Author: johnredwood

This is what Chat GPT thinks I said – it is right

Critique of QE and QT: Excessive Risk, Taxpayer Exposure

• Redwood has consistently warned that the Bank of England’s quantitative easing (QE) programme—particularly during and after the pandemic—has saddled taxpayers with massive potential losses. He cited costs already incurred, like the £24 billion by April 2023, and projected total liabilities of up to £100 billion or more if losses continue Institute of Economic AffairsYorkshire Times.
• He argues that the Bank, rather than selling bonds at a loss (quantitative tightening or QT), should hold them to maturity to avoid realizing those losses. He looks to the European Central Bank, which has adopted that strategy, as a model worth emulating Parallel ParliamentInstitute of Economic AffairsTelegraph.

2. Institutional Independence—or Lack Thereof

• Despite popular narratives, Redwood emphasises that the Bank of England was not fully independent in setting QE policies. He notes the Treasury’s role in underwriting QE bond purchases, including agreements indemnifying losses, thereby exposing public finances to risk Facts4EUParallel Parliament.
• He stresses that major QE decisions were jointly made with the Treasury and advocated greater accountability and transparency in such operations Facts4EUParallel Parliament.

3. Forecasting Failures and Inflation Criticism

• Redwood criticises the Bank’s forecasting models, asserting that they failed to predict the surge in inflation even before the Ukraine crisis. He points to the UK’s double‑digit inflation as evidence of central bank misjudgment Institute of Economic AffairsPortfolio Adviser.
• He contrasts this with countries like Japan, Switzerland, and China, where inflation remained low despite similar global pressures—largely, he argues, because those countries avoided large-scale QE Institute of Economic AffairsGB News.

4. Monetary Governance and Reform

• Redwood has called for the Bank to revise its forecasting models, placing greater emphasis on money and credit growth. He also advocates for a diversity of economic viewpoints among senior staff and MPC members Institute of Economic Affairs.
• He proposes that the pay of senior staff and MPC members should be tied to performance—specifically, their accuracy in forecasting and ability to control inflation within public finance constraints Institute of Economic Affairs.

5. Broader Constitutional and Growth Context

• Redwood urges that the Bank not be allowed to impede fiscal policy or divert vital resources—via large losses—to the detriment of public services and growth initiatives TelegraphGB News.
• He frames monetary policy missteps as hindering national growth, advocating instead for a “budget for growth” that addresses capacity gaps in energy, infrastructure, and production Facts4EUParallel Parliament.

Key Quotes from Sir John Redwood

• On losses and bond holdings:
  “The Bank of England should cease selling bonds and allow maturities to gradually reduce the balance sheet.” Institute of Economic Affairs
• On institutional risk and governance:
  “It is simply wrong to say the Bank followed an independent money policy after 2009… the Treasury/Bank agreed policy added £895 bn of assets… and set taxpayers up for possible large losses.” Facts4EU
• On forecasting failure and inflation:
  The Bank “kept interest rates too high for too long… driving up mortgage rates, and undertaking quantitative tightening (QT) – selling the bonds purchased during QE.” Portfolio AdviserInstitute of Economic Affairs
• On reform and accountability:
  He calls for “link[ing] Bank of England senior staff and Monetary Policy Committee members’ pay to their ability to forecast and control inflation.” Institute of Economic Affairs

In summary:

Sir John Redwood has been a vocal critic of the Bank of England’s post-2008 monetary policy, particularly QE and QT. He believes that excessive bond purchases—with guaranteed indemnity by the Treasury—have exposed taxpayers to undue risk. He criticizes the Bank’s forecasting failures and urges a revised governance structure: better forecasting models, more accountability, and closer alignment with growth-oriented fiscal policy.

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Only socialists in the UK could think our national flags are embarrassing symbols we should not fly in public. I am heartened to see the cross of St George appearing much more often. To me it is a symbol of England that resonates with our virtues. Slow to anger, firm in the defence of freedom, generous to those in adversity, critical of the pompous and damning of the stupidity of some officialdom. The English lion lies down in a friendly way. It takes much to arouse but can be fierce if our values of tolerance,freedom and fair play  are abused excessively.

Patriotism is at its best a benign virtue. We can be proud of our own country without running down others. We can enjoy our culture and viewpoint without  being hostile to  different foreign ways. We can fly our flags  proudly as a statement that we want to live here, we value our past and our traditions, and we wish to draw on the best of our inheritance, landscape and  institutions.

As a generous country we will help those in need and at risk. That does not extend to those who break the law or who abuse our hospitality. As a law abiding country we want to trust the authorities, but we expect them to keep us safe and look after our interests first.

I get a lift when I see our flags fly high. Anyone in public authority who is ashamed, angry or wants to take them down misjudges why people put them up. Why cannot they see what we see in the history, achievements and way of life of the English? Why do they think so many people want to come here? Many are fed up with local and national government doing us down and sending us the bill.

Many commentators are predicting one, based on rises to  25 year highs in longer term government borrowing rates. When these rates rose in 2022 Rachel Reeves called this “ crashing the economy”. All this year the rates have been higher than the one day spiked peak in 2022.

A better question to ask is how can we avoid a crash? There are 4 things the Chancellor should  do urgently.

1. As the Bank’s bond portfolio is under dual control, requiring government consent and underwritten by government against loss, the Chancellor should instruct the Bank to stop selling bonds in the market. This would reduce selling pressures which are driving up rates.

2. She should identify spending that can be reduced, deferred or cancelled and announce it to Parliament to replace the lost savings from welfare and pensioner fuel cuts, and add a bit more. Deferring some  Net zero expenditures, putting in  new criteria for new welfare cases which reduce those getting UC with no need to seek work, ending the battery car subsidies, discontinuing plans to give money to Mauritius, imposing a recruitment freeze on administrative positions in public service, and cutting Bank of England losses could be in the package

3 Rule out any tax rises in budget, learning from the adverse  impact the tax rises in the last budget had on confidence and growth.

4 Promote growth by lifting the bans on new oil and gas production and on diesel and petrol car production from 2030. Raise likely tax revenues by removing the farm and small business tax.

It is true that the Bank of England, the Fed and the ECB have the independent power to set the base rate or short term interest rate. I do not deny that or even propose taking it away. That is not the same  as these central banks being independent of the state and government policy.

The Central Banks have Governors chosen and appointed by governments and Parliaments. The Governors have to report to elected assemblies and answer questions and criticisms. They rely on state taxes  should they not have enough revenue to pay their costs. They have to work with government or accept government policy on important matters like the issue of government debt, the management of their bond portfolios, and their attitudes towards the actions of commercial banks.

The governments/Parliaments can change the rules, alter the aims, change the budgets and personnel of these Central Banks any time they like. In the UK there have been major changes. Gordon Brown who gave the Bank the power to set base rates at the same time took away their powers to issue government debt and to regulate commercial banks, making the changes a net reduction in their independent actions. The successor Coalition government changed the framework again with major changes to commercial  bank regulation. President Biden on taking office appointed several new Board members at the Fed including  the two powerful Vice Chairs  to change their policies as he was entitled to do, with two leaving the Fed ahead of their retirement date.

The main monetary policy these three Central Banks followed up to 2022 was money printing or Quantitative easing. In the UK every pound of that had to be approved by the government, who underwrote the Bank against any losses. In the last three years all 3 Banks have been pursuing Quantitative tightening. The UK government has been paying huge bills to the Bank to cover their large losses on bonds they have been selling. The ECB has not been selling bonds, presumably because their owners will not pay the losses. The Fed which like the other two overdid the QT had to pump large sums into the markets to prevent a collapse of regional banks. No government can afford to ignore Central Bank actions which help create a fast inflation by creating too much money, or create a recession by tightening too much.

The wrong belief that these Banks are “independent” other than over the base rate means much media and commentary refuses to ask why these 3 allowed or created a large inflation. It means they escape proper scrutiny of what they did wrong and how in the future they could use their power to set the base rate to promote faster growth and lower inflation. They all have to work with their governments.

Some in the Trade Unions are alarmed by the spate  of closures and job losses we are experiencing. 90% of farms have delayed or cancelled investment. 8 pubs a week are closing. 2 refineries are shutting down. 2 olefins petro chem plants are at risk. Half our steel industry only avoids closure with taxpayers paying the bills to keep it alive. 2 ceramics factories have shut this year.

The car industry is at a record low of output and under government orders  to close all factories making diesel and petrol cars by 2030. Government plans  to close  all our oil and gas production are proceeding well with a  ban on most new investment. We are importing more and more of our electricity as government fails to expand the grid and renewables  fast enough to replace closing fossil fuel plants. All but one of our existing nuclear power stations will close by 2030.

Government should listen to the wise Trade Union  voices arguing against this rapid de industrialisation and idiotic reliance on imports. They should also listen to the farmers and the hospitality industry who are suffering badly from the last budget.

There are many good reasons to discontinue current UK net zero policies. I have concentrate on the following for some years now:

1They are de industrialising the UK, losing us jobs, investment and prosperity

2 They are undermining tax revenues we need, sending the  tax payments abroad to the suppliers of the energy and goods. Banning UK oil and gas loses us billions in tax which we pay instead to Qatar and the US

3 They are undermining national security, making us import dependent for energy, steel, petrochemicals and other essentials.

4.They are contradictory in their own terms. Importing more boosts world CO 2.

5. Battery cars and heat pumps  running on gas fired electricity from the grid does not cut CO 2. It cuts living standards burdening households with big bills to acquire and run these items.

Some of you wish to argue that net zero is a scam, human  CO 2 does not warm the planet, or UK CO 2 is too small to make much difference, or human CO 2 is only one influence on climate which might be offset by others including water vapour and natural CO 2.  I have given space to these opinions but still think the easiest way to stop the bad policies is to advance views 1-5 which climate activists find difficult to answer.

I wrote an article for the Telegraph showing how the government target to decarbonise our electricity system by 2030 was looking more and more unlikely. I pointed out that on their own numbers the government needs £44 bn a year for six years of investment in renewables and extra grid. Over the last year a number of leading  green energy shares have been poor performers. Hornsea  4 a 3.2 GW wind farm planned  for off the Yorkshire coast has been put off. Most of the investment needed has to come from the private sector given the state of the public finances.

Most of the readers comments were very critical of net zero policy and saw the  dangers and implausibility. One complained I had only just worked this out! Strange when I was  against the 2009 Climate Change Act and refused to vote for it, and went on to write various articles and short books in recent years explaining why consumers will not buy into heat pumps and battery cars on the scale envisaged.

Most interesting in the current government plan is how little extra  electricity they propose for 2030. If their other plans for a large expansion of heat pumps and battery cars took off as they wish they would need a very large increase in power output.  In this respect their plans  seem more realistic .

The pace of deindustrialisation is the main way they are getting UK CO 2 down, relying on imports which boost world CO 2 whilst reducing ours. Inviting in large numbers of extra people is incompatible with faster reduction of UK CO 2 but that does not seem to bother them.

Conservatives believe in freedom. We believe in free speech, free elections, and  free enterprise. We believe in the talents of individuals, the benefits of the small battalions and free institutions, in the power of the family and the importance of traditions and learning passed down the generations.  We wish to see a prosperous country with wealth and ownership widely spread, a well defended country safe from war and threats, and a civil society with sufficient common bonds and culture.

         Conservatives support  limits placed on freedoms for the greater good. We expect a strong rule of law. Free enterprise does not extend to  theft and fraud. Freedom to do things should not stretch to  harming your neighbour or advancing by violence.

        Conservatives do not want to blindly follow the past, welcoming positive change from the ideas and actions of enterprising individuals and institutions. Traditions and the past should be respected and drawn upon but not become restrictive bonds preventing something better. Conservatives wish to be the “dwarves on the shoulders of the giants”, seeing further because we climb higher, inheriting past wisdom and knowledge.

        Conservatives welcome strong families and see them as their own welfare societies, transferring wealth and skills between generations and accepting most of the responsibility for bringing up children and caring for the elderly. The state has a welfare  role when families break down or when the demands are too great on  family members.

        Conservatives understand that whilst most individuals have plenty of capacity to do good and to advance themselves and those close to them, there is in some a criminal tendency to harm and  evil which needs controlling by clear laws and punishments.

         Conservatives believe in equality of opportunity, offering a hand up in preference to a hand out. We want to help people on their individual  journeys, and accept that those who achieve more and contribute more may earn more and save more.

          We believe in lower tax rates to protect incentives. We tax the rich who have the money by setting rates that they will stay to pay. We believe in the power of choice for individuals, and the power of competition  to prevent monopoly abuse. We believe most goods and services are best delivered by free enterprise, whilst supporting free healthcare and education for all. The state defends and protects us with uniformed personnel and a monopoly of authorised  force.

         Conservatives oppose most revolutions for their violence and extremism. Conservatives believe in evolutionary change. There is no perfect state or utopian society that can be created because  mankind has criminals as well as saints. Imposing too many solutions from government leads to the abuse of power and to the distress of freedom loving citizens.  One of the least perfectible of human institutions is government itself, which needs to be watched, checked and controlled to avoid tyranny.

       Conservatives love the countryside and the vernacular and varied styles of our urban architecture. We conserve the best. We value fresh air and clean water. We treat animals well, recognising their needs as they live alongside us or with us.

          Conservatives believe in democratic government with choice between parties and philosophies at elections. We believe that Opposition is an important part of democratic government, to prevent a tyranny of the majority and to represent the views of legitimate minorities.

          Conservatives believe in their countries, seeing the nation state as the means to create a voluntary common culture, shared experiences and team loyalty in friendly competition with other states.

          Conservatives are sceptical about drives to international and global government and to rule by an elite or bureaucratic class. There is no global democracy so global government is never government by the people or of the people. Conservatives oppose the imposition  of bad international law. It is wrong to weaponise treaties, stretching their meaning  well beyond their original intent. Over  mighty quangos where power has gone to their heads regulate too much and govern badly. International quangos can be particularly remote and haughty.

           Conservatives oppose extremism. We see National Socialism and Communism as two evil creeds of the last century that resulted in mass murders, dreadful wars and the suppression of freedoms which we should strive to prevent in the future.

            Conservatives believe in the pursuit of happiness, with ownership and prosperity for the many. Freedom is usually the best means to achieve our aims. It should be moderated by a just and necessary rule of law to protect us and  our precious freedoms

Instead of wasting time and money going round their areas taking down Union and England flags, Councils should  respond to the public mood. They all must own a few Union and England flags, so run them up the Town Hall flag poles. Show us you want to be on our side. Stop complaining about law abiding tax paying people who pay the Council  wages and who are proud of our country.