Permalink

        We have no moral obligation to taxmen. Obeying the law is sufficient.

        • Lifelogic
          Posted November 5, 2017 at 9:47 am | Permalink

          Indeed and there are lots of ways the tax laws could be changed to catch these transnational corporations – especially when/if we are outside the EU straight jacket.

          • Rien Huizer
            Posted November 5, 2017 at 7:45 pm | Permalink

            Pse explain the link between the “EU straight jacket” and transnational corporations’ taxation.

          • Leslie Singleton
            Posted November 5, 2017 at 8:02 pm | Permalink

            Dear Lifelogic–Straitjacket please, as in Straits Of Dover or Dire Straits–It means “Narrow”–This is not a Fashion Show.

      • Liam Hillman
        Posted November 5, 2017 at 12:30 pm | Permalink

        No need to flaunt you igorance, Rita.

    • acorn
      Posted November 5, 2017 at 11:11 am | Permalink

      Oh no, not the Laffer curve again. Reagan proved beyond doubt that it doesn’t work and never has; it’s total BS. There is no such animal as “trickle down supply side” economics based on Laffer theories. https://www.theguardian.com/commentisfree/2012/jun/27/laffer-curve-tax-cuts-rich-funny

      According to the CBO, the US effective corporate tax rate is currently around 18.6%, essentially the same as the UK’s effective rate (18.7%) and not far above Germany’s effective rate (15.5%).

      • Edward2
        Posted November 5, 2017 at 5:05 pm | Permalink

        Laffer as a guide works.
        Increasing research into behavioural economics suggests radical changes in people’s behaviour when taxes are increased and decreased.
        If you ran a multi national trading company where would you place your HQ for accounting and tax purposes?

      • acorn
        Posted November 5, 2017 at 5:26 pm | Permalink

        If you want to know why the US economy grew so much better than the UK’s, the following explains.

        The U.S. budget deficit widened to $666 billion for the fiscal year 2017 as record spending more than offset record receipts, the Treasury Department said on Friday. The 2017 deficit increased to 3.5 percent of gross domestic product. The previous fiscal year deficit was $586 billion, with a deficit-to-GDP ratio of 3.2%.

        Fiscal 2017 [US fiscal year starts 1st Oct] revenues increased 1 percent to $3.315 trillion, while spending rose 3 percent to $3.981 trillion.. Since taking office in January, the Trump administration has sought to overhaul the U.S. tax code with precise details currently being worked on in Congress. The Republican tax plan currently calls for as much as $6 trillion in tax cuts, which would sharply reduce government revenues. It has prompted criticism that it favours tax breaks for business and the wealthy and could add trillions of dollars to the deficit. (Reuters)

        The kicker is the Trump tax plan includes a 20% import tax proposal targeting the abuses of so-called transfer-pricing, where multinationals themselves set prices of goods, services and intellectual property rights that constantly move between their business units in different countries. The object being to make it appear that they are making all their profits in low tax countries. The UK particularly, would be hit by such a tax, as it has a large share of overseas registered US corporates.

      • Lifelogic
        Posted November 5, 2017 at 6:08 pm | Permalink

        So if income tax was at say 100% would you still pay to go to work every day at a net negative income after travel costs?

        If not the Laffer Curve is clearly there. What the Laffer point is varies by tax and person be in the UK we are largely over it.

      • Richard1
        Posted November 5, 2017 at 6:09 pm | Permalink

        There is extensive evidence for the Laffer curve effect. When Thatcher cut the top rate of tax from 98% to 40%, receipts rose – and so did growth. When the coalition cut the 50p rate to 45p the same thing happened – receipts rose and so did the proportion of tax paid by the highest earners. When CGT was cut by Labour receipts rose, and then fell when it was increased again despite the increase happening at a time of record high asset prices. Recognising this, m Macron in France is now cutting CGT and dividend tax sharply in France. Examples go on and on. Only a leftist blinkered by ideology would deny the Laffer curve – it isn’t surprising they do as it undermines the very foundation of egalitarian socialism. (Nor is the article you site in any way a proper evaluation of Reagan’s great success in restoring dynamism to the US economy).

        • acorn
          Posted November 6, 2017 at 8:03 am | Permalink

          All the tax changes you mention were signalled well in advance so allowing “forestalling” plans to be employed by transnational corporations. Look up the long term tax yields.

      • libertarian
        Posted November 5, 2017 at 9:44 pm | Permalink

        Dear Tree nut

        I suggest you go take a look at what happened in Latvia when they reduced the rate of tax. There are dozens of further examples including in this country of tax cuts generating more revenue .
        You are deluded the laffer curve principle is entirely mathematically obvious. If you charge 100% tax, you won’t raise very much at all. So the principle is established the argument is over at what point.

        “Trickle down” is a myth invented by socialists

  9. James Doran
    Posted November 5, 2017 at 7:42 am | Permalink

    Higher taxes? You speak of the Treasury as if it’s a body outside the (Conservative) Government’s control.

    • NickC
      Posted November 5, 2017 at 12:24 pm | Permalink

      James, That’s probably because the Treasury is outside JR’s control. And because the (Treasury and other) civil servants are outside government control.

      The really odd thing is that many in the Conservative party, in the government civil service, and indeed in Labour, have still not registered that we are no longer satisfied with business as usual.

      They have convinced themselves that we “didn’t know what we were voting for” and by extension that we know nothing at all, or merely have to be re-educated to love the EU, migrants, and higher taxes for poorer services.

  10. Turboterrier.
    Posted November 5, 2017 at 7:54 am | Permalink

    So much of the UK economic establishment is dominated by endlessly repeating the arguments of the Brexit referendum for no good reason.

    But is not the case with all change programmes? It creates three groups of protagonists:

    Those that make it happen.

    Those that want it to happen

    Those who wondered what the hell happened.

    The remainers are definitely in the latter as all they can relate to is the perceived changes that will affect them and their easy existence.

    As with fracking this new financial package for the American people will have a huge effect on their economy. This country needs more people in positions of influence and power to make it happen for the UK.

    The line in the sand has been drawn and politicians and civil servants have to make a choice of cross over and make it happen or just walk away, we cannot carry on like this tearing the country apart from within. We have more than enough problems outside our borders to worry about. The old guard has to be disbanded and allow new blood and new ideas to take us forward those who are open to change and totally committed to making it happen.

  11. Nig l
    Posted November 5, 2017 at 8:01 am | Permalink

    If boldness was a necessary attribute for your Cabinet, most would fail at the interview stage, eg Hammonds totally risk averse approach to Brexit and Theresa May being elected as a safe pair of hands. Unfortunately I haven’t heard one dynamic utterance from her with her approach to the energy sector confirming she does not understand markets.

    The other factor is the strength of Corbyn and it is obvious she is chasing him left so is closer to Blair as was Cameron, than Thatcher.

    You are correct and businesses, wealth creators are desperate for a low interventionist, reduced tax and regulation economy and there lies the rub Trump is a business man and risk taker not a machine politician, that is why he beat Clinton, oh and he has charisma (like him or not).

    Actually the Brexit and for Corbyn, vote showed the same as the Americans that we are fed up with being run by a narrow self serving, self satisfied elite who think they know better than us and hold our views in contempt. You can almost see the smell under the nose of the likes of Clegg, Soubry, Heseltine etc

    However I fear their view will prevail again. I am also convinced that Hammond and the Treasury have been told by the EU not to reduce corporation tax.

    Keep on plugging away sir, surely it is time for you and like minded colleagues to get this out to a wider public.

    • Timaction
      Posted November 5, 2017 at 1:20 pm | Permalink

      Thats why the EU speech May gave, written by the EU, said we would not reduce corporation taxes even when we have left the dreaded dictatorship. Remainers still think of themselves subservient to the EU. Get off your knees May and deliver the Brexit or go home and let someone take over who can!

  12. Anonymous
    Posted November 5, 2017 at 8:01 am | Permalink

    Worst of all has been the tax rate left where it is – to capture people by stealth. So that ordinary workers can now find themselves paying higher rate tax. Also inheritance tax originally designed for aristocratic families now paid by ordinary people too.

    O/T A big disincentive to buying a house have been estate agent fees – set at a percentage with no link to increased effort. Boom time for them.

    • sm
      Posted November 5, 2017 at 1:48 pm | Permalink

      You must pay your taxes, you don’t have to employ an estate agent to sell your house for you.

  13. Excalibur
    Posted November 5, 2017 at 8:06 am | Permalink

    On the button again, JR. ‘Enthusiasm’ and ‘boldness’. Would that we could witness both from our Government, instead of this relentless mediocrity.

  14. Richard1
    Posted November 5, 2017 at 8:16 am | Permalink

    I agree with all this. Certainly it’s going to be a great lesson to high taxing European governments including the U.K. if the much reviled Mr Trump succeeds in really boosting US growth through radical tax reform. Presumably he will get re-elected if he does, & we will be able to enjoy the horror and outrage of BBC-Guardian types when that happens.

    But is there a majority in Parliament for the ‘Thatcherite’ approach you propose?

    • stred
      Posted November 5, 2017 at 10:55 am | Permalink

      Watching BBC guardian types on Breakfast yesterday, they had an Irish lady journalist on to review the papers. She picked up the guardian to tell everyone that the cost of essentials for poor families would increase by up tp 40%, because of Brexit, and then the FT with another Fear story. Then an idea occurred. How about HMRC investigating all the mega pay through BBC journalists companies, paid as dividends with big tax breaks. These must be questionable, as they are regular employees. Make the right tax payable back to when this began, then use it to subsidize all those poor families that they are keen to help. And fine the financial advisers in management who told them to do it, just like they are threatening accountants who do so today.

      • Denis Cooper
        Posted November 5, 2017 at 2:57 pm | Permalink

        And neither of those fear stories was refuted by the government.

      • Green Isle
        Posted November 5, 2017 at 6:38 pm | Permalink

        No sign of the Irish leaving here and returning to Ireland.Surely their wives and children would be entitled for immediate residence in the Emerald Isle too. No great rise in Irish housing company shares. It appears Irish business people secretly see the UK as a success when we leave the EU. They have voted with their money and their feet in wellies! 🙂

    • rose
      Posted November 5, 2017 at 1:38 pm | Permalink

      “But is there a majority in Parliament for the ‘Thatcherite’ approach you propose?2

      JRM said not.

  15. hefner
    Posted November 5, 2017 at 8:25 am | Permalink

    Funny how results of economic forecast models are anathema to some when produced by some institutions but become “It is costed as providing a $1.5trillion stimulus over ten years” for other types of believers when produced by other models in other countries.
    Then those blighted models disappear and are replaced by the oh-so-much better “I suspect the proposals will collect rather more revenue than the conventional official models predict”.

    We really need JR and his crystal ball at the Treasury.
    Good fun to start a beautiful Sunday morning.

    Reply I write it like that as I suspect these US official forecasts also overstate the revenue loss.Revenue loss equals stimulus to the establishment forecasters

    • NickC
      Posted November 5, 2017 at 12:40 pm | Permalink

      Hefner, That is the human condition: none of us can actually see the future. Even you.

      However the vast majority of the world’s countries (by people, GDP, land area, whatever) are not in the EU. So it’s pretty certain that we could join them. And whenever countries have put enterprise first by cutting and simplifying taxes and regulations, the result has been an increase in wealth.

  16. JoolsB
    Posted November 5, 2017 at 8:25 am | Permalink

    And not just the EU where we should definitely pay not one penny in a so called divorce bill. Instead of finding ever more ways to tax hard working people, how about cutting the ridiculous arbitrary foreign aid budget, the bloated public sector including politicians, the skewed Barnett Formula, the over generous benefit system. Oh and how about getting our money back from RBS, most of which is going to prop up greedy bankers’ pensions?

    Just a few to be getting on with if only we didn’t have a socialist, wasteful, incompetent Government under May.

  17. Caterpillar
    Posted November 5, 2017 at 8:41 am | Permalink

    Does the Treasury run the Chancellor, PM and Brexit negotiations?

    • William Long
      Posted November 5, 2017 at 10:17 am | Permalink

      YES is the resounding answer to this question, and we will get nowhere until we have a Chancellor who has his own ideas and is prepared to stand up to the mandarins.
      I have two candidates: our host or Mr Rees-Mogg.

    • NickC
      Posted November 5, 2017 at 12:42 pm | Permalink

      Caterpillar, No, the civil servants do.

  18. Peter Martin
    Posted November 5, 2017 at 8:45 am | Permalink

    ” If they (the Treasury) fully embraced the idea that lower tax rates often lead to higher revenues we could make more economic progress.”

    We could make even more progress if we understood that higher revenues shouldn’t be interpreted as giving the Govt more money to spend. It should be the other way around. When the economy is buoyant and revenues are high, the Govt should trim back its spending and/or raise taxation to prevent overheating and inflation in the economy.

    On the other hand when the economy is sluggish and revenues are low the Govt needs to spend more and/or tax less to speed it up.

    • APL
      Posted November 9, 2017 at 9:29 pm | Permalink

      Peter Martin: “On the other hand when the economy is sluggish and revenues are low the Govt needs to spend more and/or tax less to speed it up.”

      And we know from experience, which of those two options the government always chooses.

      Peter Martin: “higher revenues shouldn’t be interpreted as giving the Govt more money to spend. ”

      But they nearly always do. Which leads to a big problem when the economy takes a downturn, because what government in a democracy can afford to say to its electorate ” you are all losing your jobs, you all have less money to spend, so we’re going to spend less. “

  19. BartD
    Posted November 5, 2017 at 8:58 am | Permalink

    If it were so simple then why cannot JR get enough support in the house and force the necessary changes? If he cannot get the necessary support or anywhere near it, then we can only guess who that someone is who is so out of step with the rest- simple!

  20. Kenneth
    Posted November 5, 2017 at 9:26 am | Permalink

    Mr Redwood your logic cannot be faltered.

    However, there are powerful forces out there pushing us to somehow maintain these eu payments.

    On Farming Today, BBC Radio 4 last week we had a professor from Imperial College London (15 million Euros received in eu grants this year) and somebody from the Agriculture and Horticulture Development Board (works for the eu distributing £millions of Horizon 2020 funding).

    They wasted no time in telling us of all the problems we would encounter from Brexit.

    This was followed by an anti Brexit question in the HoC by Barry Sheerman MP in the “Exiting the EU” – questions to the minister (Steven Baker) session on Thursday, where he cited “Farming Today” as a credible source for the prediction that “farmers are going to go bankrupt”.

    Whether that was an orchestrated campaign or Mr Sheerman was being played like a violin by the BBC, the result was that the unelected tail was wagging the elected dog.

    I would say that the Treasury can be added to the list of unelected anti-Brexit organisations.

    For the sake of the country the PM must get the message out loud and clear that:

    – the civil service is working for the UK and not the eu;

    – eu-funded organisation will soon have their funding (if any) coming directly from the taxpayer instead of via the eu

    – the BBC has no right to run this constant propaganda

    The sooner these unelected people realise they will no longer be within the eu orbit – whatever happens – the quicker we may get to some balance and common sense.

    • Kenneth
      Posted November 5, 2017 at 11:44 am | Permalink

      …and to add insult to injury, according to the BBC:

      “Media watchdog OfCom recently said that Brexit was now one of the biggest challenges facing the [broadcasting] sector” (here: http://www.bbc.co.uk/news/business-41875853)

      OfCom is supposed to police the BBC so what hope is there of impartiality when the watchdog itself agrees with the BBCs propaganda.

  21. A.Sedgwick
    Posted November 5, 2017 at 9:30 am | Permalink

    Our system of Government is moribund. It is a part time, antediluvian, inefficient, unproductive operation with timeouts, recesses, delays, unnecessary procedures, reviews, green papers, white papers being the norm. Blair’s second biggest failure for me was the missed opportunity with his massive majorities to revolutionise the way Government and our overpowered mandarins operate. Brexit is of course the current prime example. Any idea of serious change that has good support is lucky to hit the statute book in two years or in a parliament. Successive chancellors have bemoaned the complex tax laws but do nothing but increase the number, now up to 20,000 pages in the official tome. A simple change like combining income tax and N.I. causes apoplexy in the Treasury it would seem.

    Hammond will continue this mess and more if small businesses become subject to VAT, who pays? The taxpayer does e.g. work on my car itemised VAT at £147 on its recent service, mot etc., if this spreads to window cleaners, small jobbers more cost, more bureaucracy.

    • Lifelogic
      Posted November 5, 2017 at 9:53 am | Permalink

      More black market economy, far less overall efficiency, fewer jobs (as lots no longer worth the candle), more people filling in VAT returns, rather than doing productive work.

      What a great plan, what could possible go wrong here? Let us see what happens in three weeks, but it seems to me that Hammond’s budget is going to be another disaster.

      • ian wragg
        Posted November 5, 2017 at 4:45 pm | Permalink

        This is one of the reasons the government wants to get rid of cash. I for one pay small traders in cash, I don’t see why the government should charge me £500 tax because I have to re-lay my drive.
        I bet the VAT man won’t be chasing all the foreign car cleaners and window cleaners.
        There is a foreign registered car on our street for over 3 years, paying no road tax and probably uninsured for UK roads. They would make more money if they administered the current rules without adding to them.

    • Rien Huizer
      Posted November 5, 2017 at 2:33 pm | Permalink

      The US economy is running very well on the basis of current tax and FED policy. The US (corporate) tax proposals have little impact on US corporations engaging in international trade, because these have a myriad of ways to manage their taxes. Maybe this proposal will result in repatriation of of piggybanks. It may have effects on tax-driven strategies for certain investors and funds but that will probably be overcome by lobbying and clever lawyering.

      Re your suggestions: what are appropriate levels of deficits, overall taxation, government spending and how should all of that be distributed. Ending EU contributions (and no longer collecting import duty on EU behalf) would be s ubstantial saving, especially if the gross amount could be saved (ie no UK replacement for EU support to farmers, universities, regions, projects etc). Of course that would require considerable political courage, more than seems to be on display currently.

      One question about one of your earlier suggestions: to cancel UK debt on the books of the Bank of England. What asset would replace it? You are not suggesting the Bank would take a loss of that magnitude, without recapitalizing it immediately. With all due respect, etcetera…

      Reply The state owns both sides of the government debt so there is no loss to take

      • Rien Huizer
        Posted November 5, 2017 at 7:58 pm | Permalink

        The Bank funds the Facility (see BoE balance sheet) and is indemnified by the UK government. I would expect that the BoE would call under that indemnity if these loans were not repaid. Pse show me where I go wrong. Macro you are right of course but would treat the BoE as a mere government department, ignoring the independence that we investors see as our protection against predatory politicians.

  22. Dave Andrews
    Posted November 5, 2017 at 10:10 am | Permalink

    Reduce government spending please, and no more taxes.

    I suggest the welfare bill is subtracted from current government spending, after which we should show a surplus. It can then be put back in on a rationed basis, allowing for some national debt repayment.

    Those of us in business have to adapt our budgets to cope with varying fortunes, I suggest those on welfare should do so also. If that is too punitive, find savings from other government spending, as suggested from other postings on this site, and I would add cancel Trident.

    And next year do the same, except nudge down a tax rate here and there.

  23. BOF
    Posted November 5, 2017 at 10:14 am | Permalink

    Yet another post that is right on the button. Do I detect that you share our utter despair?

    This country desperately needs another political party to counter the far left socialists in opposition and the socialists heading up the Government. Unfortunately it can only happen by changing to a PR system and it suits both Labour and Conservatives to maintain the status quo so there is little hope of ever seeing such sensible tax reform being introduced. Most especially with our current PM and Chancellor.

    While the USA thrives I can only see us saddled with big state, high tax socialism and probably still shackled to the EU in some form or other.

  24. Prigger
    Posted November 5, 2017 at 10:15 am | Permalink

    I saw Ms Rudd on the Marr show today. She says she is going to roll it out over the country…the fight against naughty behaviour. This was followed up by a deep deep discussion on a programme about flirty text messages.
    Meanwhile Mr and Mrs Trump are on a long world tour attempting to sort out nuclear proliferation, world poverty, climate change, international trade relationships, and peace.
    I guess they can send a squeaky clean text message asking advice from Ms Rudd when world leaders get on to the subject of cheeky-speak…assuming they do.

    • Nig l
      Posted November 5, 2017 at 4:36 pm | Permalink

      Spot on. Ms Rudd tried to divert the criticism of behaviour of parliament by saying it was wide spread, what craven rubbish, either she really doesnt know living in an insulated tent or she us deliberately dissembling.

      Diversity/equal ops training together with extensive written codes of conduct have been in the private sector for at least the past 20 years and as with the criminal code, human nature being what it is, people will always transgress the behaviour will never be ignored as with parliament.

      The sad thing is we know why. Valuable ‘political’ people are more important and must be protected over and above the people they abuse. Only when they outlive their usefulness or become too ‘hot’ are they discarded.

  25. Mark Watson
    Posted November 5, 2017 at 10:21 am | Permalink

    I run a small family business and I swear if the Government reduces the VAT threshold on small businesses, it will be the last time I or my family ever vote Conservative.I’ll find some minor party or simply abstain.
    If they think the £85k threshold stops businesses growing do they not realise that dropping the threshold to 20k will stop them starting up at all?
    I hope this utterly mad proposal is rejected out of hand.

  26. Bert Young
    Posted November 5, 2017 at 10:22 am | Permalink

    The size and dominance of the USA economy does influence the rest of the world ; John is right , we must be in shape to take full advantage of the growth that will follow . Lowering the tax regime has always had a positive effect and we would be fools not to recognise this . Sadly the Chancellor – and presumably his advisers , have given no indication that we will go for lower taxes ; he still pursues the idea that one side has to pay for the other .

    The Chancellor should concentrate on reducing the size and expenditure of the Public Sector and boosting private enterprise ; creating initiative at this time would send an important message to Brussels that we are different and can exploit all opportunities .

  27. Epikouros
    Posted November 5, 2017 at 10:30 am | Permalink

    Philip Hammond has already made further damage to the housing market that was already suffering from too much regulation and other interference. Like George Osborne before him he has attempted to introduce budget changes that he has had to scrapped because of the furore they caused. George Osborn at least attempted to reduce spending in preference to increasing taxes not perhaps vigorously enough but that is perhaps is understandable considering the considerable opposition to austerity even the rather mild version that he introduced.

    Philip Hammond on the other hand appears set on following centre left practices when it comes to setting budgets to attract popular support although as noted above he does not manage to do that to well. Also in doing so he is has abandoned cutting spending and encouraging growth. The two most important components needed at this time if the UK is to regain her economic health and retain it. I am not optimistic given his track record that Hammond’s next budget be any better than the last one and indeed it will encourage capital flight and weaker growth. Your point about the likely tax changes that the USA will impose I doubt that will enter his thinking as his intense dislike for Brexit tells us that rational thinking is not high on his list of attributes.

  28. rose
    Posted November 5, 2017 at 10:32 am | Permalink

    The BBC told us this am that the tax put on beer last time has shut a lot of pubs. A chancellor needs to think beyond the immediate sums to the indirect effects.

  29. The Prangwizard
    Posted November 5, 2017 at 11:39 am | Permalink

    I was in the USA for a month just recently and those Americans I met like the positive messages coming from President Trump. They like the idea that things should be made in America by American owned businesses. And it is starting to happen.

    Contrast that with the endless negativity from all sources here which is endemic. And we get nothing positive from the dreadful PM, she adds her own mix of doom by telling how unjust our society is, and shows no interest in encouraging us to do the same thing. She would rather insult President Trump than learn from him. Sadly most of our businesses are foreign owned as a result of government policies over many years selling them. It has harmed us rather than do us good.

    The Australians are correct to call us ‘Whinging Poms’. We need positive upbeat messages from our leaders. Being in the EU for so long has turned us into a nation of weaklings thinking we need others to hold our hands in everything we do frightened to strike out on our own.

  30. formula57
    Posted November 5, 2017 at 11:56 am | Permalink

    So those of us expecting a maladroit, lacklustre, gloomy budget will not be disappointed then!

    Meanwhile, France I understand proposes that an exceptional surcharge be levied on large companies (to help repair government finances as France struggles to meet Eurozone rules). Le Monde I am told reports: –

    “The corporate tax rate for companies with turnover of € 1 billion to € 3 billion is expected to increase this year from 33% to 38%. It will rise to 45% for companies whose annual performance exceeds 3 billion euros.”

    A daft idea to be taken up by Chancellor Hammond perhaps lest the UK’s competitive position is advantaged?

    • ian wragg
      Posted November 5, 2017 at 4:50 pm | Permalink

      Then even more will relocate overseas. When they tried to tax the wealthy, they all decamped to London.
      Macron is a dyed in the wool socialist but the voters were too stupid to realise.
      Roll on 2022 when le Penn will clear the field.

  31. Prigger
    Posted November 5, 2017 at 12:22 pm | Permalink

    You can see why Anna Soubry gave up Law. When you have such a lousy case as hers, its much easier to win if you have an unqualified, inexperienced and easily led bunch like the electorate.

    • rose
      Posted November 5, 2017 at 10:07 pm | Permalink

      Don’t you think it more likely Melenchon and his (supporters ed) will win? The young people are gullible there too, and they seem to be out on the streets in very large numbers.

  32. Denis Cooper
    Posted November 5, 2017 at 12:37 pm | Permalink

    I found out something surprising this morning: apparently this government is dominated by Brexiteers. At least that’s according to some woman who I believe used to be a TV presenter, who already had some equally illuminating things to say during the referendum campaign. The fact that she has resurfaced at this point is presumably an indication that we are being lined up for a repeat referendum during which she can make more stupid and ill-informed and patently incorrect contributions to the debate, once the government has been brought down over (claims of) ministerial misconduct. Nobody else appearing on the programme this morning challenged her over her ridiculous claim, and nor indeed has there been any reaction from any of the duty officers in the Rapid Rebuttal Unit of the Department for Exiting the European Union.

    • rose
      Posted November 5, 2017 at 10:09 pm | Permalink

      Cabinet is 74% Remain and 26% Brexit.

      • Denis Cooper
        Posted November 6, 2017 at 11:15 am | Permalink

        Thanks for that, I knew that the percentages had been calculated but couldn’t be bothered to look them up … I suppose the DExEU duty officers may have had the same problem and that’s why they didn’t rush to tweet:

        “June Sarpong totally wrong about composition of the government, 74% of the Cabinet supported Remain but now all agree that we must leave the EU”.

  33. Denis Cooper
    Posted November 5, 2017 at 12:52 pm | Permalink

    I also saw Mark Carney on TV this morning asserting as an incontestable fact that since the 2008 financial crisis the trend growth rate of the UK economy has been permanently reduced from about 2.5% a year to maybe something below 1.7% a year. At least he said that this was since the 2008 financial crisis, even though naturally enough the presenter tried to wangle it round to it really being since the 2016 EU referendum.

    However I would like to refer back to an earlier comment I made on this:

    http://johnredwoodsdiary.com/2017/11/03/the-bank-of-england-twists-and-turns/#comment-898243

    pointing out that there is as yet no solid evidence that the UK economy has permanently shifted from the 2.5% a year long term trend growth rate which has applied more or less since the end of World War 2.

    • Peter Martin
      Posted November 6, 2017 at 11:38 pm | Permalink

      If you Google {GDP UK} the first item on the list will be a graph showing that something went very wrong in 2008. Not just for the UK but Germany too. If you then click on “Explore more” you’ll see that the USA has done much better.

      • Denis Cooper
        Posted November 7, 2017 at 10:04 am | Permalink

        2008 was not the first time something went very wrong.

        http://brexitcentral.com/does-brexit-mean-cliff-edge-more-shallow-pothole/

        “Indeed if we look at Office for National Statistics figures for the year-on-year growth of the UK’s GNP from 1949 to 2016, booms and busts make little difference to longer-term trends. Macmillan’s consumer bonanza; disengagement from empire; entry into the EEC; the miners’ strike; Thatcherism; Blairism; globalisation: these things produced, at most, modest effects.”

      • APL
        Posted November 9, 2017 at 9:32 pm | Permalink

        Peter Martin: ” something went very wrong in 2008.”

        Don’t be so silly, we were in the European Union in 2008, nothing could have possibly gone wrong.

  34. Chris
    Posted November 5, 2017 at 1:17 pm | Permalink

    I think they should follow Trump’s example: (apologies for length but this is a remarkable achievement/work in progress by Trump).

    http://www.express.co.uk/finance/city/875209/Trump-economy-Republicans-investment
    “Has Trump pulled off unlikely economic miracle? US economy confounds forecasters
    AGAINST the experts’ forecasts Donald Trump seems to be turning the US economy around recording THREE per cent growth for the second quarter in a row.

    Business investment on new equipment increased by 8.6 per cent annualised rate.
    And the unemployment rate has also fallen to 4.2 per cent.

    All of this has occurred before the Republicans have even delivered on their tax cut and reform package. The motive behind these proposed movements by the Republicans is to lower marginal income tax rates and to slash the US federal corporate income tax rate from 35 per cent to 20 per cent.

    …..If the package is secured economists such as Lauren Kotlikoff, Seth Benzes and Guillermo Laggard all believe it could add between three and five per cent to GDP.
    This rise would be transformed in to a remarkable four and seven per cent wage rise.

    Regarding new regulations, Trump has imposed a ”one-in, two-out” system similar to the UK system. He is also aiming to introduce more stringent regulatory budgets.
    Trump’s most recent order gives direction to people that could lax regulations giving people the ability to access renewable short-term insurance for lower premiums compared to that under Obamacare.

    The Trump administration seems to have placed its faith in supply-side economics, with the desire to lower marginal tax rates on work and investment and a open-minded regulatory state

    • Peter Martin
      Posted November 6, 2017 at 11:43 pm | Permalink

      Lowering rates of taxation isn’t supply side economics. It’s a Keynesian stimulus in exactly the same way as increased Govt spending.

      Whether you choose one or the other is largely a matter of political preference.

  35. hans chr iversen
    Posted November 5, 2017 at 1:22 pm | Permalink

    John,

    I am deeply concerned about your comments about just cancelling to government debt to the BoE , your proposal and response basically shows no understanding of the economic implications of your proposals and considering how long you have been an MP and commented on Economics that makes it even more worrying.

    Let me explain, why, you unfortunately do not grasp the details about debt write off and QE.

    1) The fiscal benefits of cancelling the debt would be precisely zero. In other words, the debt equivalent to 30% of the UK overall debt, has from a budgetary perspective already been effectively cancelled and here is why?

    2) It may sound radical to say the budgetary implications of QE correspond exactly the debt write off, but let’s compare them. In the case of QE, the coupons are paid by the Treasury to the Bank Asset Purchase Facility Fund. These coupons are the property of the Treasury and will be remitted back to the Treasury, in the case of a debt write off, the coupons will never leave the Treasury.
    By contrast the impact of a de jour (rather than a de facto cancellation) debt cancellation would be principally to signal to the currency markets that Sterling could no longer be regarded as a store of value.
    This is because a de jour cancellation would impede the BoE ability to re-sterilise the monetary base anytime in the future.

    This is why, just cancellation of the government debt bought through QE could have major implications for the value of Sterling and monetary politics going forward.

    However John denies this but the facts are very clear.

    Another example of John just not understanding the facts of his economic proposals,

    HOW REALLY SAD

    Reply This is nonsense. The Fed are now embarking on a debt cancellation programme. How does it help to pay yourself interest on debt you own?

    • hans chr iversen
      Posted November 5, 2017 at 5:39 pm | Permalink

      John,

      I am sorry I have really tried to explain it to you but I can but try, we are not the USA with the preeminent world currency.

      Reply You are wrong. I understand QE perfectly well.

      • hans chr iversen
        Posted November 5, 2017 at 8:31 pm | Permalink

        yes but you do not understand the difference between de facts and de jure cancellation of debt and the implications of the de facto and the de jure cancellation of debt, if, you had read the answer I gave you wold not have answered the way you did.

        Did you actually understand the difference or did you just use the difference by saying all of what I wrote what nonsense?

        I am very happy to have a face to face debate with you on this, so we are sure you understand the difference?

        • Peter Martin
          Posted November 7, 2017 at 9:56 am | Permalink

          I think its more likely that you are incorrect in your QE understanding.

          Say you own £10 of Govt bonds/gilts. The BoE buys them off you for £10. Everyone is all square after the transaction. That’s QE. Up to this point QE is just an asset swap.

          You can then go and buy £10 of new bonds from the Treasury. So the Treasury gets £10 in cash and you end up with the bonds you had to start with. The BoE is still all square.

          So is this part of QE too? That’s the more controversial part. That’s when we hear allegations of “money printing”. However, we need to be realistic enough to know that all money is either printed or created in a computer. There are many more pounds in existence now than there used to be. They have to have come from somewhere!

          So it’s the amount of QE that could be of some concern, or rather the amount of extra spending that it could create. High inflation would be an indicator of this.

    • Richard1
      Posted November 5, 2017 at 6:16 pm | Permalink

      The only coherent objection to cancelling the QE debt is it makes the money creation permanent. In theory that should lead to inflation. But since for whatever reason there don’t seem to be any signs of a problem with inflation – maybe due to the deflationary effects of technology and globalisation – it would make the public accounts clearer to refer to actual net debt, which is c 60% rather than gross debt which is c 90%.

      • hans chr iversen
        Posted November 5, 2017 at 8:34 pm | Permalink

        but unfortunately it would make future monetary policy unworkable for teh international financial community from the BoE, but john has not understood that part of the argument, because his economic knowledge is unfortunately, rather superficial.

        I wish it was different, it wold make me feel more comfortable about the knowledge of our MPs

      • stred
        Posted November 6, 2017 at 9:01 am | Permalink

        Negative real interest rates for savers keep spending and inflation down, while the government uses QE for its own spending. It’s called ‘legalised theft’.

      • Denis Cooper
        Posted November 6, 2017 at 11:05 am | Permalink

        And the small problem that it would bankrupt the Bank of England, the value of the gilts held by the Bank appearing on its balance sheet as an asset to be set against the liability of the new money issued to purchase them. It is true that Parliament could pass an Act permitting the Bank to continue to operate with negative net assets, or even an Act to arbitrarily restructure its balance sheet so that it returned to having positive net assets. How the financial world would react to either of those proposals is open to question. It would certainly leave doubts about the reliability of any promise made by the Treasury in the future if it was allowed to cancel the indemnity it gave to the Bank when QE was started up, see the Open Letters from both Alistair Darling and later George Osborne linked here two years ago:

        http://johnredwoodsdiary.com/2015/09/01/lower-rates-bring-in-more-income-tax/#comment-780286

        But that’s all I’m prepared to say on this, we’ve been over it again and again during the past eight years and it’s long past being merely tedious.

      • Peter Martin
        Posted November 6, 2017 at 11:58 pm | Permalink

        The correct theory predicts little no change in inflation. The only real economic effect of QE is to reduce longer term interst rates. The BoE becomes an additional active buyer of bonds and so the price of bonds rises – meaning their yield and effective interest rate falls.

        Now that interest rates are low there is less need for QE. The Govt can use the lower rates to borrow by selling gilts in the normal way.

        There’s no need to cancel any debt. If the Treasury and the BoE were to merge then it would cancel to zero in any case.

    • Rien Huizer
      Posted November 5, 2017 at 9:36 pm | Permalink

      Mr Redwood,

      I have not found any evidence that the FED is “embarking on a debt cancellation policy”. The FED is no longer reinvesting coupons and maturing principal of its QE portfolio. It would take some more time do do better research but I recall that in the original academic debate pro and con QE like schemes, the idea that the program would be credibly reversible (ie unwinding would go through the markets rather than by cancellation) was one of the reasons that investors could be assured that such a scheme would not amount to financing the State budget via the printing press rather than via the capital markets. The key is the degree of discipline provided by the relatively “harder” budget constraint of a credibly reversible scheme rather than the Bank simply funding the government. Your proposal would affect the reversibility quality of the scheme and reduce the credibility of the Treasury/BoE relationship with unpredictable consequences for the UK’s reputation.

      Looking at other QE schemes, especially ECB and BoJapan, neither scheme is explicitly credibly reversible, but in the ECB case the moral hazard is mitigated by diversified ownership (ECB) or unique institutional arrangements combined with a strong external account in the case of Japan.

      Reply The US is going to self cancel the debts it now owns!

  36. PaulW
    Posted November 5, 2017 at 1:37 pm | Permalink

    We would need to lower our corporate tax rate here if we were on for inviting foreign businesses here to invest but that would depend very much on these companies having easy access to the EU markets and since that is not going to happen there’s little point since few new foreign businesses are going to come anyway

    • Dave Andrews
      Posted November 5, 2017 at 4:03 pm | Permalink

      If governments weren’t so obsessed with taxing away the wealth of UK companies, perhaps they would have the money to invest, rather than looking to global companies who squirrel their wealth away in tax havens.

  37. mickc
    Posted November 5, 2017 at 2:11 pm | Permalink

    The sooner this government goes, the better! Yes we will get Corbyn with all that entails but it will educate those not around in the 70s and hopefully lead to a return to Thatcherism in the Tory party.

    • Dave Andrews
      Posted November 5, 2017 at 4:05 pm | Permalink

      If Corbyn got in and actually implemented his ideas, the Conservative party may as well pack its bags. After the socialists are done, there won’t be a country left worth leading.

      • Up Corbyn!
        Posted November 5, 2017 at 7:05 pm | Permalink

        Corbyn has just shot, for reasons unknown to all but the wise, into a very likely contender for mature leadership of our Country. It is a matter his maturity which has made limp the Tory opposition.

      • mickc
        Posted November 6, 2017 at 6:31 am | Permalink

        The Conservative party already has packed its bags! Instead we have blulabour.
        And we certainly had a country worth leading after the 70s….Thatcher did it and turned it around. It can be done again; the UK, whatever the problems, is a good country.

    • Roy Grainger
      Posted November 5, 2017 at 5:15 pm | Permalink

      Yes I tend to agree. Certainly I wouldn’t vote Conservative with May/Hammond in charge. There is a real lack of a party with Conservative policies, except the DUP.

    • Richard1
      Posted November 5, 2017 at 6:18 pm | Permalink

      That is a very dumb remark. It is not Country’s interest to have a (far left ed) Government, riven with antisemitism and class hatred. Huge and permanent damage will be done, even if it is kicked out after one term.

      • mickc
        Posted November 6, 2017 at 6:35 am | Permalink

        No….there needs to be change. It obviously isn’t going to come from the Blairite Tory party.
        Corbynism has the wind in its sails and will win the next election. A true Tory party will win the one after that….if by then tgere isa proper Tory party.

  38. Na
    Posted November 5, 2017 at 2:35 pm | Permalink

    Torys have become the radical feminist party.

  39. Denis Cooper
    Posted November 5, 2017 at 2:43 pm | Permalink

    Off-topic and also leaping ahead a bit, a Commons debate on the European Economic Area has been scheduled for tomorrow afternoon/evening:

    https://publications.parliament.uk/pa/cm201719/cmagenda/ob171106.htm

    The motion laid by the euromaniac “my friends in the EU will give you a punishment beating if you dare to vote to leave” Stephen Kinnock being:

    “That this House believes that for the UK to withdraw from the European Economic Area (EEA) it will have to trigger Article 127 of the EEA Agreement; calls on the Government to provide time for a debate and decision on a substantive motion on the UK’s continued membership of the EEA; and further calls on the Government to undertake to abide by the outcome of that decision.”

    There is a preparatory House of Commons Library briefing here:

    http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-8129

    That says:

    “1.3 Free movement of people

    EEA members accept free movement of people, although there are some rights to suspend this in certain limited circumstances.”

    But it doesn’t go on to say that having told David Cameron that their “four freedoms” are completely inseparable and so, no, he could not be allowed to control immigration from their countries, it seems unlikely that the leaders of the other EU member states would now agree to the UK staying in the EEA but with the cynical intention of abusing those rights to “suspend” free movement “in certain limited circumstances”.

    I know that I wouldn’t if I was in their position; I would mention that I’d seen articles in the UK press proposing that our government should grossly abuse the Agreement by using the “safeguard clause” to permanently reduce immigration from the other EEA states, and I would probably refuse to allow the UK to stay in the EEA at all; at the very least if I did allow the UK to stay in the EEA then I would insist on a binding protocol in which the UK solemnly promised never to attempt to use the “safeguard clause” in that way.

  40. Edward
    Posted November 5, 2017 at 5:05 pm | Permalink

    How long ago was it, that the UK had a man secure in his own conviction and the will and backing from his political party to sit behind the desk in No11 and plan and drive through supply side reforms, chuck the current tax code into the bin and to start again, and never probably is the answer. The nearest to it, was maybe – Geoffrey Howe, admittedly Mr. Howe was not a keen tax cutter, though he affected demand more than supply and the consequences made future chancellors shudder but they read the precisely the wrong code and Howe didn’t quite get it right. And now we’re all Keynes-ed out, not to say zombified.

    There must be another way…………………..over in the States, maybe?

    American fuel duties and energy costs are already below ours, Mr. Trump understands that cheap energy fuels robust economies.

    Cutting taxes and bringing back large US companies to US shores would be another great fillip to further boost the US economy. There is no mystery to this, Mr. Donald Trump thinks ‘America first’ and only America.

    Whereas, UK chancellors, the BoE take their primary orders from elsewhere and in alignment with, out of Frankfurt and the ECB.

    The problem with the UK is that, even within the EU Britain has some of the steepest energy prices and fuel duties and not least with our unilaterally imposed ‘carbon tax’. UK businesses, consumers alike are strapped by a government who are supposedly on the side of the ‘little guy’ – what a sick joke that is but it’s just the way the Fatherland orders it.

    All thanks since Mr Brown, to a succession of micromanaging interfering bodging chancellors we have the worst of all worlds, an onerous labyrinthine tax system, a nation which even by EU standards is overtaxed.

    We are yet, lumbered with another gentleman in Mr. Hammond who sees not very clearly and is beholden to the phalanxes of lobbying hard luck victimhood shroud waving welfarists and an administration and public sector addicted to high and ever higher spending……..’spending’ should I call it what it is – waste.

    Red tape stifles and kills off the competition, that’s why the EU is so fantastic for the big boys, there is no free market in either the single market nor anywhere to be found in Britain.

    Mr. Hammond could……………. kick start the process towards a lighter burden, ie less regulated lower taxed, more open economy, [with smaller leaner govenment] and out of the sclerosis of the single market. Coming down the way is some shock and awe from our great partner across the pond, the only way to compete is for Britain and its chancellor – to to think like the Trump.

    I’m not holding my breath.

  41. hefner
    Posted November 5, 2017 at 6:27 pm | Permalink

    Such interesting times: according to Sueddentsche Zeitung, there are new interesting bits of news concerning Wilbur Ross (close D.Trump), Stephen Bronfman (close to J.Trudeau) and Brighthouse (close to the Duchy of Lancaster) following an investigation by more than 300 journalists: the Paradise Papers. What a wonderful world.

  42. DragE
    Posted November 5, 2017 at 10:52 pm | Permalink

    Yeah..England as a nation is bunched.
    It’s people are too fragmented..there are too many different nationalities with outsider ideologies/ not native to these shores..if we were talking about grey squirrels we could call it an invasive presence..and it all happened since the 1950’s..it was allowed…some like enoch powell spoke out..but to no avail..we have lost tje will to strike out for ourselves and so now after leading us into this brexit deadend..JR would have us follow trumps america..the blind leading the blind.

  43. Chris
    Posted November 5, 2017 at 11:04 pm | Permalink

    what madness is this, Mr Redwood? Apparently the government is willing to pay up front a £53 billion bill to the EU to start Brexit trade talks:
    http://www.express.co.uk/news/politics/875842/Brexit-divorce-bill-EU-Brussels-Theresa-May
    “Government ‘willing to pay’ Brussels demands for £53bn Brexit bill to kickstart trade talk
    THE Government has indicated it is willing to meet Brussels’ demands for a £53 billion Brexit bill in a bid to move negotiations on to trade, it is claimed….”

    If true, this is quite beyond belief.

    • Edward
      Posted November 6, 2017 at 9:59 am | Permalink

      It’s a Daily Express link, thus, I don’t think that any further explanation is required.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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