Author: johnredwood

The Chancellor’s latest Mais lecture told us he believes in a free enterprise economy and lower taxes.  I have no problems with that. It began with a quote from Adam Smith and praise for a competitive free enterprise approach to delivering goods and services. The lecture then modifies this vision as it needed to do by reminding us that we encourage substantial government intervention in such an economy. He did not raise the issue of how far government intervention can go before you cease to have his ideal private enterprise model. Today by common wish we have the state as a near monopoly buyer of healthcare and education. The railways have effectively been renationalised. Government also presides over a major policy of transfers of cash to those on low or no incomes .

The lecture states an aim of growing faster. This is to be achieved by concentrating on people, capital and ideas or innovation. The lecture talks of the need to raise the productivity performance of the economy. It is unexceptional that we could achieve more progress with more and better education and technical training. He wants a higher rate of private sector investment, given the big boost to public capital investment that has been agreed. He wants to see more innovations and ideas, which will require a private sector boost to investment in research and development. The lecture lacks detail on how any of this might come to pass.

He asserts that a larger state will not deliver faster growth or higher prosperity. There is some truth in that. He then argues he must not cut tax rates before he has got the deficit down, as he does not believe there will be more revenues from lower rates. This flies in the face of abundant evidence. The Thatcher/Lawson Income  tax cuts brought in a lot more revenue from higher earners. The Republic of Ireland low corporation tax brought in a  surge of new investment and extra corporation tax. The smaller Osborne corporation tax cuts brought in extra revenue.

His policy of tax rises and frozen tax thresholds in April runs the risk of less revenue than if he set lower rates. It will bring slower growth, reducing the output and incomes to tax. The lecture disappointed in saying nothing about the energy crisis and little about the cost of living crisis which is related. If he wants to grow with faster productivity he needs to address the chronic shortage of affordable energy for industry in the UK and needs to restrain the impulse of other Ministers to favour imports over home production in a wide range of areas.

Rt Hon Sir John Redwood MP (Wokingham) (Con): Will the Government now allow and encourage more domestic production of oil and gas, to help reduce the cruel dependency of Europe on Russian energy?

Elizabeth Truss, Secretary of State for Foreign, Commonwealth and Development Office: We certainly are committed to using the UK’s oil and gas fields. Energy independence is vital. We also need to invest more in nuclear, which my right hon. Friend the Business Secretary is working on.

 

Sanctions  come with a cost to those  imposing them as well as to those suffering them. The West’s sanctions on Russia will slow world trade, help keep energy prices high and add to the loss of real incomes . There will be a bit more  inflation  and a bit less growth as a result.

 

Central Banks have to grapple with emerging stagflation. It means they should not be too hawkish on curbing inflation  when falling real incomes will start to do their work for them.

In the U.K. after a policy which was too inflationary  there rests the danger of flipping to too tough a policy with too sharp a slowdown. The Bank is determined to over correct for its error of continuing to create too much new money last year. The negative impact of the war and sanctions reinforces the case to abandon the tax rises and cut VAT before they hit in April.

There are wild allegations circulating about dirty Russian money in London and in U.K. politics.

U.K. law is very clear. U.K. parties cannot accept donations from overseas residents and companies. All donations with their source have to be registered. If anyone has evidence of a party breaking this rule they should send it to the police.

U.K. law is also clear about Foreigners with wealth coming to live,work and invest in the U.K. They need to meet the Home Office rules on rights to live and work here. When transferring money into the country they need to satisfy banks receiving the cash or securities that they comply with anti money laundering rules. These rules are designed to stop people depositing any proceeds of crime. This ranges widely from drugs and arms dealing money  through theft and bribery to tax avoidance. Again if anyone has evidence of a rich foreigner resident here breaking these laws they should inform the authorities.

We should not want to live in a society where it is a crime  to be rich or where any rich foreigner living legally here is automatically branded a crook.  There will be rich Russians in London who have  obeyed our laws and who oppose Putin’s thuggery. If they wish to give money to political parties they need to comply with our donation laws. Many rich settlers in the U.K. make welcome contributions by investing, creating jobs and supporting good causes. It will now be illegal to do business with Putin cronies now on the sanctions list.

(I pay for my own election leaflets and political support.)

Dear Kwasi

I see you wish to help the PM apply pressure to Russia as Putin prosecutes an illegal and murderous war against Ukraine.

There is  a major way in which you can make a difference. The PM’s wish to see stiffer sanctions has been impeded by Germany and Italy owing to their dependence on Russian gas. A single western country cannot bring much pressure to bear without all other countries undertaking the same measure so it is watertight.  The UK needs to help ease the energy squeeze in Europe.

You should invite in  the leading oil and gas investors and licence holders in the UK industry and work with them to increase the output of UK oil and gas. This should be a series of immediate short term measures to maximise output from existing fields in production, and work to move through exploration to production investment and licences for new fields and field expansions. Over the next couple of years the UK could achieve a substantial increase in output which can replace UK imports at the moment or could be exported to help displace Russian gas in the EU.

Burning our own North Sea gas rather than imported LNG more than halves the amount of CO 2 generated, gives us a big increase in domestic tax revenues from the existing higher corporation tax rate applied to oil and gas production and helps ease the squeeze on European energy markets. In due course nuclear and renewables will provide more of our energy, but only once these plants are built and once many more people have switched from gas to electricity to power factories and heat homes. You need a plan for this decade which remains the decade of gas in the UK and Europe. That plan must cut reliance on Russian gas and oil.

 

Yours

 

John

 

The world will make little progress to reduce CO 2 this decade owing to the likely increases in Chinese, Indian, and Russian output. Protesters for net zero need to concentrate on these  large emitters set out in the slides.

Removing carbon dioxide from human activity needs buy in from most people living in the world so they change their lifestyles and jobs. To do this we need a new generation of green products which people want to buy. They need to be cheaper or better than current technologies. The digital revolution is the model. Governments don’t make people buy smartphones, shop on line or use the internet. They choose to do so.

Governments will not force the transition they want by bans, subsidies and taxes. These breed resentment and will lead to unpopularity for parties associated with limiting consumer choice, hiking prices and overtaxing.

Please see below my lecture at All Souls College, Oxford, titled ‘The Long Road to Net Zero’:

Slide 1

Solutions to CO 2 output  have to be multilateral  not unilateral. With the exception of China, no country is big enough to make a difference to world output by its own actions without buy in from others.

Reducing  CO 2 substantially will only be possible if people want the new green products and services. It cannot be delivered by bans, subsidies and taxes.

Current net zero policies rely heavily on making the use of fossil fuels dearer running the danger of increasing inequalities and allowing the rich to buy themselves pardons for continuing use of fossil fuels.

Slide 2

From UN Report October 2021:

 

Total estimated Green House Gas emissions       2025    54.7 Gt    58% above 1990 level

2030    54.9Gt     58.7% above 1990 level    15.9% above 2010

UN says GHG emissions need to be 43% lower than 2010 by 2030 to hit 1.5 degree C increase, or 25% lower to hit 2 degrees.

This decade will see a further increase in the amount of CO2 generated by the world economy with an increase in the annual use of fossil fuels.

The main producers will be China, India and other emerging economies. The USA and the EU accounting for a quarter of current CO 2 will reduce their output a bit.

Slide 3- The Scale of the Problem

 

Slide 4 –  The main sources of CO2

China         30.65%  10,670,000m tonnes

USA           13.5%     4,700,000m tonnes

EU              9%          2,600,000m tonnes

Germany   2%          644m tonnes

Russia       4.5%       1,580,000m tonnes

UK              1%          329m tonnes

Slide 5

Sources of energy for China

Coal – 57%

Oil – 20%

Gas – 8%

Main fossil fuels total – 85%

Sources of energy for USA

Oil – 37%

Gas – 32%

Coal – 11%

Main fossil fuels total – 80%

Sources of energy for EU

Oil – 37%

Gas – 25%

Coal – 11%

Main fossil fuels total – 73%

Slide 6 – Gas – a transition fuel?

Natural gas versus coal

EU designation

Mixing hydrogen with natural gas

Blue and green hydrogen

Slide 7 – How do you power homes and factories when the wind does not blow or blows too hard?

The dangers of over reliance on wind energy – the UK has days when wind only supplies 2% electricity

Need for electricity storage

Pump storage systems

Green hydrogen as an energy store

Battery storage

Time shifting of power use

Slide 8 – Carbon accounting

Is it sensible to shift from a petrol to an electric car?

Total carbon generated by manufacture of new vehicle and destruction of old vehicle.

Over what time period do you amortise that excess carbon

What mileage would you need to do each year to make the vehicle switch worthwhile?

How do you guarantee that your battery is only recharged with renewable power?

Slide 9

Carbon accounting

Putting in a heat pump

CO2 produced in manufacture of equipment and installation

Nature of the electricity to fuel the heat pump system

Need for heating and immersion heating back up to secure sufficient temperature to water and air ?

Slide 10

Carbon accounting for wind energy

The carbon dioxide produced during fabrication and installation of the turbines and towers

The carbon dioxide generated for replacement turbines and parts

The carbon dioxide generated for the stand by power capacity needed

The carbon dioxide produced when stand by generation is used during low or high wind periods

Slide 11 – What would make the green products fly off the shelves?

Cars –  range, refuelling and recharging, cost, style

Heating systems – Average temperatures, cost,  degree of intrusion

Diets – taste and appearance of alternatives to meat/ social acceptability

Slide 12  

Technologies for the 2030s and 2040s

Green hydrogen for storage of renewable power

Green hydrogen to drive internal combustion engines

Nuclear power and small nuclear reactors

Nuclear fusion?

Large battery storage

More use of water power and pump storage

Hydrogen for home heating and industrial processes

 

NATO were right. The Intelligence reports, shared widely with the public, pointed to a major invasion of Ukraine. Putin assembled the majority of his country’s substantial military forces around the borders of Ukraine for a purpose. We had to await the ending of the winter Olympics and the interviewing of a succession of western leaders, presumably to reassure him that NATO would not go to war. Only now has Putin decided to set some aims for his violent mission. He says he wants Ukraine to change its government to become a neutral state that would effectively be a puppet of Russia. If he does not get his way easily he may well turn to complete conquest to enforce his will.

Putin has revealed the strategic weakness of the European position. Short of energy, reliant on Russian gas, the Europeans gave the Minsk Agreement and a possible new settlement their best efforts. It was in  vain. Putin did not want to see Ukraine remodel its constitution as a single state looking towards the West. He  ripped up what remained of Minsk by recognising the rebel states as independent countries.

The UK is right to work with our US and European allies in NATO to do the best we can in  a grave situation. What this must  now do is make the UK take some hard and good decisions about our future national security. It should start with a National Security Council review of our energy supply with a view to re establishing self sufficiency as soon as possible. It needs to include a further military review to expand our forces. We could spend the extra tax we collect on producing more of our own oil and gas to pay for a larger military. It needs further work on our cyber defences, on protecting our networks for utilities and better defence of core technologies and industrial competences. We have been too free with our best ideas, and too careless about keeping domestic production and intellectual property in core areas like steel, special metals, ceramics, electronic chips and the rest.

Rt Hon Sir John Redwood MP (Wokingham) (Con): Has the Minister made sure that all future contracts are properly set up and policed at the beginning, so that the Government know what they are buying?

Eddie Hughes (Parliamentary Under-Secretary of State, Department for Levelling Up, Housing, Communities and Local Government): My right hon. Friend makes an interesting point, but we leave those decisions to councils that are commissioning locally. I guess it is up to us to try to ensure appropriate standards against which such accommodation is measured and then to give them the necessary powers to enforce that. Personally, I think that councils already have a considerable number of powers. I am not disagreeing with Opposition Members about what powers are required; I am just saying that I would like to see the existing powers used to the absolute max before we necessarily go reaching for others. If people feel they do not have the necessary powers, I would consider it not inappropriate for the Government to legislate, but we need to consider that carefully.

We are committed to finding the right approach to this issue, and we invested £5 million in a number of pilots in recent months to support the worst-affected areas, including Birmingham, Blackburn with Darwen, Blackpool, Bristol and Hull. Through the injection of those funds, we have been working with local authorities to test approaches to improving the quality of this type of accommodation. We chose these specific areas partly because of the existing commitment to tackle these issues, and I pay tribute to the local authorities, which have worked collegiately and collaboratively with us during the pilots.

To take Bristol as an example, it has been conducting thorough assessments of new schemes and providers for some time. The council was able to use its funding to complete its work in summer last year. Meanwhile, Hull’s supported accommodation review team was implemented in 2019, and the council has already shown a strong commitment to making the changes needed to solve the problems besetting exempt accommodation. Through the pilot, it was able to fund a large part of its programme and to take its approach to that programme one step further. As the House would expect, we know that the need stretches beyond these pilot areas and that local authorities in other parts of the country want to invest in tackling these problems, too.

Tomorrow I will give my lecture at All Souls College Oxford on net zero policies at 11 am.

If you would like to attend in person or by on line link please contact the College at   https://www.asc.ox.ac.uk/event/long-road-net-zero