Author: johnredwood

I have spent weeks this summer researching and  writing how the government and Bank of England could give us a better future. I have set some of these views on this website, in tv and radio interviews and through comment in papers. I have sent the main ideas to Ministers and advisers.

In the next few weeks I will be publishing an updated and improved version of my Central Banks lecture. This will reinforce the need for changes to their model, forecasting and current policy stance.

I will be launching another booklet on wider ownership, setting  out how we could help many more people to become owners of property, shares and businesses. It will set out ways to boost public sector productivity by involving officials in ownership and participation of delivery for public services.

I am just finishing a third on a supply side revolution so the UK makes and grows more. This  will need targeted tax cuts and a pro business approach in government departments.

These three pieces will provide a policy framework for a decent ownership and supply side revolution, against a background of a more stable and supportive money policy. They will also provide many individual  proposals government could adopt even if it is unable or unwilling to embrace the new vision,

The Bank of England’s way of fighting its inflationary mistakes of 2021 is to slow or stall the economy. They want to stop price rises by ensuring people cannot afford to buy so much, and to stop wage rises by increasing unemployment. This is all most unpleasant.

I have often pointed out it ignores two ways of sorting out inflation. The first is to avoid excessive money and credit growth It is true the Bank without saying so has now flipped from monetary excess to monetary tightness. The second is to promote more supply, which the Bank and government working together could and should do.

Yesterday the updated survey of UK business found that the average figure had fallen to 47.9 where 50 is the tipping point from no growth to growth. Services were at 48.7 and manufacturing at 43.3, so both sectors are now in retreat. This mirrored the Euro area whose Central Bank made the same mistakes in 2021. Their overall figure is 47, with services at 48.3 and manufacturing at 43.7.

Euro area interest rates have been held lower than ours and their Bank is not selling bonds off in the market at huge losses. When will the Bank of England get the message that it may now be lurching to too tough? It needs to get better at forecasting inflation  and to build a model which reflects the realities of the lag between raising rates and the impact on jobs and activity.

So we learn that UK state borrowing was £11.3 bn less in the first four months of this financial year than the OBR forecast.Spending was up so the main reason for a further large error once again was understating tax revenues. Income  tax was up by a massive 13% . The OBR often understates revenue when the economy grows a little.

I renew my question to Ministers. Why do you make the OBR five year forecast of the deficit the key control on your economic choices? As the OBR cannot get within £10 bn for the immediate year why believe the 5 year forecast? If the OBR model regularly understates tax revenue why accept advice to hike tax rates?

The numbers were further distorted by the transfer of £14 bn to the Bank of England to pay losses, taking the total to an astonishing £24 bn in just four months. The Bank’s decision to sell bonds at the low prices it has driven them down to instead of holding them to repayment has added to the misery and inflated government ex Bank borrowing and spending.

Spending on benefits was up £11bn, on staff costs £8.2 bn  and  grants to Councils up £3 bn, making a total increase of £24 bn so far this year. If the government would introduce a freeze on public sector recruiting save for key personnel like medics and uniformed roles the government could start to control some of these outgoings.

Debt interest remains very elevated. More than half the stated costs do not entail any cash payments out or additional borrowing given the way the accounts treat indexation of some bonds.

The government needs to look through these confusing numbers and forecasts. The underlying reality is it could cut the rate of increase in spending, boost public sector productivity and cut some  tax rates to grow the economy and revenues more. OBR forecasts are an ill fitting restraining jacket that falls apart every time it meets reality. Why keep stitching it up again when it delivers wrong forecasts and wrong policy responses?

In order to close the gap with net zero ambitions governments and companies pursuing this agenda need to revise the way they account for it. Here are some questions they need to answer.

1. As China, Russia, India produce more than 40% of the world’s CO 2 output and their output is still growing, how do we get to the 2030 and 2035 targets? What actions are being taken to get the largest and fastest growing outputs by these countries  to be reined in?

2.Why does the system assume electric vehicles are a win for less CO 2? Will the figures include the fact that many EVs are being recharged with electricity that may come from more fossil fuel than renewable generation? What allowance is made for all the CO 2 produced in mining  and smelting the raw materials for an EV and its battery? And for total assembly and delivery? How many miles does an EV have to travel before it generates less CO 2 than carrying on with an older ICE vehicle,assuming it can get 100% renewable electricity or putting in accurate figures for the CO 2 content of the electricity likely to be used.

3. Why does the accounting system credit a country with lower CO2 because it has closed down fossil fuel based activities, only to import the products needed? This will usually raise world CO 2 by the amount of extra transport involved.

4. When attributing success to more renewables shouldn’t you need to also factor in the extra  costs and extra CO 2 from the standby fossil fuel generation needed to prevent black out when the wind drops?

5. What will be the CO 2 impact of needing to put in so much more grid capacity and cable to allow a major switch from gas to electricity?

6. When calculating the CO 2 impact of rail travel it is important to include connecting travel by road vehicle and do a whole journey calculation. It is also important to use a realistic mix of electric and diesel trains and allow for times in stations with engines running.

Our road system is badly run, delivering a poor service to all the people struggling to get to work, to drop children off at school and getting to the shops. It lets down delivery drivers, large trucks bringing  essential supplies and business vehicles carrying people to do work in our homes and commercial premises.

It is a typical nationalised monopoly. It believes in keeping us short of roadspace on the bizarre grounds that if they built more roads we would use them more. Any normal business is delighted to expand when it hits on a popular product or service.

The highways authorities take special delight in making life as difficult  as possible for their tax paying customers. They regularly restrict access, narrow lanes, increase junction delays and change rules on road use. They  compound this by setting traps to get more fines revenue out of complex and changing regulations.

They fail to maintain the surfaces of many roads, letting potholes grow until more extensive and expensive repairs are needed. The state grossly overcharges for use of the roads, collecting far more in motoring taxes than it defrays in road costs.

They insist on putting cables and pipes under the middle of main road requiring digging up the road every time a repair, replacement or increase of facility is needed.

Why? We depend on the roads for so much of our lifestyle.

The governing elites are usually unpopular. They may have to make unpopular decisions. There will always be some who think they tax too much and others who think they give away too little.

The current governing elites of the EU are particularly unpopular. So are those officials, lawyers and other senior people in UK institutions that have a similar world view to their EU friends and opposite numbers. One of the reasons is the overarching bossiness, the we know best attitudes they strike on so many crucial matters.

There is first the discourse. They wish to talk about the road to  net zero, the need to be generous to migrants, the need to follow international Agreements and Treaties, the need to suppress or defeat populist movements. Many in the public want their concerns to  be heard. How do I get a better job? How do I pay the energy bills?  When can I afford a home of my own? Am I allowed to fly abroad? Can I use my car or van to get around without more charges and barriers?

The refusal of the elites to take  many of the popular issues seriously adds to the tensions. The populists cry humbug when they see elite players flying round the world to green conferences, staying at air conditioned hotels and ordering the best meat on the menu whilst telling the rest of us to do none of the above. The elites shout back that the people must understand the priority of cutting carbon dioxide , the need to accept dearer energy and more fossil fuel taxes to get there. They explain their carefully contrived legal framework which turns out to thwart populist ideas of how to improve more voters lives.

As a result of this process most of the major governing and opposition parties in the EU of the late last century have been destroyed or have shrunk in the face of populist movements of the right and left. The splintering of their votes reveals an inner unhappiness by electors.

Some large companies like banks seem intent on getting as out of touch with many customers as nationalised concerns do.  Just as the railway faces a hail of criticism for wanting to close its ticket offices, so the banks are intensifying their closure of branches.

The railways say they will redeploy the staff to be generally helpful around the station. They can be very helpful in a ticket and information office where they have a chair to sit on, computer access to all the details of timetables, travel options and fares and online knowledge of the state of play on the trains at or coming to their station. A staff member on the move around the platform has less easy access to the information, and may be more difficult to find for a worried traveller.

The banks do not promise to redeploy their staff. They want us all to spend our time wrestling with their on line systems which have to balance difficulty of access to make them secure with feasibility of access so we can move our money around. Security is much less of an issue if you go regularly to your local branch to bank, as they get to know you. Your face is your identity. Faced with the narrow systems of the computer you have to choose answers the computer has been taught rather than being able to describe what you want to do and get help from the bank. For commonplace transactions this usually works, but there are often glitches in the software. My bank’s  computer often fails to recognise people I wish to pay from past payments so you have to go through the new payment process each time.7

Government is now requiring banks to ensure we can all have access to cash from nearby machines. This is a minimal response to the retreat of the banks from most personal contact with their customers. Whilst most of us conduct most of our transactions electronically by card and by bank transfer there remain a number of needs for cash. Cash is a reliable resort when machines or the internet goes down. Cash is often quicker and more sensible for smaller transactions. You can always offer  cash even if your phone has run out of battery or the internet coverage has gone down or outdoors if the sun is shining so you cannot easily read a phone screen. No-one should be made to use electronic money if they do not want to.

It is a strange modern wish of some large institutions to want to distance themselves from customers, to cut themselves off from the flow of information and social contact which personal service brings. It breeds resentment amongst customers, sometimes  causes greater costs and delays and allows some to claim there is a big plot to make us go cashless so the government will be more in charge of our lives.

One of the world’s largest car makers has been speculating on the future of the car.

They see the future as all electric. They do not tackle the issues of range, charger availability, charge  time, lack of renewable electricity to recharge , CO 2 generated in creating the metals, minerals needed and making the batteries or the issues with scrapping.

They do see an evolution to more automated vehicles. They wish to excite future customers with more digital  displays and capabilities. They anticipate moving away from the old ownership model to more varied patterns.They expect  there to be car pools and systems to summons a vehicle when you need one. They anticipate much more use of each vehicle as a result.

There is also a parallel vision of owners of EVs seeing them as mobile batteries, using them to supplement the grid and then finding some time when they can recharge them.

The two interesting features of the commentary were the absence of  any research into what we the potential customers might want, and the lack of any analysis of what might be possible in terms of access to renewable power and chargers. There was no carbon accounting, just an overall  assumption an  electric vehicle entails less CO 2 than a petrol one. That would depend on where the electrical  power came from, how many miles the vehicles were to do, and how much CO 2 it took to produce the battery of the EV.

These companies are becoming very  detached from customers and practicalities. They have also lost a lot of volume with petrol and diesel sales down by much more than electric sales are up.  What is your vision of the future car you want?

As someone who embraced the coming of the first mobile phones, adopted the iPad and welcomed the scope the web offered as with this blog I am in principle happy with the idea of a self driving car that would leave me free to do other things on a journey.

As a legislator I will need some persuading we have reached the development point with self drive cars that is acceptable and will fit on our roads alongside cars with human drivers.

So far I have found the addition of extra computing power to my current car far from smart. It is often annoying, slows down using the vehicle and can conflict with your safe judgements as a driver.

In the morning the computer display says Good Morning. There is no point in saying Good Morning back, and it delays being able to tell the sat nav where I am going which needs to be done before driving off . I drive to a local shop, leave the car for 5 minutes and then it wishes me Good Morning all over again with no sense of irony!

You are driving along on a sunny day -remember those?- and go briefly into shade. You can see perfectly  well. The car puts the lights on. Why? I didn’t tell it to.

You are in heavy London traffic on one of those junctions where your turn gets a few seconds on green. You follow the car ahead closely but safely at a slow speed to get round before red and the car screams at you.

You choose to stay in third gear because you foresee the likely need to stop at lights a few hundred yards ahead. The car tells you to change to a higher gear in blissful ignorance that you will need to slow down.

The sat nav tells you you will arrive in Westminster at a stated time. You estimate it will take a quarter an hour longer because the last three miles are always impossible thanks to the anti motorist street layouts, lights and road blocks. The sat nav is nearly always wrong and never learns from the repeat errors.

The other day the car told me I needed to download additional software. I complied when the car was parked overnight. In the morning it needed more time to complete. It had for no good reason hidden icons I needed to access easily, so I had to waste more time before setting off trying to rescue items that would be useful.

It has a fuel use/ environment programme. However you drive the vehicle the accelerator rating plunges from 5.0 to 1.0 as soon as you get the car moving. The brake and speed ratings make more sense and help give you better consumption figures for restrained  driving.

Car producers need to keep in touch with what buyers want. Not all technology is good. Touch screens in cars are difficult to read when the sun shines on them and when they get finger marked. They do not always respond to touch. It is dangerous to look at them  when you need to be very alert watching everything going on on the road around you. It is very annoying when they do not respond to first touch. It is therefore important the touch screen  does not contain controls you need when moving. Switches and knobs on older cars always work first time  and do not require you to look away from the road ahead.