Author: johnredwood

At the end of the last century Labour pushed through a devolved Parliament for Scotland and a  devolved Assembly for Wales. They did so claiming it would end the growth of the emerging nationalist parties in both parts of the UK.

Instead in Scotland it gave a platform and more grievance to the modest minority campaigning for independence twenty five years ago, swelling their support and leading to an SNP government in Edinburgh always pressing for more powers and for full independence. Under Nicola Sturgeon the SNP became a very successful vote winning party, drawing the support of a much enlarged  minority that did want an independent Scotland and adding to it others who thought it a good idea to have an aggressive Scottish government seeking to maximise money and support from the rest of the UK under threat of leaving.

It led directly to the need for an independence referendum, which the SNP said they would regard as a once in a generation opportunity. No sooner had they lost and they were looking for reasons to try again, wanting to commit Scotland to  permanent uncertainties and painful divisions as long as they lacked a majority for their cause. Nicola Sturgeon managed to keep in office whilst fuelling the divisions,. She did not seek to use the governing powers she enjoyed to improve Scottish services, but as a battering ram against the Union. During covid she gained advance information on the views and understandings of the Union government, to always go earlier and for more lockdown than the rest of the country. There was no wish to work collaboratively at a time of public health danger common to all when the rest of the UK wished to help  and share with Scotland.

Now she has resigned it is possible to have a more informed debate about why the Scottish devolved powers in crucial areas like health and education have not been used to make improvements in services and management, despite the more generous money allocations sent by the Union Parliament. It is possible to rethink the collision course Nicola Sturgeon was designing to raise the issue of independence again, despite losing a court case over another  referendum. Her party can rethink its views in letting rapists serve sentences in women’s prisons which proved to be a provocation too far even  for the very tolerant UK government.

Meanwhile our Union is also threatened in Northern Ireland by the EU. Fresh from its success in standing up at last to the SNP by seeking to override its unwise law, the government of the UK now needs to complete the passage of tis legislation to restore UK government of Northern Ireland.

The Unionist community in Northern Ireland has been ignored and angered by the actions and words of the European Union. The Northern Ireland Protocol has as its first Article a statement that the Good Friday or Belfast Agreement takes precedence over the Protocol. It states that the constitutional status of Northern Ireland is to be upheld and all has to proceed based on the principle of consent. The hard won peace in 1998 established Stormont as a devolved Assembly where all decisions were to be agreed between the two main communities, Republican and Unionist.

The EU’s insistence that all new laws passed by the EU apply to Northern Ireland breaks that promise of consent. Northern Ireland sends no Ministers to the Council to frame the laws and has no MEPs in the Parliament to approve them. The European Court of Justice is the ultimate authority on how those laws are interpreted and enforced. For this reason all Unionist parties in Northern Ireland refuse to return to Stormont to govern in agreement with their Republican colleagues.

The EU wishes to portray this dispute and the rest of Brexit as a matter of trade, when it is primarily a matter of who governs. There are various ways of smoothing the passage of goods between Great Britain, Northern Ireland and the Republic of Ireland that do not require EU laws to apply to Northern Ireland and do not end up in the European Court of Justice. It is the EU’s refusal to explore such options that have left this issue unresolved for so long. The EU should return to the negotiating table willing to accept Article 1 of the Protocol and the Articles of the Good Friday Agreement, and to see they are incompatible with Northern Ireland having to accept EU law and the EU Court.

The UK and the EU have both said they do not want new physical border controls. There is no need for them. The EU now seems to want to walk away from this promise, by proposing new border posts and controls between GB and Northern Ireland, whilst respecting the wish not to have such further controls between NI and the Republic. It is neither sensible nor fair to suggest creating a complex internal border within the UK to avoid one with the EU. The UK would happily make it an offence to seek to send unwanted or non compliant goods to the Republic from Northern Ireland, and would use full state powers to enforce against smuggling. Checks needed on GB to NI trade can as now take place at the premises of the company despatching the goods from GB or at the premises of the buyer in NI. All will be covered by the usual standards, enforcement and electronic paperwork that is used to regulate internal trade in GB. Trusted trader schemes work well. Surely a UK supermarket chain which can send sausages to Liverpool without a border check at the city edge can also be trusted to send the same sausages to Belfast for its store there?

The UK government has said it cannot accept proposals which do not result in the restoration of Stormont. As Unionists have made clear, it will require a sensible fix on trade issues which end the idea that Northern Ireland is governed by EU laws and is still under some influence or jurisdiction of the European Court of Justice. The EU/UK trade agreement has reference to an independent arbitrator for disputes, not to the ECJ. That is what is needed as a long stop in issues of UK to EU trade across the invisible Northern Irish border. People in Northern Ireland will follow EU rules and requirements for anything they export to the Republic as all countries selling into the EU need to do, but not for the rest of their business activity.

Those who battle Treasury orthodoxy of no tax cuts often end up going for a feeble compromise of allowing more tax offsets, tax free allowances and temporary concessions. These are well intentioned and marginally better than unrelieved high taxes, but they will not provide the big boost to investment we need.

A business looking at an investment is of course worried about the up front costs and cash outflows when making the initial commitment. An investment allowance allowing the business to pay less business  tax in the year or two when it is building the new factory can help with that initial cash outlay. What the up front allowance cannot do is to make the figures for the rewards on the investment over the life of the project look much better to justify going ahead in the first place. An investment when our business tax rate is 19% looks a lot better over 25 years than if you have to put a 25% tax rate in. An investment earning £100 m of profits over 25 years will pay £6m or 37% more tax at 25% than at 19%.

Worse still is many company investors will look at where best to place their next factory or office from a list of countries ranked by their headline tax rate. Where the UK at 19% was in a decent place on the table, at 25% it is an also ran. Many lists will not include countries with a rate that high. The company with a possible £100 m of profits will stay and pay £19m but may well not hang around to pay £25m.

The Treasury needs urgently to rethink its policies to attracts and sustain investment in the UK. 25% does not hack it, with or without super allowances at the beginning.

One of the joys of tax cutting which even gloomy Treasury advisers should like is the way cutting taxes can allow you to end or cut subsidies. The present government has been dragged into an expensive and poor  model of taxing too much then offering subsidies as offsets, or vice versa. We read how they offered subsidies to Astra Zeneca to put their investment into the UK only to find Astra preferred a lower tax rate and rightly so.

We are currently offering substantial subsidies to users of domestic gas fuel, whilst charging VAT on the fuel as well. Why? If the government suspended the VAT whilst fuel prices are high there would be two  big benefits. Inflation would come down a bit quicker, cutting other public sector costs. Energy subsidies could be reduced saving more public spending. Cut out the middleman and woman employed  to get the tax right and get the subsidy payment right, and save on admin.

We currently impose the highest  carbon taxes on our high energy using industries like steel and ceramics. They then are not competitive, and end up needing large subsidies from taxpayers if they are to have any chance of limping on in a  very competitive world. Why do the round trip and end up with a bad answer? Suspend the taxes whilst times are tough.

The government has got to get away from the idea that it is wise enough to fix prices, settle subsidies, offer tax incentives and dictate a new pattern of economic output unrelated to people’s wishes and preferences. There is too much nudging and not enough allowing. If government sets out too may rules and interventions big business and rich people decide to go elsewhere. The interventionist model ends up with too heavy a reliance of imports. Too much borrowing and money printing ends in poor outcomes. That is why we need to cut tax rates to raise investment and tax revenues. That is why it is foolish to tax to raise money to subsidise the activities you are overtaxing.

The decision by Astra Zeneca to put a major new investment  into Ireland where they charge 15% business tax compared to our new rate of 25% shows just how stupid our high tax policy is. Instead of getting 15% of a good stream of profits over many years alongside income tax and VAT on all the well paid ,jobs they bring, the UK has settled not to have any of it. 25%  of nothing is  nothing.

The same folly is evident in the North Sea. In a rush to get a bit more revenue this year with high and erratic windfall taxes, the government has delayed or lost important investments in new gas and oil fields. Instead of generating more well paid jobs and plenty of tax revenue on the output over the next decade or two, we opt to import and to pay huge taxes away to foreign governments on all the imports. Just one of the fields not currently going ahead would generate a gross £25bn over its life, with a lot of that passing directly to the Treasury in taxes.

Ireland makes my  case perfectly. With a much lower rate of business tax than us Ireland enjoys a much higher proportion of its revenues from business tax because so many businesses go there to set up an HQ and to invest in plants and offices. Ireland  has a much higher per capita national income than us thanks to all the foreign investors congregating there to create jobs and spend money. The UK should copy them with a 15% tax rate as Jeremy Hunt himself proposed last summer. We too would get more revenue and have higher per capita average incomes. Enthusiasts for the EU are always urging us to align more with our Irish neighbours. This would be a great way of doing just that.

When Margaret Thatcher and her Chancellors cut higher rate income tax from 83% to 60% and then to 40% the amount of income tax paid by the better off rose in cash terms, rose in real terms, and rose as a proportion of total income tax. What’s not to like for all involved? When George Osborne drove UK corporation tax down gradually to 19%, the take from company tax went up, not down. So why do OBR and Treasury models tell Ministers any cut in tax rates will lead to a reduction in tax revenue we cannot afford? History and modern experience suggests otherwise.

The Chancellor is an intelligent man who recommended a 15% business tax rate when running for leader and who set up and ran a successful business before being a Minister. He says he wants more UK growth, and now serves a PM who has made growth one of his central aims. So why do we read every day there is no scope for tax cuts? Why are we told the numbers do not allow  better incentives for those who work hard, who bring new jobs, and for companies that might come here or stay here and make more investments here if tax rates were lower?

We are told the issue is public borrowing. The government remains wedded to a version of the EU Maastricht rules over debts and deficits which gave us austerity economics throughout the previous decade. Treasury advisers tell the government they can have any rules they like to run the economy as long as they come down to the two EU rules that deficits must be below 3% of GDP, and debt must be falling. They use this to recommend damaging austerity policies which may raise not lower the deficit.  What is even more puzzling is how these same advisers are apparently working on measures like bigger subsidies for childcare which could be affordable whilst ruling out tax cuts, and why with the Truss package they were only annoyed by the tax cuts, not by the huge increase in public spending for energy subsidies which cost twice as much as the tax measures on their costings.

In order to constrain the Chancellor the Bank of England , the Treasury and the OBR have decided to present the UK figures in the bleakest possible way. Only in the UK does the taxpayer have to pay up for the losses the Central Bank insists on taking on all the bonds they bought so badly. That’s over £100 bn of losses over 5 years according to the OBR. The European Central Bank  will not sell bonds into the market to take such huge losses, whilst the US Fed does sell bonds at big losses but does not charge the losses to the taxpayer and Treasury.

Then there is the bizarre UK accounting treatment on debt interest. The Treasury rightly publishes the costs of paying the regular interest on all the state has borrowed, which comes out less than  £45bn  this year. Then it adds to that this year another £70bn to allow for the impact of rapid inflation on the future repayment cost of the bonds they have sold that are linked to the inflation rate. This is not something taxpayers have to pay when they pay the debt interest. What happens is the eventual capital repayment of the bond is increased by the amount of inflation, when the government will simply re borrow the repayment amount.

All this should be seen by the Chancellor as perverse good news for  next year. There will be a big windfall decline in the costs of debt interest as stated, giving him more than £25 bn of lower “spending” to offset any tax cuts he might want to make. He could also slash the costs of selling bonds which this year will cost taxpayers £11bn by telling the Bank not to sell them into the market at big losses. The Bank of England makes it quite clear  on their website the bonds belong to taxpayers and they act as Agents of the Treasury in this matter. That will free more scope for tax cuts .

So cheer up Chancellor. Tell the advisers that in their own terms there is flex for tax cuts in their numbers. Tomorrow I will talk about how cutting taxes can raise more revenue, not lower it.

The disappointing GDP figure for December was dragged down by a fall in output at Health and Education. There were fewer GP appointments, less test and trace and vaccination work. Fewer pupils went to school. It is worrying that after such a large extra recruitment of NHS managers and non medical staff  in the last three years output should be falling. More support staff alongside the extra doctors and nurses need organising and motivating by the managers so more is achieved.

Hospitality and leisure was also weaker than the Christmas season deserved. It is true Premier League games were lost to international competition, but also the case that business suffered from train strikes which prevented or deterred many people going to city centres where much of the leisure and hospitality is located.

I have pointed out before that public sector productivity has  now failed to grow for 25 years. The covid years have been especially bad. We do need to find managers that can improve all that, and can tailor jobs for talented staff that are worthwhile and well remunerated within the large budgets available.

The Department of Health and Social Care has provided the following answer to your written parliamentary question (117395):

Question:
To ask the Secretary of State for Health and Social Care, how many senior managers in the NHS, including NHS Trusts and administrative bodies, earn over £100,000 a year. (117395)

Tabled on: 06 January 2023

Answer:
Will Quince:

At NHS Trusts and other core organisations, between October 2021 and September 2022, 3,010 staff earnt over £100,000. Furthermore, in the same time period, at NHS Support Organisations and Central Bodies, 500 staff earnt over that amount. All remuneration, including non-basic pay elements such as band supplements, medical awards, geographic allowances, local payments, on call payments, overtime, recommended retail prices, shift work payments and other payments, are included in this total.

The answer was submitted on 07 Feb 2023 at 14:30.

Comment

It is interesting that central bodies for the NHS employ 500 managers earning over £100,000. It makes the absence of a full manpower plan for so many months that much more difficult to understand, given the central importance of sufficient well motivated and rewarded personnel to run a good service. One of the prime tasks of well paid senior managers must be to recruit, retain, and motivate staff to deliver a good service. I continue to seek replies to questions on what use NHS managers are making of promotions, increments, pay gradings and the other flexibilities they have to reward and encourage good staff on their books and to switch away from the short term  contract model which so often forms part of their service response.

Ownership for everyone

       In the 1980s I took to Margaret Thatcher the idea of ownership for everyone. She was already a keen exponent of Council house sales, the sale at a discount of a rented state owned home to the tenant. It was a win win for everyone involved. The Council or government got its money back on the home to be able to build a new one or to clear its debts. The tenant changed rent for mortgage so as they approached retirement the mortgage would be paid off and they had no more rent to pay. Surely old age is more secure if you are rent free? They could also extend, improve, decorate their homes as they saw fit, free of tenancy restrictions. We worked on beefed up home sales. The Opposition parties opposed but some of their Councillors and members loved the idea enough to buy their own. 

      Margaret agreed we could work up a series of measures to give more people more opportunity to own. We extended and improved employee share schemes, so those working for a larger company could be a shareholder. We launched a big privatisation programme with special deals to encourage employee shareholdings, including some free shares. We advertised the share offers direct to the public, and many bought their share in a great national  company like British Telecom or British Gas. We fostered more employee and management buyouts of the businesses they worked for and led by example with the very successful sale of National Freight to the lorry drivers and managers of the company. This was followed by Tower Colliery where the miners who bought it proved the nationalised industry had been too pessimistic about its prospects when they wanted to close it. 

      We let people save for their pension in personal pension plan portfolios instead of having to do it through collective company wide schemes. This meant people could see what shares and bonds they owned and could influence how the money was invested directly. For those staying with the larger schemes we worked on improving the information so savers could see they indirectly owned shares in many of the great companies of the UK. 

       You cannot have capitalism without many people owning capital, If capital is too concentrated it will  be resented. It becomes easier for those who dislike free enterprise to gain majorities in democratic Parliaments and seek to tax and legislate it into difficulties. Conservatives believe in levelling up, not levelling down. It does not give capital to the poor by taking away more of the capital and income of the rich. It will drive the rich to other countries or will get them to hire smarter lawyers and tax advisers. Conservatives believe in policies that promote wider ownership and allow markets to set prices that expand supply and tackle shortages.

       We  do believe in collective insurance against unemployment and disability. A successful free enterprise society can afford to help the vulnerable with the costs of a decent life. We also believe in individual and family effort and insurance wherever possible. That is why it must always be worthwhile to work rather than to be on benefit. That is why from self employed to billionaire large company it must always be worthwhile to venture, to expand, to serve customers better. Socialism is the politics of envy, where people would rather everyone was worse off if less unequal. Conservatism is the politics of aspiration, where we want the many to be better off by their own efforts and the vulnerable minority  to be well looked after through state action. We welcome ownership for the many.  We promote better paid jobs with smarter working and higher levels of training.  

        We want a can do society, a society where the strivers are the heroes and where free enterprise can show it serves you better.