Author: johnredwood

The government’s aim of getting the UK economy to grow faster than the rest of the G7 is both ambitious and achievable. I will explore in this and later pieces what it will require to bring about. We will need to look at dear energy, difficulties in affording your own home, the disastrous boom bust policy of the Bank of England, the wish to deindustrialise to hit net zero quicker, the public sector productivity collapse and others.

The task  is to match or exceed the US rate of growth which has  been considerably faster than the UK and the EU this century. The superior  US growth rate has greatly benefitted from  the supercharged growth of its leading large companies in technology.The UK needs to ask why it has been left behind in the digital revolution, along with the rest of Europe.

The US has nurtured a number of crucial technology companies. Their system of spin out from universities, their tolerance of small business, their venture capital and private equity markets have provided plenty of finance and back up to new idea have all helped. Their wish to run successes and grow them from billion dollar companies to trillion dollar companies has also been crucial, where in the UK a successful entrepreneur may sell out early when he or she has made enough money to cover the needs of the rest of their lives. Government has helped in keeping regulation proportionate and in setting lower tax rates.

The Republic of Ireland has shown how a European country can greatly benefit from US success. By setting its own corporation tax rate at a low level to act as a magnet to the large US digital companies, who have set up and channelled much of their European business through Ireland. If the UK set its own corporation tax rate at the Irish level it would attract much more of this US investment, given the talent pools and other advantages of the UK

The UK has allowed semiconductor investment to be mainly elsewhere, and allowed bidders to buy up any promising UK company in the area. The government needs to have a targeted strategy to bring more microprocessor manufacture to the UK, just as President  Biden has done in  the USA through his Chips Act. The UK has plenty of data centre demand for sophisticated chips and needs general microprocessors in a range of items from defence to consumer electronics.

The UK has been too ready to follow the prescriptive regulatory approach of the EU to this important cutting edge sector, leading to tensions with the main US players and diverting innovation and investment away from such heavily regulated area. Most of the crimes we want to avoid through technology from theft and fraud to grooming and planning crimes are already serious criminal offences that can be detected and prosecuted in the usual way. There does not have to be a new range of regulatory and legal offences that overlap or duplicate with the underlying crimes people can use technology to assist.

The UK needs to improve the range of tax incentives for start ups, and create a much more welcoming environment for home grown and US tec businesses.

I thought it strange Nigel Farage used his Queen’s Speech slot to call for a referendum on the European Human Rights Treaty.  That makes two referendums Reform now want, one on PR and one on human rights. There is no way a Labour government with such a huge majority will offer either, so Reform is left demanding things the government will never grant and which most people do not see as a priority. Calling for a referendum when there is a popular need is best done in an Election Manifesto as the Conservatives did with the EU referendum which was long overdue.

There is likely to be 4-5 years before a General election. In that time there is scope to forecast what is going to go wrong for Labour and to build up a head of steam for change. I think many people will be livid with Labour if the small boats keep delivering illegal migrants, and if well paid lawyers use International law to block action against illegal migrants. Labour may well be forced to take further action to control our borders.

The obvious answer is the one the last Conservative government turned down. Parliament can and should legislate to put   beyond doubt what is required of our Border Force and courts to turn back or return illegals. I supported amendments that would have done it, setting out a sensible way to stop the illegals in U.K. law and saying that law takes precedence over any international court .There is no need to tear up the whole Treaty which Labour will not do. There is every need to constrain actions  of the international  court that makes it impossible for legal U.K. authorities to control our borders sensibly.

The next election will not be fought under a system of PR so Opposition parties have to work within the current FPTP system. It produced an unusually unbalanced Parliament last time where it gave Labour a majority out of all proportion to its vote. That should be a rare event and was only possible because both major parties were unpopular at the same time, and both had been following very similar policies. We still have the accountable single member constituencies where once again many have discovered the hard way they do get sacked if they cease to please. The way to get change from here is for Conservative and Reform to oppose intelligently and energetically. That requires understanding the reasons people are so disillusioned with the traditional parties , and offering something better either by their reform or by a new party winning support for a new approach that does reflect public concerns.

Labour think nationalisation is a better answer than free enterprise. They are held back from nationalising more by the cost of it. The last Conservative government gave up on making the case for free enterprise and allowed some business to slip back into public ownership. Theyb too went in for back door nationalisation of energy by imposing a network of price controls, windfall taxes and subsidies. Both parties favoured rolling rail nationalisation. Labour nationalised the bulk of the railway when last in government and the Conservatives added some train operating companies as their leases ended. Labour will carry on. Railways are effectively nationalised with government controlling profits, prices, timetables and much else.

Labour will discover all over again that nationalised industries rule governments more than governments run them, There is the doctrine of independent management  strangely allied to the reality that when anything goes wrong people and Parliament blame Ministers. Labour inherits a nationalised Post Office that started wrong sending staff to prison on its watch. They now have to find large sums from taxpayers to pay for all the losses and for the compensation owed to staff. Labour will also have to wind down HS 2 as its costs spiral and its ambitions are scaled back because they are ludicrously too dear. Another nationalised industry that  devours tax revenue excessively.

What can we expect of Great British Energy? Last year U.K. infrastructure Bank and British Business Bank made losses in the well established nationalised tradition. Why would Great British Energy do anything different? It will be offered the investments the private sector does not rush to buy.

Many people stayed at home or switched to Reform in protest at the big surge in legal migration. Reform had highlighted the numbers of illegals but like the other parties said little about the far bigger numbers of legal.

People were right in seeing difficulties from allowing so many visas to be granted. The country is short of homes, short of water and sewage pipes, short of electricity generation, short of GPs, short of school places. Inviting  in so many people is not fair on them without the homes and services they will need, nor fair on people already here facing high prices for homes and scarce services.

The Treasury backed by most parties and many MPs thought more inward migration welcome to fill poorly paid job vacancies and to add to growth of output. Very few MPs in the last Parliament were willing and able to argue we need higher out per head, not higher output from more low income jobs. It needs investment in more mechanical and digital backup to help people be more productive and to earn better wages.

Every extra migrant adds to the need for more infrastructure, more public service and more highly trained staff like doctors and teachers. So why cannot the parties see what people can see? Why can’t  there more concentration on the need to get numbers well down? Will more make the case for a higher wage higher productivity economy and stand up to interest groups that think the answer to their woes is more cheap Labour from abroad? A large increase in low pay migration means large increases in public spending to provide them with homes and services.

Many voters are angry that the U.K. government allowed inflation to hit 11%. That is part of the reason Conservatives lost so many votes as they were meant to be in charge.

The public also saw that Labour did not warn about the coming inflation to suggest any policies that might have prevented it. Their vote also fell.

The problem went unsolved because most MPs and all parties in the House said the Bank of England is independent, None  of them wanted to challenge let along change the inflationary policy the Bank of England followed. This was both under its own powers and more importantly through the main policy of printing too much money and buying too many bonds which government and Opposition both backed and approved.

There is still no party calling for an end to the sale of bonds in the market at huge losses. This policy is not followed by the European and US Central banks though they made the same big inflationary mistake as the Bank of England. All parties want a better financial outlook to afford more spending and or tax cuts yet none can see how the Bank is sending huge needless bills to taxpayers.

Why? inflation  in Japan, Switzerland and China stayed low despite the war and energy price surge.This shows it was not the war but Bank policy that caused the overall inflation. .

I read there is a debate amongst Conservative MPs over who to have as leader, which goes to the heart of what the Conservative Party should believe and advocate.There is also a debate over the leadership and structure of the Reform party with some wanting a democratic  Party constitution to be introduced.

The One Nation group of Conservatives thinks they lost because they did not move sufficiently in the Labour/ Lib Dem direction. They say the party needs to win back voters from Labour and Lib Dems by moving  closer to their preoccupations and ideas.They want to downplay migration, move closer to the EU, talk more about public services and uphold the European human rights law.

The more conservative minded group thinks they lost because many former Conservative voters either stayed at home or voted Reform. They want a new Conservative Party to have a credible offer of much lower migration, lower tax rates and a more focused state, using Brexit freedoms to promote global U.K.

To help them examine this choice it might be useful to analyse voting patterns in Wokingham, one of many seats that passed from Conservatives to Lib Dems  or Labour.

In 2024 the Conservative vote plunged by 13,336
The Labour vote fell by 2819 , a nearly identical percentage fall to the Conservative vote

The Lib Dem vote rose by 2392

The new Reform vote was 5274

So if you add Lib Dem and Labour their combined vote was slightly down. There was no net switch from Conservative to Lib/Lab. The most likely explanation of changes in their votes is more Labour voters switched to Lib Dem to defeat the Conservatives.

Even if you thought all 2392 extra Lib Dem votes came from Conservatives you still need to explain where the other 11,000 missing Conservative votes went. The most likely explanation for the 13,336 fewer Conservative votes is many of them voted for Reform with the larger number staying at home. This would marry with the national outcome.

The voting pattern means there are many voters who want a more identifiably conservative approach to borders, taxes, economic growth than the last government managed and than Labour is offering. They split between voting Conservative, voting Reform and abstaining. The new Conservative leader will be in a struggle with Reform over who can best represent this group. Both Conservatives and Reform also will be looking for a platform with wider appeal that is compatible with the core economic policy and border controls they need to unite this large group of conservative voters. Reform have added the Lib Dem policy of proportional representation to their offer which complicates their priorities.

The government has got off to a bad start over migration.
It sounds as if they will effectively grant an amnesty to the backlog of applicants who have already arrived illegally. They have scrapped the Rwanda plan which for all its troubles was putting some illegal migrants off coming to or staying in the U.K.

The strategy rests entirely on better enforcement. The previous government spent a lot money and effort on trying to get more collaboration from the French. They claimed a lot of boats were intercepted and gangs prosecuted, but such a lucrative trade produces more organisers. The French coast is long. Yet you would have thought they could intercept the buses that now take people to the boats. With drones and surveillance cameras they should get early sight of boats getting ready to make an illegal run.

Following the money should help as banks are charged with watching out for money laundering. How do they pay for the boats? Why not respond to more of the adverts for the trips?

They need to ask why so many want to come to England? Why is England seen as offering a much better deal than France?

They also need to understand that current levels of legal migration place far too much pressure on housing and public services. They need to tighten the qualifications further compared to the January policy changes.

Bizarre that the U.K. hosted the meeting of 46 leaders of European countries at Blenheim. That great British victory against France and Bavaria was an important part of a war  against Franco Spanish attempts to dominate Europe. Stressing the associations with the Churchill family made everyone think of the U.K. ‘s role in thwarting a later German plan to dominate Europe. These are unhappy memories of Europe’s centralising  thuggish tendencies and of the great loss of life resisting them entailed. Far from showing the U.K. as a friend and partner it reminds of times when the U.K. stood for self determination of people’s and states against those who wanted to create a European tyranny.

Today most of the Europeans assembled wanted to believe they are more united. They were willing to give the time of day to the U.K. offer of closer friendship without making any positive moves of their own. It was a mistake to think this was an occasion to reboot the U.K./ EU relationship when there were 18 non EU members there as well and when Commission President Von der Leyen was absent seeking votes from the European Parliament to keep her job.

The EU / U.K. relationship is set out in ghastly legal detail with the EU wanting to enforce it in ways that suit them. It is not normally a way to a happy marriage for the bigger partner to make the smaller sign a pre nuptial agreement they do not like, nor does it help the marriage if either partner wants to renegotiate. If the government does want to change the costly and unsatisfactory Treaty it will find changes come at a price which will not be worth offering.

The government would be wrong to enter a defence treaty with the EU. Let us stick to NATO and collaborate through that. They would be wrong to join Horizon and other EU programmes, It is cheaper and better to run our own. They are quite wrong to think being closer to the EU will boost our growth rate.The  EU is mired in slow growth and no growth. The single market is no free market. It is a rule bound  customs Union that is hostile to innovation and small business.  By all means have a growth strategy. The more you divert from the EU model the faster you can grow.

I have written to the Chancellor wishing her success in getting the U.K. economy to grow at the fastest pace of the G7 economies. As she says if we achieve that we can afford better public services and infrastructure. We should also boost the after tax incomes of the many and help business grow profitably.

The task is difficult but not impossible. The U.K. along with the other large European economies in the G7 have fallen way behind the USA in GDP per head, with a much slower growth rate this century. The US has raced ahead on the back of nurturing seven world beating digital giants, going for cheap fossil fuel energy produced domestically which it is also now exporting to Europe, and demonstrating leadership in many areas from pharmaceuticals to defence equipment. The U.K. has higher GDP per head than the EU, and has done relatively better at pharmaceuticals and digital technology than the continent.

I suggest the government look again at the control framework for the U.K. The US has twin targets of 2% inflation and growth in jobs and activity. The U.K. government could regard the 2% inflation target as binding on itself as well as the Bank, as government decisions on pricing public services and managed prices have a direct impact on inflation outturns. It could then complement that with a growth target. 2% would be an attainable improvement on the past. Maybe they would need to adopt 2.5% to give us a good chance of outgrowing the US in the years ahead from the lower base.

Of course government should consider OBR forecasts of debt and deficit, as both need to come down as a percentage of GDP. Relying  on their fifth year forecast is not such a good idea, as it is impossible to forecast accurately. If the OBR is too pessimistic it limits unduly choices to pay for a growth strategy.

I am a great believer in democratic parties and leaders telling us clearly what their aims are, and explaining the principles or beliefs that will help guide them. I am a critic of the modern craze to govern by targets.

Let’s consider the target to spend 2.5% of GDP on defence. The aim should be to ensure our country is well defended and can make a good contribution to the NATO alliance. We need first to ask what forces we need, not how much we must spend. If GDP falls or grows slowly the target means we have less defence, whatever the need.

A similar set of objections relates to the target of spending 0.7% of GDP on oversea aid. When this was in place the U.K. ended up backing projects of questionable worth and giving large sums to the UN and EU to spend in ways we could not control.

Worst of all is the deeply damaging national CO 2 target. This is encouraging all 3 main parties in Parliament to back closing down energy and industry in the U.K. to hit our domestic CO 2 target, only to import fossil fuel and industrial products so more CO 2 is generated elsewhere than we save.

The government’s target of growing faster than any other G 7 country is a good aim. It however depends on what 7 other economies do which we do not control as well as on what we do. Were they all to go into recession or slowdown beating them does not give us much growth.

Setting  a target to get NHS waiting lists down a more sensible target as it is under government control and not relative to external events.  Even this has proved to be beyond the U.K. public sector to deliver despite record NHS funding.They cannot even collect and publish reliable and relevant figures on how many are waiting for what. If you want to manage something that is under your control it helps if you can measure it accurately and watch progress.