John Redwood (Wokingham) (Con): I have declared my business interests in the Register of Members’ Financial Interests, although I am of course not speaking for them.
I congratulate the hon. Member for Ilford South (Sam Tarry) on an excellent maiden speech. He was warm and informative about his predecessor, who was much respected on both sides of the House. He rightly drew attention to injustices and problems which he has a passion to solve. I would just like to reassure him that there is no monopoly on wishing to solve those problems on his side of the House. That is what we are all here to do.
It is a great pleasure, for the first time in about five years, for me to be able to welcome the actions of the Bank of England today. It is a pleasure to see the Bank of England and the Treasury co-ordinating their work, and doing things that are massively in the public interest. For the past five years, it has been my miserable task to ​be the one voice in this House pointing out that the Bank of England has consistently got its economic forecasts wrong and that it had made a number of very bad decisions. I have been particularly critical of the way it decided to tighten monetary policy and slow the economy from spring 2017 onwards, culminating in the very ill-judged decision it made at the end of last year to increase the counter-cyclical capital buffers, which meant denying loans to businesses that wanted to expand or to solvent people who wanted to buy a new car or a new home. It was a very bad policy and it is wonderful news today that the Bank of England, with its new Governor, has started off on a much better basis and has cancelled those counter-cyclical buffers. It is the single biggest amount of money we are talking about in this debate. As the Bank of England itself calculates, it means up to £190 billion more is now available for good projects, for business requirements and for individuals who want to borrow for big ticket items. Of course, banks must still be prudent and sensible in the way they advance that money, but the previous controls were too tight. Against the background of world downturn, it is very important that that firepower is made available.
Just to reinforce the position and to deal with the special problems that the virus is now likely to create, the Bank of England also put forward a new medium-term lending scheme for the banks, so they can get access to large sums of money—up to £100 billion in total—at the new very low rate of 0.25% to lend on to medium and small-sized enterprises. Again, that was something I was very keen for it to put forward. I am delighted that it has returned to this idea. It is much needed, I fear, because we already see the virus having a very negative impact on certain businesses, most obviously in aviation and other transport, but now also in events and some other tourism-related activities where we see the pinch already being established by the virus. If, as we fear, it spreads more, that is going to get rather worse, so I welcome the double set of actions by the Bank of England. I am not sure that 50 basis points off the interest rate makes very much difference. It is not something I would have done myself, but I can see that it was well intentioned and it sends a very clear signal that borrowing should not only be available but cheap in these very extraordinary times.
I also welcome the fiscal stance the Government have adopted in the Budget. If anything, it is on the prudent side of what one might have expected in the current circumstances. Some of my colleagues will find that curious coming from me, a former hawk, on how much this country can afford to spend and borrow. However, in these circumstances, and against the massive monetary and fiscal tightening we have experienced for some three years and the very noticeable slowdown or faltering of the world economy, it is obviously sensible to have a fiscal stimulus. The ÂŁ18 billion underlying stimulus is definitely at the bottom end of the kind of range that many people were thinking about.
On top of that, there is the £12 billion package which the Government have wisely put forward. They stated that if the virus problem gets worse there will be more. I hope it will be the case that the virus problem does not get that bad and we do not need to spend the £12 billion or anything like it, but I am pleased the £12 billion is there by way of additional resource for the health service should the need arise and as additional money ​available particularly for the business sector, which, in certain circumstances, if we have anything like the experiences of some other countries abroad have now had, would need cash injections. I am very pleased that thanks to the Bank of England it will not just be a question of lending at cheap rates through the commercial banks, but that in some cases, particularly in hospitality and tourism-related areas that are already being fairly badly hit, it will be a reduction in their bills.
I listened carefully to the very long address by the SNP spokesman, the right hon. Member for Ross, Skye and Lochaber (Ian Blackford). I cannot see how that party’s VAT proposal would help, because VAT is turnover-driven and we are talking about businesses that lose much or all of their turnover, so it would not deal with the problem. The Government have a much better answer: to take a cost that businesses cannot get out of quickly or avoid—their property cost—and say that the Government should not be charging them for using property when no money is coming in, because there is no turnover as they have lost their customers. I agree with the Government.
Sir Edward Leigh (Gainsborough) (Con): I was not allowed to intervene on the leader of the SNP, but surely any sensible person would come to the conclusion that when faced with an existential threat to our country, such as the coronavirus, we are much better dealing with this together, as a United Kingdom, than as separate nations.
John Redwood: My right hon. Friend and I think that, but more importantly, that is what the Scottish people voted for just a few years ago, when we very wisely and democratically said, “Yes, let the Scottish people decide.” They did decide and I wish their elected representatives here would understand the result of the referendum and remember that their colleagues told us at the time, when asking for it, that it would be a once-in-a-generation matter. While I am a democrat who thinks that these things occasionally need exploring, we cannot explore them every five years. These are fundamental things that are very disruptive if we keep going into them. I had to wait many years to get an EU referendum—rather longer than I wanted—but I do not think we should have one every five years. That would be quite inappropriate.
To go back to the Budget judgment, I was interested to see that quite substantial increases in spending, which we need in health, education and police, for example, have been relatively easily accommodated. It is good to see already in the first-year figures—for 2020-21— £4.6 billion of Brexit savings coming through. It is very good to see that there will be another £10 billion on top of that by the end of the forecast period, so the Brexit bonus is available and is beginning to come into these figures.
It was also good to see the £6.6 billion of interest cost reduction, thanks to the quite substantial falls in interest rates that had occurred before this month. The point that I was making to my right hon. Friend the Member for Bromsgrove (Sajid Javid) is that those savings would be considerably bigger if we forecast them at today’s interest rates, because interest rates for Government borrowing have fallen even further. He countered and said, “Yes, but you still have to be very careful because you can’t necessarily assume that that will go on into ​the future.” The bad news is that interest rates are going to stay low for a bit, but the good news is that the Government can borrow for 30 years for practically nothing, so now is surely a very good time to lock those interest rates in so that the future interest rate programme is very cheap, as well as the present one. It is something the Government need to think about. I know they have issues about how long they fund, but this is surely a time to move in the direction of longer funding so that we lock the very low rates in.
Stephen Crabb (Preseli Pembrokeshire) (Con): On the very low costs of borrowing, does my right hon. Friend recognise that there is enormous demand in the City of London for long-dated assets? There is a lot of money looking for long-term investments that will provide secure returns, which is ideal for long-term infrastructure spending.
John Redwood: Let us hope that that is right, yes. We hope that the City gets better at managing the gap between those who say they have all this long-term money and the projects that are available. We seem to need a bit more work on that. I am very keen that more of it is privately rather than publicly financed, so that we can get more investment for less strain on the public finances.
The Government, looking at their forward budgets, have rightly said that they wish to increase public sector infrastructure investment. In principle, I agree, but I urge one thing on the Government—I wish that they would look at a large number of smaller, quicker schemes, because what we need to deal with transport problems, in particular, is quicker-acting, smaller schemes that we can get up and running and that will have some tangible results. On the railways, we could have short sections of bypass track on existing main lines to get express trains past stopping trains when the timetable falls over, and digital signalling on a very widespread basis, which could give us something like a 25% capacity increase much more quickly and cheaply than some of the rather big schemes that we have been looking at in this place recently, but I will not be dragged down that particular avenue today.
On roads, the immediate priority is the digitalisation and rephasing of the many traffic signals in this country, because they are not optimised, meaning that junctions restrict traffic much more than they need to. Roundabout substitution, right filters with right lanes and junction remodelling are also possible. We need to get people on the move, and junctions are often a cause of tension and delay. Junctions would also be safer if we optimised them and had less frustration and conflict between vehicles at those junctions. I hope the Government will look at that. We also need lots of bypasses and other local roads to relieve the main motorway system, which is a fixed entity; nobody is suggesting building a new motorway any more, so we need to relieve the pressure on the motorway network with more local road projects. I want to see those projects going in and some concentration on that in the investments we will see in that programme.
I hope that we will look at water management on both sides: we probably need to store more water for water use—there is plenty of it around at the moment, and it will be galling if we have a long hot summer and then discover we are short of water, given what we have just been through—but we also need that accelerated ​development of drainage projects and probably more pumps, more dredging and more routes to take water safely away from areas of habitation. It is not good in a first-world country to see the kind of scenes we have seen this winter, with this prolonged period of excess rainfall.
The Budget is going in the right direction. The Bank of England has joined in and is doing the things it ought to be doing—we hope we will not need all that credit, but it is important that those facilities are available against a possible worsening of the virus situation—and I am glad we are making down payments on what we need to do on health and education spending. I have said how I would like the infrastructure money to be accelerated and developed into smaller projects that will really work.
We also need more tax reform. My one worry about the Budget is that it does not cut taxes enough; I would like to see more tax cuts. We only have five years to show how fast this economy can grow before the electorate will judge us, and the more the Government cut taxes, the more the economy will grow, and the more we trust people with their own money, the better they will spend it and the better the economy will do. I say to the Government: trust the people and cut taxes more, and then it would be an even better Budget.
March 12, 2020
John, the problems with water parallel those with health provision when faced with emergencies.
I read that in the Calder and Taff Valleys, the flooding was worsened, because spare reservoir capacity had been disposed of, so there was no means to contain otherwise flood waters.
On the other hand, during droughts we have hosepipe bans.
This all stems from undertakings being run on commercial or quasi-commercial lines, where the bottom line is everything, and any overheads such as maintenance of spare capacity and keeping additional staff of the payroll are avoided at all costs. It holds for water, and it is true for health.
This American small state, bean-counter-run doctrine has been for years a mantra amongst your party, and its utter uselessness is now becoming glaringly apparent for all to see.
March 13, 2020
It isn’t the private sectors fault that more reservoirs haven’t been built.
The EU’s Water Directive and their policies on Climate Change enthusiastically embraced by our governments and councils is the reason.
We should use less water and value it higher is their mantra.
No new reservoirs is the outcome.
March 13, 2020
Tripe.
March 13, 2020
Yorkshire Water have filled them in and sold the land for building, for instance.
March 12, 2020
If I were you I would have said how ridiculous it is for freelancers to be now expected to pay for work travel and hotels out of taxed income due to the IR35 nonsense.
I would have drawn attention to the terrible things going on in the financial ombudsman service.
I would have demanded that all the medical ventilators in the supply chain, warehouses etc, are moved to hospitals asap. I would have asked for local suppliers to be asked to make medical masks and cleansing gel asap, and not wait for the international supply to restart.
I would have preferred more money to be given to individual citizens and far less to the state to spend, as the state is pretty mad at spending it. Dom Cummings “white heat of technology” approach has been tried before and the state ended up gambling on chips that did not win.
Thanks for trying.
Reply I have repeatedly called for an end to IR35
March 13, 2020
Iain the dramatic nursing spokeswomen and C4 news last night said even if you had more medical ventilators there aren’t the staff to use them. She seemed quite panicked about it all.
March 12, 2020
Thank you, Sir John. I’m sorry to say I didn’t see you make the speech but I’ll make a point of keeping a copy on file. It will be good to return to it for encouragement on how to think clearly and promote sensible solutions.
March 12, 2020
It would be useful to return to it if you ever needed an illustration as to how to ignore the blindingly obvious staring you straight in the face.
That is, that anti-collectivism, anti-cooperativism, and a belief that there is “no such thing as society” sooner or later lead to disaster.
This country is now not even counting coronavirus cases.
March 13, 2020
Marxists hate the concept of the individual.
They want to fit us into groups so we can all be assigned collective characteristics and then they can set one group against another.
It won’t work.
March 13, 2020
Who is a marxist? Not me.
March 13, 2020
Your post used typical Marxist phrases.
So I thought you were.
An easy idea to gain when reading your posts.
March 12, 2020
good speech, I particularly agree with the last para on taxes. Boris must not be complacent. in 2024 the electorate will judge whether the tories – and brexit – have been a success. there needs to be a relentless focus on competitiveness and making the UK the most attractive destination in Europe for investment and entrepreneurship. Brown tripled the tax code and Osborne doubled it again – to 10m words! lets cut it to 2m, and abolish a tax with each budget as Nigel Lawson did. That is the way to boost confidence and investment.
I certainly agree the govt should look to push out maturity of debt and, if they can, raise massive 50 or even 100 year gilts to take the costs of the vanity infra projects like HS2, so they don’t impact negatively current spending or good investment projects.
I thought you went a little easy on the 50 bps cut in interest rates – what on earth is the point of it? If anything panicky monetary policy undermines investment as the benchmark keeps wobbling around. Mr Bailey should try to restore normality in interest rates as soon as he can.
March 12, 2020
“We also need more tax reform”
Quite right
I think two particular areas where a review is needed are:
1. The VAT rate. A reduction to encourage spending and, in particular, to help retailers
2. Rate of employers National Insurance. A reduction would make it less expensive to employ someone and might go some way to “solving” thge IR35 issue.
March 12, 2020
It’s good but kind of the wrong way round. Surely cutting and delaying taxes now (NI/PAYE/Business rates/NEST/Corp tax) would be a better use of resources short-term than offering cheap money to borrow? Most astute companies would have 3 months spare cash to cover late payments etc., and will delay paying to reduce borrowings, but they will still be hammered for some of these government related costs.
March 12, 2020
Good points. When traffic lights are out of action in London (in a power cut for example) the traffic flows far better.
I too say to the Government: trust the people and cut taxes far more.
To cut taxes more you should cancel the absurd HS2, have a bonfire or red tape, go for a cheap and on demand energy policy, forget about zero carbon, halve the size of government and get off the backs of the wealth creators. Also go for easy hire and fire scrap gender pay reporting and workplace pensions too. Also this new data regulation tax on almost every company.
Before moving those civil servant up North check how many of them actually do anything remotely useful and all fire the others. Certainly scrap the absurd Committee on Climate Change.
I see they also increased the climate levy tax on gas, so even more of the elderly will have to shiver as well as the very damaging changes to the entrepreneur relief. Also want to spend even more on paying HMRC to inconvenience & distracting people from productive activity with even more tax investigations.
March 12, 2020
But even more vitally importantly is provide these thousands of temporary critical care and ventilator facilities in place right now – and do what is needed to smooth out and slow down the inevitable peak.
Thank goodness it is not killing many children and the young!
March 12, 2020
I thought you were at the side of President Trump handing out a speech yesterday . It must have been a look alike , but hey you were in the HOC . It’s strange though some deride the word common as being for the lowly ignorant . Is the house full of the lowly and ignorant .. I think not . An insult is meant to be the view that it is ‘common sense’ yet intellectualised many problems can be focused into Phd projects foregoing the big picture. The Budget seems to get it right . The main questions are .. where will the money come from ! This is not common knowledge ?
March 12, 2020
Sorry had to cut it short for work purposes and was going to write more questions which the public have been asking in various social media outlets , thus to see ,it reads ;- “the main questions are” and in this sentence it should have been the main question is. I don’t know how you manage all the written work and swap from one thing to another in the day and still make few mistakes John.
March 12, 2020
I note that the government plan to reduce or eliminate new index linked gilt issues. Couple that with long dated borrowing, and it reminds you of 2 1/2% Consols and 3% War Loan that traded down as low as ÂŁ25 per ÂŁ100 of nominal stock. It would seem that the plan is to default on value destroying government mandated investment such as HS2 by inflating away the debt.
March 12, 2020
Who would have thought it?!
March 12, 2020
Love your closing paragraph!
March 12, 2020
Me too! ‘trust the people and cut taxes more’
March 12, 2020
We are looking at ÂŁ60 billion budget deficits and thats if all goes well and they stick to their current money bonfire .
Its manageable ( ish) with interest rates as they are and as we all know it is quite impossible that could change from historic lows and ever so easy for the government to reduce spending commitments it has undertaken
I think one would get a clearer understanding of our position if Sunak had delivered this suicide note whilst Boris Johnson held his head under his arm . I think an absurd military hat for Johnson ,pictured against a grandiose project ( a dam or an airport maybe ) would also clear away any lingering ideas this is a British Conservative Government.
It is a “People`s” government, by which is meant , as usual an incompetent vainglorious tub thumping dishonest government which exists entirely to keep its self aggrandising slippery power brokers comfortable.
March 12, 2020
CNBC with their Chinese lady correspondent in China reports over video link today the Chinese in Wuhan are now going back to work ( “with restrictions)
Of course the rest of China..a bit big…never stopped working.Still working. presumably using oil too
Don’t tell the NHS. It would upset them and will continue to upset them
March 13, 2020
St.Greta must be furious. All that coal and oil being burned making low quality goods to be shipped around the globe. I wait for her public apoplectic outrage….. BBC headlines?
March 12, 2020
I do wish the Government would think again about regional Mayors and ‘devolution’
Even as it stands….well.. a Regional Government can sweep even more dirt under the carpet than in a single one or two Labour MBCs
It is a Security issue, Defence, Health, did I say Health…children’s health, OAP health
March 12, 2020
Well said Sir John
March 12, 2020
What action does the government intend to take to prevent banks from charging predatory rates of interest or even putting into administration businesses which through no fault of their own are currently suffering from a catastrophic fall off in turnover and likely to suffer much more in the future when the coronavirus starts spreading unchecked as it will ?
Businesses should not be forced to make workers redundant or even close because it is vital that when the epidemic is past its peak, there is as rapid a rebound in the economy as possible. Businesses should not have to spend all their future profits paying interest on money which banks themselves have created out of thin air.
March 12, 2020
Sir Edward Leigh’s and your comments on Scotland and the corona virus have been well and truly trashed just now by Nicola Sturgeon ..
Is the. situation there very different to here ,or were your comments yesterday like a red rag to the SNP ?
I would identify the cost of her new policies where they differ from ours and deduct them from our massive contribution to their budget .
March 12, 2020
Sir John, correctly in my opinion, knows how to incentivise wealth creation by reducing taxes – what he probably doesn’t know is how to keep his and other Tory seats if they do so.
Perhaps (unbiased) economics and politics should be core school subjects along with the “Three Rs”.
March 12, 2020
Excellent insights and ideas SJ!
March 12, 2020
I agree that the budget would have been even better had the burden of taxation been lightened and, in particular, either Income Tax rates been reduced or personal and/or higher rate thresholds been raised.
In the interests of fairness and a more equal economic boost to all parts of the UK, shouldn’t there be a level playing field across all parts of the United Kingdom? What is the point in voting Conservative in the General Election and celebrating the government that we now have, only to have the SNP being vindictive against those on middle or higher incomes and for the Wales government threatening to do the same through higher rates of income tax?
March 13, 2020
The problem with the early raising of the tax thresholds to ÂŁ12500 and ÂŁ50000 last year means that we have already priced those rises in to our cost of living.
By not raising them this year by at least inflation your government has made us poorer.
The rise in NI threshold goes some way to rectifying this (ÂŁ100 per year) but no doubt this has been adjusted at the secondary threshold so higher earners don’t benefit.
Tax, borrow and spend. Who would have thought it?
March 13, 2020
The DT is leading on there going to be painful tax rises in the Autumn statement. So what is it that they know Sir JR that you don’t or are not sharing with us?
It wouldn’t surprise me. This is a Blairite tax and waste government.
March 13, 2020
Perhaps someone could explain here how very small entrepreneurs will be encouraged to start or grow their little businesses after this Budget. Similarly why would farmers redouble efforts to grow more or invest in milk and meat production?