Author: johnredwood

The EU in 2020 made a momentous decision. With the UK no longer having voice or vote to oppose, they decided to go ahead with large borrowing programmes at EU level. Germany was reluctant to see the EU become a transfer and collective borrowing union but was persuaded to let it pass.

Prior to 2020 the EU had borrowed just 30 bn in its own name. Now it has borrowed 400 bn. It plans to borrow the best part of 1 trillion Euros this decade, with 806 bn ear marked for the NextGenerationEU  fund and other money for SURE, the unemployment fund. Whilst some of the NextGen money is loans where the ultimate borrowing countries are meant to repay, the overall borrowing is on the EU account. The EU is evolving into a transfer union with a single larger budget.

Had the UK stayed in the EU the totals  borrowed may have been larger.We represent 15% of total EU plus UK Gdp. Member states are liable for their Gdp proportion  of the total. In practice though markets will hold all EU states jointly and severally liable for EU debt and the EU could demand higher proportions in a future decision for any member state.

So the UK would have added at least  120 bn euros to our state debt burden by accepting 15 % of this new debt. That is more than £4000 for every UK family of extra  debt we have avoided by leaving the EU.

The EU has also upped the amount member states have to pay into the annual budget of the EU by 0.6% of GDP. That would have been another £14 bn a year of contribution by taxpayers before any rebate.

Public sector service productivity has collapsed 7.5% 2020-23. This is without precedent and means taxpayers need to pay more than £30bn a year extra for their services, with all the extra costs of inflation on top of that. No wonder public spending is so high.

In an extreme case the Post Office, a nationalised industry, admits it wrongly prosecuted hundreds of its own staff and took money from them for losses they had not made. 25 years on from the start of these errors it has still not even repaid  the money it wrongly took from them in many cases, let alone paid them the compensation they are due.

In some NHS hospitals there have been bad cases of failure to provide essential care in the form of drinks, food and help to the bathroom. There have been deaths that should not have occurred. In the worst case a nurse murdered babies in the care of her ward.

In some areas schools fail to provide a decent education for young people and see too many youths give up or drop out of school with no qualifications. The NHS waiting lists are very long, but apparently the large numbers of administrators cannot vouch there is no double counting, wrongful recording or people on the lists who no longer need a consultation or treatment

Ask the Opposition parties about this and they usually say it is all down to a lack of money. This is despite record levels of funding and big recruitment drives for extra staff. Where the bad news comes from devolved government in  Wales and Scotland, or from Labour and Lib Dem Councils they still usually claim it is a lack of funding and demand bigger increases from government.

Many of the things that are wrong including the fall in productivity come down to bad management. A growing army of CEOs and top management on six figure packages has allowed productivity to fall badly, and in some cases has allowed standards and quality to drop alarmingly. In future blogs I will look at the duties and powers of political leaders and of the senior executives to put this right. What should we expect of public sector CEOs?

The government has sent out its latest update of progress in repealing, amending and incorporating EU law into UK law. It gives us the apparent good news that 2000 laws have now been repealed or reformed in total. This leaves another 4500 to deal with.

The latest list of laws repealed or amended continues with the official approach of doing many  repeals to items that are already time expired or did not apply to us in the first place. The first 3 on the list that I checked out from the latest report were:

Commission decision of 29 June 2005 (2005/477/EC) This was a temporary permission for plants Vitis L to be allowed into the Community from Croatia between January and March 2006. This was requested by Italy.
Commission decision of 9 March 2001 (2001/199/EC) This was a temporary permission for New Zealand potatoes to enter the EC from 1 March to 31 August 2001.
Commission decision of 29 January 2004 (2004/110/EC) was measures to handle the risk of BSE at a time when the UK had BSE in the cattle herd. This no longer applies with the end of BSE.

It is difficult to assess  progress when   lumping in  so many items that never applied, applied temporarily or apply only in circumstances no longer applying to the UK.

Many of the other items recorded in the list show how industrious the civil service has been to transfer many EU requirements into new SI s or Acts of Parliament, sometimes reinforcing their regulatory impact. The Aviation(Consumers) Amendment Regulations 2023 may well be important “restatements of EU case law related to compensation and assistance for passengers” but they are not repeals or deregulations. They keep us close to EU ways of doing this.

The Energy Savings Opportunity Scheme Amendment Regulations 2023 “amended the EU 2014 regulations …to report additional information concerning ESOS assessments/energy performance data and provide an action plan with annual progress updates”. In other words this one strengthens and extends the requirements of the EU regulation.

There is plenty more scope to do some good by repealing the unnecessary and simplifying the important. I have set out many examples in previous blogs of what can be done.

I h ave tweeted today to remind people of the big win from Brexit. The EU has gone on a 800bn euro borrowing binge. If we had still been a member we would have had to stood  behind that and paid a big bill to help meet the interest on all that debt.

Facts4EU doing a good job

https://facts4eu.org/news/2024_jan_brexit_is_working

If we left energy policy to the Opposition we would be closing down our oil and gas fields more quickly, refusing to get more out of the ground, and urging the construction of more windfarms. This requires a big increase in the grid which will take years to plan, agree and build. Meanwhile we would be even more dependent on imports. We would be in more danger of rationing or interruptions to supply. Prices would rise to provide sufficient incentive  to put in the extra  wind and solar capacity.

These parties have energy policies based on the imperative of getting to net zero. They never seem to worry about security of supply or affordability. These two aims should be more central to energy policy.

The government has now accepted that  getting more of our own oil and gas out makes sense. It did with some persuasion keep open a couple of coal stations for longer which has been helpful in the last two years.

We still do not have good ways of storing renewable power when it is available for times when there is no wind and sun. It may be possible to do this with battery stores and or making green hydrogen. Until that happens we need more back up power. As government and Opposition press  on with wanting  more things to run on electricity  we need more reliable power, it would be good to put extra gas fired stations in to meet need.

There is no point in urging more people to switch cars and heating  systems to electricity if there is insufficient renewable power on a reliable basis and insufficient grid space to carry the power from a distant offshore wind farm to a customer. There needs to be greater clarity about costs and charges and more consideration of affordability. The UK is suffering from too little domestic output at too high a price.

I was critical of OBR accounting for  inflation linked linked government debt. They said the  extra repayment costs on index linked bonds  from higher inflation  were like monthly cash payments though the government does not send the bondholders cash each time prices go up. .  Now I can enjoy the reverse process where the accounting system to correct the figures going forward will record big drops in the costs of government interest payments as inflation falls away. In the year to November 2023 the OBR charged the government accounts  £50bn with inflation top ups to bonds that do not become liable until the bonds are due for repayment. This year beginning with December 2023 with inflation down from 10% to 4% the debt interest figure will tumble. It went below zero in December for the inflation adjustments.

It looks as if on their accounting system government interest charges and spending will benefit from a fall of more than  £30bn in the year ahead, assuming inflation now falls from 4% to 2% as forecast by the Bank of England. Tax revenues are predictably disappointing a bit compared to OBR forecasts as the higher rates and frozen thresholds bite. The Treasury/OBR model still attributes too much revenue growth with tax rises and fails to credit tax rate cuts with more revenue yet this often happens with the main capital and income taxes.

We need a growth strategy which must include tax cuts. We now know there will be more than £30 bn extra headroom as the interest payments plunge. The government should cut energy taxes as a priority. Getting inflation down more quickly would mean even  bigger falls in debt interest and curb inflationary increases in public spending across all the budgets. Cuts in taxes on small business and the self employed will boost output and competition. Income tax should also be brought down by taking more people out of the higher tax brackets they are being dragged into.