Author: johnredwood

Labour in Opposition campaigned vigorously against individual Conservative MPs and Ministers, accusing them of breaking rules, being hypocrites and behaving badly. It seemed they were out to recreate the sleaze campaign they ran against the members of the governing party of John Major. It looked as if Lord Mandelson, architect of that approach in the 1990s, was advising or backing Sir Keir to do the same in the 2020 s. It is therefore  a fitting irony that Labour, fresh from its moral pulpit in Opposition, should this week be brought low by their need to sack Lord Mandelson for his own personal conduct. The endless allegations and enquiries into Conservatives filled the media and papers for much of the last Parliament. Now it is Labour’s turn for full scrutiny.

Most of the public understand that any governing party will have people who are too casual about applying the laws and rules they impose when it comes to their own conduct. Some will make genuine mistakes, some will be so busy they miss deadlines to declare and explain, some will let office go to their head and take liberties. There will be a smattering of crooks who get through vetting, or who become  crooks faced with new temptations. So it has proved with Conservatives, Lib Dems and Labour in the successive governments I have witnessed.

I agree teasing out hypocrisy and criminal behaviour by governing party MPs is a part of the process of Opposition. I do not however think Labour was right to believe  that its heavy handed sleaze campaigns against a few malefactors and some unlucky people caught in the crossfire won them the 1997 and 2024 landslides. Their misunderstanding of this has distorted their approach to Opposition, left them unprepared for government this time round, and in a quandary now the sleaze allocations are a rising tide hitting themselves.

The Major government was brought down by joining the European Exchange Rate Mechanism and putting the country through a needless inflation followed by recession. The Johnson/Sunak government was brought down by the Bank of England money printing and big inflation of the covid era which Ministers allowed and by the disruption to growth their covid policies induced. The fact that Labour supported the Exchange Rate Mechanism and the money printing policies that destroyed the Conservatives just made it more difficult for them  to follow an economic policy which works once they got into office. The electorate rightly blames a government for visiting on them bad policies, even when these are urged by the Opposition as as well.

If you decide to campaign on a ticket of offering sleaze free government you need to do a lot more homework on who you appoint and how you control them. If Labour still believe sleaze free government was the important offer, then they have failed miserably. 5 MPs elected as official  Labour candidates are currently under investigation by the Parliamentary Commissioner for Standards. 5 Ministers have left the government following allegations about their conduct. A Homelessness Minister was accused of bad treatment of tenants, a Treasury Minister accused of financial wrongdoing, and a Transport Secretary had failed to declare a past fraud offence. 2 Ministers resigned in protest over government policy. They have now lost their very political appointee as Ambassador to the most powerful country in the world, and have had a dangerous reshuffle of Ministers  highlighting their weaknesses.

Reform is discovering that these mishaps can happen to them as well as to parties of government. They would be wise to give a no sleaze pledge a miss. Two of the five elected in 2024 have lost the whip. Rupert Lowe was thrown out by the party amidst serious allegations which he has vigorously denied. James McMurdock has gone independent following issues about his financial and business affairs. Meanwhile they have gained two replacements, one from a by election and one from an MP changing his mind about which party he supports. They seem to have their own version of the government’s one in, one out policy.

My conclusion is Oppositions need to concentrate on planning and promoting how to make things better so they are ready for government. They should expose bad behaviour by Ministers and other senior people in government but avoid claims that in future human foibles, mistakes and bad conduct will all be banished.Labour’s failure to plan a positive future when in Opposition and to work out how to  have fast growth and low inflation is hurting us all.

 

As Number 10 and Number 11 argue over taxes and how to get enough revenue to pay  for an expanding low productivity public sector they should take advice on why they are presiding over a collapse of industry.

It is their actions that are running industry into the ground.

1 They ban all new oil and gas exploration and new wells and production. It is imports only with an accelerated run down of a once flourishing industry

2. They will ban all new petrol and diesel car manufacture here in 2030 leading to factory closures now. It will be imports of nearly new  only soon.

3. They sacrificed the ethanol industry in their recent tariff deal with the USA likely to lead  to closures

4 They have watched as their penal energy prices, carbon and emissions taxes close down two refineries and will close olefins   production. Again they prefer we import all those.

5. They have kept quiet about the closure of a large fibreglass plant where dear energy was an important reason.

6. They back policies that mean the closure of our remaining blast furnaces  at Scunthorpe to go over to steel recycling instead but now also say they will protect the jobs there for the time being with large subsidies. For how long?

7. They make pharmaceuticals an industry for growth. 3 of the largest companies have suspended or cancelled  UK investment because the NHS will not buy sone new drugs and pays  too little for others.

8. International Paper is closing plants here thanks to high energy costs and other considerations.

9.The ceramics industry has lost two factories recently owing to dear energy and tax rises.

10. The governments farmers tax and lack of support for growing food means we rely on increasing volumes of imports.

 

 

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Welcome to the Mod Cons podcast.

In this week’s episode we speak with Sir John Redwood, former minister and Margaret Thatcher adviser.

Jamila talks to Sir John Redwood about Jeremy Corbyn’s new party, his vision for Brexit Britain and why we need to cut tax.

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According to a recent pre budget briefing the government is looking at options to lower energy prices . They have apparently got there from polling showing people are alarmed by rising inflation. Dear energy is squeezing real incomes.

Well done for getting there, though it is surprising it has taken so long and  needed polls. What has been obvious for a long time is the damage Mr Miliband’s supercharged version of net zero  transition is making for uncompetitive industry floundering on very dear energy, carbon taxes and emissions controls. Mr Miliband may be pleased to see the string of closures of refineries, oil and gas production, petro chemical, steel, ceramics and the rest. These are destroying good jobs, undermining national security, paying taxes to foreign countries and making us depend on imports. This  dear energy policy must be changed.

We read they are looking at scrapping VAT on home  energy bills. That would be welcome, if paid  for with one of the cuts in public spending I have often  listed. It is not however tackling the root causes of our dear energy and not providing relief  to factories on the edge of closure.

Locking ourselves into very expensive renewable power by providing a guaranteed price for many years well above competitor country energy prices needs to stop. The costs of having gas fired back up needs to be factored into the sums on renewable energy.

The bidding system for electricity capacity and for electricity take off from current generating plant needs to be based on going for the cheapest.When commissioning capacity the  cost of back up power to meet a contractual commitment with interruptible renewables   needs to be part of the bid.We need an end to emissions trading, carbon  taxes and the forthcoming carbon tariff.

 

I was in London yesterday to go to theLast Night of the Proms. It was a great atmosphere, with people enjoying a good mixture of old and new music, classical and popular. The favourites were the traditional sea songs and the patriotic rendering of  Land of Hope and Glory, Jerusalem and the National Anthem.

It is true we had to make  our way through childish pickets trying to get us to take free EU flags in some colonising move to impose themselves on a very British tradition. It was best to ignore them , though some took their flags to throw away. The songs that were sung needed the Union flag and the flags of the four countries of the Union as backdrops. This was one of those days to just celebrate being British. That was why the show gets such a large international audience. The UK has much to be proud of in its past contribution to the world and in its rich musical and literary culture.

On our way there some people who had been on the lunchtime demonstration from Waterloo to Whitehall wanted to talk to me. One  showed me photos of a large peaceful demonstration enjoying being in Central London and saying it with flags. Will the government listen?

They were saying they are proud of our country and want to be free to display our flag, just like the  promenaders last night. They cannot understand why some local and national officials want to tear down our flags and why they seem ashamed of our country. The country which  gave the world a model of freedom and Parliamentary  government, an economy  which gave the globe the prosperity of the industrial revolution, the culture that gave Shakespeare and the English language to the many should not be run  down by its own progeny.

Those on the demonstration resent the way law abiding UK citizens are treated by our own government. Flying the flag says to them  control  our borders,put  UK people and interests first, respect our traditions. Why does every decent peaceful protest have to face a counter protest? Why does government give priority to foreign law? Why do illegal migrants get better treatment than people born here who are down on their luck?  Why is our money given away to foreign countries and not spent on us at home? Why is it thought  a good idea to close down our oil,gas, petrol  car manufacture, petrochemicals and so much else, only to import these products from abroad.

So listen and watch, government.The flag waving yesterday was from people who love our country and want you, the government, to treasure it too.Our flag  is not the symbol of a narrow political group or party but the symbol of a great nation. Those who disliked the protest or want us to wave other flags should try to join us, not try to divide us.

 

 

A regular complaint here is my views are ignored.

Those who support them write in to tell  me to promote them in other ways, ignoring the fact that I do. I am always ready to reproduce them in the media, or to write an article for another blog or publication, or to talk to decision makers.

Those who disagree write in to tell me I am wrong and ignored. They amuse me as they clearly are not ignoring me and at least think I am worth abusing.

Watch this space. Much of what I am saying about growth, net zero, running public services, management of quangos is apolitical and helpful advice.

I have written, spoken and promoted a number of causes that did succeed. I spent the 1970s and early 1980 s promoting privatisation and private capital investment to promote jobs and growth. I had to write the books about wider ownership, and the failings of nationalised industries. At the time academic opinion and commentators ignored the big damage to jobs, customer service, innovation and investment from heavy reliance on nationalised monopolies.  Labour opposed privatisation strongly. Conservatives were sceptical or cautious. Then Margaret Thatcher invited me to advise her on a large transformational  programme. Tony Blair adopted private capital and choice for some public services and accepted most of the privatisations . Big wins.

In the 1990 s the imperative was to save the pound. The public wisely wanted to  keep it but many in senior official  and political jobs wanted to join the Euro. I resigned from the Cabinet highlighting the dangers of abolishing the pound. John Major and more importantly Tony Blair then offered a referendum realising the focus on the issue showed a bad gap between them and the public. That was crucial in saving the pound. I set out the case in Our Currency, our Country (Penguin) and Just say No. Another big win. If we surrendered the currency we would have surrendered crucial rights and powers of self government.

In the 2010-2015 Parliament I worked with a small but then a growing number of Conservative MPs to get a referendum to leave the EU. People on this site told me I could not do it that way and I should join another party.I explained that we had to firstly persuade the Conservative party to adopt a referendum as policy, then help it get elected. Then we would need to join a cross party Leave campaign. Many writing in thought this all impossible but it happened.

Today we may well be close to the Bank of England changing its policy on making big losses which I pioneered as a vital issue. Those of us putting the case against self harming net zero policies are at last a growing voice getting more attention.

If you want what I am saying then actively promote these views and use the materials I provide. If you disagree then debate with me if  you think  I am wrong. I am happy to  do so on any recognised media and here on this site.

I have had a complaint that I failed to post a couple of contributions from a frequent visitor to the site. I refused to do so as they repeated general and tired  condemnation of past Conservative government in the same way as before. This site debated the  failings of the past government extensively when it was in office. I myself set out proposals on the economy, migration, taxation , relations with the EU and other matters where the government could have done differently. The electorate made clear its view in the election. I do not intend to spend more time and space on historic errors.

There are two people who want to contribute the same thing when ever they write in.  I stopped posting their work.

One wants to go on about alleged undue influence of a couple of billionaires as if they ran world governments and were the sole cause of bad policy. They have never contacted me to complain of the views I hold or to persuade me to change.I have never been at a UK government meeting where they have been present or  mentioned in discussion. Others repeat these claims and are free to do so, subject to libel law. This site concentrates on governments and public institutions which we can influence  and change.

 

One wishes to abuse both Labour and Conservative in inaccurate and unpleasant ways, which will not contribute to the debates and analysis here.

 

I would like the meeting between the Governor and Richard Tice to change things for our country.  They are to meet with the Governor defending his current policy of large losses on the bond portfolio, and Richard Tice suggesting there could be cuts of £35 bn in the annual  costs. There  needs to be compromise, not a stand off. I set out in this brief a way through for both men.

The OBR says the Bank will lose £257 bn from the end of profits in the second half of 2022 to the final disposal from the declining bond  portfolio.All of these losses will be refunded by Treasury payments to the Bank, with taxpayers paying the bill.I have long argued these are excessive, in part avoidable, an invasion of fiscal policy and unacceptable to taxpayers.

These losses are of 3 kinds.

1. Losses on sales of bonds particularly long dated at current depressed prices. These are avoidable.

2. Smaller losses on bonds held to repayment, where the bond was bought at a price higher than redemption value. These are unavoidable.

3 A running loss on holding the bonds, as the Bank says the bonds are financed by commercial bank deposits placed with it. These now attract a higher rate of interest than the interest return on the bonds overall. These losses could be abated.

1.No other Central Bank sells bonds at big losses. The ECB and Fed with similar problems to the Bank of England are running down their bond portfolios as the bonds mature, not by forced sales of  them. Getting into line with the others would save the Bank and UK taxpayers who pay the losses billions in losses in the next few years, as the up front capital losses are much bigger than the annual holding losses.

The Governor may argue that over the long haul the losses will be similar. This is only true if the base rate stays up at current levels or goes higher. Assuming the Bank now gets inflation down to 2% base rates should go considerably lower, greatly reducing future running losses on bonds.

The Governor may argue as the UK has on average longer dated bonds it will take longer to end the portfolio by waiting for repayment. Having more longer dated debt is good news as much of it was taken out at lower interest rates and it reduces the refinancing burden on markets, There is no need to panic  out of long debt now it has halved or fallen more in value. Just stop the sales.

3. The ECB has moved to reduce its running losses on bonds by offering a lower deposit rate than its base rate. Markets accepted this normal banking practice. The Bank of England lends and borrows at the same rate in most cases, preventing it covering its costs on these activities. Why not introduce a spread between borrowing and  lending?

It is also possible to say commercial banks need to keep a minimum reserve with the Central Bank for credit and money policy purposes. This could be at zero interest.Indeed, prior to 2006 the Bank demanded special deposits to regulate commercial bank lending and offered no interest on them.

However, it could be a step too far to abolish all deposit interest on the current high level of bank reserves placed at the Bank of England. That would greatly impair bank income and cashflow, leading to less credit to finance growth. Switching all commercial deposits to zero interest would amount to imposing a major bank tax. Markets might worry that such a shock could hit  an already weak economy badly.

Does all this undermine Bank independence?

The Bank and even the Treasury may say this undermines the independence of the Bank. If so they misunderstand current Bank powers and status. The Bank has an independent duty to hit the 2% inflation target and maintain the solvency and stability of the financial system. It has the independent power to forecast inflation and fix  the Base rate. Nothing in these proposals affects that.

When the Bank under Darling as Chancellor first started creating money and buying bonds they sought permission to do so from the Chancellor, and did so for all subsequent  tranches of bond buying. More importantly each time they sought and obtained a government indemnity to pay  all losses whilst agreeing to pay  the government any profits. They clearly act as agents of the Treasury when it comes to the bond portfolio. The government has every right to influence the way their portfolio is managed by the Bank.

So the Governor needs to compromise on bond sales and rates of interest on commercial bank deposits, and Richard Tice needs to compromise on how much money he can take off the banks given their role in financing growth.

 

Summary of proposals

Stop all sales on bonds held by the Bank with more than 3 years to maturity

Introduce a deposit rate a little below base rate and a lending rate a little above to give the Bank of England a spread or margin in dealings with banks

Make a monetary and economic judgement of whether to introduce minimum reserves to be deposited in the Bank by commercial banks at zero interest and  if so how much is feasible, given current modest levels  of money and credit growth.

 

The first is well known to readers here. Cut  the bond losses. More about that tomorrow.That will help get the longer term interest rate down. Government debt interest has soared to over £100 bn a year, making it a major burden on the budget and taxpayers. The current government is borrowing all of the money needed to pay  the interest on past debts.

The debt interest will reduce if the government and Bank get inflation back down. The UK has issued too  much index linked debt, which led to large extra costs in recent years with high inflation.It will help if the government and Bank get longer term rates down. At the moment every pound of debt that needs refinancing when the old debt is repaid means paying a much higher rate of interest on it.

The surge in benefit payments under this government needs tackling. Welfare is the second big task.  Unemployment has gone up, and many more grants of benefits for long term sickness have been made. Where this is to young people or people with milder mental health issues, the government needs to help these people into work.

It will require more incentives through lower taxes to boost jobs and investment. It requires the end of the bans on oil, gas and petrol cars and rebuilding UK manufacturing. It also needs welfare reform as set out by the Centre for Social justice. Iain Duncan Smith  ‘s Universal Credit introduction greatly  boosted employment and cut welfare bills the right way . CSJ has set out how get more into work, particularly young  people. Work is a good therapy for people, suffering from mild depression and similar mental health conditions.

The third is to boost public sector productivity. We pay £40 bn more than in 2019 to deliver the same services, before adding in the extra costs of inflation. Government does know how to run these services better, as it did so six years ago.I am setting out a tool kit for Ministers and senior officials to manage for higher quality and productivity. It includes a public sector external recruitment freeze ( exempting teachers, medics and uniformed personnel), quality management systems, use of pay and bonuses to reward productivity success, and removing needless and wasteful functions.