Author: johnredwood

The government which gained a majority by uniting pro Brexit voters with Remain voters who wished to accept the referendum and go with some Brexit wins, needs to be aware that some forces that cannot accept Brexit are out to push back on policy.

1. They are trying to oust the Home Secretary as they fear she will take action to stop the flow of illegal migrants across the Channel. Anti Brexit lawyers and some Home Office officials are out to prevent policies that could work, as they dislike the wish of many Brexit voters to take back control of our borders..
2. They want to sell out the Unionists in Northern Ireland who are resisting the EU’s unreasonable misinterpretation of the Protocol to stop the free flow of GB to NI trade, to stop NI benefitting from any VAT cuts, and to keep NI under EU laws. They wish to block a moderate UK legislative solution to restore UK trade and taxes in NI which is necessary to reinstate the Good Friday power sharing arrangements.
3. They want prevent  gas exploration and development where communities want the revenue and the jobs it could bring, and where companies are willing to produce more from the North Sea,  to keep the UK import dependent
4. They continue to block VAT cuts on energy despite the advantage this would bring by lowering the inflation index and helping people’s personal budgets
5. They wish to impose an austerity budget to  deepen and lengthen the downturn and worsen the UK’s economic performance
6. They want to abandon the Bill to reduce the volume of inherited laws from the EU and to establish the full supremacy of UK courts.

The persistent use of right and left as ways of analysing politics much favoured by the BBC and other commentators is way out of date. I heard yesterday morning the BBC describe Bolsonaro as extreme right and Lula as left in Brazil. Both are different kinds of populists who worry the global elites, though they currently think Lula will conform more with their wishes if he gets another period in office than he did the first time so they do not call him extreme.

The populist against the internationalist  is the best shorthand or generalisation to capture modern politics. In Europe we see globalist parties like the old Social Democrats and Christian Democrats can no longer win majorities and need to form difficult coalitions with other parties willing to trim to the establishment line to get Ministerial office. We see waves of challenger parties seek to assemble a popular army against the elite. In Greece Syria’s mounted a strong but ultimately unsuccessful challenge. In Italy first Lega, now Fratelli, try to moderate EU internationalist policies. In Spain Vox has dented traditional parties. In the UK the Conservatives could only win a convincing majority by embracing populist Brexit.

In the USA the Republicans could only win the Presidency by embracing populist Trump who railed against the internationalist establishment Democrats.

I myself find myself in agreement with the populists in some of their challenges to damaging elite theories and policies, but not in agreement with their more extreme views and actions. The internationalists are not always wrong and do include many talented people with good ideas and the capacity to improve the lot of the people. I do not like the arrogance and thuggish dismissal of any alternative view that the elite at their worst display. Nor do I like rioting Trump supporters loose in the Capitol.

I think the PM was right to say he needs to stay in the UK to work with the Chancellor on a good budget rather than flying to Egypt. It would be better if these conferences to urge us all to travel less  and to burn less fuel were more often conducted on line to set an example on the issue of jet travel and to make their own contribution to reducing CO2 .

COP 27 faces the same big problem COP 26 faced. China generating 30% of the world’s CO 2 intends to  carry on increasing its output for most of this decade. President Xi will not be in Egypt for others to lobby him  to do what western countries are doing to cut their output. Current policy of us closing down energy intensive activities and fossil fuel mines and wells in order to import goods  from China does nothing to cut world CO 2. In many cases it  boosts it as we spend more on transport and on less environmentally friendly production in China. India, Russia and Brazil also are large producers of CO 2.

COP 27 does face a new problem from COP 26. As a result of the war in Ukraine and the need for the EU to cut its use of Russian gas, countries like Germany and Poland will be using more coal. China, facing shortages of power from hydro and renewables has also turned to more coal dependence. This is against the main conclusion of COP 26 that  countries should make rapid progress to eliminate coal, treating gas as a transition fuel whilst renewable electricity was expanded and technologies developed to store it for times when the wind does not blow and the sun does not shine.

It will be interesting to see what solutions they propose to tackle this difficulty.

Please see below my recent interview with Julia Hartley Brewer, Talk TV:

It is hard work persuading government to cut out waste and remove marginal or undesirable programmes.

There is a vocal group of MPs who want the rest of HS2 cancelled. The business case was always poor, relying on diverting a lot of passengers from the existing network. The sharp fall in commuting and business travel thanks to lockdowns followed by more home  working further undermines the case. The government does not seem to want to save £100 bn.

This week saw the foolish decision to bankroll the Bank of England to lose £11 bn this year to let them take losses on bonds they do not need to sell.I was  the only MP to say this  was wrong.

There is substantial agreement we should not be adding perhaps £3bn more this year to bills for hotel accommodation for illegal migrants, but still the system resists any Minister and proposals to end the dangerous trade in people.

We continue to spend more than £1 bn a year on free smart meters and their promotion when anyone who wants one now presumably has one.

We spend large sums on maintaining, heating and lighting huge office blocks in expensive city centres when many civil servants now work from home. The estate should be streamlined.

Councils build large commercial property portfolios in their areas on borrowed money in time to lose a lot in a falling property market. Why let them borrow this money?

We spend large sums on benefits for people born and legally settled here whilst inviting in hundreds of thousands of migrants to take the jobs. The state incurs large bills to provide the new arrivals with homes, school places, health facilities etc Let’s get people already here into work.

We still send overseas aid to thug states and countries with expensive weapons programmes.We should confine aid to humanitarian relief in crises and the very poor countries. Trade is often better than aid.

We are now subsidising well off people to burn more energy by price capping power for their heated swimming pools, garden lighting, saunas and the rest instead of limiting the amount of  price capped power each can have to the needs of an average family. Let’s rejig the energy scheme.

There was more uncertainty yesterday about the Financial Statement scheduled for 31 October. We had been told it was crucial to the markets to see early sight of the spending and tax proposals of the new team and to accompany it with Office of Budget responsibility forecasts. I was never that happy about holding it on Halloween, thinking of some of the obvious headlines and journalistic jokes that would invite. It is better it is done in a considered way with full buy in by the new Prime Minister as well as the fairly new Chancellor.  They are saying that they want the latest forecasts, and with the recent fall in gas prices there will be at least temporarily better news on the costs of the Energy package and inflation.

We are told this will be a Financial Statement, not a budget, yet it will have many of the characteristics of a budget. It will presumably have a set of tax proposals, full spending plans, and forecasts of budget outturns with borrowing figures for the next few years. It will be accompanied by OBR forecasts. The difference between a Statement and budget will not it seems be a matter of substance, but a matter of Parliamentary treatment. A budget is presented to the House by the Chancellor often in an hour long speech,  responded to immediately by the Leader of the Opposition with a speech and followed by  a five day debate on wide ranging economic , taxation and public spending matters. A Statement will be a much shorter  speech by the Chancellor followed by maybe two hours where many MPs can ask just one question each of the Chancellor, with the Shadow Chancellor able to ask several things in a short response.  The idea of announcing substantial spending plans by Statement was developed by Rishi during the pandemic to reflect the need for quick action, often agreed on a cross party basis.

The Financial Statement is clearly dominated by whatever figure the Office of Budget responsibility comes up with for the possible deficit or amount of borrowing in 2025. The government has allowed itself against my advice to have as its main economic control the need for state debt as a percentage of GDP to be falling in  three years time. The problem with this is twofold. The OBR has been wildly wrong on its next year forecasts at all three recent annual  budgets. No-one can come up with a realistic forecast of state borrowing three years out given all the likely  big changes to inflation, the costs of the energy package, interest rates and government policy. The second is the figure could send the wrong signal for policy changes now. Today inflation is near its peak and is widely expected by independent forecasters as well as by the Bank of England to fall away rapidly over the next two years. The new threat is to trigger a longer and deeper downturn to the economy as the higher interest rates and restricted credit have their impact. Tightening further into a downturn is usually a bad policy but a negative guess about borrowing levels in three years time could force just such an action.

The cruel paradox is this. Tightening too much now, whether by hiking taxes or cutting public services could create a recession. In a recession deficits rise and the state has to borrow more, not less. Tax revenues fall as people lose jobs, consumers spend less  and companies make less profit. State spending goes up as more people need benefits. It would not be a good idea to follow the wrong response to current economic conditions in pursuit of a lower number for three years time which no-one can accurately predict or deliver .